CIPLA LIMITED ANNUAL REPOR T 2019-20 Caring since For Life 1935
Reimagining Tomorrow Table of Contents
Corporate Overview Statutory Reports Financial Statements
002 ...... 014 ...... 030 ...... 121 ...... 231 ...... 424 ...... Caring for life since 1935 Ten-Year Highlights Strengthening Our Communities Management Discussion and Standalone Financial Statements GRI Standard Index Analysis with Auditor’s Report 004 ...... 015 ...... 032 ...... 434 ...... About this Report Corporate Information Cipla Product Spread 142 ...... 318 ...... Glossary of Abbreviations Board’s Report Consolidated Financial 005 ...... 016 ...... 034 ...... Statements with Auditor’s Report About Cipla Chairman’s Message Strategy Strengthened for a 175 ...... Sustainable Tomorrow Business Responsibility Report 420 ...... 006 ...... 018 ...... Salient Features of Financial Our First Principles Executive Vice-Chairperson’s 041 ...... 182 ...... Statements of Message Our Value Creation Model Report on Corporate Governance Subsidiaries and Associates 007 ...... Financial Highlights 020 ...... 044 ...... MD & GCEO’s Message Stakeholder Engagement 008 ...... Sustainability Highlights 022 ...... 046 ...... Creating Hope since 1935 Materiality Assessment 010 ...... Global Reach 024 ...... 048 ...... Awards and Accolades Our Integrated Approach to Risk 012 ...... Management Board of Directors 026 ...... Lung Leadership 052 ...... 013 ...... Six Capitals as per Integrated Management Council 028 ...... Reporting Framework Cipla stands strong in the battle against COVID-19
Dr Y K Hamied Samina Hamied Umang Vohra Chairman’s Executive Vice- MD & GCEO’s Message Chairperson’s Message Message
“Cipla’s endeavour to ensure equitable access “We are in the business of saving lives “As the world gets a grip on the unabated to quality healthcare is entrenched in our and true to this philosophy, the people COVID-19 pandemic, I firmly believe that it also humanitarian purpose of ‘Caring for Life’ that has of your Company have demonstrated presented us with multiple opportunities to reflect Scan this code with driven our efforts in India and globally over the extraordinary dedication to help combat and reimagine the future! At Cipla, we acted with a QR reader app on past 85 years.’’ the challenges posed by COVID-19.” speed and agility; optimising overall resourcing your smartphone or tablet and know across businesses and creating a digital roadmap more about us Page No. 16 - 17 Page No. 18 - 19 for the future.” Page No. 20 - 21 Caring for life since 1935
Cipla began its Our founder Dr KA Hamied’s With its all-pervasive impact, vision - ‘Never again will India be the pandemic has changed the humble journey in starved of essential drugs’ - served dynamics of workplaces. As the 1935 with the sole as the roadmap for the enterprise new normal takes shape, our purpose of making which had at its core the lofty ideal resilience and agility powers of harnessing Indian expertise our confidence to reimagine healthcare accessible to achieve self-sufficiency in the business landscape. With to all. For over eight pharmaceuticals. technology as our biggest lever, Cipla stands ready and geared to decades the Company With its strong R&D credentials, reimagine a new tomorrow. dedicated itself manufacturing prowess and legacy of innovation, Cipla has played a For Ciplaites, a few key not just to improve critical role in managing global fundamentals – of contributing to access to quality health crises over the last 85 years. society, of making a difference, In 2001, the crusade against HIV and continually striving to make the healthcare but to saw Cipla introducing, for the world healthier and better – are make a difference in first time in the world, a unique deeply ingrained. We are hoping the lives of people fixed dose combination of triple that this makes the difference – in antiretroviral drugs at less than a tipping hope over fear. This is what and in the process USD 1 per day, saving millions of Cipla was born to do; to care for life established an lives. When the SARS pandemic and we will continue to espouse it. engulfed several parts of the world enviable international in 2003, Cipla was one of the first footprint. Today Cipla to launch a generic treatment for is ranked 3rd largest H1N1 influenza. in pharma in India Today, yet again Cipla is at the forefront of the fight against and 3rd largest in COVID-19, providing a spectrum the pharma private of treatment including remdesivir, tocilizumab and favipiravir in market in South Africa addition to other complementary and is among the most therapies. Our Government dispensed generic collaborations, strategic global partnerships and endeavours players in the U.S. with industry association further illustrates our solidarity efforts towards saving millions of lives impacted by the pandemic.
Dr K A Hamied (1898 – 1972) Founder, Cipla Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
About this Report1 About Cipla2
Welcoming our Our core elements Report boundary and scope Established in 1935, Cipla is a For over eight decades, making stakeholders to the to enhance value A purpose- global pharmaceutical company a difference to patients has The FY 2019-20 Integrated Report focused on responsible and inspired every aspect of Cipla’s FY 2019-20 Integrated creation covers the business activities of Cipla driven sustainable growth of complex work. Our paradigm-changing st for the financial year 1 April, 2019 to generics and deepening offer of a triple anti-retroviral Report Cipla’s FY 2019-20 Integrated 31st March, 2020. Our journey towards portfolio in our home markets therapy in HIV/AIDS at less Report adequately showcases shared value creation encompasses promise In our mission to pursue of India, South Africa and than a dollar a day in Africa in its integrated organisational Cipla’s global operations. Information sustained value creation as a North America, as well as 2001 is widely acknowledged as strategy, taking into account on our subsidiaries and joint ventures responsible pharmaceutical key regulated and emerging having contributed to bringing important risks and valued has been showcased wherever Company, we are proud to With over eight markets. Our strengths in the inclusiveness, accessibility inputs from the Stakeholder appropriate, to enhance our disclosures present our third Integrated respiratory, anti-retroviral, and affordability to the centre Engagement and Materiality and provide a holistic view of our decades of Caring Annual Report. This Report aims urology, cardiology, anti- of the HIV movement. A Assessment (SEMA). Our report operational excellence. Exclusions are for Life, we have to provide detailed insights into provided in the respective sections. infective and CNS as well responsible corporate citizen, is defined by the contours of our financial and non-financial adopted a patient- as other key therapeutic Cipla’s humanitarian approach the material topics derived and performance encompassing segments are well-known. Our to healthcare in pursuit of its further elaborated in our six centric approach in our leadership, culture and Responsibility Statement 46 manufacturing sites around purpose of Caring for Life and
2GRI 102-1, GRI 102-2 1GRI 102-12, GRI 102-46, GRI 102-49, GRI 102-50, GRI 102- 52, GRI 102-53, GRI 102-54
004 Caring For Life since 1935 About this Report | About Cipla 005 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Financial Highlights
2 Revenue from Operations (H in crores) EBITDA Margin (H in crores) OneCipla Credo¹ 5 year We are a 26.4% CAGR 9% 24.7% 25.3% 25.4% PURPOSE - INSPIRED 24.2% 24.5% RESPONSIBILITY - CENTERED 19.1% 18.6% 19.4% 18.9% INNOVATION - DRIVEN 17,132 18.0% 16.9% 16,362 EXCELLENCE - FOCUSSED 15,219 3,171 3,230 14,630 INTEGRITY & TRUST - ANCHORED 13,790 2,826 2,476 global pharmaceutical firm that consistently Cares for Life and delivers 11,345 2,480 on its commitment to all our stakeholders- patients, regulators, 2,162 customers, partners, employees, investors and community. This is our OneCipla Credo ASPIRATION FY 2021 OUR WINNING FY 14-15 FY 15-163 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 14-15 FY 15-161 FY 16-17 FY 17-18 FY 18-19 FY 19-20 EBITDA Reported EBITDA% Revenue Pre R&D EBITDA % -2022 OUR FIRST CIPLA LEADERSHIP ESSENTIALS
PRINCIPLES 4 PAT Margin (H in crores) R&D Investment
10.4% 9.9% 9.3% 9.3% 9.0% 6.9%
PATIENTS 1,528 1,547 PEOPLE 1,360 1,411 8.0% Focus on impact, and double the number of 1,181 patients we serve globally 1,006 7.1% 7.4% 6.9% INSPIRATIONAL 6.6% Transform to be an innovation-led enterprise TALENT MINDSET 6.3% focusing on unmet patient needs PERFORMANCE LEADERSHIP IN CORE MARKETS ACHIEVEMENT ORIENTATION Be among the top 3 in home markets and SYSTEMS THINKING legacy emerging markets Be among the fastest growing in emerging HEALTH economies and Speciality business INNOVATION & CHANGE ENTERPRISE FIRST FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 COMMERCIAL EXCELLENCE FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 Accelerated revenue growth and sustainable margin expansion PAT PAT Margin R&D Investment
1 FY 2015-16 includes one-time profit share of esomeprazole of around H1,050 crores 2 EBITDA = Revenue from Operations - (Cost of Material Consumed + Purchase of Stock-in-Trade + Changes in inventory of Finished Goods, Work-in-Progress and Stock-in-Trade + Employee Benefits Expense + Other Expenses) 3 Normalised EBITDA for FY 2015-16 adjusted for above-mentioned profit share and other one time charges was approximately 14% 4 Opex including deprecation as a % of revenue 1GRI 102-16 Note: Figures mentioned above for FY 2014-15 are as per IGAAP whereas FY 2015-16 onwards are as per IND AS
006 Caring For Life since 1935 Financial Highlights 007 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Sustainability Highlights1
Our Natural, Manufacturing and Financial Our Human and Intellectual In line with our philosophy of Capitals provide a robust foundation to Capital enhance our business ‘Caring for Life’, we are humbled build a responsible business activities and accelerate our to deliver sustained value for our journey towards long-term community through augmented value creation partnerships, supported by our Social and Relationship Capital
Responsible Resource Enhanced access Robust A diverse and Cutting-edge Improving the lives of our Consumption and affordability of Financial Growth talented workforce technologies and stakeholders as a strong medicines worldwide solutions to deliver partner-of-choice operational excellence During the year
Improved interactions with more than 1,938 TJ 46 6.9% 25,000+ 13 6 lacs Total Energy Consumption Manufacturing facilities R&D Investment Employees Patents filed healthcare professionals across India
Cipla is * 9.1% 1,500+ 9% Revenue 52 J 41.81 crores GPTW New products launched Energy from renewable Products Manufactured CAGR over the last 5 years certified, CSR expenditure for FY 2019-20 across the world resources Globally 2nd year in a row J17,132 With 6,09,624 43 crores 30% 6 615** Kiloliters water recycled to Regulatory audits Revenue from Operations Female Clinical trials local suppliers, reduce pressure on fresh conducted representation in our registered water resources Board composition 49% of Cipla’s total procurement budget is spent on local sourcing.
1GRI 102-7 * Represents global spend including statutory spend of H36.31 crores by Cipla Limited ** Suppliers from country of operations (India, South Africa, USA and Uganda) are treated as local suppliers.
008 Caring For Life since 1935 Sustainability Highlights 009 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
1 API Global Reach Europe Revenue Growth 5% Revenue Growth 14% Key highlights: Key highlights: Continuous momentum in Revenue North America seedings and lock-ins Contribution 5% Focus on top 4 DTM markets in Europe Revenue Growth 12% Revenue Growth led by key account sales Contribution 23% Deepening presence in Key highlights: respiratory, oncology, complex Growth driven by expansion of injectables and ARVs direct-to-market (DTM) presence and Fluticasone Propionate contribution from limited competition Salmaterol (FPSM) market launches Revenue share1 ramps-up to 20% in Contribution Continued focus on differentiated 4% Europe launches along with expansion of respiratory franchise (approval for Albuterol and filing of gAdvair) India Overall Growth 5% India Rx growth 9% Key highlights: Strong momentum under Emerging markets One India strategy with successful portfolio Revenue Growth -17% transition to consumer Key highlights: health (Prolyte, Maxirich Focus on top 10 DTM markets to drive and Mamaxpert) growth India Rx delivered strong Portfolio expansion double digit growth (11%+) Organic launches such as from Q2 to Q4 with full SynchrobreatheTM breath-actuated year growth at 9% inhaler in multiple markets and Continued leadership Flohale in Algeria position in respiratory Strategic in-licensing and and urology coupled partnership deals such as Novartis Revenue with improving market partnership in Australia and Contribution 9% share in cardiology and Sri Lanka diabetology Continued respiratory leadership Maintained 2nd largest position in Sri Lanka and Nepal; ARV SAGA (South Africa, Sub-Saharan presence in chronic leadership in Myanmar Africa, Global Access) therapies Strengthened biosimilar franchise Trade generics business Revenue Growth -5% across emerging markets via multiple stabilised post model in-licensing deals SA private growth 11% change and delivering strong growth De-growth largely attributable to Key highlights: Revenue rd certain supply related challenges and 3 largest pharmaceutical corporation (Rx + OTC) within the SA Contribution 39% geopolitical volatility private market; growing at 9.7%/2x the market growth rate (including CHL) Top three therapies and market share - CNS (10.2%), Respiratory Revenue (12.6%) Alimentary tract & metabolism (5.1%) Contribution 18% Emerged largest OTC player in the addressable market with a 1 internal estimates rd share of 7.1% and 3 largest ARV player in the private market Note: Market share and rankings as per IQVIA MAT Mar’ 20 with a share of 15% Balance 2% sales over and above the geographies mentioned pertains to ther operating income. 1GRI 102-6 Revenue growth numbers are in local currency
010 Caring For Life since 1935 Global Reach 011 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Board of Directors1 Management Council
Dr Y K Hamied Mr M K Hamied Ms Samina Hamied Mr Umang Vohra Mr Umang Vohra Mr Paul Miller Dr Ranjana Pathak Chairman Vice-Chairman Executive Vice-Chairperson Managing Director and Managing Director and Global CEO Cipla South Africa & Global Head of Quality, Global Chief Executive Officer Chief Executive Officer Regional Head Africa and Medical Affairs and Access Pharmacovigilance
Mr S Radhakrishnan Mr Adil Zainulbhai Mr Ashok Sinha Ms Naina Lal Kidwai Non-Executive Independent Director Independent Director Independent Director Mr Kedar Upadhye Ms Geena Malhotra Dr Raju Mistry Non-Independent Director Global Chief Financial Global Chief Technology Global Chief People Officer Officer Officer
Dr Peter Mugyenyi Ms Punita Lal Independent Director Independent Director
Mr Pradeep Bhadauria Mr Swapn Malpani Committees Chairperson Member Global Chief Scientific Global Head Supply Chain Officer Audit Committee Nomination and Remuneration Committee Investment and Risk Management Committee Stakeholders Relationship Committee Corporate Social Responsibility Committee Operations and Administrative Committee
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012 Caring For Life since 1935 Board of Directors | Management Council 013 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Ten-Year Highlights Corporate Information1
Consolidated Founder Company Secretary and Compliance Officer
H in crores Dr K A Hamied Mr Rajendra Chopra 2020* 2019* 2018* 2017* 2016* 2015 2014 2013 2012 2011 (1898-1972) Statutory Auditor Income Statement Data Chairman Revenue from M/s Walker Chandiok & Co LLP 17,131.99 16,362.41 15,219.25 14,630.24 13,790.10 11,345.44 10,173.39 8,279.33 7,020.71 6,323.84 operation Dr Y K Hamied
Profit for the Chief Internal Auditor 1,546.52 1,527.70 1,410.53 1,006.39 1,359.99 1,180.77 1,388.41 1,544.85 1,144.24 989.57 year^ Vice-Chairman Mr Deepak Viegas Dividend 564.26^^ 241.57 160.94 160.84 160.62 160.58 160.58 160.58 160.58 160.58 Mr M K Hamied
Balance Sheet Data Cost Auditor Executive Vice-Chairperson Total equity Mr D H Zaveri attributable to 15,763.00 15,012.28 14,229.19 12,525.42 11,516.22 10,789.24 10,050.35 9,018.68 7,638.93 6,666.13 Ms Samina Hamied owners Registered Office Property, plant Managing Director and and equipment - 4,805.32 5,114.35 5,315.35 5,008.69 4,604.85 4,140.56 3,995.94 3,609.97 3,215.49 3,094.18 Global Chief Executive Officer Cipla House Net block Peninsula Business Park, Mr Umang Vohra Ganpatrao Kadam Marg, Current Lower Parel, Mumbai – 400 013, Maharashtra Investments including Cash 2,008.98 2,734.96 2,057.74 1,451.52 1,441.83 940.99 471.32 2,244.30 1,017.39 306.77 Non-Executive Tel. No.: +91 22 2482 6000 | Fax No.: +91 22 2482 6120 and cash Non Independent Director Email id: [email protected] equivalents# Website: www.cipla.com Mr S Radhakrishnan Additional Data / Cipla_Global / Cipla Earnings per Independent Directors C 19.16 C 18.93 C 17.50 C 12.50 C 16.89 C 14.66 C 17.27 C 19.24 C 14.25 C 12.32 / Cipla share - Diluted Mr Adil Zainulbhai Corporate Identity Number Mr Ashok Sinha Ms Naina Lal Kidwai L24239MH1935PLC002380 Dr Peter Mugyenyi Share Transfer Agent Ms Punita Lal
KFin Technologies Private Limited (Unit: Cipla Limited) Global Chief Financial Officer Selenium, Tower B, Plot No. 31 & 32, Gachibowli, Financial District, Nanakramguda, Mr Kedar Upadhye Serilingampally, Hyderabad – 500 032, Telangana Tel. No.: +91 40 6716 2222 / 1511 * Figures from FY 2015-16 to FY 2019-20 are in compliance with Ind AS Email id: [email protected] ^ Profit after tax attributable to the shareholders Website: www.kfintech.com # Includes Bank balance other than cash and cash equivalents (excluding balance earmarked for unclaimed dividend) ^^ includes interim dividend for the year FY2019-20 1GRI 102-3
014 Caring For Life since 1935 Ten-Year Highlights | Corporate Information 015 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Chairman’s Message1
Dear Shareholders, therapy (ART) and nearly two-thirds as APIs. The Government, along extensively contributed to building a out for the year. Looking ahead, it of the world’s antiretroviral drugs with our industry, must set up its robust healthcare ecosystem for the is evident that the pharmaceutical These are unprecedented and are supplied from India. priorities on availability of essential industry and supported the medical industry must prepare for more uncertain times that we are living drugs and give suitable incentives to fraternity by way of technology and health crises like COVID-19 in the Apart from the above, Cipla helped in today. The world hasn’t faced the industry to boost development. trained manpower. future. Cipla’s purpose of ‘Caring a health crisis of this magnitude in the early part of the century, Cipla has many decades of for Life’ has been our guiding since the Spanish flu pandemic the fight against the Anthrax scare expertise in the manufacture of bulk Apart from this, Cipla was the first principle over the last 85 years – of 1918. Globally, the COVID-19 and offered Ciprofloxacin tablets APIs. We therefore look forward to produce aerosol nebulisers for and will continue to light our path pandemic has caused massive to many countries. Following this, to extending our whole-hearted respiratory disease in the mid-1970s even for the next 85 years. Your Cipla manufactured oseltamivir and disruptions across every sphere of support to our Government in this in India and newer drugs for many Board and Management Council zanamivir to fight Bird Flu and Swine human and business activity. There initiative. injections. We were among the first stays committed to upholding the Flu. has been an adverse economic to introduce fluoroquinolones in purpose of ‘Caring for Life’ that will 85 years of Cipla the country in the late 1980s. During anchor our business for years to impact on people, communities Today Cipla is yet again, at the the 1980s and 1990s Cipla rapidly come. and countries. It is essential to have forefront in the fight against Cipla’s endeavour to ensure progressed to becoming a leader quality healthcare to build a strong COVID-19. Through our strategic equitable access to quality in the domestic pharma industry. In society – healthy people lead to global partnerships, we offer healthcare is entrenched in our early 2001, we brought in the drugs Warm Regards, a progressive and prosperous a wide range of drugs in our humanitarian purpose of ‘Caring for HIV/AIDS and subsequently nation. In an effort to combat the portfolio giving relief and improving for Life’ that has driven our efforts drugs for pandemic diseases. current pandemic, we are seeing treatment access. This is especially in India and globally over the past governments, public institutions, true with the vital life-saving drugs 85 years. We began our journey From importing inhalers in 1950s to healthcare professionals, like remdesivir, favipiravir and on August 17, 1935 as the Chemical, revolutionising inhalation therapy organisations, pharmaceutical tocilizumab. The magnitude of this Industrial and Pharmaceutical in India through novel innovations, companies and citizens rallying pandemic has been unparalleled, Laboratories Limited, when our Cipla has been delivering on Y K Hamied together to fight this threat to and we are currently ramping up founder, Dr. K A Hamied made a its promise of freedom, helping human life. manufacturing of essential drugs commitment that “Never again millions breathe freely. Today, required. This also includes drugs will India be starved of essential Cipla offers the world’s largest In 2001, in the global fight against for chronic ailments such as Asthma, drugs”. Ever since, Cipla has played range of respiratory products the HIV/AIDS pandemic, Cipla COPD, etc. Cipla is collaborating a pivotal role in ensuring the and devices, all developed with developed the world’s first triple with the Council of Scientific & availability of affordable life-saving in-house innovative technology. anti-retroviral drug combination, Industrial Research (CSIR), Indian medicines. For decades, our approach to Triomune and offered it at below Institute of Chemical Technology innovation has been based on USD 1 per day as against the then (IICT), Indian Council of Medical The first factory in Bombay Central improving healthcare, alleviating prevailing international pricing Research (ICMR) and the Ministry of was setup in 1936 and today Cipla suffering and helping society. We of USD 12,000-USD 15,000 per Health to develop medications for has 46 state-of-the-art drug recently partnered with Drugs year. This was a global health the treatment of COVID-19. manufacturing facilities across the breakthrough and enabled a lower globe - India, South Africa, USA, for Neglected Diseases initiative drug dosage and Triomune became This pandemic has also served as a Uganda, China and Morocco. We (DNDi) and developed a new HIV truly accessible for all. It opened wake-up call spotlighting the need have taken a pivotal position in breakthrough - a 4-in-1 strawberry- the door for the treatment of HIV/ for every nation to be self-reliant. the manufacturing of the world’s flavoured paediatric formulation AIDS across third world countries, Cipla’s philosophy of self-reliance generic drugs. In 1995, Cipla’s under the brand name Quadrimune, especially in Sub-Saharan Africa. As and self-sufficiency and its pledge international sales accounted for an advance over a previous 2-in-1 a result, millions have been treated to provide universal access to just 10% of the turnover. This has sprinkle formulation Lopimune. in Africa over the years. affordable medicines has become grown to over 60% today. Along even more critical today. The the way, we have transformed As always, my sincere gratitude to At the end of 2019, out of 38 foundation and backbone of the from being an Indian bulk drug all our stakeholders, for the faith million people living with HIV/AIDS pharma industry is the availability manufacturer to becoming one of and trust reposed in us. I am happy globally, 25.4 million people (67%) and manufacturing of active the global leaders in healthcare. to share that the Board of Directors have had access to antiretroviral pharmaceutical ingredients known Over the years, Cipla has also has declared a 200% dividend pay-
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016 Caring For Life since 1935 Chairman’s Message 017 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Executive Vice-Chairperson’s Message1
Dear Shareholders, augment the healthcare ecosystem gloves and sanitisers to over I am humbled to be given the more patients and offer them and sustain communities. The fund 10,000 doctors, paramedics and responsibility of taking Cipla into the better solutions for awareness, The COVID-19 pandemic took included a voluntary donation of associated institutions, including future – to achieve new goals, scale diagnostics, cure and adherence. countries around the world by ~ H3 crores by Cipla employees tertiary municipal and district new heights and create an even surprise. Governments across who stepped forward in this hour hospitals. Through the Foundation, stronger legacy. I would also like to The resilience and agility, together the world were unprepared of national need. Through its the Company is connecting extend my gratitude to Ciplaites - with the forward-thinking vision for the onslaught. The Indian wide-ranging relief efforts, your doctors and healthcare workers past and present – for their passion, of our leadership team led by Umang Vohra, MD & Global CEO, Government’s decision of an early Company focussed on initiatives across India with the AIIMS and commitment and partnership. and the talent of our team, will lockdown helped slow down the that have maximum impact and ICMR-led knowledge network on For a large organisation with global chart the way for your Company’s spread of the virus and gave time reach, supporting public health Covid-19 through ECHO India - a operations, we are remarkably agile outstanding performance in the to the healthcare community to institutions, frontline healthcare technology-based knowledge and this is reflected in our decisions months and years to come. With our prepare for the outbreak. It was workers, vulnerable patients and sharing platform. These online and initiatives from time to time heads up and our hearts open, we heartening to see innovation communities struggling in the facilities, the first in India for the - be it the portfolio revamp that look forward to better days! and agility across industries. The aftermath of the pandemic. The pandemic, are being set up at has taken our consumer business pharma industry in particular came contributions will help to further leading government and medical to greater heights, or the digital together in solidarity to fight this several immediate and long-term colleges. transformation that commenced in Best Wishes, pandemic. From forging global relief efforts that the country needs, Your Company established a 2016 paving a smoother transition partnerships to launching drugs to combat the size and scale of the ‘Caring for Life Financial Assistance for business continuity during the that had potency to fight the virus crisis it is confronted with. Policy’ to provide a helping hand to lockdown. to collaborating across the value Cipla Foundation also partnered a bereaved employee’s family. chain for ramping up supplies, Future of Pharma with several hospitals in Mumbai to the Indian Pharma industry stood Cipla in collaboration with the Samina Hamied strengthen the state’s healthcare true to its positioning of being Indian Pharmaceutical Alliance The new normal is here to stay infrastructure to tackle the the pharmacy of the world, and (IPA) also helped define a standard and presents a unique opportunity pandemic. Towards this, the your Company made a notable safety protocol across the industry for the Indian pharma industry to Foundation has supported contribution in this endeavour. to ensure safety of employees and enhance its position as the largest the setting-up of a COVID-19 uninterrupted supply of critical provider of generics globally advanced testing laboratory at Standing strong drugs to the nation. and emerge out of this crisis as JJ Hospital as well as Maharashtra’s a preferred sourcing hub for the We are in the business of saving only isolation ward for paediatric Cipla @ 85: Resilient Spirit, Agile world. With many countries looking lives and true to this philosophy, patients at the BJ Wadia Hospital Attitude at de-risking their API supply chains the people of your Company for Children. Extending this care by exploring alternative sourcing have demonstrated extraordinary to our other home market, the Back in 1935, your Company hubs, this is an opportune period for dedication to help combat the Foundation in partnership with commenced operations from India to step in and present itself as challenges posed by COVID-19. Department of Health, South Africa a rented bungalow in Mumbai a viable option in the long term. For Ensuring uninterrupted supply of also established purpose-built Central. Today, as Cipla celebrates this to materialise, it would require life-saving medicines, setting up containers for COVID-19 testing in 85 years of Caring for People, it is a sustained intervention from the helplines for patients and caring high-risk communities. The Cipla a matter of great honour for me to Government to create an enabling for communities, Ciplaites across Palliative Care & Training Centre in represent the third generation of the environment, easing regulatory the world rose to the occasion and Pune continues to offer In-patient, founding family of your Company. hurdles, incentivizing research & made a positive difference. OPD and homecare care to I am grateful to my mentors, Dr Y development and creating a strong patients and families during these K Hamied & Mr M K Hamied who innovation ecosystem – not just for Contributing to the country’s fight challenging times. continue to guide me. Dr Hamied’s India but also for exports. against the global pandemic, vision to build an equitable world on your Company had set up a H25 To safeguard frontline healthcare the foundation of care has been an In a post-pandemic world, the crores ‘Caring for Life’ COVID-19 workers, your Company supplied inspiration to us and continues to be influx of digitisation across the care dedicated fund to support patients, essential items like masks, PPE, the guiding light for all our actions. continuum will help Cipla reach
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018 Caring For Life since 1935 Executive Vice-Chairperson’s Message 019 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
MD & GCEO’s Message1
Dear Shareholders, millions of lives impacted by the patient-connect yielded positive ability to innovate and stay ahead of with customers for their health and to fuel our passion even today. pandemic. Amid these challenging outcomes. We continue to maintain the curve. wellness needs through our digital Apart from the gratitude I have As much as FY 2019-20 marked a times, we did everything in our leadership positions across therapeutics’ initiatives. for the relentless support from solid year of consolidation and might to maintain uninterrupted respiratory and urology segments, Breathe. Think Cipla my colleagues at Cipla, I am also steady growth, it was also a year while maintaining third position Cipla has been identified as one grateful to the Cipla Board for its supply of medicines for patients. Our lungs are exposed to a that witnessed the onset of an of the world’s Top 3 companies guidance and counsel. I would like Towards this, we also launched a in anti-infectives and fourth in spectrum of illnesses and the recent unprecedented challenge for the 2 making steady progress in tackling to thank you, our shareholders, for dedicated helpline to assist patients cardiology . COVID-19 pandemic highlighted pharmaceutical industry, globally. the global spread of Antimicrobial continuing to believe in us. in procuring essential medication, its crucial role in our overall As the fast-proliferating COVID-19 Cipla emerged as the third largest Resistance (AMR). The Access to across therapies from pharmacies wellbeing. Over the last six decades, outbreak precipitated a world- pharmaceutical corporation Medicine Foundation’s Benchmark and healthcare institutions. unmatched presence across the care wide lockdown and pushed the [Prescription (Rx) + Over The Report 2020 has awarded Cipla Best Wishes, continuum and the widest portfolio healthcare infrastructure of nations I feel proud to be a part of Counter (OTC)], third largest player the highest score of 70%, through of drug-device combinations has an organisation that has in the OTC space and the third an evaluation of our performance to the brink, your Company took established Cipla’s position as a lung wholeheartedly endeavoured to largest within ARV (anti-retroviral) against the key parameters of a strong stand to win with hope; leader in India and key emerging hope for a healthier world with less truly make a difference; each one in the South African private responsible manufacturing, access 3 markets. According to the IQVIA suffering and more caring. of the 25,000+ strong OneCipla market . Over the years, we have and stewardship in AMR. report (Mar 2020), Cipla is the Umang Vohra team has contributed to this invested significantly in our US second largest inhaler (MDI + DPI) Reimagining Tomorrow Being a pharmaceutical company drive of optimism. I would like to business to create a sustainable selling company by volume and four gave us the opportunity to create express my immense gratitude for pipeline that offers strong medium of our respiratory brands are listed As the world gets a grip on the a degree of hope, by being their resilience and unwavering to long-term visibility on revenue among the Top 50 medicine brands unabated COVID-19 pandemic, I of service to the community commitment to care. In a post- and profitability. The USFDA in the country2. With ‘Breathe. Think firmly believe that it also presented and enabling positive social pandemic world, while people approval for generic Albuterol Cipla’, we recently articulated our us with multiple opportunities impact. Each one of us carries MDI and the successful completion resume their re-calibrated lives aspirations to become the lung to reflect and reimagine the the responsibility for the millions of the Phase-3 clinical study of and nations begin to revive their leaders of the world. As leaders, future! At Cipla, we swiftly of families who depend on our generic Advair Diskus® further economies, we at Cipla will continue we aim to build a robust respiratory deployed technology to ensure medications, and we will continue strengthened our respiratory our mission to not only help ecosystem and improve access by business continuity and offset the our steadfast journey to heal franchise in the US market - an patients recover faster but also do bringing effective cure closer to the disruptions caused by nation-wide individuals, cure communities and exemplary testament to Cipla’s everything it takes to better prepare patients. lockdowns. We acted with speed safeguard societies. This is what we the world to fight such a health crisis strong R&D capabilities in the and agility; optimising overall are here to do; to care for life. in the future. space. Our European operations Health in Your Hands resourcing across businesses and momentum continued, led by strong creating a digital roadmap for the Winning with Hope A noteworthy year performance in key DTM markets. Wellness will be another growth future. API demonstrated a remarkable engine for us, accelerating In the ‘90s, Cipla partnered with FY 2019-20 was marked by growth due to higher margins Cipla’s leadership in healthcare. Our top priority will be to address governments and global bodies momentous launches, initiatives and product mix. We continue to The acquisition of four umbrella patient needs and maintain a to democratise access to essential and engagements, and Cipla maintain the highest standards of brands from Wanbury Limited in sharp focus on cost optimisation life-saving drugs to combat the registered solid performance across quality and compliance across our the nutraceutical segment gave a in managing supply chain, R&D HIV/AIDS pandemic. Today, we the key markets of India, South manufacturing network. boost to our wellness portfolio and and marketing, while ensuring are yet again at the forefront of Africa and US. Simultaneously, we strengthened our four-decade long all our facilities are in a state of care in the fight against COVID-19 developed huge traction in the Passionate about the Future presence in the women’s health compliance and control. - be it pioneering indigenous drug respiratory pipeline with notable category. development with government filings and approvals. I am happy We aim to leverage digital I feel humble to be a part of an labs or safeguarding frontline to share that despite challenges technology in a big way and play In line with the One India model, industry that can truly make a workers. Your Company’s portfolio and our Goa remediation efforts, a leadership role in transforming we transferred select consumer- difference in the lives of patients. has almost all key drugs that our performance for the year was healthcare management. We are oriented brands from trade This is our core purpose - to be show potency against the novel notable. building our strategy for the years generics to Cipla Health, our able to care and to surge ahead coronavirus. Our partnerships ahead and I am confident that the consumer healthcare subsidiary. with hope and gratitude. This is with Gilead and Roche marked The One India synergies to promote value creation in a competitive We continue to build relevance what has inspired us at Cipla for a significant step towards saving portfolio expansion and enhanced market will come from our innate beyond medicines, by partnering the past 85 years and continues
1GRI 102-14 | 2 As per IQVIA MAT March 2020 | 3 As per IQVIA TPM MAT March 2020
020 Caring For Life since 1935 MD & GCEO’s Message 021 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
1947 Creating 2001 Hope 2017
Cipla celebrates India attaining Cipla ushers in a new paradigm in 1935 Independence with a flag hoisting Since antiretroviral therapy (ART) by offering ceremony at Bombay Central Cipla launches Synchrobreathe, a state of- the triple ARV FDC at USD 1-a-day, thus Headquarters. the-art innovative breath-actuated inhaler, opening the floodgates for affordability helping millions with Obstructive Airway and accessibility in HIV/AIDS treatment. Diseases such as asthma. 1970 2013
2019 1935
Cipla becomes one of the pioneers to manufacture APIs (active pharmaceutical ingredients). Cipla acquires 100% of share capital of Cipla Medpro (South Africa). Cipla enters digital therapeutics by partnering with Wellthy Therapeutics Operations commence from a rented 1977 in India and Brandmed in South Africa bungalow at 289, Bellasis Road, to bring together behavioural science, Bombay Central. real world clinical evidence and artificial 2016 intelligence to provide real time monitoring, coaching and advice to patients.
1939 Inauguration of the Cipla Research and 2020 Production Complex in Bangalore by Mrs. Luba K Hamied.
Cipla strengthens its presence in the US market with the acquisition of InvaGen 1997 Cipla leads the fight against COVID-19 Pharmaceuticals Inc. and Exelan through a spectrum of vital drugs that show Pharmaceuticals Inc. thus expanding its reach Mahatma Gandhi visits Cipla, inspiring potency against the virus. With unmatched in the US market, with a balanced portfolio. the Founder Dr K A Hamied to produce portfolio of drugs and devices and vital and life-saving medicines for India. leadership across India and key emerging markets, Cipla launches global lung leadership aspiration – Breathe. Think Cipla. Cipla Palliative Care and Training In the US, the approval for generic AIbuterol Centre is set up in Pune to provide free MDI and successful Phase-3 completion holistic care to terminally-ill cancer of clinical study for generic Advair Diskus® patients and their families. furthers this ambition.
022 Caring For Life since 1935 Creating Hope Since 1935 023 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Awards and Accolades
Cipla ranked in top 6 companies “Leadership Category”, as per Corporate Cipla awarded the Most Governance Scores - 2019, Cipla achieved the ‘Best Cipla wins the ‘Digital Supply Cipla wins the presetigious Outstanding Company in India jointly developed by BSE Ltd., Audit Committe’ Award Chain Enterprise Award’ Golden Peacock Award – Healthcare category at the The ICAI award for the IFC - World Bank Group for the year 2018 by the at the 9th edition of the for Corporate Social Asiamoney Asia’s Outstanding excellence in Financial and Institutional Investor Asian Centre for Corporate Manufacturing Supply Chain Responsibillity 2019 Companies Poll 2019. reporting for FY 2018-19 Advisory Services Governance & Sustainability. Awards 2020.
Cipla Supply Chain bags Excellence in Collaboration Best Healthcare Pharma Cipla in Business and Best Distributions Berok Zindagi receives Brand and Best Social Media Cipla Bags Gold Award World’s Most 2nd year in a row - Practices for Outbound Gold Award at IPRCCA Brand Cause Marketing Gold at ‘Indian Marketing Respected Great Place to Work Supply Chain at the 5th ILSC 2019 in Healthcare Providers Awards for BerokZindagi in Awards 2019’ Companies’ List! certification Awards 2019 Categary the Sammies 2019
Wolters Kluwer Innovation Cipla Bags Foracort on Award for ‘Leveraging winning the award for the Technology for Doctor category of “Excellence Cipla Bags Best Internal Certificate of Excellence for Engagement’ and the Award in Pharmaceutical Brand Communication Strategy Employee Communications ‘Best Working Capital for ‘Leveraging Technology Managment - Consistent Award at the Corporate “What’s Up Cipla” at The Management Solution for HR’ at the Digital Cipla South Africa Performance” at India Communication & PR Summit Sabre Awards 2019 South Award’ at the Adam Smith India Health Summit and Wins Gold at Pharma Awards 2019 and Awards 2019 Asia by The Holmes Report Awards Asia 2019. Innovation Awards PRISM Awards
“Indo- American Corporate Excellence award” for Innovative project of excellence in Manufacturing Cipla Website the year 2019-2020 (Category II) by the Indo Wins Gold at for IT-OT security American Chamber of DIGIXX Awards 2020 convergence program Commerce.
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Cipla ranks #2 in the sale of inhalers globally (by volume).*
With presence in over 50 countries, Respiratory contributes 22%+ of total Cipla now Cipla’s Fluticasone revenues. Think has over Salmeterol brand holds 1st position in terms of market 20% share by volume in FPSM market in... Foracort brand of FPSM pMDI stood at market share Morocco in EU and it (MS-55%)* #10 supplied ~3mn among the pMDIs (ICS, Sri Lanka LABA, LAMA (MS-45%)* 4 & ICS-LABA) Cipla brands that to Europe.** Nepal featured in the top (MS-77%)* 50 brands of Indian Pharma Market.*
46% Our Berok Zindagi campaign is the first share of volume in of-its-kind, patient-centric initiative aimed MDIs in South Africa to create mass awareness on asthma respiratory market.* and promote inhalation therapy. This Over the last six decades, Cipla is proud year, through the “Inhalers Hain Sahi” to have helped millions across the world campaign, we tried to highlight the to breathe free! Our unmatched presence benefits of inhalation therapy and Cipla South across the care continuum and wide range de-stigmatise the use of inhalers. Africa has of drug-device combinations have established Cipla’s position as a lung leader in India and 65% other key emerging markets. To create awareness on the correct use of inhalers, of FPSM pMDI Armed with this legacy, we have now market share.* embarked on a journey to solidify our position our South Africa team globally as a lung leader. conceptualised a unique
video series called Bronki * IQVIA MAT March 2020 Boosters to educate ** IQVIA MAT Dec 2019 & Cipla Helping Millions kids on how to use the FY 2020-21 primary sales data FPSM = Fluticasone Salmeterol inhalers correctly. pMDI = Pressurised Metered Breathe Free Dose Inhaler MS = Market Share
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Cipla has been at the forefront of Cipla provides essential Cipla Foundation supports supplies, such as medicines, the fight against testing by providing COVID-19 PPEs, sanitisers, masks, and testing kits at J J Hospital gloves to frontline healthcare COVID-19. From ensuring Mumbai. workers. equitable access and care, to prioritising people over profits and supporting communities, Cipla stayed Six purpose-built containers true to its purpose of Caring for life. deployed by Cipla Foundation in partnership with state health department to advance Our immense COVID-19 screening and testing Creating in high risk communities in gratitude to all South Africa. our employees for their Hope. resilience and unwavering commitment to care. Caring for Life.
Set-up a J 25 crores ‘Caring for Life’ COVID-19 Cipla stands dedicated Fund to support patients, the healthcare Cipla launches ecosystem and communities. Includes contribution from 24*7 Helpline to employees towards this compassionate cause share information strong in the on availability of Launches a spate of relief efforts for supporting COVID-19 medicines battle against testing, safeguarding healthcare providers and and other critical extending humanitarian care to communities with Cipla Foundation supports Cipla products. supplies of medicines, essential hygiene items and food Maharashtra’s first and only At the forefront of COVID care with remdesivir, pediatric COVID-19 isolation COVID-19 ward at BJ Wadia Children’s tocilizumab and favipiravir Hospital Mumbai.
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Strengthening Our Communities
Mobile Healthcare Units drive to remote Amidst the Covid pandemic, Lebo remains on Access to quality education in remote schools The dedicated healthcare professionals at our communities to care for Baburam, and many the frontlines, serving patients at the Sha’p left ignites Shanti’s love for learning partner hospital, keep Shalu’s smile shining like him, living with chronic health conditions nurse surgeries in South Africa bright
Graduate degree and technical skills open a Asanda, Zola and many more find safety, The team at Cipla Palliative Care & Training Centre, Pune continues to care for world of opportunities for Jasbir and other nutrition and education at the Early Childhood patients and their loved ones in Covid times youth from villages near Baddi Development Centres in South Africa
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For 85 years, we have dedicated ourselves not just to making medicines but to making a difference, alleviate suffering and care for life.
Disclaimer: This annual report and its contents is for information of the Company’s shareholders only and is not intended to endorse, advertise, promote or recommend the use of any products listed in it which are for representation purpose only, some of which are reference listed drugs of which the Company has approved, under approval or under development generic equivalents. The prefixes “g” and “generic” used interchangeably indicate the generic versions of the named brand drugs.
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By recognising and taking due in Passion, Economic Engine and Strategy Strengthened for cognisance of these opportunities Capability Building for a vastly and challenges, Cipla continues to different future. 1 endeavour towards delivering value a Sustainable Tomorrow to all its stakeholders. We have been The incorporation of ten Strategic strengthening our core business in Business Objectives (SBOs) in the last three years by focusing on FY 2019-20 as a part of strategic Cipla was established in 1935 with a vision to make India self-reliant and self-sufficient in healthcare. key markets, rationalising non-focus framework compared to five Today, we have grown to become one of the world’s largest generic pharmaceutical companies that Cipla’s businesses, focusing on profitability SBOs in FY 2018-19 has sharpened aims to augment the affordability and acess of global health care. The global generic pharmaceuticals trinity metrics and strengthening the our focus and brought Passion, 2 market is growing at a CAGR of 1.6% (2014-2019) and is expected to grow at a CAGR of 2.7% financials. This has enabled us Economic Engine and Capability 2 (2019-2024) with its offering of accessibility and benefits of efficient and economical drugs. to build a solid foundation for a Building together. bolder tomorrow – one immersed The global pharmaceutical industry operates in a dynamic environment. It is subjected to multiple forces: government scrutiny, pricing pressures, increased competition, sector consolidation and geo-political volatility, among others. 2020 also brought the COVID-19 pandemic, amplifying global economic vulnerability and considerable disruption. Given the multiple shades of this healthcare and financial crisis, we have identified global Passion challenges to build reinforcements and shock-proof our business. We have also identified opportunities to create new growth levers and pivot our business models towards future readiness. Strategic Business Objectives (SBOs)
Become global lung leader Market structure Channel and Consumer Global health threats 1 across the care continuum SBO C US Gx business – O Healthcare insurer-pharmacy- B Covid-19 outbreak affecting heightened and sustained hospital tie-ups on a rise more than 18 million people Cipla’s performance 2020 pricing pressure worldwide3 Second largest inhaler selling AB-rated generic therapeutic Strong market share of O Digital health platforms are driving healthcare innovation B AMR crisis could kill 10 million company (combined total of DPI equivalent of Proventil® respiratory products in key Regulatory people by 20504 and MDI inhaler devices), as per emerging markets like Nepal, IQVIA MAR Mar 2020 ANDA filed for generic Australia and UK; portfolio O Shift from curative (illness) C Increased frequency Advair Diskus® (Fluticasone partnerships in Australia to preventive (wellness) B Asthma/COPD with ~5 million of inspections by the Respiratory drugs business in + Salmeterol combination) and Sri Lanka to strengthen healthcare deaths globally5 USFDA in India India grew at 13%, outpacing after the product successfully respiratory strategy the 11% growth exhibited by the completed Phase-3 clinical overall India market, as per India study in the first attempt Launch of Berok Zindagi 2.0: O National healthcare Geo-political issues programmes being set up 3 IQVIA MAT Mar 2020 Version 2 of Cipla’s flagship Filed ANDA for another complex in India and South Africa to 2 C Increased focus on local patient-focused initiatives 4 Launch of ‘Breathe. Think Cipla’ inhalation asset in the US ensure universal access manufacturing in respiratory health with an campaign on World Asthma Day, outreach of 30 crores people 1 5 Extended current capabilities O Regulators fast-tracking Global increasing people awareness through programme launch on C Political instability and forex such as inhaled anti-infective approvals under special Challenges and about lung health TV media and cinema halls; fluctuations Pulmazole in the US and initiatives, e.g. SAHPRA for Opportunities digital platforms like Facebook Significant milestones towards inhaled insulin Afrezza in India South Africa, Emergency in and Twitter; PR conferences; strengthening our Respiratory the US newspaper coverage; radio franchise Launched Foracort Synchrobreathe in India engagement; and building FDA approval for Albuterol awareness and visibility through MDI in the US which is the first clinics, chemists, stockists, sales Note: teams, etc. C – Challenges, O – Opportunities, B – Both Challenges and Opportunities
Source: Cipla’s 3-year strategy 1 GRI 103-1, GRI 103-2 and GRI 103-3 2 IQVIA Market Prognosis Generics Forecasts April 2020; Build solutions around the care Increase penetration in key Increase awareness and 3 https://www.worldometers.info/coronavirus/ continuum from easy and early markets to establish leadership in education through various 4 https://www.who.int/news-room/detail/29-04-2019-new-report-calls-for-urgent-action-to-avert-antimicrobial-resistance-crisis diagnostics to efficient treatment volumes of inhalers sold initiatives and campaigns, 5 https://goldcopd.org/world-lung-day-2019-respiratory-groups-unite-to-call-for-healthy-lungs-for-all/; http://www.globalasthmareport.org/ and monitoring helping millions across the world burden/mortality.php to ‘Breathefree’
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Successful switch from Launched Ciphands portfolio Mutually planned exit of Fidelity- Demonstrate organisational agility, along with our purpose of Caring for Life prescriptions to OTC – Prolyte including sanitiser, hand-rub, backed private equity partner’s 2 (ORS), MamaXpert (Pregnancy and surface disinfectant to share, with Cipla Limited now SBO Address global health threats such as AMR and Covid-19 test), Maxirich (Multivitamin strengthen portfolio around holding 100% ownership in Cipla supplement) Covid-19 Health Cipla’s performance 2020
Further AMR (Anti-Microbial Launched the ‘Save Susceptibility’ Addressing every possible drug Cipla’s 3-year strategy Resistance) stewardship campaign to build awareness, that has been thought of as a enable better diagnosis and solution for Covid-19: Build a comprehensive Build core wellness brands like Cipla scored 70%, by the Access enable appropriate action and portfolio (products, services, Nicotex, Cofsils, UnoBiotics, etc. to Medicine Foundation for use of our commonly prescribed Scaling up manufacture of infrastructure, digital assets) that Consumerising Cipla’s brands the Anti-Microbial Resistance anti-bacterial drugs such as medicines that shows potency addresses holistic well-being of to build deeper connect with Benchmark 2020, which is the Fosfomycin, Azithromycin and against the virus - Lopinavir + an organ(s) irrespective of the patients highest compared to other Colistin Ritonavir, Hydroxychloroquine channel of promotion generic companies. The and Azithromycin AMR benchmark evaluates Combat Covid-19 crisis the performance of pharma Partnership with Roche for companies having major stakes Supporting the community and marketing of Tocilizumab, in anti-infectives, and compares ensuring supply reliability: which is being used on Covid-19 Core Economic Engine how they are bringing AMR patients suffering High execution focus on under control managing manufacturing and Partnership with Gilead to supply chain – both back-end manufacture and market the Focus on difficult to compete spaces such as Complex Generics and Significant additions to Cipla’s respiratory related products in the US branded portfolio of anti- supplies and front-end logistics investigational antiviral drug 4 infectives with worldwide rights Remdesivir in 127 countries to SBO Cipla Foundation supported a Measured investments in the specialty business and divest non-core assets (excluding Greater China) of help save millions of lives from Covid-19 24x7 facility for testing ZEMDRITM (IV Plazomicin) and the pandemic of 4,000 suspected Covid Cipla’s performance 2020 agreement to acquire Elores cases and also setting up of Collaboration with CSIR-IICT in (Ceftriaxone + Sulbactam + Generics: Specialty: Clinical programme completed, isolation wards for paediatric the development of Favipiravir Disodium EDTA) in India NDA submitted, and Prescription patients. The Foundation also to Cipla 10+ products launched, such Cipla’s US specialty institutional Drug User Fee Act (PDUFA) date safeguarded health workers by as Esomeprazole for oral business division branded as Cipla is October 2020 for ONPREFA supplying them with PPEs suspension (FTF), Pregabalin Therapeutics (IV Tramadol, pain management capsules, Albuterol MDI (FTF) asset) Cipla’s 3-year strategy and limited competition products Acquired worldwide rights through partnerships such as (excluding Greater China) Clinical programme with IP AMR to be the next meaningful Embrace the ‘New Normal’, post- De-risk the business for critical Fosaprepitant injection and of ZEMDRI™ (IV Plazomicin, filed for anti-fungal inhaled play for Cipla. Identify innovative Covid, and identify new ways of Intermediates Daptomycin injection patented until 2030) to further our Itraconazole (Pulmazole) ways to fight against AMR, such working to stay relevant AMR (Anti-Microbial Resistance) as drug repurposing, new routes Nine products filed, including stewardship of delivery, and identify new generic Advair Diskus® antibiotics and combinations
Cipla’s 3-year strategy
Grow Cipla Health business to become Plans to calibrate investments in Focus on maximising value Finalise out-licensing for CNS 3 a holistic and wellness player R&D and focus on large value- opportunity for key commercial specialty assets SBO accretive assets in respiratory assets in institutional business and other complex generics and respiratory specialty Cipla’s performance 2020
Cipla Health business achieved Nicotex is the undisputed Omnigel is the #2 brand in all-round play across multiple, market leader in India in the India in the topical pain relief large OTC categories NRT (Nicotine Replacement category by both value and Therapy) based smoking volume cessation category
036 Caring For Life since 1935 Strategy Strengthened for a Sustainable Tomorrow 037 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Strengthen presence in existing emerging markets Continue to build scale and depth in branded 5 home markets of India and South Africa 6 Simplify operations and build strong fundamentals to drive sustainable growth SBO SBO Explore new opportunities in emerging markets
Cipla’s performance 2020 Cipla’s performance 2020 One-India: Acquired brand name and SAGA: trademark rights for Vysov and 10%+ growth in key DTMs in Partnership with Novartis in Simplifying business: Strategic Consolidated India branded Vysov M, indicated for type 2 Third-largest player in the private emerging markets; 14% growth in Australia and Sri Lanka to market divestments of non-core assets prescription, trade generics and diabetes market, growing more than twice as Europe its COPD products including exit from FWA market consumer healthcare business as fast as the market year over year. and divestment of non-focus One- India, which has collectively Signed exclusive marketing deal Top therapies and market shares: Synchrobreathe breath-actuated Strengthening portfolio: Filed brand Lomac (Omeprazole) from grown to become a USD 1 billlion with Reliance Life Sciences for CNS - 13%, Respiratory - 11%, inhaler launched in multiple 200+ Stock Keeping Units (SKU) Vietnam organisation (~40% of total Cipla) Omalizumab for severe allergic Gastro-intestinal - 8% markets and ranked as top brand and signed licensing deals of and the second-largest player asthma and urticaria in Nepal; Flohale launched in 35+ products across emerging based on volume dispensed One out of every four patients use Algeria; overall FPSM pMDI markets and Europe Acquired exclusive marketing Cipla’s OTC product in the ‘Where market share of 20% in Europe Continues to be the third-largest6 rights for stem cell product We Play’ categories player with leadership position Stempeucel for the treatment of One in every four patients in East in therapies like Respiratory, diabetic foot ulcer Cipla’s 3-year strategy Urology and Anti-virals Africa is on Cipla’s triple therapy Acquired four nutraceutical (ARV) Achieve 2x growth through Launch respiratory portfolio in Six of the top 10 brands beat products – Cpink, CDense, superior execution China molecule growth rate Productiv and Folinine – from Joint development of 4-in-1 Wanbury Limited, to strengthen Quadrimune, a new paediatric HIV Launched Foracort our presence in the women’s drug, with Drugs for Neglected Synchrobreathe; health segment Diseases initiative (DNDi). This is to Foracort (Budesonide + be launched at USD 1 a day Formoterol) is the most widely Focus on digital and patient centricity Partnered with AstraZeneca used in ICS + LABA class 7 as future pivots for business models and Luye Pharma for exclusive SBO marketing and distribution rights of Quetiapine, indicated for Bipolar Cipla’s performance 2020 disease in South Africa and other select territories Launched Berok 2.0 (respiratory What a Relief (www.whatarelief. Pilot study of Brandmed – a awareness campaign): Second in) campaign for a urological digital initiative helping patients version of Cipla’s flagship condition called Benign manage chronic lifestyle Cipla’s 3-year strategy patient-focused initiative in Prostatic Hyperplasia (BPH) with diseases by using technology respiratory therapy (#Asthma ke outreach of 10 million+; 2,500 to track intervention outcomes One-India: SAGA: liye, #InhalersHainSahi, #Berok urology clinics already live; ~33k – completed in South Africa, Deliver market-beating growth Become a strong player in South Zindagi 2.0) rolled out with an washrooms in 835 towns geo- becoming more patient centric through focused execution of the Africa with effective launch of outreach to 30 crores people tagged on the platform; over 400 with 2,500+ patients participating One-India strategy product backlogs washrooms have been searched in the Brandmed Wellness so far, through this platform Programme One Distribution: Build a task force Expand branded OTC through to deepen channel engagement, partnerships invest in strategic partnerships and Cipla’s 3-year strategy smart analytics Establish Cipla as a partner of Continue therapy-shaping and Leverage digital assets like Continue to partner with Enhance patient connect through choice for innovator drugs/MNCs patient care continuums by going Wellthy and Brandmed to move e-pharmacy and point-of-care respiratory awareness campaigns in our home markets beyond the pill closer towards patients for devices to enable patient care (#Berok Zindagi, Breathefree) and delivering integrated care; build continuum one therapy consumer platforms more digital assets
6 As per India IQVIA MAT Mar 2020
038 Caring For Life since 1935 Strategy Strengthened for a Sustainable Tomorrow 039 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
1 Capability Our Value Creation Model
Continuous improvement: Efficiencies 8 to deliver fuel for growth Our business model is driven by the OneCipla Credo and SBO our purpose of Caring for Life. These encourage and Cipla’s performance 2020 inspire our employees and partners to strive for excellence
Continued to deliver year-over- Cost efficiencies: Delivered and Asset productivity: Unlocked in what they do, keeping ethics, transparency and good year cost savings, contributing to sustained cost reduction through additional capacity for critical governance practices in mind. Cipla’s business model is the the bottom line, and supporting process effectiveness products foundation upon which we seek to effectively implement profitability and drive a sustainable business strategy. Cipla’s 3-year strategy
Focus on cogs optimisation with Continuous manufacturing, de-specification and external reducing inefficiency and benchmarking capacity gaps Our business model also encompass key elements that drive operations, including the most critical internal and external factors that influence Cipla. These elements include:
Invest in Quality 4.0 to Our The Our Market 9 change quality paradigm SBO inspiration environment stakeholder opportunities and ethos we operate in expectations and risks Cipla’s performance 2020
Initiated culture-led units, which improved TRUST Competency upgrade through transformation programme to Culture Index, Investigation a state-of-the-art skilling create model quality plants Effectiveness, Non-Conformance programme; analysts certified Even as we aim to bring transparency and insight into Cipla’s organisational strategy for our stakeholders, we assuring quality and availability; Reduction, and Repeat Deviation in best-in-class lab and sterile accord prime importance to showcasing our global value chain and outline the key components of our business pilot programme started at two Reduction practices operations. The core aspects of our business model are mentioned below:
Cipla’s 3-year strategy 1 2 3 Paperless lab: Digitising Robotic Process Automation operations and procedures (RPA) To build on our Our six Capitals The interlinkage and foundation of across the business dependence between delivering quality and model showcase the the Capitals is what Strengthen the talent pipeline affordable products strategic allocation allows us to work 10 and improve productivity to patients, we ensure of resources to in a co-operative SBO that each element generate operational and harmonised Cipla’s performance 2020 of our value chain synergies, capitalise on environment, as
Certified as a ‘Great Place Introduced an Integrated Talent Digital skill building through Cipla works seamlessly, valued opportunities OneCipla, addressing to Work’ twice in a row, with Management framework for University, with 2,000+ unique harmonised with and contribute key stakeholder improved scores building best-in-class talent and courses and 600,000+ learning a sustainable and to efficacious requirements and a strong succession pipeline for hours transparent business stakeholder value challenges. leadership and critical roles conduct. through distinguished Cipla’s 3-year strategy outcomes. Strengthen leadership capability collaboration and digital Reimagine manning model in the in areas such as developing savviness new digitally enabled Work from an entrepreneurial mindset, Home (WFH) environment 1GRI 102-9
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Cipla’s business model revolves around its purpose of 'Caring for Life'
Our Capital Inputs that govern Cipla’s global Strategic allocation of The global value chain with an Our Capital Outcomes showcase our commitment Drivers operations resources across the capitals End Patient focus towards Patient Centricity
Financial Capital Financial Capital Capitalizing on growth opportunities with Corporate Governance Sustainable growth driven by operational a robust cash outflow in tangible capex Manage financial resources in & Internal Controls performance resulting in a 9% 5 year CAGR of a diligent manner to harness at H573 crores. 3rd largest revenue growth. Inspiration and Ethos opportunities for long-term Continue building a strong growth player in India ~300 bps increase in RoIC over the last 2 years Product sustainable economic growth pipeline for the future with R&D with FY 2019-20 RoIC at 12.5% Patient centricity investment in FY 2019-20 at 6.9%1. Technology Manufacturing Capital Innovation in-licensing 46 manufacturing sites across 5 countries. A diversified product portfolio of over 1,500 Manufacturing Capital Patient 43 regulatory audits conducted 3rd largest player products in 65 therapeutic categories and over Focus on developing complex Insurance 50 dosage forms (including US FDA and MHRA) Needs in South Africa & Payers manufacturing capabilities, improving demonstrating operational excellence. Robust Quality Management Systems (QMS) to productivity and increasing safety and Investment in latest technologies, ensure data integrity reliability of operations efficient processes, state of the art 19% improvement in TRUST Quality Culture Index equipment and building up TRUST culture. during the year Innovation Among the most Expertise in complex products supported Research and Healthcare dispensed generic Intellectual Capital Operating Intellectual Capital by over 1,300+ R&D colleagues Development Professionals Talent Management companies in US Strong R&D with 13 patents filed, 144 ANDAs Environment Invest in technologies to advance new Continuous investment in R&D comprising filed and 57 DMFs filed globally. product developments to drive better of 6.9% of revenue in FY 2019-20. Dedicated and focused approach towards Market Trends patient outcomes 5 Repurposing and product evaluation innovation - Cumulative 288 patents and 259 Regulatory Demands undertaken to combat COVID-19. Leadership positions ANDAs Global Developments across key emerging Cipla leads the fight against COVID-19 through markets a spectrum of vital drugs that show potency 25000+ global employee strength Business Channel against the virus. Human Capital Alliances Partners Integrated Talent Management Registration, Key Brands3 Cultivate employee capabilities and Framework to leverage synergies Filings and Human Capital competencies to innovate and drive of talent acquisition, learning & Approvals Institutional 30% female representation in our Board shared organizational objectives Partners development, performance management 84% overall Employee Engagement Score in and succession planning our MiVoice Pulse Survey During FY 2019-20, Cipla identified successors 2 Manufacturing for 80% of its senior management positions. Stakeholder Demands Social and Total H41.81 crores invested in Corporate Relationship Capital Social Responsibility initiatives Foracort Marketing, Social and Relationship Capital Internal Stakeholder Leverage Social and Relationship Identification of 7,000+ upstream and Sales and Cipla’s palliative care centre has reached out capital to share knowledge and downstream suppliers External Stakeholder Distribution to 17,500+ patients over 23 years resources to enhance individual and Continue to address myths and API Formulation collective well-being misconceptions surrounding asthma and 49% of total procurement spent on local sourcing Systemsand Processes
to make patients aware of the benefits of Technology Information Berok Zindagi Campaign outreach - 30 crores inhalation therapy Duolin people Supply Chain Natural Capital 9.1% of energy derived from renewable Investment in energy and water saving Natural Capital Product in-licensing resources initiatives Commitment towards efficient 19,133 tCO2e emission reductions from offsets operations resulting in reduced Solar rooftop capacity increased from Quality and Regulatory Compliance Urimax due to use of renewable energy Opportunities and environmental footprint 820 kW in FY 2018-19 to 1,789 kW in Risks Legend Overall water consumption reduced by 3%, as FY 2019-20 compared to the previous year Lines of operation We have undertaken Zero Liquid Frameworks within Generated 10.4 lacs kWh from solar rooftop Leveraging Opportunities Discharge (ZLD) projects to improve our which Cipla operates installations Management and wastewater management systems. Lines of interaction Enablers for Cipla More than 70% of wastewater generated was Mitigation of Risk Focus on sustainable business operations recycled / reused by minimising and recycling the waste Montair 95% of liquid hazardous and 1.34% of solid generated hazardous waste recycled
OneCipla Credo Purpose - Inspired Responsibility - Centered Innovation - Driven Excellence - Focused Integrity and Trust - Anchored
1OPEX including depreciation as a % of revenues 3Sales India Rx 2Represents global spend including statutory spend of H36.31 crores by Cipla Limited 4Includes ANDAs filed between April and May 2020 5Includes approved, under approval and tentatively approved ANDAs for Cipla, InvaGen as well as partnered ANDAs and filed under PEPFAR
042 Caring For Life since 1935 Our Value Creation Model 043 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
1 Stakeholder Engagement Why Capital Modes are they important Linkage of Engagement
Analysing Building our healthcare portfolio while creating value for stakeholders Government Enforce policies Relationship Scheduled meetings goes hand in hand with realising Cipla’s goal of delivering affordable and which impact our Capital Industry conferences the value we accessible patient healthcare. Our stakeholder communication model is operations and and Written communication provide aligned with the principles of the OneCipla credo. This establishes a required Regulators long-term business level of advocacy and communication on the challenges faced by the objectives Facility visits Company as well as our capabilities to address opportunities and initiatives of stakeholder concern. In FY 2018-19, we conducted a detailed stakeholder engagement exercise to understand key concerns and material issues that are essential to our value-creation process. Through regular interactions with our stakeholders, we gained new insights into existing material topics Help us better Conferences and seminars that helped enhance our organisational strategy. Healthcare Relationship understand Capital Regular visits by field staff patients’ needs professionals Intellectual Advisory Board meetings (HCPs) Capital
Why Capital Modes Help us develop Relationship Regular interaction through Communities our business Capital CSR initiatives and websites are they important Linkage of Engagement ecosystem and our Social Capital focus on creating shared value Patients End users of our Relationship Patient care products. We Capital Websites are committed Intellectual Seminars to meeting their Capital Providers of Relationship Conference calls expectations Shareholders Financial Capital Capital Meetings (one-on-one and and investors Financial Capital group) Investor conferences Annual General Meeting Channel Vital for effective Relationship Scheduled meetings distribution and Capital In-market visits Partners accessibility of our Play a pivotal role Relationship Regular meetings products B2B and in the sale and Capital In-market visits marketing of our institutional Industry conferences partners products
Providers of all Relationship Supplier visits Suppliers The backbone Human Capital Townhalls input materials and Capital Supplier audits Employees of our business finished products Natural Capital Employee engagement survey and services that activities. They Manufacturing Cipla Unplugged and What’s are critical to our contribute towards Capital Up Cipla operations productivity and efficiency, and help Senior management boost profits interactions
1GRI 102-40, GRI 102-42, GRI 102-43, GRI 102-44, Information in line with BRR Principle 4, Question 1
044 Caring For Life since 1935 Stakeholder Engagement 045 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Materiality Assessment1 Material topics The material topics for FY 2019-20, ranked as per importance by our internal and external stakeholders have been provided in the table below. Additionally, we have also provided interlinkages with our 6 Capitals and Strategic Business Objectives (SBO) for further insight into how we incorporate these key focus areas into our operational performance. Strengthening Our materiality assessment during FY 2018-19 provided valuable insights into specific Environmental, Social and Governance (ESG) topics Key Aspects Strategic Business Material Topics Capital linkage/other insight into that could affect our ability to create long-term value. At Cipla, we Objectives sections strategic thoroughly review these topics to stay abreast of knowledge relating to Quality SBO 8 Systems and processes the industry and the global business environment. Our material topics SBO 9 Pharmacovigilance opportunities also provide detailed insights into stakeholder concerns, as well as internal and external risk factors that have a certain degree of influence Ensuring product quality and safe product destruction on the Company. For FY 2019-20, we strengthened our strategy by enhancing our performance parameters specific to Cipla’s business Access SBO 1 Pricing pressures model, geographic presence, product offerings, and important market SBO 2 Enhancing availability and affordability of medicines trends and developments. SBO 4 Improving patient experience SBO 5 Our four-step materiality analysis can be seen below: SBO 6 SBO 7
Operations SBO 3 Data integrity SBO 4 Sustainable supply chain SBO 5 Energy efficiency and managing carbon emissions SBO 6 Waste management SBO 8 SBO 9 Water management Growth opportunities Ensuring employee health and safety
Identification Prioritisation and Boundary setting Review Community engagement reconfirmation Digitisation Capital productivity – balancing growth, profitability and returns During FY 2018-19, we A reconfirmation exercise The boundary for all Our material topics are identified material issues was conducted for our material issues was reviewed and internally Research and SBO 2 Focus on intellectual property after a thorough review. material topics taking determined based on validated by our key development SBO 4 Investment in R&D Initially, we conducted into account stakeholder their impact on our function heads and the in-depth peer and inputs on a scale that business operations senior management, Focus on innovation industry analysis to ranked these as high, and stakeholders. The including Cipla Board Regulatory environment understand current medium or low. boundary for all the members, before we developments in material issues included finalise the list for the Governance Cipla’s Focus on corporate governance - business ethics, Corporate Governance relative markets and the in this report is Cipla’s reporting period. Trinity enterprise wide risk management and compliance Cipla’s Enterprise wide risk trinity regulatory environment. global operations. Anti-fraud management This was accompanied Limitations related to by internal stakeholder the boundary, if any, Talent SBO 10 Human resource development and senior management are specified separately Protection of human rights reviews. under each section. Promotion of diversity Succession planning
Marked as high by internal and external stakeholders Marked as high by external stakeholders Marked as high by internal stakeholders 1GRI 102-47, GRI 102-49
046 Caring For Life since 1935 Materiality Assessment 047 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Our Integrated Approach to 2 Quality 1 Failure to comply with GxP (Good Consistent adherence to a network and are working with the Risk Management Laboratory Practices, Good Clinical quality improvement and training US FDA on addressing the findings. Practices, Good Manufacturing programme with a focus on historically known quality issues Enhancements during the year Structured At Cipla, we believe that systematic risk management practices ensure Practices, etc.) at any stage of product manufacturing and product effective navigation to achieve business objectives and enable sustainable Investigation and Corrective and Embarked upon a Quality and Informed development can result in sub- growth in a volatile and complex environment. Our Enterprise Risk Preventive Action (CAPA) for Transformation Programme that consideration optimal product quality, pose a Management (ERM) framework has been designed to identify, monitor identified non-conformities covers the following aspects: of risk factors in significant health hazard to our and minimise the adverse impact of strategic, operational, financial and Continuous institutionalising of decision making compliance risks faced by the organisation. patients and lead to issuance of Identification & communication adverse audit findings by regulatory lessons learned from past quality- of vital behaviour shifts that are agencies. related incidents of adverse required Our ERM framework enables a nature Mitigation Deployment of structured consistent, collaborative, and Implementing a risk-based quality recognition programme comprehensive approach to Aligning a team of quality approach to assessing and to reward positive behaviour identify, prioritise, respond and professionals with each managing third party suppliers monitor risks across our operating manufacturing site to provide with a linkage to our value Targeted leadership environment. A detailed update oversight, assist the delivery of chain. Regular audit of contract interventions to encourage and on ERM activities is reviewed in Risk quality performance and ensure manufacturers to help meet reinforce good practices Identification the quarterly meetings of the all-time audit readiness expected standards Investment and Risk Management Initiated training programmes 01 During the reporting period, we Committee (IRMC) of the Implementation of a product covering multiple aspects 03 Board. Based on the Board and Life Cycle Management Process received a Warning Letter from Management’s assessment, a (LCMP), which focuses on product the US FDA following an inspection Rolled out global CAPA at all sites summary of our key risks and quality of our Goa plant. While we have based on continual learnings from been able to substantially de-risk audits conducted by regulatory mitigation measures is given below; Harnessing Information the impact of the Warning Letter, agencies the list is merely illustrative and Technology to digitalise and by no means exhaustive. While we remain extremely focused on improve Quality Assurance maintaining highest standards of every company tries to establish processes mitigation measures as best as it quality across our manufacturing Risk Risk can as part of its risk management Response and Prioritisation strategy, residual risks cannot be Monitoring wished away. 3 Commoditization and other business model disruptions (including those induced by regulatory changes) 02 Our business models worldwide In South Africa, we look to maintain for generic Advair and secured are experiencing a varying consistent growth while gearing approval for Albuterol, we need to Business continuity 1 degree of disruptions such up for potential changes such as be vigilant of intensified competition as commoditization, digital the proposed National Health which can prevent us from achieving The Covid-19 pandemic threatens Mitigation Commenced organisation- innovations, an increase in channel Insurance (NHI) program. Our product launch outcomes that are ‘business-as-usual’ with its wide mandate to reimagine our consolidation and a shift from Global Access and South Africa predicted. overwhelming disruption of Implemented a formal Business business models and cost bases to Continuity Planning (BCP) curative to preventive healthcare. local tender businesses were supply chains, movement of unlock greater value. Mitigation framework to de-risk procurement, impacted by an erosion in tender workforce and markets. The nature In India, we witnessed pressure manufacturing, and distribution Enhancements during the year prices. of the pandemic also places on our margins and volume Our One India initiative is greater responsibility on the processes; aimed at achieving portfolio Created a cross-functional Business growth due to commoditization In US, the commoditisation of pharmaceutical sector to support expansion, enhancing patient Promoted strong cash and treasury Continuity Team to keep plants and and hyper-competition in select generics has led to significant the fight against Covid-19 and connect and driving affordability. management practices with a focus distribution centres operational, therapies. Further, while we enjoy price erosion across therapies. maintain access to medication for This initiative will enable us to on prompt collections, managing maintain highest standards of market leading positions in certain Growth in this market is thus led by all patients. leverage strengths across India financial market risks prudently employee safety and sustain therapies, incremental high growth successful product launches. While prescription, trade generics and through investment in low-risk liquid workforce morale and productivity similar to the past could be we progressed well on clinical trial consumer health businesses. instruments and conserving costs, challenging. 1 GRI 102-11, GRI 103-1, GRI 103-2, GRI 103-3
048 Caring For Life since 1935 Our Integrated Approach to Risk Management 049 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Continuous monitoring of Emerged as one of the largest Enhancements during the year Environment, Health and Safety (EHS) Risks regulatory landscape and players in the addressable over 6 proactive mitigation of risks posed Entered multiple strategic the counter (OTC) market in South by evolving regulations. in-licensing deals to bolster Africa EHS incidents pose critical regulatory, safety and operating exposures and Implementing a host of Covid-19- diabetology, women’s health, reputational and business continuity issues standardised corporate EHS specific safety measures at the Strengthening existing product oncology and other therapies Tie-ups with various digital health risks. These incidents could result in guidelines to our manufacturing sites workplace in accordance with portfolio in our South African platforms (India, South Africa) significant remedial costs and harm to statutory requirements and WHO (India) Ensuring compliance with local business by leveraging initiatives the environment and communities that norms. regulations and best-in-class Implemented initiatives to Strengthened business we operate in. announced by local regulator. industry safety standards across our Enhancements during the year pipeline through successful maintain leadership position The employee health risk factor is locations Rationalisation of development product launches (Albuterol, across respiratory and urology further exacerbated by the need Except for the requirements pipeline and future R&D therapies (India) Esomeprazole and others) to operate in the highly infectious Implementation of EHS Management warranted by the COVID-19 investments to be focused on Covid-19 environment. System (EHSMS) for timely scenario and their corresponding select value-accretive assets (US) Detailed mitigation plan prepared Deployed measures to improve identification of potential risks redressal, there were no other to partially offset potential trade working capital position and Mitigation major changes in risk exposures Focused investments towards margin cap regulations (India) manage intensified competition Periodic internal audits and Hazard and mitigation measures during institutional business in the (US) Corporate EHS function, independent Identification and Risk Assessment the year. Specialty segment (US) of line functions, provides oversight on (HIRA)
4 Emerging Markets – Geopolitical factors 7 Cyber-security and data privacy regulations
War, economic sanctions, and other local stakeholders Enhancements during the year Digital security breach or disruption to involves periodic testing and Fortification of processes to political unrest and a general Process of securing receivables While geopolitical de-risking measures digital infrastructure, due to intentional improvement of controls through adhere to the ’Privacy-by-Design’ lack of stability have resulted in or unintentional actions, such as cyber- simulated phishing and penetration concept in most cases through Letters of continued through the year, we also heightened volatility in select and attacks, data breaches or human error testing exercises Credit or by mandating advance harnessed the following business Creating awareness amongst highly lucrative markets in the opportunities: could lead to serious financial loss, employees on applicable privacy Middle Eastern and North African payments prior to supply business disruption and/or damage to Fostering a risk-aware culture that requirements (MENA) and Latin American Augmented biosimilars portfolio with our reputation. can anticipate and prevent attacks, Capping overall exposure to addition of Adalimumab (LATAM) regions. and where necessary, effectively Enhancements during the year the identified countries in terms We are also aware that worldwide respond to security breaches Strategic partnerships in multiple These risks mostly manifest in of sales, profits and invested measures to slow Covid-19 are pushing Multi-factor authentication controls geographies to expand respiratory Implementing cyber risk and crime the form of liquidity issues and capital, to a defined threshold at our business operations into virtual introduced as a measure against portfolio insurance policy currency fluctuations. any point of time environments which can make them Business Email Compromise (BEC) more susceptible to cyber-attacks and attacks Compliance with data privacy law Leveraging presence and data theft. Mitigation requirements through: strength of local partners to Enhancements to site cybersecurity Mitigation infrastructure In-depth follow-up of country enable effective de-risking of Performing gap analysis to identify risk and response measures to operations Defined a consistent Cyber Risk existing weaknesses protect our assets, employees Management programme that Policy and procedure rollouts
5 Supply chain disruption 8 Compliance
The global regulatory environment Mitigation Performing independent The impact of Covid-19 on China Mitigation Enhancements during the year has evolved and we have witnessed assessments to gain assurance on led to extended periods of considerable increase in regulatory Aggressive tone at the top - fostering legal compliance if any an attitude of zero tolerance of non- stoppage at the facilities of many Inventory build-up through vendors Identified multiple Alternate scrutiny as well as stakeholder compliance to laws and regulations Enhancements during the year Chinese suppliers. Owing to the / local traders / P2P vendors Vendors and made necessary expectations vis-à-vis compliance. significant value chain linkage with filings Developing alternate vendors for We recognise that non-compliance Identification of changes in the We progressed further on our China, the ability to source APIs at regulatory environment and journey of digitising the Compliance critical APIs and Intermediates, Strengthened last-mile with applicable laws and regulations competitive rates poses substantial poses a threat to our financial and their associated impact in a programme by expanding the which are currently being procured distribution capabilities in India challenges. timely manner, to stay abreast of coverage of our Compliance from China and other countries reputational standing. regulatory requirements monitoring tool.
Exploring the feasibility to develop Implementation of robust in-house manufacturing as an governance mechanism with respect alternate source for some APIs to Compliance processes
050 Caring For Life since 1935 Our Integrated Approach to Risk Management 051 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Financial Capital1 Revenue from Operations FY 2019-20 revenue stands at H17,132 crores with five- year CAGR of 9%. The year saw strong performance across our branded business in India, South Africa and At Cipla, we continue to relentlessly focus on building a profitable in the US generics business. Performance was partly impacted by distribution model changes in the India and sustainable business backed by scientifically supported trade generic business to maintain long-term health R&D outcomes, to improve the standards of patient care and of the business, certain supply related challenges and positively impact the communities we engage with. continuing geo-political volatility in emerging markets. The Company continues to focus on driving growth FY 2019-20 was yet another good year with strong revenue growth across branded in branded markets of India and South Africa, deliver markets, enhanced direct-to-market presence in the US, and unlocking of the US limited competition launches in the US and strategically respiratory franchise, towards the close of the year. Cipla delivered 5% growth in manage its footprint in emerging market territories revenues and maintained stable operating profitability at about 19%. We continued to to capitalise on the opportunities, while managing drive strong cost management, cash generation and higher capital allocation to return- evolving risks. In FY 2020-21, the Company will also accretive businesses through the year. These efforts resulted in the free cash flow of drive business re-imagination across key geographies, J 1,955 crores, prepayment of J 1,939 crores debt and very healthy year-end cash which will enable us to establish an agile business balances; all of which have led to sustained improvement in our return ratios. In FY model and thrive in the post-Covid-19 environment. 2020-21, the Company will continue its focus on business reimagination, efficient capital allocation, cost optimisation, improvement in health metrics and creation of value for multiple stakeholders as we adjust to new realities in the post Covid-19 era. (H in crores)
5 year CAGR 9%
17,132 16,362 15,219 14,630 13,790 11,345
FY 14-15 FY 15-162 FY 16-17 FY 17-18 FY 18-19 FY 19-20
Our strategic focus areas include: Revenue
Capital Productivity – Growth balancing growth, opportunities profitability and returns
2FY 2015-16 includes one-time profit share of Esomeprazole and other items Note: Figures mentioned above for FY 2014-15 are as per IGAAP 1 GRI 103-1, GRI 103-2, GRI 103-3 5 YEAR CAGR IN REVENUES whereas FY 2015-16 onwards are as per IND AS
052 Caring For Life since 1935 Financial Capital 053 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
EBITDA3 Net Profit after Tax 5 attributable to shareholders Cash Conversion Cycle Cash flow from operations Absolute EBITDA grew at CAGR of 8% over the last five years driven by growth across India, For FY 2019-20, the PAT stood at H1,547 crores, (no. of days) (H in crores) South Africa private business and new launches the highest PAT ever reported by the Company. in the US. A strong focus on the product mix and This was driven by increased operating cost optimisation initiatives have helped drive profitability and reduced depreciation and 3,068 127 125 130 expansion in the base business EBITDA. The Pre- impairment, despite a higher tax expense. The 119 114 114 2,382 R&D EBITDA grew at CAGR of 9% over last 5 years. effective tax rate for FY 2019-20 was 29%. 1,741 1,691 The Company continued to maintain EBITDA at a 1,463 healthy level of ~19% in FY 2019-20. 1,173
(H in crores) (H in crores)
10.4% 26.4% 9.9% 9.3% 9.3% 9.0% 24.7% 25.3% 25.4% 6.9% 24.2% 24.5% FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20
19.1% 1,528 1,547 18.6% 19.4% 18.9% 1,360 1,411 Cash Conversion Cycle Cash flow 18.0% 16.9% 1,181 1,006 3,171 3,230 2,826 Working Capital6 Free cash flow from operations7 2,480 2,476 2,162 (H in crores) (H in crores)
3.27 3.03 2.94 2.65 2.86 2.62 1,955 FY 14-15 FY 15-164 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 6,168 5,987 Reported EBITDA% PAT 5,028 EBITDA 4,689 4,477 Pre R&D EBITDA % PAT Margin 4,326 1,098 1,043
512 558 (H in crores) 370 Cash spends - Tangible Capex 1,040 1,047 The Company continues to identify opportunities in FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 select areas such as respiratory and strategic APIs, 771 706 and invest in enhancing manufacturing capabilities 573 WC Free cash flow to expand our global footprint. 360 WC Turnover Ratio Over the years, the Company has also invested in expanding capabilities in the areas of technology, Over the years, Cipla has maintained a strong focus In FY 2019-20, overall cash flow further strengthened, automation, safety, environment and data-systems. FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 on working capital management through initiatives which reflected in cash flow from operations growing Cash Outflow targeted at the management of inventory, receivables to H3,068 crores from H1,691 crores in FY 2018-19 and and payables. In FY 2019-20, while absolute working free cash flow growing to H1,955 crores from H1,043 capital has improved, working days have increased on crores in FY 2018-19. The robust growth in cash flow was account of higher levels of receivables, led by healthy attributed to significant progress on stabilising working sales in key geographies. capital requirements and normalising growth capex.
3EBITDA = Revenue from Operations - (Cost of Material Consumed + Purchase of Stock-in-Trade + Changes in inventory of Finished Goods, 5Cash Conversion Cycle = (Average Working Capital ÷ Revenue Per Day) Work-in-Progress and Stock-in-Trade + Employee Benefits Expense + Other Expenses) 6Working Capital = Trade Receivables + Inventory – Trade Payables 4FY 2015-16 includes one-time profit share of esomeprazole and other items. Normalised EBITDA for FY 2015-16 without one-off was ~14% 7Free cash flow = Cash flow from operations (net of tax) + interest income - interest expenses – capex (tangible and intangible) Note: Figures mentioned above for FY 2014-15 are as per IGAAP whereas FY 2015-16 onwards are as per IND AS Note: Figures mentioned above for FY 2014-15 are as per IGAAP whereas FY 2015-16 onwards are as per IND AS
054 Caring For Life since 1935 Financial Capital 055 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Cipla has efficiently allocated resources across the business to deliver long-term growth and value to its During FY 2019-20, strong cash flow generation R&D Investment shareholders. Over the years, the Company has maintained a Return on Equity (RoE) of ~10% enabled the Company to prepay long-term debt by H1,939 crores leading to improvement in the Net Debt The Company continued to maintain healthy 11 to Equity ratio to 0.05 (FY 2018-19: 0.10 ) and Net Debt investments in R&D, which helped build a strong growth Earnings Per Share - Diluted Return on Equity (RoE) to EBITDA ratio to 0.25 (FY 2018-19: 0.50). pipeline for the future. The increase over the last (H) two years was largely driven by the clinical trials for generic Advair and other strategic assets for the US 8 Net Debt to Equity business. 11.3% 12.3% 10.5% 10.4% 10.1% 8.4% With the successful completion of the generic Advair 18.9 19.2 0.32 trials and subsequent filing, R&D investments will be 16.9 17.5 moderate in FY 2020-21. The Company will focus on 14.7 12.5 0.20 select value-accretive opportunities to drive a healthy 0.14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 0.10 build-up of pipeline for sustainable growth in the future. 0.07 0.05 (as % of revenues) Return on Equity (RoE) FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 8.0% 7.1% 7.4% Net Debt to Equity 6.6% 6.9% FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 6.3%
Diluted EPS
Net Debt to EBITDA FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 R&D Investment 1.51
Return on Invested Capital (RoIC)10 1.07 0.72 The Company has remained focused on growth 0.50 0.35 investments across value-accretive businesses. These 0.25 investments have driven strong growth and portfolio expansion across our key markets. From FY 2016-17 to FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 2019-20, Cipla also fully integrated its acquisitions in the US and realised targeted synergies through Net Debt to EBITDA significant growth in the DTM business. These initiatives coupled with strong cost optimisation and margin improvement have delivered a ~300 bps increase in RoIC Interest Coverage Ratio9 over the last two years with FY 2019-20 RoIC at 12.5%.
25 15.0% 12.5% 12.5% 11.2% 19 16 9.4% 16 13 12 7.3%
FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20
Interest Coverage Ratio Return on Invested Capital (RoIC)
8Net Debt = Total borrowings less Cash and Cash equivalents including Current Investments 9Interest Coverage Ratio = EBITDA ÷ Total Finance Cost 10RoIC = EBITDA - depreciation & amortisation ÷ Average [(Fixed assets including goodwill + Current assets excluding cash and cash equivalent) - 11RoE = PAT (after non-controlling interest) ÷ Average Shareholder’s Funds (excluding non-controlling Interest) Current liabilities excluding borrowing)] Note: Figures mentioned above for FY 2014-15 are as per IGAAP whereas FY 2015-16 onwards are as per IND AS Note: Figures mentioned above for FY 2014-15 are as per IGAAP whereas FY 2015-16 onwards are as per IND AS
056 Caring For Life since 1935 Financial Capital 057 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Manufacturing Capital Cipla has over 1,500 products
Enhancing the access and affordability of medicines worldwide in 65 therapeutic categories is of paramount importance to us. Towards this end, we have forms been strengthening our manufacturing capital through state and over 50 dosage of the art technologies, cost and complexity rationalisation, that serve patients globally. product portfolio enhancement, process and yield improvements and a commitment to achieving a zero-defect standard. This approach has helped us maintain high level of Our product pipeline is driven by our state-of-the-art manufacturing safety and efficiency across our operations. facilities located in five countries, and designed with robust systems and processes for operational excellence. We also partner with over 50 loan licensees for contract manufacturing of our products. The Cipla quality assurance team continually oversees the manufacturing process, ensuring compliance to the highest standards of technical and quality specifications1.
Capacity in FY 2019-20
Strengthening our 34 billion 109.6 million capabilities and processes units of tablets and units of aerosols pMDI At Cipla, we continue to enhance Our strategic focus areas include: capsules our manufacturing systems and processes to meet our operational excellence goals, and stay relevant to changing times. Our owned manufacturing facilities as well as 8.6 million 808 million the in-licensed facilities support units of lyophilised units of repsules both the generic and biotech Ensuring product injections businesses. Investments in our Systems and quality and Manufacturing Capital include the processes safe product development of new drug delivery destruction systems, facilitation of infrastructure supporting API and formulation 29.9 million 93 million developments, and the strengthening units of nasal sprays units of oral liquids of platform technologies.
In line with our mission to make our medicines more accessible and affordable, we started work in Pharmacovigilance 2.5 million FY 2019-20 on a new manufacturing Data integrity unit in Qidong, a city near and digitisation units of form fill seal eye drops Shanghai in China.
1 GRI 103-1, GRI 103-2, GRI 103-3.
058 Caring For Life since 1935 Manufacturing Capital 059 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
This facility will manufacture Quality chain. During the year, the CQA working with external experts to nebulisation products using team continued to drive effective achieve successful completion Blow-Fill-Seal (BFS) technology. ‘Caring for Life’ is a tradition and implementation of this system of these remedial actions and Nebulisation constitutes a promise that we have been using quality metrics, data-focused improvements, and are updating over 50% of the respiratory abiding by for the past 85 years. reviews and periodic internal the USFDA regularly on the market in China. The Qidong It means providing the highest audits. progress of our remediation and facility, scheduled to be improvement plan. Cipla also 4 quality medicines to our patients Compliance is a top priority at commissioned by March 2021, witnessed 107 customer audits at affordable prices, and creating Cipla, and we strive to improve our will be an important addition Conversion of boiler fuel from an ecosystem that effortlessly completed by our B2B partners. systems with proactive compliance In FY 2019-20, there have been to our network of respiratory HSD to LPG/ PNG adapts to external changes. Cipla’s and all-time audit readiness. We 16 recalls involving 91 batches. manufacturing units. mission is to ensure that our drugs conducted 71 internal quality We have started the process of are effective and safe to use by For each of the recalled batches, changing boiler fuel from High compliance audits across all the impact on public health was Technology today patients. We achieve this through our facilities in FY 2019-20. This 2 Speed Diesel (HSD) to Liquified assessed through a Health Hazard plays a key role in a process that ensures compliance ensured all our sites were cGMP Petroleum Gas (LPG)/ Piped with required quality standards. Evaluation. None of the batches enhancing efficiency Rapid microbiology testing compliant and approved by major that we recalled posed any safety Natural Gas (PNG) at three of and helping us stay system for sterility international regulatory agencies, concerns. our facilities. This is in compliance This year, we focused on three abreast of contemporary key areas – embedding a quality including the USFDA, EDQM A new and improved rapid with the recommendations of the culture across the organisation (Europe), WHO, TGA (Australia), At Cipla, we also evaluate our manufacturing practices. microbiology testing system is National Green Tribunal (NGT) and SFDA (Saudi Arabia). Cipla vendors and suppliers on quality We regularly invest in under implementation at our through the TRUST initiative, and the Central Pollution Control leveraging the power of data and also had 43 regulatory inspections parameters, and ensure they sites for real-time detection the latest technologies, Board (CPCB). This initiative automation to improve processes, this year by major auditors such meet cGMP requirements of in- and enumeration of micro- process efficiency has also helped us reduce our and growing the skills and as the USFDA, the Medicines and house SOPs, which are prepared upgrades and in state- organisms. This will result in environmental footprint by cutting competencies of our employees to Healthcare products Regulatory according to industry regulatory of-the-art equipment. reduction of lead time at our down emissions of SO2 and other deliver high quality output. Agency (MHRA) UK, TGA, WHO standards. and German medical regulatory We have also introduced microbiology lab by up to 70%, pollutants during production. The Cipla Corporate Quality body BfArM. No critical or repeat several automation and which will result in significant increase in business velocity. Assurance (CQA) team is entrusted observations were made. The capability development Goa facility received a USFDA The system also provides early with implementing our quality 71 107 projects at our facilites, management system through warning letter in February 2020. To warning of contaminated Internal Audits Client Audits some of which are as 5 standard operating procedures address their observations, Cipla samples, making investigation, shared a detailed plan with the under: (SOPs) and policies. The system and corrective and preventive is designed to capture complete USFDA, describing the remedial Counterfeit drugs actions faster. process data at each stage of actions and improvements 43 we would undertake. We are Regulatory Audits 1 To monitor the prevalence and drug manufacturing and the supply spread of counterfeit drugs, we have the following measures in place: Barcode project 3 The Barcode Project has been Automation with DCS implemented at two formulation Quality targets sites and one API site, and has We have installed a Distributed been proposed for other sites Control System (DCS) for Track and trace systems as well. With unique barcodes Reactor Process Automation at Received ISO we are now able to track the our sample API manufacturing All-time audit Regulatory audit All plants to be in a readiness observation state of control and movement of raw material sites. The system consists of 13485:2016 responses to be compliance during the production process a Controller and a Human certification for closed within – from receipt to storage Machine interface (HMI). defined timelines device manufacturing and dispensing. This helps us The HMI provides visual eliminate the possibility of representation of the entire Unique serialisation of all ingredients getting mixed up due system, allowing the operator products intended for the European Union (EU) to human error, during various to give inputs to the control Received, for the first stages of manufacturing and system. This facilitates real-time Improving aseptic Right First All investigations packing. This barcode system has tracking of critical parameters practices in Time, for all to be closed within time, the European been designed for integration and generation of batch sterile operations documentation specified time Medicine Agency with SAP for better control reports. The system also helps to reduce period (EMA) approval for and management of data, us comply with regulatory microbiological Virgonagar site and also helps us meet MHRA guidelines by maintaining data Serialisation on primary packaging excursions requirements. integrity. for all US-bound products
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Developing a culture of quality at our Goa site. We have identified Safe product destruction audit trail. This year, Laboratory Labour Productivity Management CLEEN key interventions across different Non-Conformance and Laboratory System (LPMS) Our pool of highly competent dimensions of Quality Excellence Safe product destruction is critical Incidence modules were implemented We are implementing an intelligent employees help us stay true to our that need to be implemented. to the quality function in the in the TrackWise system at our Goa Our Labour Productivity cleaning validation software - commitment of making a difference These interventions are designed to pharmaceutical industry as it helps site to further automate the quality Management system enables CLEEN, to digitise the cleaning transform every employee into an to patients’ lives. prevent the re-use and resale of control process. This system has the management of real-time validation process. This system involved stakeholder, committed to defective and expired products. improved our operational efficiency, attendance, headcount and assists in decision making at every achieving the overall vision of quality Gurukul- learning academy At Cipla, we have established statutory compliances, along step with intelligent algorithms, excellence at Cipla. transparency and risk management detailed guidelines and SOPs to capabilities. with customised dashboards and thus eliminating human errors. The To achieve a robust talent pipeline ensure the safe destruction of productivity reports. It also helps system has helped improve our and to improve operational Some of the interventions under such products, carried out under Electronic Batch Record (EBR) monitor budgets and timelines. This risk analysis and risk evaluation efficiency, we launched Gurukul TRUST programme are: the supervision of a designated and Supervisory Control & Data system comes with enhanced tools capabilities, leading to better - a learning academy, to train Acquisition (SCADA) for decision making, compliance compliance and control. lab analysts and microbiologists. Communication and officer. Records of expiry dates and defects are maintained and cost control. This year, 288 chemists and 79 energisation to encourage the We leverage technology wherever Chromeleon 7.2 for all lots that we receive, and microbiologists were certified right behavior towards achieving possible to make our operations IT/OT Convergence Programme by the academy with hands-on product deactivation is done as quality excellence agile and transparent. We are We have upgraded the software training on key techniques. We also per streamlined procedures. All Targeted leadership implementing the EBR and SCADA We have implemented a firewall for chromatography instruments rolled out a cloud-based learning expired or defective products are interventions to promote systems in our operations to between Information Technology (IT) like HPLC (High Performance Liquid management platform called disposed through incineration at a structured role modelling and Operational Technology (OT) Chromatography) and GC (Gas MiLearning for managing training reduce human intervention. This Treatment, Storage and Disposal at multiple locations to contain risks Chromatography) to the latest activities across the organisation. behaviour (Gemba walks) development is critical to our goal Facility (TSDF) or sent for co- that might arise due to increased version, Chromeleon 7.2, at most Best practices Campaigns on of integrating data from the field processing to cement industries. connectivity to logically isolated IT of our plants. This meets quality shop floor for all associates to level to the Enterprise Resource TRUST All our sites have Hazardous & OT networks, and to protect our lab requirements and improves drive targeted behavioural shifts Planning (ERP) level, which will Waste Authorisation from the State eventually help us get deeper OT network from the new breed of regulatory compliance. Our TRUST -- Towards a Robust, Capability building for Pollution Control Board for such insights using advanced analytics threats at the gateway level. Unified and Sustainable (quality) problem solving, investigation destruction. and business intelligence software. Transformation -- programme is effectiveness, etc aimed at promoting a culture-led Strengthening of daily quality transformation within Cipla Performance Dialogues (PDs) Data integrity and by inculcating the required mindset Digitisation2 and behavioural shifts among our Structured quality recognition employees. Through TRUST we programme to promote quality- In order to ensure delivery of quality intend to create Model Quality related practices medicines to our patients, we follow Plants that improve the quality and 3 Lean governance to instil a a robust Quality Management Pharmacovigilance availability of our products. A pilot holistic quality and delivery System (QMS). Our QMS, coupled study has been rolled out in two units metrics with the latest technologies, helps us As a responsible mailbox to receive safety-related literature to understand stay agile and flexible while ensuring pharmaceutical company, complaints from consumers, evolving drug reaction. We have seen positive results of this initiative in terms of an improved high product quality standards. Cipla takes appropriate patients and healthcare Investing in these critical TRUST culture index, investigation effectiveness, and reduction in non- It also makes our manufacturing measures to detect and assess professionals. Assessment of elements of pharmacovigilance conformance and repeat deviation: systems sustainable, improves any adverse effects of our the safety profile of a drug is captures the required productivity and ensures data medicines on patients. Our done on a regular basis by improvement areas, and integrity across our value chain. pharmacovigilance team requesting relevant information aids in standardising and 85+ Rubric-based investigation This section highlights some of the ensures that we conform to all from patients. Regular follow- streamlining processes within investigators have quality score digital quality improvement initiatives regulatory requirements and up is an important part of this the organisation. engaged in IQ capability improved over 40% undertaken in FY 2019-20: our products have a favourable process. We also organise building sessions risk-benefit profile. awareness sessions for our field During the year, we were TrackWise team to sensitise them about the inspected by the MHRA, United We have a global importance of patient health and Kingdom (in 2019) and TGA, Most of the QMS data at Cipla, pharmacovigilance system for safety. Australia (in 2020). No critical relating to areas such as complaint redressal of drug safety related observations were made. The TRUST Quality Culture 250+ management, deviation management complaints as per well-defined In addition, the Cipla reporting compliance towards Index has improved by Gemba walks have been conducted, and 130+ ideas implemented for and Corrective Action and Preventive SOPs. This is complemented by pharmacovigilance team stays the adverse event cases, by 19% process improvement. Action (CAPA), is automated through a dedicated phone line and up-to-date by reviewing latest the Company to the respective the TrackWise software system. The regulatory bodies was 99.9%.
data is secured by a tamper-proof 3 GRI 103-1, GRI 103-2, GRI 103-3 2 GRI 103-1, GRI 103-2, GRI 103-3
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Intellectual Capital
Cipla’s Intellectual Capital is the bedrock of our leading role in providing innovation-led healthcare. We continue to build a strong portfolio of high- Strengthening our R&D1 quality and affordable drugs on the strength of Our research and development our exceptional research capabilities, world-class (R&D) programme, which was established in 1952, is the laboratories with state-of-the-art technologies engine that drives innovation at and our relentless thrust on operational excellence Cipla. We are a patient-centric throughout the value chain. organisation and are focused on delivering the finest quality medicines through our six world-class R&D facilities spread across Maharashtra, Karnataka and New York. Our highly talented pool of 1,300+ R&D colleagues is passionate about enhancing Cipla’s intellectual property through innovation and excellence.
We continued with our investment in R&D with an expenditure of H1,174 crores in Our strategic focus areas include: FY 2019-20. We firmly believe that our investments will lead to long-term value creation both in terms of financial benefits for the Company and by providing access to affordable medicines to patients around the world.
Strengthening Focus on This year, we have modified 1,180 6 our approach to product our R&D Innovation Cumulative DMF Total RnD units development by strategically allocating our resources to complex products with limited competition that have a greater 288 52 potential to generate higher Cumulative New Products launched revenues. This has resulted patents granted across the world during in a reduction in the number FY 2019-20 of patents filed and our R&D investments as compared to Digitisation Partnerships & Focus on R&D expenditure Alliance intellectual last year. However, the positive property impact of this strategic shift on J1,175 crores revenues will be evident in the 6.9% of the revenue coming year.
1 GRI 103-1, GRI 103-2, GRI 103-3
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Building our intellectual Intellectual property property2 We are working to enhance our presence in the dermatological 32 35 therapy segment to address unmet medical needs. Towards We are committed to enhancing Number of our product profile and drug 32 this end, we recently completed a complex in vitro penetration/ patents filed efficacy by strengthening our permeation testing (IVPT) study, and submitted a topical cream intellectual property. Our patent 24 20 portfolio is testament to our Number dossier, which has been given Competitive Generic Therapies commitment. 13 of patents (CGT) designation. FY 2017-18 FY 2018-19 FY 2019-20 granted
Complex drug-device Unique products with strong potential: Our noteworthy products3 New product launches combination products filings Synchrobreathe: Cipla is one Combination MDI: We are one Our strong Intellectual Capital has powered our ability to consistently in FY 2019-20: At Cipla, we are venturing into of the three companies in of the first companies in India expand our product portfolio over the years. This year we launched 52 specialty R&D to strengthen our FPSM DPI: Cipla the world to have a breath- to launch a combination MDI new products across the world. capabilities and presence in successfully completed the actuated (BAI) MDI device. We delivering drugs in extra-fine specialty products that address clinical study and filed an unmet medical needs. have launched this in India and drug particles with superior Number of new products launched ANDA. South Africa and regulatory efficacy. Development is Quadrimune alignment is underway for under progress for launch in 80 71 launch in Europe. Europe. Given the limited antiretroviral drug 52 options available for neonates today, a World Health Organization (WHO)-led expert group responsible Engagement with regulatory At Cipla, we also strive to generics and biosimilars industries. for prioritising paediatric bodies consistently meet industry Our team delivered presentation antiretroviral drugs and formulations benchmarks and global and posters on “Best practices and (PADO) has indicated the need to We regularly engage with regulatory assess the use of a 4-in-1 formulation standards by collaborating with robust strategies on DMF”, which health authorities such as the USFDA, FY 2017-18 FY 2018-19 FY 2019-20 (ABC/3TC/LPV/r) in HIV-exposed pharmacopoeial authorities such was extremely well received by the Brazilian Health Regulatory Agency and infected neonates. as the United States Pharmacopeia USFDA. and other represntatives (ANVISA), China Food and Drug 3 (USP), European Pharmacopeia from across the industry. We had a Geography-wise launches Administration (CFDA), the Medicines Products in SAGA To understand how this formulation (Ph Eur), Indian Pharmacopeia (IP), dedicated DMF Booth at the event in FY 2019-20 behaves in this age group, Cipla and Healthcare Products Regulatory including Dolutegravir, Tenofovir British Pharmacopeia (BP) and to showcase the depth of work done has entered into an agreement with Agency (MHRA) in the UK, Australia’s International Pharmacopeia (Ph Int). by our organisation and the best and Lamivudine tablets DNDi and Stellenbosch University Therapeutic Goods Administration practices implemented by Cipla for and Tygerberg Hospital in Cape (TGA), South African Health Products A team of our Regulatory experts Town, South Africa. As part of this various product filings in US. Regulatory Authority (SAHPRA), represented Cipla at the prestigious 8 collaboration, Cipla will supply 4-in-1 the Drug Controller General of GRx+Biosims 2019, a premier scientific Products in EU oral granules, and will also provide India (DCGI) and the World Health inputs for the study’s protocols, the and regulatory event for the U.S. including Gefitinib tablets, 6 clinical study report and scientific Organization (WHO). Fluticasone Propionate MDI, Products in emerging markets publications besides facilitating FPSM MDI and Mometasone Our purpose is to align with 335 including FPSM MDI and regulatory discussions with the nasal spray regulatory health authorities on Fenofibrate tablets US Food and Drug Administration Number of innovative approaches, scientific (USFDA) and the South African 24 ANDAs filed discussions, prioritisation, Health Products Regulatory 20 Authority (SAHPRA). etc. for filing and life-cycle 22 management of Drug Master Files 144 15 13 Products in India We are also venturing into limited- (DMFs), Abbreviated New Drug Number 6 Products in the US competition ophthalmic products Applications (ANDAs), New Drug 14 of ANDAs Formoterol fumarate dihydrate and and developing a robust portfolio Applications (NDAs) and Marketing FY 2017-18 FY 2018-19 FY 2019-20 approved including Budesonide Respule Budesonide Inhalation aerosol, of ophthalmic suspensions and Authorisations (MAs). 1’S, Metoprolol Succinate Pirfenidone Tablet, Cefpodoxime emulsion products by partnering with ER, Pregabalin capsules, proxetil dry syrup, Glycopyrrolate specialty Contract Manufacturing Esomeprazole granules. Inhalation Solution. Organizations (CMOs) globally. 4 Seven of these filings were moved to April and May owing to delays caused by the Covid-19 pandemic. 5 includes approved and tentatively approved ANDAs as well as partnered ANDAs and filed under PEPFAR. 2 GRI 103-1, GRI 103-2, GRI 103-3 6 includes tentatively approved ANDAs. 3 Information in line with BRR Principle 2, Question 1.
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Some of our successful fillings in FY 2019-20 include: Our response to Covid-19 The Covid-19 pandemic has brought infection. This licence is for 127 untold suffering and disrupted every countries, and includes India and aspect of human life around the South Africa. US Europe “We consider it world. We, at Cipla, are committed 6 to contributing to the global effort to We are currently marketing 14 5 5 2 a nationalistic Hydroxychloroquine, which is DMFs combat this pandemic. This includes ANDAs DMFs Products EDQM recommended under various (All of Europe) duty to put all fast-tracking our drug development Malaysia process, and repurposing of guidelines for the treatment and our resources respiratory, asthma, antiviral and prevention of Covid-19. HIV drugs. to benefit the We are actively studying 2 additional ways of delivering DMFs 2 Some of the repurposing and DMFs country.” product evaluations undertaken by antiviral drugs to the lungs, and China their potential advantages. 3 Taiwan - Dr YK Hamied Cipla are as follows: DMFs 6 The Company manufactures and Several other drugs are being 3 DMFs Morocco DMFs markets Lopinavir-Ritonavir, an repurposed for the treatment of 3 Korea Covid-19, and Cipla is in touch with DMFs India HIV drug combination, which is Iran currently being tested in patients scientists and clinicians to examine 4 the possibility of developing these DMFs with Covid-19. We are providing 1 test products of this combination drugs. We are also working with 4 Uganda several professional bodies and DMFs DMFs drug to the WHO and DNDi, for a Saudi Arabia study in sub-Saharan Africa. medical associations to educate Brazil Indonesia 1 physicians in India and across Kenya We have signed a licensing multiple emerging markets on DMFs agreement with Gilead, a Covid-19 and its management. We 1 US-based pharma company, intend to continue our research 22 DMFs to manufacture and market and development in this area for dossiers submitted to Remdesivir, another antiviral drug maximum impact and reach. DCGI India South Africa that could be useful in patients New Zealand 7 3 who are hospitalised with severe 7 10 Products DMFs with TGA 245 Products DMFs 1 dossiers in Australia DMFs emerging markets Clinical Trials
Our Clinical Research Department, Cipla conducts clinical trials only In FY 2019-20, after obtaining preclinical results Partnerships with academic polymorphism. We represent as reinforces our linkages with leading which is located in Mumbai, India, is 6 Clinical Trials were of in vitro and in vivo studies, as institutions experts in European Directorate of government research institutes. responsible for clinical development applicable, and assessing quality Quality of Medicines (EDQM), and We also partner with reputed and management of global clinical registered in chemistry and manufacturing Apart from strengthening our US Pharmacopeia (USP) stakeholder universities to hire new talent trials and pre-clinical studies, both in to ensure that the drug under in-house efforts, we augment our forums for the elaboration and through our Alive Tech campus vItro and in vIvo. We practice the highest ethical development is safe for human R&D capabilities by partnering revision of their methods and texts. programme. We adhere to the International standards and follow legal and administration. We collaborate with external institutions such as Council for Harmonisation and local regulatory requirements in the with industry experts, researchers, the Indian Institute of Chemical Cipla encourages its scientists As part of our continued support Good Clinical Practices (GCP), ethical process of collecting data during academic institutes, clinical site Technology (IICT), Hyderabad, to enhance their capabilities by and investment in research-led requirements, legislations, guidelines clinical trials. This includes obtaining networks and non-profit R&D the Indian Institute of Science sponsoring a PhD programme in innovation, Cipla is in the process and regulations of the concerned informed consent from research organisations to execute clinical Education & Research (IISER) and affiliation with IICT Hyderabad. As of in-licensing products and jurisdictions while conducting clinical subjects and strictly protecting and preclinical studies. We also use National Chemical Laboratory a part of this initiative, 12 scientists technology developed by the studies and trials. Cipla also registers their genetic and other confidential disruptive technologies, including (NCL), Pune. We collaborated from the Company enrolled for Council of Scientific & Industrial its clinical trials with the Clinical information. We conduct regular Modelling and Simulation (M&S) with IISER to conduct solid state various PhD programmes in FY2019- Research (CSIR) laboratories in Trial Registry-India (CTRI) and on training sessions to keep our and computational techniques to chemistry activities for our Centre 20. This initiative enables us to India. ClinicalTrials.gov (USA), among researchers up-to-date with current optimise clinical study designs and of Excellence (COE) lab for build our technical resources and others, before beginning any trial. regulatory ethical standards. mitigate risks.
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We are focused on developing quality and comply with evolving In FY 2019-20, Cipla successfully X-Ray Diffraction (HT-PXRD), spray and eliminates them during the which enable characterisation of alternative cost-effective methods regulatory requirements for clinical completed six clinical trials in drier and hot-stage microscope. development phase itself. Our complex molecules. for demonstrating bioequivalence studies. respiratory, HIV and dermatology. R&D team plays a key support role based on in vitro, preclinical, and In addition, we have about 14 Green Chemistry in conducting these Hazard and Novel techniques like surface area/ physiologically-based Pharmaco In addition to building capabilities, ongoing clinical trials in India and Operability (HAZOP) studies. energy, Dynamic Vapour Sorption we have successfully conducted Cipla continuously strives to (DVS) and morphologi G3 are used Kinetic (PbPK) modelling and emerging markets for post-surgical improve old processes by simulation approaches. In clinical trials in different therapeutic pain, Type-2 diabetes mellitus and to predetermine the characteristics areas such as respiratory, pain incorporating green chemistry. Our for critical APIs. Sophisticated FY 2019-20, Cipla worked on a Chronic Obstructive Pulmonary Strengthening API Development and oncology. We regularly aim is to evolve cost-effective and instruments like G3 and X-ray number of such approaches, Disease (COPD). environment-friendly manufacturing Through Innovative Techniques including the successful use of communicate with regulatory Powder Diffraction (XRPD) enable agencies to design efficient clinical processes. In this regard, our prime the approval of complex generic in Vitro Penetration/Permeation focus is on reducing, recycling and development paths, including Over 2,000 Cipla has state-of-the-art research formulations through reverse Testing (IVPT). We have successfully reusing solvents, avoiding the use innovative technologies. Cipla has patients facilities at multiple locations engineering of their reference listed executed an IVPT study and this of toxic/hazardous raw materials, developed strong professional with dedicated teams working drug (RLD). XRPD is used to identify expertise will help in efficient filings reducing waste, increasing atom relationships with clinical sites and participated in in the analytical development APIs in low-dosage formulations. for complex products, especially in economy and introducing energy- clinical site-networks in the US and clinical trials cell. Our research initiatives We have also performed Differential dermatology. efficient processes. India. Leveraging this established in India and are enabled with the use of Scanning Calorimetry (DSC) studies Cipla has developed a clinical R&D network, we are now capable of Safety Screening Lab sophisticated instrumentation on our and other innovators’ digital vision to strengthen our conducting large scale Phase 3 emerging markets such as NMR, LC-MS-MS, GC- formulations to study the solid-state execution capabilities, make trials clinical trials in Safety is a key area of concern MS, XRPD, Raman Microscopy properties of an active ingredient more patient-centric, ensure data the US. during the year. at Cipla. Our in-house safety and G3-Id. We have adopted in the formulation. This is one of screening lab is a unique initiative tools like NMR spectroscopy for the parameters that demonstrates that helps identify hazards in structural elucidations and SCXRD sameness between the RLD and our our manufacturing processes for absolute chiral configurations, test samples for biowaiver. Phase-3 clinical study for generic version of GSK’s Advair Diskus®
In FY 2019-20, Cipla successfully conducted over a period of 15 assessing the primary end Capabilities leading to success in product development for the US market completed the Phase-3 clinical months at over 100 sites in the US, points in accordance with In-house testing for in vitro Determinant of the clinically Computational Fluid Dynamics endpoint study for fluticasone enrolling 1,400 asthma patients. regulatory recommendations bioequivalence (BE) and in relevant fate of a drug (CFD), with applications in. propionate and salmeterol The study results demonstrated and guidelines. Considering vivo pharmacokinetic BE. delivered to the lung. inhalation powder for the that Cipla’s fluticasone propionate the complexity of a clinical Optimisation of device registration of its generic version and salmeterol inhalation powder endpoint study, success in our State-of-the-art orthogonal In silico predictions of design to ascertain desired of GSK’s Advair® DPI in the 100/50 mcg is therapeutically first attempt is an important product characterisation performance for products clinical performance. US. This Phase-3 study was equivalent to Advair Diskus® milestone and a testament of and sophisticated clinically under development, to mitigate successfully completed in the 100/50mcg. The study demonstrated Cipla’s clinical scientific and relevant during in vitro testing. risk of clinical failure. Determination of in vitro first attempt. The study was therapeutic equivalence by operational capabilities. drug characteristics and pulmonary delivery in target patient population.
7 Focus on Innovation Formulation based on inhalable technologies, therapeutic synergy (e.g. multilayer nanotechnology for oral solids and tablets, combining nanotechnology), Innovation is at the heart of Cipla’s We adopt new technologies and Our CoE laboratory has the latest Our formulation pipeline injections, liposomal injections, long- minimise dosing errors and ensure success in providing high-quality, techniques, which lead to time and equipment for screening and acting depot injections, implants, patient compliance (e.g. ready-to- affordable medicines for all. We cost savings, and greater efficiency developing novel polymorphs, co- consists of complex intra-vaginal contraceptives, peptide use depot injectable formulations renewed our commitment to drive in manufacturing and sustainable crystals and particle engineering, molecules developed with products, micellar emulsions, self- and drug-device combinations). value through initiatives across technologies, among others. and is run by a dedicated team a differentiated approach. microemulsifying drug delivery Many of these developments APIs and formulations. of polymorph specialists. In FY Our endeavour is to develop novel, systems (SMEDDs) and multi- resulted in successful commercial Centre of Excellence Lab for 2019-20, we introduced additional API differentiated and affordable particulate extended release oral scale-up in FY 2019-20. Polymorphism capabilities such as a High medicines and drug delivery systems systems. Our focus throughout is on Throughput Screening (HTS) Every year, Cipla focuses on As part of our API R&D, we have that address patient needs and respiratory, anti -retroviral, anti- During the year, we also set up an platform for polymorph automation, improving the development process instituted a Centre of Excellence expand access to quality medicines. psychotic and oncological therapies. in-house facility in the Cell Biology in R&D by taking up new initiatives. (CoE) for polymorphism research. High Throughput Screening Powder Division for assessing permeability We have developed complex Cipla has developed differentiated of drugs across intestinal, nasal and 7 GRI 103-1, GRI 103-2, GRI 103-3 formulations for global markets new products to maximise lung barriers and confirming the
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mechanism of action of drugs for Respiratory Society’s (ERS) annual repurposing projects. This resulted conference in Madrid, Spain. In Project management at Cipla AMR Benchmark Project 2020 companies are helping address We also participate in AMR in huge savings as we would have the same conference, one study AMR. It covers R&D, responsible surveillance, and are one of otherwise incurred heavy costs on Cipla’s project management was presented as a late-breaking AMR Benchmark Project manufacturing, appropriate access three companies in FY 2019- outsourcing. team plays an important role presentation. 2020, conducted by Access and stewardship. 20 to fully de-couple our in the execution and delivery to Medicine Foundation, sales agents’ bonuses from Smart devices development of our Intellectual Property We presented a total of 20 posters evaluates companies with major Cipla’s performance was sales volumes, a significant capabilities and in ensuring across various conferences such Cipla is exploring the development interests in antibacterial drugs, commendable in all evaluation step in mitigating overselling, that all activities are in line as ERS 2019; the 17th Urological of specific drug delivery through including both innovator and areas, with a performance particularly as Cipla reports with organisational goals. Association of Asia Congress in innovative in-silico explorations. generic companies. The 2020 score of 70%, the highest a global anti-bacterial sales The team designs the overall Kuala Lumpur, Malaysia; the Asia- The development involves the latest AMR Resistance Benchmark among generic companies. volume of 2-3 billion units. strategy along with robust risk Pacific Society of Respirology state-of-the-art imaging techniques compares how pharmaceutical management and mitigation (APSR) Congress in Hanoi, Vietnam; coupled with sophisticated and measures. It also plays a the Indian Society of Critical Care complex computer simulations crucial role in resource and Medicine (ISCCM); the Urological of diverse clinical conditions and 8 budget optimization. The Society of India (USICON); the Digitisation enabled us to transition towards labs. This has helped in building scenarios. This method will enhance execution consists of three National Pulmonology Congress; paperless R&D and helped BI dashboards, which help us in both efficiency and precision in major milestones – regulatory the Indian Association of At Cipla, we are our improve productivity by facilitating efficient decision making. clinical evaluation of drugs, thereby submission, clearance of Dermatologists, Venereologists systems and processes collaboration and sharing of reducing the probability of failure of In-silico approach for R&D deficiencies, and product and Leprologists Conference information, besides enhancing resource-intensive investments. to stay abreast of the projects launches in respective (DERMACON); and the Association the accuracy and precision of of Physicians of India conference latest technological research. With the help of IoT We are developing an advanced countries. Cipla completed its first in-silico (APICON). developments. tools, our R&D instruments are now ecosystem of digital diagnosis project in FY 2019-20, where we directly integrated with the ELNs. built the capability to work with and monitoring devices for Some of the key achievements Electronic Laboratory Notebooks various service providers in a select therapies. These devices include: (ELN) Business Intelligence (BI) can provide real-time feedback compliant environment through to users, and digitally connect Noteworthy Recognition Made a presentation on With the adoption of ELNs, Cipla We have built a data repository the implementation of appropriate the patients’ use of products to Generic Industry Perspective on has automated the documentation for data mining and analytics for technology solutions. Cipla’s contributions to healthcare professionals. Monographs for Finished Products process in product development. our API, formulation and analytical pharmaceutical research have been at the International Conference This software program has consistently recognised in journals At Cipla, we have tested advanced organised by the European and through other platforms. In invitro testing set-ups with realistic Directorate for the Quality of Partnerships and Alliances method of Tramadol addresses Elores FY 2019-20, Cipla featured in eight anatomical features and breathing Medicines & HealthCare (EDQM), extremely crucial and unmet In FY 2019-20, we have signed an publications in journals of national patterns that enable early screening Council of Europe at Strasbourg, ZEMDRI™ needs in pain management. After acquisition agreement to acquire a and international repute with high- of potential devices and design France. In FY 2019-20, Cipla acquired a successful clinical trial, this was novel and patented anti-infective impact factors in the therapeutic inhalers smartly. We have also built prescription drug ZEMDRI™ submitted for FDA approval. asset, Elores, from Venus Remedies areas of respiratory, dermatology, the capability to simulate fluids Recognised by United States (Plazomicin) from Achaogen Inc. Limited which is subject to fulfilment and ophthalmology. Five posters Brandmed and flow outcomes of complex Pharmacopeia (USP) for our ZEMDRI™ is a once-daily novel of certain completion conditions. were presented at one of the respiratory products to enable valuable contributions to the intravenous (IV) aminoglycoside Cipla’s South African subsidiary, Elores is a novel combination, which largest respiratory conferences informed decision making during health community at Rockville, for the treatment of Complicated Cipla Medpro South Africa is used as an antibiotic resistance in the world, the European clinical trial planning. USA, and Hyderabad, India. Urinary Tract Infections (cUTI), Proprietary Limited, acquired a breaker (ARB). It helps preserve including pyelonephritis. ZEMDRI™ 30% stake in a healthcare company the efficacy of an antibiotic, using We have implemented software- became commercially available called Brandmed during FY 2019- appropriate ARBs. The product is based simulations like Computational through Cipla in October 2019 and 20. Brandmed has developed a used for treating life-threatening A Clinician’s Approach to Neurological Disorders: Indian Experience Fluid Dynamics (CFD), PbPK was relaunched and supported by a unique fully integrated end-to-end infection caused by gram- modelling, Pharmacokinetics solution to address outcomes and Cipla has supported the publication of A Clinician’s Approach to strategically deployed sales team. negative bacteria. This acquisition Pharmacodynamics model (PkPD) value-based care for patients Neurological Disorders: Indian Experience, a new Indian textbook is expected to strengthen our etc., to reduce experimental Intravenous Tramadol with chronic lifestyles and non- that highlights the basic principles in the diagnosis and management presence in the branded Indian work and for prediction and communicable diseases (NCDs) of neurological disorders. The book is written by over 90 eminent critical care space. Since its launch, reproducibility of performance. In 2018, Cipla invested in Avenue such as hypertension, diabetes, high contributors, who have addressed various issues in general neurology, 17,697 patients have benefited from We have successfully implemented Therapeutics to strengthen cholesterol, asthma and chronic relevant to the Indian context. It has brought together renowned the product, and it is expected to similar software-based simulations its presence in the specialty obstructive pulmonary disease neurologists from across the country, who have shared their approach, reach 57,000 patients by 2021. for assessing process capabilities institutional business in the US. The (COPD). For more details refer vision, and understanding on different neurological diseases. and for scale-up. novel intravenous drug delivery Relationship Capital on page xx.
8 RI 103-1, GRI 103-2, GRI 103-3.
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Accelerating an agile and Human Capital thriving workforce nd 2 At Cipla, we believe that our employees are the most valuable strategic asset. Our people At Cipla, we aim to create a conducive work environment that year practices have been designed to augments employee productivity and satisfaction. Our people promote an inclusive and healthy Certified in a row! work environment. The Human are the pillars of our strength and it is their commitment and APR 2020–MAR 2021 Capital initiatives aim to attract, INDIA retain and encourage the best dedication to Cipla, its purpose and vision, that enables us to talent in the industry. We also invest serve millions of patients around the world. While our people year after year in ensuring diversity in hiring, leadership development say that they are proud to be with Cipla, we maintain that Cipla and capability building for all our is proud of its people – the driving force of our success. employees. Cipla is an equal opportunity employer. Our Code of Conduct (CoC) and Corporate Responsibility Policy ensure that our people practices and systems are inclusive on aspects such as gender, race, Zero fatalities religion, ethnicity, nationality, age, disability, HIV status, family status across our and sexual orientation. In FY 2019-20, we set up an manufacturing Inclusion & Diversity Council to give additional support to our facilities efforts to build a truly diverse and inclusive workforce. This has helped us attract and retain people with diverse backgrounds, experience and expertise, while providing a safe and inclusive work environment Our strategic focus areas include: where people can flourish and grow. We had 13 differently-abled employees working with us during FY 2019-201.
During the reporting period, we 33.33% further strengthened our key HR female representation processes – from onboarding talent and shaping and grooming Human Resource Succession in our Management their capabilities to ensuring their development Planning Council professional growth, wellbeing and safety at work. 14% female representation in our global workforce
Ensuring Promoting Protection of Employee health diversity human rights and safety 30% female representation in 1 GRI 103-1, GRI 103-2, GRI 405-1, Information in line with BRR Principle 3, Question 4. our Board composition
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Our workforce – Our strength2 Attracting and retaining talent business landscape. Cipla supporting them through career maintained its strategic focus on development programmes, a Diversity is one of the most essential tenets of a progressive workplace today. At Cipla, our diverse and inclusive Attracting and retaining the best best-in-class talent during talent mobility policy and new talent strategy contributes towards creating and maintaining a healthy and vibrant work culture. The table talent has become increasingly FY 2019-20. We also encouraged opportunities through internal job representing break up of our workforce as on 31st March, 2020 is given below: important for companies to stay employees to pursue long- postings (IJPs). competitive in a rapidly evolving term careers with us by <30 Years 30-50 Years >50 Years Headcount (India and overseas) 2019-20) Male Female Male Female Male Female Total Junior management 7,060 988 8,843 1,525 347 128 18,891 Middle management 291 59 4,002 485 117 37 4,991 Senior management - - 80 10 51 11 152 Our flagship talent acquisition platform, ALIVE (Aspire, Learn, Innovate, Voice and Engage), is designed to bring in Total 7,351 1,047 12,925 2,020 515 176 24,034 fresh talent from leading business schools, pharma campuses and engineering campuses across India. Some of our Indian Subsidiaries 467 147 942 218 33 4 1,811 new programmes rolled out during FY 2019-20 under the ALIVE platform are listed below: Total 7,818 1,194 13,867 2,238 548 180 25,845 ALIVE Summer ALIVE Young Manager ALIVE Tech Campus st In addition, we have 9,812 contractual employees as on 31 March 2020 Internship Programme Programme Programme
A healthy, multi-generational workforce 24 24 21 comprising 20+ nationalities Summer Interns from YMP from premier Hired for ALIVE IPD Tech Campus Program Gen Z* makes up 11% premier campuses campuses from premier pharma campuses of our workforce, ALIVE SURGE Campus Programme ALIVE Tech Campus Programme with a 42% Agewise <30 35% increase in female break up 30-50 62% representation 29 106 >50 3% between FY 2018-19 Therapy managers and scientific Associates for Manufacturing and and FY 2019-20 business managers hired Quality functions
Manufacturing Selection Programme This programme was developed to hire experienced engineering talent from premier technical education institutes during FY 2019-20. Strategic talent management During the year, we introduced an These platforms enable us to hire some of the brightest minds across the industry for a future at Cipla. Our commitment to building a Integrated Talent Management All these initiatives have helped us in attracting new talent. diverse and agile workforce is at the Framework that leverages Total new joinees FY 2019-20 4 heart of Cipla’s talent management strategy. As part of this commitment, synergies of talent acquisition, Age Bracket <30 Years 30-50 Years >50 Years we also support our employees learning and development, Employee category in managing their careers and (India & Overseas) Male Female Male Female Male Female Total enhancing their professional performance management and Junior management 2,845 436 964 111 11 5 4372 growth. succession planning functions3. Middle Management 86 24 590 55 9 5 769 Senior management 0 0 17 2 5 2 26 Total 2,931 460 1,571 168 25 12 5,167 Indian Subsidiaries 152 35 106 5 1 0 299 * Gen Z are employees who are born in the year 1995 and beyond. Grand Total 3083 495 1677 173 26 12 5,466 2 GRI 102-8, Information in line with BRR Principle 3, Question 1,2,3 3 These programs cover our India operations only, unless specified otherwise. 4 GRI 401-1.
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Succession Planning5
A strong leadership succession Leadership Summit pipeline is critical for business Assessment An annual three-day senior leadership conclave 62 continuity. Centres conducted by renowned international faculty on senior leaders including management and business 52% the theme of ‘Execution through Collaboration’. council participated during FY 2019-20 During of Mid FY 2019-20, Management Assessed Cipla identified Cipla Leadership Ascent Programme (CLAP) 55 successors for 71% A nine-month programme that provides global high potential participants completed the journey leadership perspectives to our distinguished in CLAP 2.0 in FY 2019-20, to be certified as future 80% of its senior of Senior leaders. enterprise leaders at Cipla management Management Assessed positions. Employees covered under other flagship programmes are: Succession planning at Cipla 510 1,906 411 353 75 follows a well-defined and rigorous talent actions, which are executed process. The Apex Talent Review according to the Integrated Talent Board, the Nomination and Management Calendar for the year. Remuneration Committee (NRC) and the Board of Directors are iGrow - Build for the Future Transition Onboarding High Potential Capability Interview building for entrusted with overseeing and In FY 2019-20, we introduced iGrow, management programme for Individual capability building monitoring talent management 15 a unique talent assessment and programme for first- new joinees development people managers and succession planning initiatives Key Senior Managment roles development centre for our field time managers programmes at the Company. Talent Review closely tracked and internal force. With iGrow, we identified Boards (TRBs) provide inputs for talents groomed for these roles potential high-performers among The total training hours for FY 2019-20 are provided below: job promotions and capability systematically employees in sales and marketing. Employees Trained development programmes for These high performers were taken Training programmes6 Male Female Training hours senior management. Significant through a structured learning hours are invested towards talent roadmap, cross-functional Classroom training 7 discussions and actions based assessments and partnerships with Skill upgradation (behavioural) 2,787 492 31,785 90+ Skill upgradation (technical) 26,178 onassessment. They also identify Critical Roles Identified managers. 2,460 2,47,861 Leadership skills 60 14 1,536 Induction 4,259 281 70,493 Future focused the capability development Digital capability development agenda for the entire organisation Technical 98,230 5,206 6,28,281 351K+ Behavioral 11,134 2,324 5,709 through various academies. Hours of class room training* Induction 75 04 209 This provides a future-ready Total 1,42,723 10,781 9, 85,874 foundation for our employees, As a leading pharmaceutical Other classroom and digital training while strengthening competence company for 85 years, Cipla has 643K+ Policy and compliance, process training, POSH, in areas like radical collaboration, continually invested in employee Hours of digital training* Pharmacovigilance, Code of Conduct8 12,64,051 3,76,068 risk-taking and advanced analytics- learning and capability building. driven decision making. Cipla Training by gender9 This helps us stay dynamic, agile University also focuses on growing and ahead of the curve. We have 150K+ Male Male functional capabilities such as Participants Training hours dedicated programmes that focus employee participation across 1,42,723 9,40,415 launch excellence, complex drug on several aspects of human various academies development, sterile capability, 1,53,504 Female 9,85,874 Female resource development, some of 10,781 45,459 continuous improvement, customer which have been outlined below: centricity, regulatory awareness 56 6 GRI 404-2. Cipla University is our learning and go-to-market capability. Average training hours per 7 Information in line with BRR Principle 3, Question 8 engine, responsible for driving employee* 8 GRI 412-2 * Excluding mandatory training 9 GRI 404-1, The total number of participants trained takes into account multiple trainings provided to a single individual and excludes training under other classroom and digital training. 5 GRI 103-1, GRI 103-2, GRI 103-3
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Driving performance excellence10 3 Recognition
Annual performance reviews help maximise the benefits of training provided to our employees, and evaluate outcomes. Achievers’ Awards are annual MiDNA is Cipla’s online comprehensive review system, based on the 3P philosophy of Position, Performance and gala events hosted to celebrate Proficiency. employee achivements. It includes mapping and review of employee performance against defined goals, regular/ annual feedback with Applause is Cipla’s global online SPOT Recognition was introduced Operations Excellence Awards is a corrective action plans, and periodic performance monitoring. During FY 2019-20, all11 of our eligible employees and offline employee recognition in FY 2019-20, and applauds mega event to recognise shopfloor received performance and career development reviews. platform. We celebrated the Festival of Gratitude, creating more than outstanding performance with a employees for their collaborative 30,000 moments of appreciation. monetary reward. Around 1,700 achievements. In FY 2019-20, 267 Inclusion & There are 101 offline Applause employees were rewarded during employees were recognised in the year. For Life: The Cipla Way Diversity stations across 17 countries. presence of their families. Recognition Our principle of Caring for Life is also Employee 4 Leadership Connect cascaded to our employees, which helps us Engagement foster and build a strong and meritocratic 5 core pillars organisation. Towards this end, our Wellbeing MiVoice survey: initiatives on Employee Experience are of Employee The good based upon 5 core pillars. experience Leadership OneCipla townhalls ensure MiVoice Pulse Survey provides a keeps getting Connect transparent communication and platform for associates to share better! informal interaction between their feedback with leaders. This Engagement Index leaders and employees. Four year, 9,437 employees participated in global townhalls were conducted the survey. 1 Well-being 84% during FY 2019-20. 78% 82% Work Life Assistance Programme Reflections is a quarterly connect MiConnect empowers employees to (WLAP) is a confidential 24*7 platform for 140 top leaders at connect with leaders and learn about MiFitness offers health check-ups, counselling service to equip Cipla, led by the MD & GCEO, to their aspirations and vision ahead. wellness camps (9,400+ employees iCare is our comprehensive wellness employees and their immediate strategise and build a future-ready philosophy that focuses on the covered), in-office workshops, family members to cope with stress organisation. FY 2017-18 FY 2018-19 FY 2019-20 gym memberships, nutritional physical, mental and financial due to work or life challenges. Eight counselling, guided meditation. wellness of all our employees. lives have been saved (through 5 Inclusion & Diversity12 handling of suicidal cases) via this platform. Creating an Inclusion & Diversity Council is sexual orientation, generational inclusive and safe sponsored by Samina Hamied, differences and special abilities. Cipla Step-up Challenge 3.0 Wellness day camps facilitate Cipla also conducts financial work environment Executive Vice-Chairperson, and Performance highlights for our encouraged 5,300 employees to essential screening, preventive tests wellbeing programmes to ensure at Cipla embodies Dr Raju Mistry, Global Chief People diversity parameters are provided participate and we achieved a total and individual doctor consultations that our employees stay financially our Caring for Officer. It looks at five priority in the introductory section of the of 313 million steps in FY 2019-20. for employees across geographies. prudent and invest wisely. Life credo. Our pillars – gender, race and ethnicity, Human Capital section.
Other policies and benefits 2 Employee engagement Cipla’s policies and flexible working leave and need to avail minimum 14 Birthday leave: Employees can Among our celebrations and #WeAreListening, a one-stop Cipla Fest: Family Day was practices are tailored to support the days leave in a calender year. take a day off on their birthday. numerous touchpoints with platform for employee concerns, celebrated in Cipla locations work-life balance of our employees. Work from home (WFH): Employees Work Week management: employees, we also engage via feedback and ideas, was launched across India, Sri Lanka, Malaysia, Choice Pay policy: This policy at Cipla Mumbai offices have a WFH Employees can accrue four hours Cipla Unplugged and What’s in FY 2019-20. Our Grievance Myanmar, Algeria, Morocco, offers flexible ‘choice pay’ options option for two days in a month. in a week, to be taken on any one Up Cipla – our in-house radio Redressal Committee addresses Nepal and Colombia. Around for employees, in the form of meal day of the week. programme and video channel, any grievance within three days of 14,000 employees and their family allowances and contribution to the Adoption leave: Six months of paid respectively. receiving it at the first level, and members participated. National Pension Scheme, among adoption leave. Creche: Cipla provides high within seven days at the next level. others. standard Creche/Day Care support Medical leave: 30 days of leave to to employees in partnership with Time away from Work: Cipla support employees with critical or external specialists. employees are entitled to 28 days 10 GRI 404-3. chronic illnesses.
11 This excludes trainees and contractual employees. 12 GRI 401-2.
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Maternity leave13: Six months of Nurturing a safe work formulation facilities for the manufacture of potent molecules. Our EHS 18 paid leave to cherish the precious In FY 2019-2013: environment reports cover not only the safety aspects but the environmental footprint moments of motherhood. Of 2,340 of our products, as well. entitled employees, 223 employees Cipla remains committed At Cipla, we also operate dedicated healthcare facilities across our availed maternity leave during 97% return to work rate with: 149 to providing a safe work sites, while maintaining confidentiality of employees’ health-related FY 2019-20. environment for employees, female employees and 1,820 male information. All our employees and contractors are provided with pre- contractors, visitors and the Paternity leave13: Two weeks of employment and periodic health assessments. community. paid paternity leave for male employees returned to work after employees. Out of a total 19,260 their parental leave ended Our Safety Governance Process safety entitled employees, 1,871 availed Framework Our Process Safety Cell is managed by seven engineers, and ensures paternity leave. Adherence to Environment, effective hazard identification and risk assessment of all new and Compassionate leave: Five days of 252 (out of 307) female employees Health & Safety (EHS) principles existing processes. During the year, we conducted a process safety gap paid leave to help employees cope and 1,210 (out of 1,575) male is at the core of our operations. assessment, and engaged a process safety consultant to implement an with the loss of loved ones. appropriate control strategy for Cipla. This will ensure a more efficient employees were still employed 12 We have established Safety process of hazard identification and safety, while minimising risk. Accident leave: Applicable for any Committees at different levels injury that requires more than three months after their return to work in the organisation, to guide Safety Committees18 days leave. employees on EHS matters. We have established Safety Committees at the department, plant and from parental leave These Committees meet Sabbatical leave: One year of regional levels to provide the requisite guidance on EHS matters, as periodically to discuss, resolve unpaid leave to pursue personal provided below. We also support worker participation to enhance and escalate safety issues at obligations or interests. the effectiveness of our occupational health and safety management work. As part of our commitment systems and programmes. to consciously promote safe and Safeguarding manner. This process is guided our employees are accessible healthy workplace practices, Representation Human Rights14 by the Audit Committee, with under our training programs on we encourage our employees, Non- Frequency of periodic oversight by the Ethics Page 84. supervisors and managers to Safety Committee Management management meetings At Cipla, we strive to keep the Committee. Anonymity and take direct ownership of their confidentiality of our employees We uphold freedom of safety, and the safety of their Department level 273 165 work environment free of any Monthly/ is maintained to safeguard their association and collective colleagues. Plant level 513 204 prejudice, bias, physical or bi-monthly/ bargaining among employees, Company/ business Unit/ mental harassment. Across our interests. quarterly by recognising and supporting We have a well-documented global operations, we have regional level 93 73 During FY 2019-20, we received labour unions across our sites. procedure for Hazard a zero-tolerance approach 45 complaints, of which 31 We regularly engage with Identification and Risk Analysis towards discrimination on any Safety Management Systems were resolved. The remaining labour unions to address matters (HIRA), which helps limit safety ground. complaints will be resolved after related to employee health hazards. It covers routine We have implemented our Occupational Health and Safety (OHS) Our corporate responsibility, due investigation. Nine cases of and safety, notice periods, and non-routine works with system at all Cipla manufacturing sites. It is based on recognised risk code of conduct and whistle sexual harassment were reported wages paid and optimisation of an executed action plan that management system standards, and covers all our workers. We have blower mechanisms ensure during the year, of which seven processes. We have three labour minimises risks to acceptable received OHSAS 18001/ ISO 45001 certification for all our manufacturing that ethical business practices have been resolved through associations at Patalganga, levels. Hazard studies are and Integrated Product Development (IPD) sites in India. and respect for human rights appropriate action, and two are Kurkumbh and Bengaluru, with conducted through a six-level Under this certification, OHS management and improvement plans are are ingrained in Cipla’s culture. pending resolution after due a worker representation of 8.1%, stage gate process: HS-1 through investigation.16 There were no 3.9% and 6%, respectively. In our HS-6. regularly drawn and executed. Additionally, we follow a PDCA (Plan, These policies apply to our Do, Check, Act) cycle for effective health and safety evaluation and employees, members of the incidents of child labour, forced SAGA operations, about 38% of Our New Products Introduction improvement, conforming to OHSAS 18001. Board, contractors, consultants, labour or compulsory labour CMM employees are members 17 (NPI) framework ensures trainees and service providers.15 reported for FY 2019-20. Our of GIWUSA, while about 95% of We also ensure that our sites are audited and certified through third- that all new and modified Violations of any nature are code of conduct covers various Mirren employees are part of the party agencies. Cross-site audits are conducted to strengthen the 17 products and processes in API dealt with in an appropriate aspects of human rights and the Bargaining Council. implementation of our EHS systems. Safety audits as per the Factories manufacturing undergo stringent details of trainings provided for Act are conducted periodically at our Kurkumbh, Goa, Patalganga risk assessment. We also have and Sikkim sites. Need-based external specialist audits such as process 13 GRI 401-3 formal processes in place for safety, electrical safety, fire and water demand assessment, ergonomic 14 GRI 103-1, GRI 103-2, GRI 103-3, GRI 406-1, GRI 407-1, GRI 408-1, GRI 409-1, GRI 102-41 assessing risk, and allocating studies and site emergency preparedness are also organised. 15 Information in line with BRR Principle 1, Question 1, Principle 5, Question 1, GRI 103-3 18 16 Information in line with BRR Principle 1, Question 2. This covers our India, US and SAGA operations. Information in line with BRR Principle 3, Question 5 and 6. GRI 103-1, GRI 103-2, GRI 103-3, GRI 403-1, GRI 403-2, GRI 403-3, GRI 403-4, GRI 403- 6, GRI 403-7, GRI 403-9. 17 This statement covers our India, US and SAGA operations, Information in line with BRR Principle 5, Question 2 and Principle 3, Question 7
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MySetu: Embedding Safety Performance: COVID-19: Protocols and preventive measures information Technology in our safety systems There were no cases of ill health owing to work-related hazards at any of our manufacturing sites for the reporting period. Details on safety As a responsible pharmaceutical company, we keep patient-centricity at the heart of how we operate while The MySetu Incident Tracking parameters at Cipla for FY 2019-20 are provided below: also ensuring utmost safety for our employees. The COVID-19 pandemic required more than a pre-determined System is a digital platform emergency response. At Cipla, we have developed a structured system that ensures the safety of our employees during this time of crisis. where employees report safety Safety Committee Employees Contract Personnel events such as online reporting Lost time injuries (Nos.) 12 5 Employee safety and appreciate our employees of all incidents, near misses Our contribution to the Lost time injury frequency rate and contract workers and their and observations like unsafe community (per million man-hours) 0.38 0.22 We have established a COVID-19 contribution during the COVID-19 acts and conditions. MySetu Fatalities 0 0 task force with cross-functional pandemic. At Cipla, we pride ourselves supports system-guided incident representation to address real- on being a responsible investigation and Root Cause time issues of employee health and pharmaceutical company, Analysis (RCA) to provide Safety Training20 Special daily workplace sanitation measures. payout to and consistently encourage recommendations that are All our employees and contractors undergo regular EHS training care for the community. During converted to Corrective and contract workers conducted by safety experts and in-house safety personnel. Training in recognition of their unrelenting the COVID-19 pandemic, we Preventive Action (CAPA). While needs are assessed in accordance with job-specific hazards at stores, Distribution of service launched the COVID-19 Caring deploying controls that define and in manufacturing, engineering and quality laboratories. Along for Life Fund. In addition to the CAPA, elimination/ reduction Personal with training, periodic mock drills help improve the effectiveness of our initiatives by Cipla Foundation, we of hazards and associated Communication emergency management systems across locations. also helped local communities at risks take precedence over Protective We supported our workforce our sites and depots with health engineering controls. This is Equipment with guidance on COVID-19 and safety essentials such as followed by administrative OHS Training prevention measures, and regular Personal Protective Equipment, controls and deployment of (PPE) communication and informative food, sanitisers, among others. Personal Protective Equipment (In FY 2019-20) webinars. The Cipla leadership team (PPE). The MySetu system sends 88,706 connected with our employees, both out email alerts at each stage 69,770 13,600+ 80,000 Self-declaration on a local and global scale, through of incident tracking to all key associates each voluntarily 60,000 the One Cipla Global Townhall, which personnel at Cipla. 47,422 app 38,448 saw 16,000+ virtual participants. contributed a day’s salary or 40,000 more to the PM Cares Fund
20,000 Learning and development Medical Mental Well-Being 60 0 We encouraged and augmented Number of Man-hours of insurance digital learning initiatives at Cipla, We understand that the Internal audits employees trained training provided coverage particularly through Cipla University, unprecedented nature of the Management employees Contract Leaders as Teachers, Synchronous COVID-19 pandemic could affect for employees and contract workers Virtual Learning (SVL) sessions, and our employees’ mental health. bite-size learning through apps. This We have been supporting Cipla 33 For FY 2019-20, we conducted 110 emergency mock also helped drive need-based skill employees and their families External audits drills across our operating sites and offices development across the organisation. with professional consultation Enabled remote working with from psychology experts, as well complete IT support for suitable as a range of self-help sources roles Results of efficient Human Capital Management ~7.67 lacs and personalised support from Recognition learning hours recorded, covering professional counsellors, to help Our initiatives around human resource development, capability building, employee experience and caring for our them cope better with the effects employees have enabled us to keep our workforce motivated and engaged, maintaining our voluntary attrition We introduced several initiatives of this ongoing global crisis. rate at 14.98%21. and awards to encourage ~13,500 employees globally
20GRI 403-5 21This covers our Indian Operations only.
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Relationship Capital
Our purpose of ‘Caring for Life’ extends to all our stakeholders. With a vision for a brighter future, Cipla aims to enhance Augmenting accessibility and the affordability and availability of medicines, improve availability of medicines: Our constant endeavour is to improve the lives of our patients patient and customer experience, implement sustainable and other stakeholders by maximising value for them and business practices and maximise stakeholder value. In our We strongly believe accessibility endeavour to increase outreach and deliver meaningful and affordability of medicines by enhancing business transparency and sustainability. This impact, we have continued to build strong partnerships is of paramount importance. approach has enabled us to emerge as a strong partner-of- and alliances with our stakeholders. In FY 2019-20, we To address this, we constantly choice to all our stakeholders across our value chain. introduced a Supply Chain Management Sustainability work towards strengthening our Policy and a Supplier Code of Conduct1 to facilitate communication and relationship seamless and successful business operations. In addition, with our customers and patients. we have put robust grievance mechanisms in place to Our ongoing partnerships monitor the effectiveness of our initiatives2. with global scientific research organisations provide the impetus to develop innovative, effective and affordable formulations for the key therapeutic areas we operate in. Some of Cipla’s key initiatives during FY 2019-20 are outlined below:
Quadrimune
While there are medicines and treatments available to Our key stakeholders Include: help patients with HIV/ AIDS, these are usually pills or fluids containing alcohol. At Cipla, we End Patients have developed the HIV drug Our strategic focus areas include: Quadrimune in a powdered Healthcare Professionals granular form, making it easier engaged with more than for children to consume, which 2.4 lacs Shareholders and Investors helps improve outreach and Patients screened under impact in this area. Another Berok Zindagi Yatra ~50K Customers doctors through both advantage of Quadrimune Improving Enhancing physical and virtual is that it does not need to be availability and patient Collaborations for programmes refrigerated, making the drug affordability of experience Consortium of combating AMR more suitable for developing medicines countries where electricity and Channel partners refrigeration are not widely 7,000+ available, especially in rural Suppliers and Governments and areas. For further details on distributors globally 1.5 lac associtaions Healthcare professionals Quadrimune and clinical trials, reached by Multichannel please refer to our Intellectual Suppliers and vendors Marketing Capital section. Sustainable Alternate vendors Digitisation added for supply chain
56 1 Effective from 12th May 2020 Products / process 2 GRI 103-1, GRI 103-2, GRI 103-3
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Ciphands sanitiser Pregabalin capsules Pregabalin is Elores With the onset of Covid-19, the demand for sanitisers, we launched During the reporting period, Cipla also indicated for During FY 2019-20, Cipla World Health Organization (WHO) Ciphands in March 2020 to ensure received final approval from the adjunctive therapy strengthened its presence in the prioritised hand sanitisation as an availability of a quality product. USFDA for Pregabalin, an AB-rated branded Indian critical care anti- effective measure of protection Ciphands demonstrates the high generic therapeutic capsule, which in the treatment infectives space by signing an against the novel coronavirus. agility in our operations. aims to address better management of partial onset agreement to acquire the novel With an unprecedented spike in of neuropathic pain associated with and patented anti-infective product diabetic peripheral neuropathy seizures in patients Elores for the Indian market. The Cipla has provided and spinal cord injury, postherpetic who are 17 years of benefits of this drug have been As part of our initiative India’s frontline neuralgia and fibromyalgia. age and above. further elaborated in Cipla’s Intellectual Capital section. heroes with Maxirich, #WithOurHeroes, we provided a multivitamin 20,000 hand sanitiser packs supplement to help Acquisitions and partnerships to the Mumbai Police and boost their
Brihanmumbai Electricity Supply immunity and has gained significant advantage in light of the Covid-19 and Transport (BEST) authorities. pandemic and related supply Joint venture in China challenges. This has helped us ensure the availability and supply In FY 2019-20, we formalised an of key pain, cold and flu medicines Brandmed acquisition 80:20 joint-venture agreement with throughout the pandemic and Niveoli™ Jiangsu Acebright Pharmaceutical During the year, Cipla acquired Quetiapine winter season in South Africa. Co Ltd, China, with Cipla as In FY 2019-20, we leveraged our In FY 2019-20, Cipla concluded countries. The existing portfolio the majority shareholder. The expertise in respiratory inhalation an exclusive agreement, securing consists of the brand Seroquel® partnership aims to enhance our 30% therapy to launch India’s first originator and authorised generic and the authorised generic brand, business of manufacturing, selling stake in Brandmed (Pty) Ltd, which extrafine ICS-LABA combination brands of an atypical anti- Truvalin®, a medication that is used and distribution of pharmaceutical offers connected healthcare HFA inhaler for adults, Niveoli™, psychotic drug, Quetiapine. The to treat mental health conditions products, as well as research and solutions that predict risk, which targets drug delivery to transaction also allows Cipla to such as schizophrenia, bipolar analytical development services guide diagnosis and monitor the small airways. A recent meta- market and distribute the medicine disorder and major depressive in China. This move is in line with non-communicable diseases analysis shows that small airway in South Africa and its neighbouring disorder. our purpose of providing high- Acquisition of four key brands (NCDs) such as hypertension, disease is prevalent in 50-60% quality and affordable drugs to our from Wanbury Limited diabetes, obesity and asthma. 3 of asthma patients. Hence, with patients and customers. We expect this pill+ solution to Niveoli™, we address an unmet During the year, Cipla acquired grow our market share across need associated with obstructive four key brands — CPink, CDense, the Chronic Management airway diseases (OAD) such as Productiv and Folinine – from portfolio by enabling a COPD asthma and chronic obstructive Wanbury to further strengthen our risk assessment. BrandMed is an pulmonary disorder (COPD). presence in women’s health. These innovative platform that provides nutraceutical products address comprehensive, contextual and Mirren acquisition health needs for conditions arising standardised assessments at due to nutritional deficiencies The Mirren aquisiton has played a the point of care. The initiative or insufficiencies, and include crucial role in Cipla’s endeavour is regulated towards patient supplements such as multivitamins, to increase the accessibility and home monitoring through the multiminerals and antioxidants for affordability of medicines to our Kardiofit and KardioPro solutions. adolescent girls, pregnant and stakeholders. Mirren commands a The BrandMed technology lactating women, women going strong position in the South African architecture takes us further through menopause, and male and market as a local manufacturer, towards the future of Genomics. female reproductive health.
3Respir Med 2016; 116: 19-27
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Enhanced industrial alliances for We serve as active members in industry associations for public Improving patient experiences policy advocacy4 advocacy, a few of which are mentioned below: At Cipla, we value patient satisfaction as this guides us in improving the Our continuous dialogue with quality of our products and services. Accordingly, we undertake various key stakeholders provides us with campaigns that seek to improve patient experience while inculcating a keen insights into future policy responsive culture within the organisation. developments. To strengthen Cipla’s Confederation Federation of Indian position as a thought leader in of Indian Chambers of Commerce the pharmaceutical industry, we Industry (CII) & Industry (FICCI) Berok Zindagi identify and position our senior leaders as panelists in noteworthy pharmaceutical forums organised by various industry associations. In Indian Pharmaceutical Export Our campaign objective FY 2019-20, we engaged with the Pharmaceutical Promotion Council is to address myths and Indian Council of Medical Research Alliance (IPA) (PHARMEXCIL) (ICMR) and collaborated on their misconceptions surrounding event themed ‘Positioning India as a leader in the global South through asthma and to make patients innovations spearheaded by the Bombay Chamber Federation pharma industry’. This also served of Commerce & of Pharma aware of the benefits of as a platform for discussions on Industry Entrepreneurs (FOPE) key regulatory matters between inhalation therapy. Campaign the Government of India, industry thought leaders and Cipla’s senior outreach - 30 crores people leadership.
One of our major mass-media Some of the highlights for FY 2019-20 are provided below: List of a few Government bodies with whom Cipla engages for policy advocacy initiatives is Berok Zindagi, which is a continued campaign to improve patient awareness on asthma Ministry of Health and Family Central Drugs Standard Ministry of Environment, On-ground reach Social media highlights and its right treatment. This year, Welfare Control Organisation Forest & Climate Change the campaign was bigger with the (CDSCO) Campaign outreach of 1 lacs Conducted a Facebook Live Ministry of Chemicals & Ministry of External Affairs addition of many more voices, doctors and 1 lacs chemists event titled ‘What’s the truth Fertilizers – Department of Ministry of Finance bolder with a strong message across India about asthma’, for awareness NITI Aayog Pharmaceuticals ‘Asthma ke liye #InhalersHainSahi’, about asthma Ministry of Corporate Affairs and better with increased outreach Supported patient screening National Pharmaceutical in towns across India. The campaign through Berok Zindagi Yatra Supported pledge videos of Ministry of Commerce & Pricing Authority adopted a 360-degree approach with 1,300+ camps conducted personal stories by influencers Industry through TV commercials, social in 65 days and 2.4 lacs people who have overcome asthma, media, public relations (PR), print, screened, as compared to 1.7 and videos by doctors dispelling radio, cinema and on-ground lacs people in FY 2018-19 myths around asthma on social activities. We followed a digital-first media approach this year, kickstarting the Awards campaign on social media. We also Radio received tremendous support from Received seven awards in key opinion leaders and recognition FY 2019-20, with a total of 12 Engagement with 41 doctors at major industry forums. awards for the campaign, so far. across 41 cities for 15 days, The award genres include Best facilitating the dispelling of myths Integrated Campaign, Best Social around asthma and inhalers, with Media Brand in Cause Marketing, an outreach of 50 lacs people Best Healthcare Pharma Brand, and Best Use of Social Media
4GRI 102-12, GRI 102-13, Information in line with BRR Principle 7, Question 1, 2.
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Breathefree Saas Cha ta Aasch Cha Combating Anti-Microbial addition to being a signatory includes our antibiotic API suppliers, Resistance (AMR) to the Davos Declaration, 2016. formulation loan licensing facilities In FY 2019-20, we launched a We support these partnerships and B2B suppliers. Breathefree is one of our campaign titled Saas Cha ta Aasch Globally, AMR has been observed as our commitment to provide Cha (Where there is breath, there to reduce the effectiveness of anti- sustainable solutions to combat As part of our endeavour to add biggest patient support is life) in Nepal, which aimed to microbials treatments. It particularly AMR. We represent the Indian Drug greater depth and synergy to our generate mass awareness on pertains to the ability of micro- Manufacturers Association on the pipeline of specialty products, and programmes. It aims to support chronic obstructive pulmonary organisms (bacteria, viruses and expert committee for developing continuing our consistent efforts disease (COPD) and encourage parasites) to prevent anti-microbials standards for antibiotic residues in to combat AMR, Cipla acquired respiratory patients throughout early detection among the people (antibiotics, antifungal and pharmaceutical industry effluents. worldwide rights (excluding Greater of Nepal. According to a detailed antivirals) from working effectively. This also supports the India National China) of a novel drug, Zemdri™, their journey, from awareness study by the Nepal Health Research The number of deaths related to Action Plan on combating AMR. with its allied assets and limited Council, COPD has a prevalence AMR is predicted to increase to 10 liabilities during the year. Zemdri™ is and acceptance of the disease to of 11.3% in the country. Awareness million a year, making even routine We conducted one round of the latest milestone in Cipla’s history about the disease, though, has minor surgeries a serious risk. assessment of our own antibiotic of proactive and humanitarian the adherence of treatment. been limited, with people taking manufacturing facilities in India.6 leadership to increase access to cough symptoms lightly and often Cipla is a member of the AMR Based on the AMR Alliance life-saving drugs. Additional details misinterpreting shortness of breath Industry Alliance and the Common Antibiotic Manufacturing can be accessed in our Intellectual For FY 2019-20, our outreach expanded to more than two million as a sign of ageing. Diagnosis International Federation of Framework, we have engaged an Capital section. respiratory patients, the highest in any year. This was supported by 600+ of COPD thus happens at a very Pharmaceutical Manufacturers international agency to assess educators and 5,800+ doctors. We counselled patients on better disease late stage, usually through an and Associations (IFPMA) in our antibiotic supply chain. This management with focus on disease monitoring and device hygiene. Some exacerbation episode, and leads to 5 of our patient testimonials are provided below. a high mortality rate. This campaign is efficiently modelled to address Interactions with healthcare these concerns and drive mass professionals (HCP) awareness around COPD for early Cipla reached out detection and treatment. In FY 2019-20, we continued to engage with HCPs across different to over 50,000 “If you ask people around “Today, my daughter is Change of Device (CoD) specialties for scientific programmes me, they don’t even believe doctors through healthy and happy. She uses campaign such as speaker meetings, advisory that I have asthma because her inhaler on a regular boards, conferences and webinars. of the life I have been basis and can play like any In Nepal, we found that due to lack Our HCP engagement programmes both physical and living...as normal as any other child her age. She of awareness, patients had been brought cutting-edge and relevant other person, all thanks even thrives in cold places. using the same inhalation device scientific topics for discussion and virtual programmes to my loved ones for Thanks to her inhalers, I for three years or more. The normal direction in the interest of patient supporting me, my doctor now have high hopes for her recommended duration for optimal care. We introduced the Doctor and provided Empanelment initiative – a forum for guiding me and, of future.” use of the device is six months. As to obtain advice from key opinion course, my inhaler.” part of our Change of Device (CoD) support through the - Jyothi Ramki* intervention, we directed Breathefree leaders and thought leaders in - Zahid Khan* Educators to counsel patients on the relevant therapy areas on disease correct use of devices, with emphasis pathophysiology, diagnosis and the dissemination of on periodic replacement as per the latest treatment modalities. During the year, we also consolidated the Breathefree chemist network and recommended frequency. scientific abstracts trained 5,000+ chemists on respiratory illness and inhalation devices. Today, Our CiplaMed initiative grew Breathefree chemists help train patients on devices and encourage them exponentially during the year, and journals to adhere to inhalation therapy. Breathefree Educators are Cipla-trained Over 6,000 inhalation paving the way for virtual meetings personnel who support patients through counselling at doctors’ clinics. In devices were replaced such as webinars, e-advisory FY 2019-20, we provided tablet devices to our Breathefree Educators, on time, within 6 months boards and delivery of science- enabling them to better understand patient needs and use smart digital from launch of this driven content across the specialties tools to counsel them. The patient data recorded through the device also of chest physicians, cardiologists, helps in research and for publication purposes. campaign diabetologists, intensivists, surgeons and obstetricians.
5Information in line with BRR Principle 9, Question 4 *Patients name has been changed. 6 Cipla does not manufacture antibiotics at its overseas sites
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Closed Loop Marketing (CLM) complaints received in FY 2019-20 mandated product and packaging For FY 2019-20, there were no as compared to FY 2018-19. During norms, and are assessed for incidents of non-compliance with Our Closed Loop Marketing (CLM) FY 2019-20, 3,055 complaints compliance with such procedures. regulations or voluntary codes tool helps boost our customer were documented, of which 3,006 concerning product and service service standards. The Company’s Improved interactions were resolved and 498 complaints We have established a robust information and labelling. 8,000-strong field force uses CLM are under due investigation.9 We review process, wherein every to engage in meaningful discussions with more than 6 lacs also received 77 complaints from product and labelling information with healthcare providers within a prepared by the packaging team regulatory bodies. For the reporting We received the SIES limited time-span. The CLM system is reviewed by Cipla’s medical and healthcare professionals period, there were no significant SOP Star Award in 2019 in automatically analyses physician cases filed or pending against the regulatory affairs department, and the ‘Product Packaging’ preferences and equips the sales across India Company regarding unfair trade subsequently approved by our team to deliver personalised practices, irresponsible advertising corporate affairs, supply chain and category for Cipla content that closely matches their or anti-competitive behaviour.10 quality assurance teams. MESALO Foam. interests and needs. We value the health of our customers, and ensure that 100% Maximising shareholder value of our products are assessed for MESALO Foam improvements in terms of health Mesalo Foam is a unique product from At Cipla, we value our investors General Meeting (AGM). The demonstrates our sustainable and safety impact. For FY 2019-20, Cipla that requires a precise drug dose and their interests, and address survey’s responses indicated an foundation. FTSE4Good, a global there were no incidents of non- to reach the site of inflammation. The their concerns through our Investor excellent level of satisfaction among sustainable investment index compliance with regulations or packaging of this product is designed to Grievance Redressal Policy. We our shareholders. To cut down series, identifies companies that voluntary codes concerning the clearly depict a step-by-step procedure engage with investors through our environmental footprint, we demonstrate strong environmental, health and safety impact of our for its use, storage and disposal. shareholder feedback surveys, have ensured that all documents social and governance (ESG) products and services. To further earnings calls, presentations, pertaining to the AGM, dividends, practices, as measured against grow consumer awareness, we meetings and conferences. Clear annual report, etc. are sent through international standards. adhere to all packaging and and transparent communication electronic mail to shareholders labelling standards and regulations, is established to assist them who have registered their email Cipla was among and advertising guidelines.11 in understanding our business addresses with us. Additionally, information displayed operations and strategic vision so the top six on our products conform with as to support informed decision- Paperless communication companies in the making among shareholders. with more than 80% ‘Leadership’ category of Sustainable supply chain We continued to enhance our shareholders having a S&P BSE 100 companies, engagement with shareholders registered email address ranked as per the Indian As a responsible pharmaceutical Quality in our Supply Chain13 and investors through 100+ one- Corporate Governance Company, we are aware that on-one interactions, meetings and the timely supply of high-quality Enhancing the quality of our Scores-2019, evaluated supply chain requires a strict participation in over 15 domestic by BSE Ltd, the IFC- medicines to our customers and and international conferences. patients is vital for enabling screening process to ensure that During the reporting period, we For the second consecutive year, World Bank Group and better access to healthcare. our suppliers conform to ethical also conducted a shareholder Cipla secured its membership of Institutional Investor This is reflected in our expertise and sustainable standards of 6,500+ feedback survey at the Annual the FTSE4Good Index Series, which Advisory Services (IiAS) in responsible supply chain operation. In keeping with this, management. During FY 2019-20, we have implemented a Supply Non-Critical we identified 7,000+12 upstream and Chain Management Sustainability suppliers and 465 Customer Satisfaction7 downstream active suppliers across Policy and Supplier Code of 14 28 countries to make our supply Conduct , which extends to all our Critical suppliers At Cipla, we value our customers Assurance (CQA) system, which securely and facilitates deeper chain more robust. suppliers and contractual business identified and prioritise their satisfaction contains well-developed standard investigation through a fair process. and feedback. We believe this is operating procedures (SOPs) to We acknowledge, thoroughly 8 As on 15th May, 2020. essential for the continued success respond to customer complaints investigate and respond to all 9 Information in line with BRR Principle 9, Question 1 and health of our business. on product quality. We have an complaints as per these SOPs to 10 GRI 417-3. Information in line with BRR Principle 9, Question 3 advanced customer complaint ensure there is no repetition of 11 Information in line with BRR Principle 9, Question 2 In FY 2019-20, we continued to tracking system, which enables such complaints. This has resulted 12 An increase from 1,000+ suppliers in FY 2018-19. The augmented number of suppliers for FY 2019-20 pertains to the incorporation of both, Cipla’s upgrade our Corporate Quality us to maintain customer data in a 4% decrease in the number of direct suppliers globally and indirect suppliers in India. 13Information in line with BRR Principle 2, Question 3. GRI 102-9 and GRI 102-10 7 GRI 416-1, GRI 416-2, GRI 417-1, GRI 417-2, GRI 418-1 14Effective from 12th May, 2020
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partners. The Policy and Code of During FY 2019-20, 201 vendor on this scorecard and all of them Efficacious de-risking of conducted with geographical team identifies opportunities Conduct outline the criticality of audits were conducted against complied with our standards. To the supply chain and climatic parameters to to reduce any negative impact adhering to environmental and parameters such as GMP, augment the quality of our supplier assess vendor performance on the environment by utilising social parameters. This ensures facility compliance, quality scoring process, we developed Our responsibility and progress and potential, catering to environment-friendly materials. that present and future business management system controls an automated digitised scorecard towards sustainable business varying levels of demand. We In line with our OneCipla motto relationships with Cipla are built on and documentation. in March 2020 to calculate the practices does not end with take a proactive approach of Caring for Life, we encourage ethical values to realise sustainable supplier performance score directly compliance. We work to elevate in identifying bottlenecks to practices like consolidation We also evaluate our vendors on economic, social and environmental from our SAP and QA systems. This the quality of our processes and resolve logistical challenges in and optimum vehicle utilisation, their EHS governance as part of benefits. The Policy and Code also will help us identify opportunities for practices. We have taken this our supply chain. Our Alternate thereby reducing the number the vendor qualification process. encourage increased transparency improvement, and assess the impact forward through a Continuous Vendor Development (AVD) of trips for overall operations. in disclosure, strict adherence on business-critical parameters strategy ensures uninterrupted This helps us cut down on our For FY 2019-20, we Improvement Programme, which to human rights and effective through a built-in RCI mechanism. focuses on the optimisation supply of raw materials. We carbon emissions and derive environmental stewardship. We identified 35 vendors of processes through cost- completed 56 AVD processes cost benefits. Our supplier grievance mechanism have ensured that all our suppliers as part of our vendor effective procurement of raw aimed at de-risking and follows the same process as and vendors are aware of the materials and reductions in serviceability in FY 2019-20, engagement strategy, our whistleblower mechanism. compliance requirements of our the cost of APIs. Additionally, as compared to 28 AVDs in and assisted them We have a dedicated email Supplier Code and Sustainability a 360-degree review is FY 2018-19. Our supply chain Policy. To know more about the with compliance address for supplier grievances, Supplier Code and Policy, please improvement and segregated by operational and ethical perspectives. The Cipla visit https: https://www.cipla.com/ quality management investors/corporate-governance Ethics Committee investigates these systems. documented grievances internally To ensure quality procurement or sources them externally, when within our supply chain, vendor or This was conducted in line with required. All grievances received new site additions are based on a regulatory standards. are aggregated with a status strict site audit conducted every update for the Audit Committee Our supplier performance three years for API, excipients every quarter, in addition to evaluation was conducted and packaging, as per Good board oversight. For the reporting through on-site and paper Manufacturing Practices (GMP) period, we received two supplier audit. As part of this mechanism, regulations. We also conduct grievances, both of which were duly we perform a detailed risk site audits for our third-party resolved. ~ 3 ~38 assessment of our suppliers. suppliers contract manufacturing Invagen projects API projects completed A Risk Priority Number (RPN) organisations (CMOs) and principal is calculated based on this to principal (PTP) contract vendors. assessment. Accordingly, the Periodic audits as per the Cipla Completed next performance evaluation of audit policy are conducted, with a the supplier is dependent on this timely closure of audit observations RPN. During FY 2019-20, Cipla ~ 56 AVDs and monitored Corrective Action evaluated our top 25 suppliers Preventive Action (CAPA) closure. for derisking business
intermediate Our vendor quality team performs an audit of vendors as per 10 projects FPS packaging cGMP compliance standards based on: 5 material projects
Working hours at the Waste management Company processes at the vendor’s Health and medical end in line with in-house examination of employees SOPs and based on regulatory guidance Safety measures available at site
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Encouraging local sourcing15 Material availability dashboard specific items through the Recognition for excellence Won two awards at 5th India platform. We conducted 809 – Cipla GSCM Logistics & Supply Chain A common access tool for e-auction events in FY 2019-20 Awards 2019 With 615 local our procurement, planning with e-sourcing capabilities Won two awards at and manufacturing teams, this to enhance visibility of supply CargoConnect Awards 2020 Supply Chain Excellence in dashboard addresses possible requirements, purchase, delivery Collaboration suppliers, Supply Chain People delays and risks to material and invoicing status. Best Distribution Practices for availability. Development Outbound Supply Chain 49% of IBP project Best Innovative Use of Predictive analytics Technology in Procurement Awarded Cipla’s total SAP IBP (Integrated Business Cipla Global Supply Chain Planning) is one of the advanced Best Digital Management (GSCM) rolled out cloud-based business planning procurement two predictive analytics models platform. As an early adopter Supply Chain in supply and demand planning of technologies that drive budget is during FY 2019-20 in order to efficiency, Cipla implemented Enterprise at the improve forecast accuracy SAP IBP with SAP ECC (ERP Manufacturing Supply spent on local and on-time delivery through Central Component) in FY 2019- Chain Awards 2020 proactive risk mitigation. This 20 for end-to-end planning of 16 also enhanced the prescriptive demand, supply and materials. sourcing . dashboard for inventory control.
Field force automation We undertake a variety of support measures to enhance the capacity We developed an indigenous of local and small vendors. These field force automation software We include imparting monthly trainings that enables daily reporting of to our contract manufacturing production data and dispatches implemented a organisation staff on cGMP from contract manufacturers. fully digitised practices and compliance, data This initiative also supports integrity, GDP for production and monthly production scheduling B2B supplier risk assessment, among others. and monthly visit planning for We hold periodic meetings with field staff. network in our vendors, sharing industry trends and insights to help them Primary freight Phase-1 FY 2019- A fortified response to Covid-19 upgrade their capabilities. We also integration into SAP provide certifications to select 20, using We implemented the SAP LE With the Covid-19 pandemic vendors to enable them to render Transportation (LE-TRA) module resulting in an alarming number their services in line with supply the reverse involving our pan-India depots of infections and deaths, chain management or industry and hubs. SAP automation auctioning even advanced countries are compliance standards. struggling to find a strong Adopted innovative has led to better control on Since the start of strategy to combat this crisis. ways to connect with logistics expenses and tracking tool to procure the lockdown, our At Cipla, we are proud to stand doctors through webinars of movement, and other such employees attended direct and tall with our global operations and digital channels, Driving an innovation- efficiencies in our operational all hotline calls and which have rolled out strong disseminating knowledge centric supply chain processes. helped in the supply of indirect initiatives to keep people safe. around our Covid-19 products, benefiting e-auctions and Ariba catalogue We stay committed to serve products and therapeutic Our journey towards materials worth patients and chemists sustainability is accompanied by our stakeholders and are measures our drive for innovation. This can With 40% addressable spends determined to help combat be seen in some of our initiatives available on Cipla’s catalogue, the devastating effects of the requesters can directly order 2.6 Bn outlined below: J pandemic by bringing necessary drugs to patients in the shortest possible timeframe.
15 Suppliers from country of operations (India, South Africa, USA and Uganda) are treated as local suppliers. Information in line with BRR Principle 2, Question 4. 16 GRI 204-1. Local Suppliers includes the supplier of Direct material and Finished goods only.
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1 Governance for a Brighter Social Capital Tomorrow 2,3 At Cipla, we understand the potential as well as the responsibility of our business activities to drive positive change in society. Our CSR Cipla Foundation furthers Cipla’s long-standing, initiatives are implemented through purpose-driven and socially conscious legacy. Cipla Foundation. We also have an The Company’s patient-focused values reflect established governance structure and mechanisms that are aligned in our community-centered approach to to our CSR policy. The Foundation social change. Cipla’s deep-rooted culture works with credible institutions, nongovernmental organisations Cipla received the of responsibility, innovation and integrity (NGOs), government agencies, Golden Peacock domain experts and visionaries and guides our vision to build an equitable world Award for CSR in other philanthropic foundations FY 2019-20 on the foundation of ‘Caring for Life’. In our to enhance the outreach of our endeavor to empower communities, we create CSR initiatives in line with the CSR collaborations and build partnerships to co- policy. Additionally, the Foundation maintains the highest standards of evolve solutions for lasting social change. diligence, and audit and monitoring mechanisms for the partners and stakeholders it engages with.
Cipla Foundation works across four key CSR focus areas – health, skilling, education and disaster response – in India and South Africa. We consistently aim to maximise our CSR outreach, and contribute to our identified CSR priorities while remaining flexible in responding to unprecedented disasters like the Covid-19 pandemic.
CSR Spend4 (H crores)
5 38.38 41.81
Our strategic focus area include: FY 2018-19 FY 2019-20
1 Information in line with BRR Principle 8, Question 1 2 Information in line with BRR Principle 8, Question 2, 3, 4. 3 GRI 103-1, GRI 103-2, GRI 103-3, GRI 413-1, GRI 413-2 4 Information in line with BRR Principle Community 8, Question 4. Represents global spend engagement including statutory spend of H36.31 crores by Cipla Limited AMOUNT SPENT (H IN CRORES) 5Represents global spend including statutory ON CSR IN FY 2019-20 spend of H36.31 crores by Cipla Limited
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Strong CSR governance structure, based on three pillars; Creating Access to taking forward. Here, through a We believe Palliative Care is: 1 Palliative Care Services7 unique family care model, cancer patients and their care givers Constitute CSR Prepare and propose Identify CSR projects under receive free-of-cost holistic care Responsive Care Committee CSR Policy agreed thematic areas As few as 4% of people in India by a professional multi-disciplinary Personalised to suit the individual with serious health conditions team. CPC also provides free-of- Approve CSR Policy and Approve and Implement and monitor CSR needs of patients and their loved have access to pain relief or cost palliative homecare services Budget recommend CSR plan projects 8 palliative care. We strive to and runs outpatient clinics at public ones based on thematic Approve thematic areas Online Project Management bridge this unmet need by building and charitable hospitals in Pune. areas for CSR projects and System for measuring and access to palliative care services Additionally, CPC facilitates various 5 and by training general health Not Just End-Of-Life Care Board ensure that CSR projects Institute a transparent monitoring CSR activities training courses for healthcare practitioners in this specialised are executed and monitoring professionals and volunteers: Update the CSR Committee line of care. Our work is primarily Starts right from the time of CSR Committee CSR management on the status of CSR projects anchored in the Cipla Palliative diagnosis of a serious illness
Cipla Foundation/Others Cipla Care Centre in Pune. We Patients Home additionally support palliative care served care visits Quarterly update Regular update to CSR organisations across the country. Needed Beyond Cancer to Board Committee 4,700+ 6,000+ 3,900+ 4,800+ We also work with the National Every chronic life-limiting illness Health Mission in Maharashtra requires palliative care to provide community-based Our FY 2019-20 highlights are detailed below. palliative care services and integrate palliative care into the FY 2019 FY 2020 FY 2019 FY 2020 public health system. National palliative care outreach CPC is the only official recognised training centre With the aim to increase access for the End-of-Life Nursing Health Skilling Eduation Disaster Response to palliative care services beyond Education Consortium (ELNEC) CPC, we support 15 palliative course in India. care providers across the country. HEALTH Reached out with medical care in This enables us to serve patients 105,000+ South Africa to in remote communities and roll The Foundation takes Cipla’s efforts Free-of-cost health check-ups out training programmes for of accessible health care to patients, by Mobile Health Units (MHUs) 42,000+ healthcare professionals. to the communities we serve. We individuals through Owethu and strive to bring quality primary Sha’p Left initiatives healthcare services within the reach Cipla Foundation partnered with Served through partners of those in need and align our efforts in FY 2019-20 with national and global health 15+ Government Health Institutions mandates. In India, we prioritise palliative care and respiratory 7,400+ health, while our initiatives in South patients Africa focus on HIV and mental health. Additionally, we aim to respond to the health needs of communities around Cipla units as Cipla Palliative Care (CPC) & 15,000+ family caregivers well as those of underserved and Training Centre- Growing Cipla’s marginalised groups. This includes legacy of compassionate care women, children, the elderly and individuals with disabilities6. Cipla’s purpose-driven approach is reflected in the establishment of 3,500+ Scan QR code for healthcare providers received The Palliative Care Centre has the Palliative Care Centre in Pune, more information ‘train-the-trainer’ module of reached out to way back in 1997 – an initiative on ELNEC that the Foundation has been palliative care training in FY 2019-20 17,500+ patients over 23 years 7Information in line with BRR Principle 4, Question 3 8Alleviating the access abyss in palliative care and pain relief – an imperative of universal health coverage: The Lancet Commission Report, 5Information in line with BRR Principle 8, Question 5. March 2018 6Information in line with BRR Principle 4, Question 2
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Integrating palliative care into cost primary healthcare services diabetes, respiratory disorders and public health systems 35+ 100% including diagnosis, medicines, arthritis, among others. population screened in Sitarampur treatment and referrals to patients For the second consecutive year, District doctors and medical in remote communities. This village, Purulia district in West we supported the integration officers trained in palliative care especially benefits vulnerable Bengal for Hepatitis B and 56% of palliative care into the Non- patients such as women, children 1,05,000+ received third dosage of vaccination Communicable Disease (NCD) and the elderly. Through this free-of-cost health checkups out of the total screened and the Programme with the National 700+ initiative, we aim to additionally provided through MHUs, as project continues compared to 1,10,000+ in the Health Mission, Government cases identified and referred by support patients with chronic conditions like hypertension, previous year of Maharashtra and Aga Khan trained ASHA workers Health Services (India). Under this innovative multi-partner project, in 84% two blocks (Bhor and Purandar) in 290+ of the total population screened in Maharashtra’s Pune district, we are Katabuni village, Birbhum district ASHA workers trained to supporting the training of doctors in West Bengal for Hepatitis B and identify and refer patients and community health workers to 92% received second dosage of vaccination out of the total screened diagnose and identify palliative Intervention covers care needs in the community, and drive referrals to public health Project Prakash facilities. 3,00,000+ people through 11 Primary To enable better management Health Centres across two of viral hepatitis, we continue blocks of Pune district to support training sessions for healthcare professionals on diagnosis and management of the condition. This is being rolled out in partnership with the Institute of Respiratory care: clinics with necessary equipment Liver & Biliary Sciences (ILBS), New Supporting national and training in government 2 Delhi through online sessions, using health priorities hospitals in Dhar and Chandrapur. WHO curriculum. Project Ashwaas is a Through the ‘Inhale’ Project, we aim Chronic obstructive pulmonary to include COPD into the existing disorder (COPD) is recognised unique community- Non-Communicable Disease as one of the five surging non- based intervention for Control Programme in Ludhiana 4,600+ paramedics and doctors trained communicable diseases in India, city with successful training for with lack of timely diagnosis creating awareness, in FY 2019-20, as compared to frontline healthcare workers. Owethu Model of community health Project HOPE - Health identified as one of the biggest 1,200+ in the previous year early diagnosis and services and Sha’p Left Nurse Opportunities for Prevention challenges in managing this Surgeries for primary healthcare and Empowerment condition. Cipla Foundation management of COPD recognises the urgency to address We believe that sustained health Other health initiatives The Foundation’s Owethu and Alignment with Global 4 awareness and community the growing national burden Partnering with the Government Sha’p Left initiatives in South Health Mandates: engagement has the potential of COPD, and applies a multi- for scalable change 3 Africa continue to provide access stakeholder approach through a Eliminating Hepatitis We continue to respond to the to affordable quality healthcare to create positive health seeking behaviour. With this in mind, range of initiatives. We have been collaborating with primary healthcare needs of in remote communities. This year, we brought HelpAge India and the governments of Maharashtra, Reaching the unreachable communities living near Cipla units, the Foundation established five additional Nurses Surgeries Americares India on a single Madhya Pradesh, Punjab and and also strive to serve underserved Project ASHWAAS – to decongest government platform, to improve health Rajasthan to run pilot initiatives In line with the WHO global health needs that include detection Co-creating solutions for change healthcare facilities and provide outcomes of communities around campaign, ‘Finding the Missing and management of disabilities. to scale access for respiratory communities with essential Patalganga in Maharashtra. Millions’, we continue to support Under this innovative multi- care and to include COPD into primary healthcare services. Detailed sessions have been partner collaboration with the existing Non- Communicable Liver Foundation in Sonarpur Doorstep Health - conducted by trained community Disease Control Programme. West Bengal. Over a sustained Mobile Healthcare Units health workers on diabetes, Ambuja Cement Foundation, Reached out people we are supporting the training We supported the setting up of period of six months, we hypertension and respiratory In partnership with HelpAge India, issues, and on empowering of frontline workers (Sakhis) to a Centre of Excellence in the conducted free of cost drive we support Mobile Healthcare 35,000 42,000+ communities to leverage include COPD and asthma into Government Medical College for awareness, screening and Units (MHUs) that provide free-of- FY 2018-19 FY 2019-20 government health schemes. existing health interventions for in Chandrapur, Maharashtra. immunisation in two villages of non-communicable diseases. Additionally, we supported COPD Purulia district.
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Reached out to of sustainability. In addition to Developmental disabilities Care Pediatric Haematology – Cleft lip surgery- A global building community awareness and Oncology and BMT Centre in initiative for cleft lip treatment for With support from Cipla Foundation, 24,000+ participation, the programme has Borivali, Mumbai that has gained children streamlined referrals into the public Ummeed Training Center advanced exemplary recognition. participants through the upskilling of professionals and health system including primary A Cipla Foundation South Africa BCC (Behaviour Change caregivers in multiple states of health centres and hospitals in initiative in partnership with Communication) in FY 2019-20 India and overseas. Ummeed now Municipal Corporation of Greater 61 Operation Smile, ‘Miles for Smiles’ serves with the ‘Ummeed way’ Mumbai (MCGM), Thane Municipal lifesaving bone marrow creates awareness and raises Conducted philosophy of training and aims Corporation (TMC) and Vasai Virar transplant surgeries Supported funds to facilitate life-saving to enable better understanding Municipal Corporation (VVMC). reconstructive surgery on children and integration of disability into born with clefts. 4,127 programmes run by governments, training sessions through BCC in corporates, healthcare practitioners 999 FY 2019-20 blood transfusions Supported 51,400+ and the community at large. connects established with the Screened communities in FY 2019-20 (Science, Technology, Engineering EDUCATION learning for undergraduate 1,310+ chemistry students on the varsity and Mathematics) education campus by giving them access to model. This model encourages 2,493 professionals trained at the Center At Cipla Foundation, we recognise students for respiratory ailments best-in-class equipment, including a practical approach to science 18,290 with an outreach of 20,000+ children that access to quality education in FY 2019-20 people directly benefitted through virtual learning facilities. activities and stimulates curiosity, with disabilities is critical for children and youth to health trainings, counselling and while developing student aptitude achieve their full potential. Towards referrals in FY 2019-20 Additionally, the Centre will also and skills. Sha’p Left Chronic Medicine Pick-up- this objective, we support schools serve 5,000 students and 1,000 Point Units: Access to medication for Thalassemia treatment and in communities near Cipla units teachers every year from proximate stable chronic State patients Supporting technological innovation management: Rare needs Care and work to strengthen higher schools and colleges that do not for scalable health solutions: Moving education government institutions have access to such high-end 13 across the country. Mini Science Centres in 13 schools The Foundation in South Africa has knowledge, not people learning facilities. This is in line Supported by Cipla benefiting established 22 chronic medicine with the Student-Scientist Connect Project ECHO (Extension for Pick-up-Points for patients who Programme – a national initiative to Community Healthcare Outcomes) Supporting the setting up of a world would otherwise rely on collecting represents the movement to augment class chemistry lab at IISER, Pune extend learning outreach for school medication from government best practice care for underserved children. 5,572 health facilities. students communities across the world by With the aim to advance innovation harnessing the power of online and research in India and foster Computer labs and e-learning This project has been co- knowledge sharing. ECHO operates industry-academia collaboration, Unit-level infrastructure support equipment funded by USAID to the on a hub-and-spoke model using an we have supported the setting up of internet technology-based platform. Cipla Foundation has contributed value of USD 4 million a world-class Centre for Chemistry Experts and specialists (comprising Education & Research at the Indian Through this initiative, we helped to better infrastructure support for the hub) disseminate practical, Institute of Science Education & set up Mini Science Centres government-run and government- Medication dispensed case-based knowledge to health Research (IISER), Pune. Comprising in schools. These centres are aided schools near Cipla units, in practitioners (spokes) who in turn four state-of-the-art laboratories equipped to teach innovative and line with the national priorities of cascade this to more professionals, 20,000+ 43,000+ built across a 27,000 square feet interactive concepts in science the Sarva Shiksha Abhiyaan and and apply it in their own medical FY 2018-19 FY 2019-20 area, the Centre will enhance and mathematics using the STEM the Swachh Bharat Abhiyaan. This practice. We support ECHO training sessions in underserved and specialised therapies such as 9 Undergraduate Chemistry Lab, IISER Pune Maternal & Newborn Health (MNH) pediatric rheumatology, autism We are proud to grow our work in spectrum disorders, respiratory and Our sustained support to the the management and treatment palliative care. community-centered MNH of thalassemia, an orphan programme that we have been disease that Cipla has long been running in partnership with SNEHA, committed towards. To take this Mumbai, has shown impressive 85+ ECHO sessions forward, we have established outcomes in achieving its objective conducted with 950+ partnerships with organisations in of strengthening the public health Mumbai, Pune and Bengaluru. This system and building community healthcare professional includes support towards setting ownership with an underlying sense from 30+ locations up the Comprehensive Thalassemia
9Information in line with BRR Principle 4, Question 3
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includes setting up of sanitation among students by augmenting Early childhood development SKILLING Short-term vocational skilling blocks for girls, boys and teachers, centres (ECDs) teaching with innovative low-cost computer labs and e-learning models and providing access We partnered with Ambuja Cement As a responsible corporate citizen, this initiative, we focus on creating Foundation in Baddi and the equipment, as well as libraries and We support ECDs in India and to quality learning in remote we aim to play a part in India’s opportunities for underserved Industrial Training Institute (ITI) in provision for grade-relevant books. South Africa for children in the communities. Each van, equipped National Skill Development Mission. youth to maximise their potential. Sikkim to grow skill enhancement age group of 2-6 years, who with over 100 science models, In our endeavour to contribute to opportunities for financially Supported more than live in communities near Cipla drives to government-run and disadvantaged youth. This includes manufacturing units. Through these government-aided schools, providing technical and functional facilities we aim to cater to the where trained professionals 100 skilling opportunities through schools needs of nutrition, education and conduct grade-relevant science trained professionals in areas such safety of children in the critical learning sessions. We have been as plumbing, electrical, sewing, formative years of their lives. supporting seven MSLs under this programme, where teachers from beautician courses, etc. 3,300+ government-run and government- students benefited from this aided schools are trained through initiative teacher training programmes, and communities are engaged and educated in science through community visit programmes. 7 MSLs engaged for 97,000+ exposures to students Youth trained in Baddi in practical
science Professional skilling10 Skilling individuals with 71% gainfully disabilities- Every life matters learning, as Together with Baddi University employed compared to in Himachal Pradesh, we have A joint initiative between Cipla designed a unique professional Foundation and Ambuja Cement 200+ 60,000+ for the training programme wherein Foundation, the Skill Development Children benefitted in India holders from government-run and youth from the community earn & Rehabilitation Centre (SDRC) FY 2018-19 and South Africa through the government-aided schools. previous year. a 3-year graduate BSc medical in Ropar, Punjab, provides Ajuga and Balvatika initiatives degree at the University while vocational skills in areas such as We Felicitated 629 receiving on-the-job training at the bakery, pottery and jewellery- Cipla manufacturing unit in Baddi. students with merit making to persons with disabilities This initiative enables financially (PwDs). We also support job awards (including 47 disadvantaged yet meritorious readiness skills for PwDs to students with disabilities) youth to gain both the theoretical facilitate increased employment 69% 1,430+ 1,690+ from 134 schools across as well as practical skills needed opportunities. 57 youth have been gainfully FY 2018-19 FY 2019-20 the country to excel in a competitive work trained at this Centre during the employed environment. Students from the last three years, to build on their Merit award scholarships first batch, who graduated in 2018, potential and equip them to lead 345+ Mobile Science Labs (MSL) have been successfully pursuing a life of dignity through financial FY 2019-20 We continued encouraging professional careers since. independence. exemplary students by presenting This nationally lauded programme aims to ignite the interest of science financial merit awards to rank 10Information in line with Principle 4, Question 3
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Project Eyeway11 Covid-19 pandemic
Along with Score Foundation, During the unprecedented Cipla Foundation continues to pandemic that hit the world in support the EyeWay helpdesk at early 2020, Cipla Foundation the Victoria Memorial School of supported Covid-19 initiatives Blind in Mumbai. The helpdesk is a by working with the government, one-stop resource and information public health institutions, local repository that aims to increase administration, healthcare access to resources, information workers and vulnerable patients and counselling for people with in India and South Africa. The visual impairments. focus of these response initiatives has been to care for vulnerable patients, frontline healthcare 2,300+ workers and communities. visually impaired individuals engaged through the EyeWay helpdesk Partnering With Government and Public Health Insitutions Partnering With Local Administration Support towards setting Supplied personal protective up of Covid testing facility equipment like gloves, Existing Sha’p Left Nurse DISASTER RESPONSE Cyclone Fani in JJ Hospital, Mumbai with sanitisers and gowns at Nair Surgeries provided reagents/ kits for testing Hospital, Mumbai During this time of crisis, we primary healthcare 4,000 cases services in South Africa Cipla has always been at the reached out to communities in Innovatively modelled and forefront in supporting communities Odisha with 1,500 water testing kits, to ease the burden on Set up Mahashtra’s only deployed five containers government facilities affected by natural disasters, dry food ration, mosquito fogging pediatric Covid isolation to serve as testing facilities providing medicines in the machines and tarpaulin sheets. ward at BJ Wadia Hospital in high-risk communities in immediate aftermath of a crisis. Additionally, we also distributed for Children, Mumbai South Africa Cipla Foundation takes this legacy saplings and initiated tree forward by partnering with like- plantation drives to help farmers minded organisations to provide rebuild their lives. essential supplies, hygiene items, rations and more for disaster-hit communities across India.
Maharashtra floods For more updated information on We provided non-food items, safe our ongoing Covid-19 response initiatives, visit: covid-care. drinking water kits and, mother and ciplafoundation.org child care kits. With this, we extended care to families, pregnant and lactating women, and children below five years in Sangli and Kolhapur We remain embedded in the values districts of Maharashtra. Additionally, Partnering With NGOs and Communities of Cipla with the well-being of we reached out to over 1,000 families communities as our core focus. with free-of-cost health checkups Cipla Palliative Care & food vouchers for the Together with like-minded partners, by deploying our mobile healthcare Training Centre, Pune teaching staff. Partnered with we are striving to empower units to the disaster areas. continued to provide 24/7 UNICEF to distribute learning individuals to build a healthier and care for patients and families material productive life, and stand by with support during natural disasters Distributed food parcels Provided food packets and and unprecedented crisis, like to Ajuga-Early Childhood meals to migrant workers in Covid-19. Development Centres in India South Africa and provided 11Ground work has been reduced due to COVID-19. The data is only available till Q3 for the same purpose.
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Governance for Natural LEPs introduced in the previous and hazardous waste were Natural Capital Capital management1 year. Committees have been within regulatory permissible set up at the department, plant limits. Due to our active At Cipla, we are committed to and division levels to ensure monitoring and actions through environmental sustainability across adherence to the EHS policy. EnMS, we do not have any At Cipla, we believe in living by our ethos of contributing our business operations, to ensure open show cause/ legal notices, Further, all our manufacturing that resources are utilised in a and no penalties were levied towards a greener environment and sustainable value creation. sites across India (Sikkim II, safe and responsible manner. Our by environmental regulators. stage I audit completed) are We recognise the impact of our business activities on the senior leaders closely monitor Our operations do not impact certified for the Environment the Company’s environmental environmentally sensitive zones environment, and consistently strive to ensure responsible Management System (EnMS) and footprint and drive sustainability as all our manufacturing and Occupational Health and Safety environment management and conservation to encourage initiatives through technological R&D facilities are located in Management System (OHSMS) 5 sustainable profits for people and the planet. innovation in our operations permitted areas. on ISO 14001 and OHSAS 18001/ and products. This approach IS0 45001, respectively. These Cipla’s EHS framework lays delivers a positive impact for systems push us to do better, equal emphasis on capacity the environment and benefits all and hence the assessment of our building, periodically conducting stakeholders.2 Cipla’s ongoing practices is a vital focus area mandatory and need- commitment to sustainability is for us. An established auditing based EHS training for our ingrained in our Environment, process helps ensure consistent employees. During FY 2019-20, Health and Safety (EHS) policy, improvement in these areas. we identified nine EHS training which acts as an overarching This year, we conducted 33 topics and developed training guidance manual for our external and 60 internal audits calendars which were followed stakeholders. All our subsidiaries which showed no major non- by employees in the API, and joint ventures have either compliances / observations. Formulation and IPD divisions. adopted this policy as it is, or are Details on EHS training are aligned with it.3 During FY 2019-20, we were provided under the Human compliant with all applicable We believe that successful Capital chapter of the Integrated environmental regulations. Air adoption of policy is dependent Report on page number 084. emissions, effluent discharge on a strong governance system. With an established, top-down approach to our governance system, we ensure Our strategic focus areas include: that implementation is rolled out Cipla Leadership through a bottom-up approach. Governance and execution EHS Policy of the EHS policy, along with the mitigation plan for critical QUANTITY OF WATER EHS risks, are overseen by the RECYCLED AND REUSED Investment and Risk Management Cipla EHS Leadership Energy efficiency Committee.4 and managing Corporate Corporate EHS Good EHS Practices our carbon The Local EHS Procedures Governance Standards Guidelines Guides (GPG) emissions (LEPs) at our sites are based on corporate EHS standards and guidelines defined by the
leadership, which forms the basis Implementation Site Leadership & Line Functions for a sound EHS implementation. We released seven LEPs during Local EHS Procedures the year, as compared to five Water Waste 1 GRI 103-1, GRI 103-2, GRI 103-3 Management Management 2Information in line with BRR Principle 6, Question 2 ENERGY FROM 3Information in line with BRR Principle 6, Question 1 4Information in line with BRR Principle 6, Question 3 RENEWABLE SOURCES 5Information in line with BRR Principle 6, Question 6, 7
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Energy renewable sources in our total ISO 50001 Energy Management During FY 2019-207, we continued sources of energy have The figures and table below Management6 energy consumption mix. System standard. to grow the share of renewable helped reduce Cipla’s overall provide an overview of energy energy across our sites by environmental footprint. We consumption within Cipla8 Energy management is one Cipla has always believed Internal and external audits at encouraging and establishing new have now adopted new targets Energy Consumption (TJ) of the prime focus area under in putting robust systems in our manufacturing locations installations for renewable energy to keep growing our energy Natural Capital at Cipla, since it place to ensure the accuracy keep track of our energy generation. This includes the mix in the coming years. During and stability of its strategy. In management performance, has a direct impact on emissions commissioning of a 693 kW FY 2019-20, we invested H9 1810.4 and cost of operations. Our line with this thinking, we have and help identify areas for solar rooftop plant under the crores of share capital (26%) 1718.8 1760.7 energy management strategy implemented a strong Energy improvement. Internal audits are Renewable Energy Service in a special purpose vehicle, is based on a two-pronged Management System in each conducted every six months, Company (RESCO) model in AMPSolar Power Systems approach – improving energy of our locations. Our API and and a surveillance audit is done December 2019 at Baddi in Private Limited, for setting up efficiency across our operations, formulations sites in Goa and annually, while external re- Himachal Pradesh, and a 276 kW a 30 MW DC capacity captive 181.6 177.0 and enhancing the proportion of Indore are certified as per the certification is carried out once solar rooftop plant in January solar plant in Maharashtra. 0.8 every three years. 2020 at Bommasandra, Bengaluru. The project is under advanced FY 2017-18 FY 2018-19 FY 2019-20 A total of 2.96 lacs kWh of power stages of construction, and is were generated through these scheduled for commissioning Renewables Non Renewables Energy Savings installations during the year. by Q2 of FY 2020-21. From this plant we plan to source power Conserving energy in our We undertook several initiatives in FY 2019-20 to reduce our environmental Solar rooftop capacity Installed solar rooftop capacity under the captive Open Access operations is a continuous footprint. This was possible because of the active participation from all our increased from 820 kW in previous years totaling to route for our Kurkumbh and process at Cipla. Our initiatives locations. Some of the initiatives that helped reduce energy consumption 820 kW (including 150 kW in Goa, Patalganga units, and shift ~55% (including 410 kW of in this area have led to a 3% at Cipla are: 175 kW in KKB + PTG, and 85 kW of their combined annual power depots) in FY 2018-19 to reduction in overall energy in Vikhroli and 410 kW at requirement to green energy. 1,789 kW in FY 2019-20. depots), continued to generate consumption for FY 2019-20, as 7.45 lacs kWh of power during At our Goa site, 2,477 kW of compared to last year. We are We were able to the year. solar rooftop capacity under also taking active measures to generate 10.4 lacs kWh the RESCO model is slated to reduce our consumption share ON/OFF logic Installation of We have continued to grow our of energy sourced from fossil from solar rooftop be commissioned soon. Another operation for Air energy efficient renewable energy initiatives this 1,100 kW of solar (rooftop and fuels (High Speed Diesel and Handling Units pumps (heat installations year, as well. Through the third- ground mounted) plants are Furnace Oil), as compared (AHU) pumps) party open access route (solar under construction at our Sikkim to the previous year. Capital and wind), we sourced 85% of expenditure of H5.27 crores was For the FY 2019-20, site (units 1, 2 & GC) and are the total electricity requirements scheduled to be commissioned approved for these interventions 223 lacs kWh electricity at our Bengaluru units by Q3 of FY 2020-21. in FY 2019-20, of which a part Installation of Process was sourced through (Virgonagar and Bommasandra) was spent during the year. rooftop solar modifications, solar/wind third-party PPA from renewable energy sources. Considering the share of (Total electricity consumption renewable energy in electricity units installation of Energy reduction in GJ (non-captive). This grew by at Bengaluru was 248 lacs kWh, purchase from various DISCOMS compared to previous year LEDs, installation 23% over last year out of which solar and wind across our manufacturing units of VFDs and Open Access contributed 210 (according to data from the more lacs kWh). For the Vikhroli R&D Ministry of Power, Government Total 39,253 Interchange of centre in Mumbai, we sourced of India) and our internal efforts, high gravity In FY 2019-20, we 12.68 lacs kWh via the third- we estimate that 19% of our 13,140 chillers with low party Open Access route during total electricity supply for India Fuel HSD gravity chillers were able to save April-November 2019. locations during FY 2019-20 has come from renewable sources. 26,113 Sustained efforts to shift from We plan to continue our focus in Fuel FO around 13,027 GJ conventional to renewable this area in FY 2020-21, as well. of energy through our energy saving
initiatives 7We have included data for Mirren from South Africa and Depots data from India in the calculations for this year. 8Includes energy from nonrenewable sources (779 TJ from fuel and 1107 TJ from electricity) and renewable sources (93.03 TJ from fuel and 83.08 TJ 6 GRI 302-1 and GRI 302-4. Information in line with BRR Principle 6, Question 5 from electricity). We have included data for Mirren from South Africa and Depots data from India in the calculations for this year.
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Greenhouse gas emissions9 Our emissions intensity (tCO2e/ Water management11 Water Consumption break- GJ) remained unchanged from the Our efforts up by source At Cipla, we understand previous year at 0.15. Water is a valuable natural the imperative to reduce resource, and is used throughout Our GHG emissions are generated and actions Greenhouse Gas (GHG) our manufacturing process. from diesel, natural gas, furnace 23% 21% emissions in our operations. Water management is therefore oil (residual fuel oil) and electricity have helped Accordingly, we have aligned one of the most important FY 18-19 FY 19-20 consumption. We have used our targets with the global goals parameters in our sustainability 4% 2% The Intergovernmental Panel reduce our and the national agenda for agenda. Cipla takes all possible on Climate Change (IPCC) AR 4 reducing GHG emissions. precautionary measures to 73% 77% emission factors for fuels [Global Scope 1 manage and improve its water warming potential (GWP), as per Emissions in tCO2e footprint. We actively monitor Industrial water supply Ground Water Surface Water AR 5] and CEA (Central Electricity emissions by water consumption levels and Authority) emission factors for have adopted the 5R approach grid electricity in India. We 6% and Scope – reduce, recover, reuse, recycle Some of the initiatives in FY 2019-20 that helped reduce water consumption 2,41,959 have also used country-specific 2,39,853 and rethink – for efficient water at Cipla are: 2,36,358 emission factors for our electricity 2 emissions management. consumption in other countries. by 1%, as This has helped us reduce our In addition to an overall reduction ETP RO treated Reuse of overall water consumption in GHG emissions through compared to by 3%, as compared to the water reused for water after conventional energy sources, we 48,146 55,013 51,624 previous year. The graph utility makeup (for backwashing of were able to further cut down below represents our water Cooling Towers) filters used for on emissions with the help of our the previous FY 2017-18 FY 2018-19 FY 2019-20 consumption by source for renewable energy initiatives, by purposes processes Scope 1 Scope 2 FY 2019-20. 19,133 tCO2e.10 year Total water consumption Water usage Throttling of (kL x 1,000) optimisation in incoming potable canteen and wash water lines of areas by providing manufacturing 1,827 1,811 auto taps block 1,744
In addition, we have also started harvesting rainwater at sites where the runoff water from rooftops is being used in the cooling towers. At a 19,133 tCO2e emission few sites, rainwater is also used for non-GMP purposes. However, the reductions from quantity was not significant for FY 2019-20. We plan to increase this offsets due to use of FY 2017-18 FY 2018-19 FY 2019-20 capacity in the coming years. renewable energy. Our investments in renewable energy have led to an increase in carbon emissions offset by 3,883 tCO2e as compared to the previous year.
9GRI 305-1, GRI 305-2 and GRI 305-4 11GRI 303-1 and GRI 303-3 10Emission reduction from offsets calculated basis - renewable energy in GJ*0.82
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Wastewater management12 The total wastewater generated (POTW), in compliance with Waste Management13 the rest is sold to authorised the development of its new in FY 2019-20 was 8,39,494 the consent/ permit conditions. recyclers. At our formulation cartons and shippers. In line We have been constantly kL, of which 2,12,062 kL was The quantity of water recycled In line with our focus on site, primary waste generated with our goal of increasing this working to improve the discharged from Cipla’s and reused during the year sustainable business operations, consists of packaging waste, share year-on-year, we follow efficiency of our water usage. operations at Patalganga, was 6,09,624 kL, which amounts Cipla seeks to minimise the rejected materials and shelf-life a comprehensive protocol We have undertaken Zero Baddi, Vikhroli and overseas to 34% of our total water generated waste at source, expired products. These are assessment of factors such Liquid Discharge (ZLD) projects sites into CETPs and Publicly consumption. where possible, and recycle the sent to Treatment, Storage and as recyclability, nature of the to improve our wastewater Owned Treatment Works rest. A considerable portion Disposal Facilities (TSDF) or material, single material usage, management systems. All our of the waste generated in the subjected to thermal destruction product to packaging ratio, API manufacturing sites (except pharma industry is classified in external incinerators or sent ease at the manufacturer’s as Patalganga) are now zero liquid as hazardous and requires for co-processing. well as at the user’s end, design discharge sites. At Patalganga, Our constant efforts safe handling. We ensure for distribution and its disposal, The global ban on single use we treat the total generated that the waste generated by etc. plastic promotes the use of wastewater, of which a part our operations is handled have helped us manage paper-based carton boards Cipla has also been registered is discharged to a Common and disposed off in an for packaging, which has led as a Brand Owner under the Effluent Treatment Plant (CETP) environmentally responsible our wastewater more to more sustainable industrial Plastic Waste Management under obligation of discharge manner, and in full compliance practices. Most of our product Rules by the Central Pollution in-line with the agreement. We with applicable government packaging – particularly Control Board (CPCB), as are also working to convert efficiently and consistently regulations. secondary and tertiary per the Extended Producer our existing ETPs to ZLD at our We also monitor our waste packaging components – is Responsibility commitment. Sikkim plant. for the last three years. management processes and manufactured using recycled This allows us to recycle and We now recycle and procedures regularly so that materials such as paper and process plastic waste. Till 31st adequate and safe treatment board. Use of recycled paper March, 2020, we channelised reuse of is available for the waste also helps preserve forests around 4,500 MT of plastic more than 70% generated across our facilities. by lowering the demand for waste generated from our Solvent recovery systems wood, generates less pollution products through recycling and wastewater generated. installed at our API sites enable during production, and helps co-processing, thus preventing the recovery of prescribed optimise costs. Cipla ensures it from being dumped at urban amounts of used solvent. These that approximately 10% of landfills. amounts are then reused, while recycled material is used in
The summary of waste generated from our operations in FY 2019-20 is provided below: 14
Hazardous waste
1,367 MT 1,576 MT 937 KL 13,584 KL 4,173 KL Secured landfilling Incineration (solid) Incineration Reprocessing/ Reprocessing/ (SLF) (liquid) recycling (spent recycling used oil solvent)
38 MT 2.4 MT Reprocessing/ Reprocessing/ recycling containers/ recycling e-waste acid etc
Non-Hazardous waste
8,446 MT 1,01,428 Nos All scrap (PVC, shoes cover, box Scrap (plastic drum, fibre drum and paper, MS, GI parts, etc.) can, MS drum and EC/FD, etc.)
12GRI 306-1 13GRI 306-2, GRI 306-3 and GRI 306-4 14Information in line with BRR Principle 2, Question 5
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For FY 19-20, there were Environmental Awareness Storage capacity of the 1 no spills reported. All non- and Employee Engagement Kheda dam near Indore Management Discussion and Analysis hazardous waste, such as metal scrap, paper, etc. were sent to Cipla has been regularly has been increased recyclers. organising employee from ~10,000-11,000m3 engagement activities to to ~14,000-16,000m3 The following Management Discussion and Analysis foster awareness around Report (MD&A) has been drafted considering business Cipla is taking 95% environmental conservation. This Benefits accrued to 650 as usual through FY 2020-21. of liquid hazardous year too, we celebrated World proactive measures to th households with a total waste recycled14 Environment Day on 5 June, The Covid-19 pandemic has caused unprecedented 2019 across all our locations. population of around disruption in global economic activity, reflected in manage the crisis and Various initiatives like sapling 4,500 people severely weakened macro-economic indicators. plantation, distribution of adapt to new realities 1.34% recyclable bags, outdoor waste Global GDP numbers are being revised depending upon of solid hazardous collection, etc. were undertaken. stimulus packages initiated by respective governments to ensure sustainability waste recycled15 and central banks, and the recovery potential of economies through the pandemic. All these will lead to of its procurement, significant volatility in the near to medium term across key economic indicators, including currency, liquidity manufacturing and Some of the active measures Tree plantation at Kallabalu and inflation. Despite the perceived immunity of the and interventions to reduce village lake processed waste from our pharmaceutical sector, the Covid-19 pandemic is likely distribution, and deliver operations are: The Kallabalu lake is located in to cause major shifts in chronic and acute drug usage Kallabalu village, Jigani Hobli in and healthcare delivery in developed and developing on its strategic goals. Polyhouse used for drying Anekal taluka in Bengaluru, barely markets, impacting the operations of pharmaceutical ETP sludge, which reduces two kilometres away from Cipla’s companies across the globe. Overview water content in solid waste Bommasandra unit. Realising Since March 2020, most governments worldwide have that the lake was polluted to RO rejects (good quality) accelerated containment measures to restrict the Cipla’s relentless commitment an alarming extent, the Jigani from freshwater purification spread of the virus and utilise healthcare infrastructure Industrial Association, the Kallabalu and contribution over the last are re-engineered and used and resources for Covid-19 treatment. This translates into Panchayat Committee and the in utilities, instead of being fluctuating demand for medicines in hospital channels 85 years towards improving Jigani police station came together sent for treatment due to restricted patient flow for routine ailments (OPD) for an environment protection healthcare outcomes and Some of our notable initiatives are: and rescheduling of non-critical surgeries. Restricted initiative. This involved removal of Condensate recovery used patient visits are likely to adversely impact prescriptions standards of care has sewage and silt from the lake bed, for boiler feed water Renovation of masonry check and medication refills, field force engagement, and construction of a walkway and positively impacted the lives of dam new product launches and inventory levels in the Installation of automatic and fence around the lake boundary distribution channel, depending upon the duration and patients in more than spray taps A masonry check dam was to prevent dumping of garbage. the severity of the pandemic. The pandemic may also constructed by the government To help in these greening efforts, 80 countries globally. Compost created from cause interruptions in the procurement of raw material about 15 years ago at Kheda Cipla Foundation supported the canteen and garden waste supplies, manufacturing operations and therefore the Our purpose of Caring for Life enables us to deliver village near our Indore unit. planting of grass and saplings over supply of medicines as the Company ensures the safety unmatched capabilities across the care continuum Through years of neglect, the a 54,000 sq ft area around the Utilisation of hazardous and well-being of its employees and stakeholders. in various therapeutic areas, including the widest lake. The rejuvenated Kallabalu waste for co-processing, dam gradually lost its water range of drug-device combinations and cementing lake and its surroundings now offer instead of conventional storage capacity due to heavy The above factors have created an environment of our position as a lung leader in India and other key a healthy environment for aquatic methods such as TSDF siltation and erosion of its walls. significant uncertainty, which limits the ability of the emerging markets. Our R&D engine and manufacturing life and birds to flourish, and is The Cipla Foundation rolled out company to make appropriate projections about operations are well-positioned to unlock opportunities a preferred location for physical E-logs instead of manual initiatives to renovate the check business trajectory in the coming year(s). Evolving emerging from the evolving healthcare ecosystem, and fitness activities. The lake also paper recording, in dam and restore its functional demand patterns can also have an impact on financial deliver superior value to patients, shareholders and all serves as a source of water for manufacturing and structure. This helped increased health as we extend liquidity support to our channel other stakeholders. packaging the availability of water through farmers nearby. partners and suppliers. better retention and storage, and also recharged ground water and thus helped raise the yield of wells in the area.
15Information in line with BRR Principle 2, Question 5 1GRI 103-1, GRI 103-2, GRI 103-3
120 Caring For Life since 1935 Management Discussion and Analysis 121 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Global pharmaceutical industry structure Specialty investments in developed markets are Expected trends for global pharmaceutical markets and key developments expected to be higher in niche areas like oncology, orphan indications, and cell and gene therapies. The Artificial intelligence and projected lower spending in emerging markets is in line Demographics Machine learning Digital health systems Global Medicine Spending Growth 2009-2024E with historical levels attributed to high out-of-pocket expenses, limited reimbursements and disease morbidity Improved standards of living, Artificial Intelligence (AI) and Digital technology has been 1,115- differences leading to lower uptake. and evolving demographic and Machine learning can serve a transformative force in the 1,145 2-5% epidemiological trends will drive pharmaceutical companies in creation of modern infrastructure 955 100-130 Cipla has been at the forefront of offering complex demand in emerging markets. Here, to evaluate patient engagement 4.2% 1-4% 777 Improving the sophistication 4.3% 102 315-345 respiratory products such as inhalers, nasal sprays the ageing population and rapid and medical outcomes and shape 628 2.6% 5-8% of digital engagements with 90 244 and other dosage forms such as injectables and incidence of non-communicable future strategies. Accelerated 2.8% 7.7% physicians and patients 78 168 1-4% 12.2% biosimilars via organic development, and through diseases (NCDs), especially adoption of digital services is 95 3.3% partnerships in key geographies. This allows greater cardiovascular disease, cancer Optimising the selection of likely to promote convergence of Spending in USD bn USD in Spending 2.6% 665-695 609 455 519 access to cost-effective medicines and treatment and diabetes, will see growing candidates for drug discovery healthcare systems in developed investments towards control and and clinical trials in a cost- and developing economies options, to positively impact healthcare outcomes. prevention effective manner 2009 2014 2019 2024E In India, Cipla expanded its portfolio offerings through acquisitions and partnerships such as Vysov® Developed Emerging Rest of the World Global 5-yr CAGRs (anti-diabetic DPP4-Inhibitor) and brands in the Source: IQVIA Market Prognosis, Sep 2019; IQVIA Institute, Dec 2019 nutraceutical-women’s health space to reinforce its Access Global pricing action Diversity in innovation launches strong offerings in the domestic market. The Company Continued expansion of national Governments are exploring a range Specialty, orphan, biologic As per a recent IQVIA2 report, global medicine spending also entered into multiple agreements with MNCs across key geographies, which include partnerships with healthcare schemes by South-East of policy options to negotiate the and oncology will represent is projected to grow at 2-5% annually and exceed and East Asian countries in response pricing of prescription drugs to an increasing proportion of AstraZeneca in South Africa and Novartis in Australia USD 1.1 trillion by 2024. Most developed markets are to rising demand, demographic and reduce cost and increase access innovative product pipelines in the and Sri Lanka, and is looking to grow its in-licensed expected to continue investments in specialty medicine epidemiological trends to drive for patients developed markets. At the current and new branded product spending at a lower growth biosimilar franchise in emerging markets. More recently, spending rate, biosimilars are likely to see rate of 1-4%, given that price and volume growth will slow Cipla has partnered with Gilead Sciences for the increased uptake. Gene-based down owing to pricing pressures and loss of exclusivity on manufacture and sale of Remdesivir, which is currently therapies, backed by genomic patented medicines. In volume-driven emerging markets, being considered as a potential treatment drug for data, will see higher relevance in medicine spending is expected to grow 5-8%. These hospitalised patients suffering from Covid-19. product approvals and outcomes markets will continue to see increased access, leading to higher volume and uptake in novel therapies. New payments infrastructure to manage high cost therapies Evolving regulatory framework across key Introduction of telemedicine guidelines led to the would be critical to lessen the impact on spending. markets3 formal recognition of this practice in India, legally. This is expected to improve patient convenience as Regulatory developments and government consultations can be done remotely through any Global Medicine Specialty Share by Region initiatives in India form of communication media. 60 During the year, the Indian regulatory authorities The Union Cabinet has proposed schemes with an announced several initiatives around generics, APIs and allocation of approximately H10,000 crores towards 50 clinical trials. construction of bulk drug parks, incentives to boost domestic output and reducing dependency on 40 The government continues the focus on revising and imports. The government has also identified 53 updating the National List of Essential Medicines APIs that it would like domestic drug companies 30 Expansion of Jan Aushadhi stores offering affordable to focus on. From a manufacturing perspective, medicines continues to provide price competition to implementation timelines of such schemes and timely 20 pharmaceutical companies. product approvals will be key to reduce dependency on imports over the medium to long term. 10 The Ayushman Bharat programme, the world’s largest state sponsored health insurance scheme, E-pharmacies, entering into their fifth year of existence, will continue to evolve their business 0 will continue to drive access to healthcare services 2009 2014 2019 2024E in the country, and can potentially trigger a rise in models to integrate into the overall healthcare Developed Emerging Rest of the World Global demand. ecosystem. The continuation of discounting models
Source: IQVIA Market Prognosis, Sep 2019; IQVIA Institute, Dec 2019
2Global medicine spending and usage trends (March 2020) 3GRI 103-1, GRI 103-2, GRI 103-3
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and focus on profitability may lead to channel Other global regulatory developments branded medicines was made effective in January 2019. Africa, along enhanced direct-to- consolidation, with potential pricing implications for Initiatives such as the Accelerated Access Collaborative market presence in US and strong pharmaceutical companies. In addition to India and the US, Cipla’s operations are (AAC), and reforms to the Cancer Drugs Fund will subject to a variety of regulations in other jurisdictions expedite patient access, and extend uptake of new traction in the respiratory franchise, New Drugs & Clinical Trials Rules, 2019, were across the world, impacting the sales, marketing and medicines in the UK. Given the dynamic and diversified with successful filings and launches at introduced to improve the scope of existing distribution of its products as well as ongoing product nature of European countries and their regulatory the close of the year. regulations to include provision for bioavailability development. authorities, Cipla will focus on key large DTM markets and bioequivalence studies and inclusion of geriatric for a well-entrenched footprint. and pediatric population for relevant conditions, South Africa relaxation of local clinical trials for launching drugs Cipla continues to maintain a robust quality “We continue to maintain our The South African Health Products Regulatory marketed in foreign jurisdictions recognised by the management system to ensure full compliance with aggressive investment stance in Authority (SAHPRA) is committed to clear the massive health ministry, and introduction of the concept of regulatory requirements, with manufacturing processes established branded franchises backlog of regulatory applications inherited from investigational drugs and orphan drugs. that produce high-quality products exported to various of India and South Africa, and the Medicines Control Council (MCC) that it replaced markets globally. Regulatory developments in the US in February 2018. In its annual strategy document, calibrated investments in the the agency has targeted to re-engineer approval US generics and specialty The US pharmaceutical market continues to be the Financial performance processes to reduce the regulatory decision timeline businesses, which will drive top export destination for Indian pharmaceutical to 275 working days for new chemical entities and companies. Over the years, Indian pharma companies further improvement in our return 180 days for registration of generic products, and have adopted the strategy of pruning R&D pipelines to reduce the regulatory backlog in two years. The In FY 2019-20, the metrics. We will remain focused focus on complex formulations where competition and agency also plans to strengthen its human resource on ensuring a healthy cash pricing pressures are limited. capacity, introduce a new fees model and digitise its Company made position and reimagining the cost The pandemic has led the US government to realise key processes. Furthermore, adequate funding has base across our businesses in its over-dependency on imports to support domestic been raised from key stakeholders to implement the significant progress these times.” demand for medicines. To increase long term self- strategy. This is likely to significantly increase approval reliance and to curtail shortages, the US government rates and benefit Cipla’s developmental pipeline in on its key priorities – Kedar Upadhye is likely to encourage increased indigenous the region, thereby improving access to life-saving Global Chief Financial Officer capacities, as well as sourcing from a diversified medicines and generics. It could also potentially across businesses. pre-qualified import base. Indian pharmaceutical increase competition in the South African market as companies will need to reassess their manufacturing multiple players receive product approvals. base and distribution channels, and prepare for such The consolidated shifts over the medium to long term. In August 2019, the National Health Insurance (NHI) Growth in key markets Bill was introduced to provide all South Africans PAT was historically US pharmaceutical market witnessed an increase essential health services as part of the government’s The India Rx business continues to deliver strong in approvals for novel products based on unmet initiatives to improve universal healthcare access the highest at market beating performance with 9% growth on clinical needs via expedited regulatory pathways, for all its citizens. a YoY basis while maintaining ranks and market through 2018 and 2019. J1,547 crores. shares across key therapies - respiratory, urology, Europe anti-infectives and cardiology. The trade generics Pricing pressures will remain for market participants, business came back strongly after distribution given the focus to reduce drug prices and out-of- Key priorities for governments across Europe included Cipla’s capital continues to be allocated model change in Q1 of FY 2019-20, and delivered pocket costs for patients. Efforts to boost market price control initiatives and improvement in patient in value accretive businesses, which strong growth in H2 of FY 2019-20. This year, the access for generics by increasing competition access. In Germany, the GSAV Bill for more safety in the has led to a year-on-year (YoY) three businesses, namely Rx, trade generics (Gx) and and lowering prices are expected to continue supply of pharmaceuticals, was introduced to increase Consumer (Cipla Health Ltd; CHL), were converged through programs such as Generic Drug User patient safety and is likely to have implications on strengthening of the balance sheet and under the One-India strategy to harness synergies Fee Amendments and Competitive Generic biosimilars and orphan drugs. In France, a new health law a sustained improvement in RoIC. of these businesses. This is likely to see significant Therapies. was adopted in July 2019 which targets transformation FY 2019-20 witnessed continued traction traction in the coming fiscal with synergies playing of the current health system, with emphasis on greater The number of inspections and adverse in branded markets of India and South out across distribution and portfolio management. control of chronic diseases. classifications of manufacturing sites by the USFDA have increased through 2019. Indian companies Italy’s new pharmaceutical governance strategy, are working towards resolution of regulatory launched in end-2018, outlines measures to address observations given the high importance of the issues affecting the underfunded healthcare system in geography from a long-term growth perspective. the country. In the UK, a new voluntary pricing system for
124 Creating Hope since 85 Years Management Discussion and Analysis 125 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
The South Africa business grew by 8% in local were maintained at 9%. The diluted EPS (earnings per The expenditure on tangible assets for the year Earnings before Interest Tax Depreciation and currency terms, driven by strong performance share) for the year stood at H19.16 (FY 2018-19: H18.93). was H573 crores (FY 2018-19: H360 crores), spent on Amortisation (EBITDA) of 11% local currency growth in the private and routine maintenance capex and new lines in India, and OTC markets, significantly outpacing the market The Company further improved its net debt position upgradation at facilities in the SAGA region. The capital The EBITDA for the year was H3,230 crores, with EBITDA growth. The Sub-Saharan Africa business was to H807 crores (FY 2018-19: H1,581 crores) by repaying expenditure for the year in intangible assets (net of margin at ~19% to sales. Operational profitability impacted by receivables-related challenges, and H1,939 crores debt ahead of schedule. The net debt/ sales) was H427 crores (FY 2018-19: H167 crores) spent on continued to remain at healthy levels across key the CGA business rebased during the year. equity stood at a solid 0.05 for the year (FY 2018-19: 0.1). brands acquired and in-licensed in India and USA. businesses of India and South Africa while improving significantly in US driven by strong commercial execution In the US, the Company optimised an IP-led The Company’s leverage and debt metrics remained and contribution from an IP-led opportunity. opportunity of Cinacalcet (gSensipar) amongst Net debt healthy with the net debt-to-equity improving to 0.05 other approvals, and scaled-up revenues to (FY 2018-19: 0.1) while the net debt to EBITDA improved Employee expenses USD 547 million. Recent pipeline developments to 0.3 (FY 2018-19: 0.5). The Return on net-worth was J807 crores Cipla’s employee expenses for the year stood at such as generic Albuterol approval and gAdvair marginally lower as compared to last year. In FY 2019-20 J3,027 crores, an increase of 6% over FY 2018-19. The filing, FTFs (Esomeprazole 10mg) and other limited increase was largely driven by annual increments and competition approvals will help drive the business in J1,581 crores FY 2019-20 financials other performance linked components. FY 2020-21 and beyond. In FY 2018-19 The Company’s consolidated income from operations Other expenses While the European business continued its strong during FY 2019-20 grew by ~5% to H17,132 crores. EBITDA for the year was H3,230 crores or ~19% of sales. Profit after market performance, the emerging markets In FY 2019-20, the free cash flow improved by 87% to The other expenses which include R&D, quality, sales and tax for the year stood at H1,547 crores or 9% of sales. business was impacted by supply constraints and H1,955 crores (FY 2018-19: H1,043 crores), led by significant marketing, regulatory, manufacturing and others, stood progress on stabilising working capital requirements geo-political and associated economic instability. Total income from operations at H4,908 crores for the year, growing by ~6%. The other The Company continues to focus on key value- and normalising growth capex. expenses at 28.6% to sales remained largely stable, generating DTMs across the EU and emerging Revenue growth in FY 2019-20 was driven by the India, against FY 2018-19. This increase was largely driven markets. South Africa, North America and Europe operations. by growth investments in the India business, including Free cash flow The Company’s consolidated income from operations the Omnigel consumer campaign, growth investments The API business grew by 5% in $ terms during the during FY 2019-20 grew by 5% to H17,132 crores such as expenses related to specialty acquisitions and year with higher margins driven by healthier product 1,955 crores (FY 2018-19: H16,362 crores). product development in the US, and remediation costs mix. The business exhibited continued momentum in J for the Goa plant. global seedings and lock-ins. In FY 2019-20 Consolidated income from operations 4 J1,043 crores R&D investments Key financial highlights In FY 2018-19 J17,132 crores In FY 2019-20, the Company reported In FY 2019-20 Total R&D J16,362 crores 5% In FY 2018-19 Core margins (quality of earnings) investments stood
Overall, Cipla reported stable EBITDA margins of ~19% Revenue split by business at J1,175 crores or J17,132 J3,230 during the year. The Company is focused on improving Revenues (in crores) EBITDA (in crores) core margins by driving value accretive growth and 5% 4% 6.9% of revenue evaluating the cost base for efficiency improvement Europe Global API and productivity. with significant Balance sheet health 2% 9% Others contribution from 19% Cipla continued its focus on strengthening the balance Emerging markets EBITDA margin sheet by optimising capex and working capital investments in investments. The Company deployed its capital to support 39% scale and to enhance product portfolio. Improved cash India Respiratory portfolio For the year, the consolidated PAT was historically the generation enabled the Company to prepay debt by highest at H1,547 crores. On a YoY basis, PAT margins J1,939 crores, and fund growth investments. such as the Advair 18% 23% SAGA North America development.
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is largely attributable to the inclusion of leases as per FY 2020-21 Outlook: Combatting the pandemic and driving continued growth across key markets
st Ind AS 116, excluding which the increase was marginal. 31 Marc n h, o 2 Pre-payments on long-term debt were done in two s 0 2 175 tranches, with a higher amount paid in Q4 of FY 2019-20, A 0 Managing supply across all key markets is a priority for Cipla. The Company has approved and hence the reduction in finance costs is expected in robust plans in place for manufacturing, supply chain, R&D and marketing with 259* FY 2020-21. a focus on cost optimisation and cash management. The Company is proactively ANDAs Income tax working on ensuring adequate inventory levels for critical raw material and finished C goods in the channel. i f pl o The effective tax rate stood at 29% for FY 2019-20. The a al had a tot 22 Company continued with the old tax regime for FY 2019- tentatively 20 to utilise the available MAT balances. In FY 2020-21, approved the Company will transition to the new corporate tax Business Continuity Planning Quality & Compliance structure. 62 Managing supply Comprehensively address observations at Goa under- Profit after tax Focus on cost optimisation plant approval Cash management Operate our facilities globally with the highest level of compliance and control Profit after tax for Prudent Inventory management the year at J1,547 South FY 2019-20 India US EU & EMS launched crores or ~9% Africa 12 13 ANDAs approvals of sales. Driving market beating Drive share and focus Continue growth Continue to focus on top received by the filed growth in India business on maximising value momentum in the private DTM markets with product Debt-Equity through focused execution opportunity across key market portfolio to deliver offerings that create long Company of the One-India strategy assets, including Albuterol growth in the overall term value for our patients 6 ANDAs In FY 2019-20, the Company demonstrated strong business improvement in balance sheet health and related Engage with channels Continue to track financial metrics. At 31st March, 2020 the Company’s via digital platforms and respiratory filings closely; Sustain the dominant play Depreciation and amortisation long-term debt stood at USD 315 million, out of which continue to track emerging focused R&D investments in the OTC space and demand patterns going forward drive further growth in the USD 275 million is towards the InvaGen acquisition, and During FY 2019-20, depreciation and amortisation Mirren portfolio expenses (including the impact of change in lease ZAR 720 million for the Mirren acquisition in South Africa Finalise out-licensing for accounting) stood at H1,175 crores (FY 2018-19: H1,326 and other operational requirements. The reduction CNS specialty assets; work crores). The FY 2018-19 depreciation and amortisation in long-term debt was on account of pre-payment of with USFDA on IV Tramadol charge included a one-time impairment linked to the USD 275 million in two tranches in July 2019 and February Company’s US acquisition. 2020 in FY 2019-20. Working capital loans of about USD 41 million and South African ZAR 280 million, act Potential evolving developments and risks to the outlook as natural hedges towards the Company’s receivables. Total net debt-to-equity remains healthy at 0.05. The Company continues to operate in a challenging and dynamic environment. The nature of the pharmaceutical J1,175 crores business exposes the Company to various competitive and regulatory risks in the near term: Furthermore, the outstanding forward and option In FY 2019-20 Evolving pressures on commoditization in India led by disruptive business models and potential impact on the st contracts with the hedge for receivables as of 31 branded generics business in India J1,326 crores March, 2020 are USD 197 million and ZAR 510 million. In FY 2018-19 Outstanding cash flow hedges as of 31st March, 2020 are Consolidated customer base, high competition, regulatory requirements impacting product approvals and continued pricing pressure in the US USD 121 million and ZAR 312 million. Finance costs Increasing regulatory scrutiny, leading to delay in product approvals for the US markets including potential No material changes and commitments have occurred delay in resolution of observations received for the Goa plant. Geo-political uncertainties in middle-eastern During FY 2019-20, finance expenses increased by 17% after the close of the year till the date of this report, markets could impact business growth opportunities in the emerging markets region to H197 crores (FY 2018-19: H168 crores). The increase which may affect the financial position of the Company. Shifts in drug usage and healthcare delivery in developed and developing markets, on account of Covid-19 and *includes approved, under approval and tentatively approved ANDAs for Cipla, InvaGen as well as partnered ANDAs and filed under PEPFAR associated supply chain disruptions
128 Creating Hope since 85 Years Management Discussion and Analysis 129 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Business performance India branded prescription business 8 brands in the top 100 brands “Inspite of the continued uncertainty, our business teams have actively reimagined For the full year of Indian pharmaceutical their operating models which include aspects such as creating a digital roadmap market (IPM), and for the future, optimising overall resourcing across businesses, speed and agility, FY 2019-20, the and making informed choices to drive value.” – Umang Vohra, MD and GCEO 22 brands in the top India branded 300 brands [A] India prescription Over years, the Indian pharmaceutical industry has The Indian pharmaceutical market continues to be one Chronic Business Growth: Chronic therapies are played a significant role in delivering life-saving drugs of the most important and focused markets for the business grew increasingly becoming a major growth driver for to patients across the country. Indian pharmaceutical Company. Cipla continues to be the 3rd largest pharma the Company. As per IMS, Chronic therapies now companies, including Cipla, have invested significantly company in India with strong presence across both by 9%, contribute 54% of sales. towards building strong R&D, manufacturing and chronic and acute therapies. In FY 2019-20, the Cipla with three consecutive quarters of market beating marketing capabilities. This has positioned them as India business, which included the branded prescription, double-digit growth since Q2 of FY 2019-20. Cipla’s In FY 2019-20: Cipla's chonic business grew by 12% strategic partners for multinational pharma companies, trade generics and consumer health businesses, product portfolio spans various therapeutic areas over FY 2018-19 in secondary terms while maintaining and helped bring innovative new therapies to Indian delivered H6,741 crores or 39% of total revenues for including respiratory, anti-infectives, cardio-metabolic, the number two position in chronic therapies and patients, which were otherwise only available in the Company. To further leverage Cipla’s strengths urology, gastro-intestinal etc. The Company has been growing consistently better than the market. developed economies. across the India branded prescription, trade generics further strengthening the portfolio in therapies such and consumer health businesses, the current year saw as diabetology, women’s health, IVF and oncology, India’s regulatory and policy framework has undergone the three businesses come together under the One- Cipla’s market performance for key therapies (as through various acquisitions and partnerships. multiple interventions to establish policies to drive India strategy, where strong synergies across portfolio, per IQVIA MAT Mar’20): FY 2019-20 also saw the launch of Berok 2.0, which is availability of medicines to the general population. distribution and consumer-focused initiatives would be the second version of Cipla’s flagship patient-focused Cipla's Market Cipla Cipla These include the expansion of the National List of leveraged. This will help drive market beating growth initiative in respiratory therapy. Rank in share growth CAGR Essential Medicines (NLEM), and the introduction and structure the overall India business for long-term market (17-20) of the Jan Aushadhi and Ayushman Bharat (PMJAY) success. programmes. The Indian pharma industry will also play Market Performance Respiratory 1 22% 14% 14% a pivotal role in helping the economy achieve its dream of becoming a USD 5 trillion economy. Respiratory Inhalation 1 68% 13% 14% India (Rx + Gx + CHL): Rx continues the momentum with market beating double digit growth; Growth for FY 2019- Cardiac 4 6% 12% 13% Gx fully recovered post model change 20 was primarily driven Urology 1 15% 10% 13%
YoY Q2 Q3 Q4 Rx delivered 3 quarters by inhalation, cardiac, (starting Q2) of market gastro-intestinal, pain, beating double digit 9% Respiratory in India Cipla Rx 13% 14% 12% FY 2019-20 YoY growth dermatology and diabetes. Cipla's respiratory portfolio maintained its leadership in the entire respiratory market in IPM1 13% 10% 10% FY 2019-20 with a share of
Gx revives strongly (Q4 YoY Growth) 21.59% since Q2 highlighting the (Adjusted for Consistently achieved Model change Cipla Gx 8% 15% fundamental strength of 15% CHL product being implemented YoY transfer in base) double-digit growth in the business In the inhalation market, Cipla continues to be the cardiac; Moving Annual leader with a healthy market share of
CHL Total (MAT) March 2020 68% Strong growth momentum across organic brands and in FY 2019-20. ramp-up of products transitioned from trade generics growth is 12%. FY 2019-20: J 201 crores 36% YoY
Note: 1 Market data as per IQVIA quarter numbers
130 Creating Hope since 85 Years Management Discussion and Analysis 131 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
Cipla Respiratory’s mega brands in top 50 brands of IPM: of channel partners. During FY 2019-20, the generics based energy drink. CHL has rechristened Pregtest as business contributed approximately 1/5th of the overall MamaXpert, and will launch a range of products to care Brand FORACORT DUOLIN BUDECORT SEROFLO domestic pharmaceutical revenues for the Company. pregnant mothers during various stages of pregnancy. The business recovered from distribution re-modelling The first launch among the extensions is MamaXpert Rank 10 24 31 32 in H1 of FY 2019-20, registering YoY growth of 8% in Q3 Intimate Hygiene Wash. The Maxirich brand was Therapy-wise share split of Cipla India business (as per IMS MAT March 20)*: of FY 2019-20 and 15% in Q4 of FY 2019-20, adjusted for transitioned to CHL in Q4 of FY 2019-20, helping CHL CHL product transfers. strengthen its portfolio in the multivitamins category.
The business continues to operate in a dynamic CHL also launched Ciphands (sanitisers and handrub) regulatory environment with uncertainty governing in March 2020 to cater to the increasing demand 3% 5% 2% rationalisation of trade margins and proliferation of for hand hygiene essentials amidst the Covid-19 Ophthal Urology Others national as well as regional competition. outbreak. The launch was managed within five days of 3% 6% 1% conceptualisation. Antivirals Gastro Anti Diabetic Cipla Health Limited (CHL) With an enhanced product portfolio, CHL is now poised to achieve its mission of ‘Improving Consumer’s Lives, Cipla Health Limited is the Company’s consumer Everyday’, and towards strengthening its position as a 3% 13% 1% healthcare subsidiary. During FY 2019-20, CHL CNS Cardiac Vitamins formidable player in the consumer healthcare industry. strengthened its existing brands through line extensions, and successfully transitioned trade generic brands such [B] North America 4% 18% 2% as Prolyte (ORS), MamaXpert (Pregtest), and Maxirich Derma Anti-infectives Gynaec (Multivitamin) to establish these as consumer brands. US Generics
4% 34% The Company’s flagship smoking cessation brand, Over the last six years, Cipla has significantly expanded Pain Respiratory Nicotex, continued its momentum while retaining market its portfolio and presence in the US, the world’s largest pharmaceutical market. This has been a result of a well- *Balance 1% in the therapies mentioned is account of rounding off figures leadership in its category. Nicotex offers a range of products that help control the urge to smoke, and aids in designed strategy to balance capital allocation across organic and inorganic initiatives. Building further on Portfolio build-up through in-licensing and M&A during 2019-20 quitting smoking. The new campaign theme, ‘We Believe You Can’, launched in September, 2019, saw a shift in the commercial frontend acquired through InvaGen Partner Therapy Molecule / Brand Partnership structure Status brand ideology from the earlier ‘Helps Quit Smoking’ Pharmaceuticals Inc and Exelan Pharmaceuticals Inc, to come across now as ‘a friend who understands your North America reported revenues of USD 547 million in Venus Remedies Anti-infectives Elores In-Process of Launched struggle, and trusts and supports you along the way’, FY 2019-20, growing at 12% over FY 2018-19 and driven acquisition positively impacting consumer offtake. The campaign by contribution from an IP-enabled opportunity. North Wanbury CPink, CDense, was recognised at the e4m Health Marcom Awards America contributed 23% to the Company’s total Women's health Productiv and 2020, winning Gold in the Best Television Campaign and revenue in FY 2019-20. portfolio Folinine Acquired Launched Best Brand Identity categories, and Bronze in the Best During FY 2019-20, the Company continued its R&D Integrated Campaign category. Stempeutics Co-development, investments for the US market, which has resulted in pipeline Diabetic foot supply and marketing In clinical CHL’s efforts in building the Cofsils franchise reaped expansion to include multiple differentiated assets. ulcer Stempeucel partnership development benefits, with the brand growing at more than 50% Reliance Life Sciences Severe allergic (in value terms) in FY 2019-20 on a year on year basis Business-wise sales ramp-up (USD m) and outperforming the market. Brand extension to two asthma and Exclusive marketing Cipla B2B Cipla DTM InvaGen urticaria Omalizumab deal Launched new flavours of herbal lozenges, Dry Cough Syrup, Wet Cough Syrup, and Experdine Gargle has further Growth momentum up due Esomeprazole to differentiated launches Novartis Vysov & Vysov M Acquired brand name cemented the brand’s presence as an expert in the sore 300 Anti-diabetic (Vildagliptin) and trademark rights Launched throat and cough category. The brand was awarded the 285 Best Healthcare Brands 2019 award by The Economic in the traded generics segment in terms of revenues and 221 221 212 India trade generics business Times. 206 profitability. 205 Retaining market The Company continued to drive strong synergies During the year, three Cipla trade generics brands – 132 share since between the branded, OTC and generics businesses In FY 2019-20, Cipla’s trade generic business in India 125 110 acquisition despite Cipla ORS, Pregtest and Maxirich – were transitioned pricing pressures by focusing on product transfers. During the year, has undergone distribution reconfiguration this year, in to CHL under the One-India strategy to drive portfolio 82 72 55 the Company invested in strengthening its channel order to stabilise the health metrics of the business and 23* synergies. With this, CHL has started promoting its 40 partnerships, rolling out digital connect initiatives with build the base for sustainable growth in the future. A ORS range under the Prolyte brand in OTC and FMCG 1 12 retailers, expanding product offerings and developing number of initiatives were rolled out in Q1 of FY 2019- channels. This has also paved the way for further FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 FY 19-20 greater consumer connect with its key brands. The 20, to address issues related to sales concentration, extensions under the Prolyte brand, which is a fruit- Company continued to maintain its leadership position rationalisation of channel incentives and reconfiguration *invagen consolidated for 2 months in FY15-16 post-closing
132 Creating Hope since 85 Years Management Discussion and Analysis 133 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423
FY 2019-20 - Pipeline Portfolio Update Respiratory franchise in the US Unlocking of Respiratory franchise in the US:
During the year, Cipla filed 6 new ANDAs. The Company Approval for generic Albuterol, filing of generic Advair® and filing of another complex respiratory received approval for 12 ANDAs during the year. 63 of Cipla has been leveraging asset Cipla’s ANDAs are under approval or are tentatively its existing respiratory approved. This represents a strong pipeline for the Formulation/ capabilities and investing Pre-clinical US generics business, which will drive growth in this Brand name Phase 1 Phase 2 Phase 3 Filed Approved Status geography. significant resources with a
ANDAs Under Approval / Tentative Approval vision to expand its respiratory Albuterol MDI / Approved franchise in the US. Currently, Proventil (SABA) Total UA/TA March 2019 69 Fluticasone + the Company is working Salmetrol DPI / Filed in Q1 Filed in FY 2019-20 6 Advair Diskus® FY 2020-21 towards developing respiratory (ICS+LABA) Final Approvals (FA+TA to FA) products under various in FY 2019-20 12 Complex Filed in Q4 Inhalation Asset FY 2019-20 Total UA/TA Mar 2020 63* categories like ICS+LABA,
*Includes only Cipla and InvaGen LABA, LAMA and LAMA+LABA. Phase 3 Partnered clinical trials Inhalation Asset The USFDA has approved ongoing Market size split Cipla’s generic albuterol sulfate >USD 500 Mn, USD 100-500 Mn, 26 inhaler, which is a Proventil® 13 inhaler equivalent. This is the The Company continues to support patient demand Cipla continues to evaluate the capability, longevity for respiratory products with supplies of Budesonide, and risk-reward ratio of such unique opportunities. first generic of Proventil® HFA further supplemented by the launch of Albuterol inhaler At an appropriate time, the Company may also look (albuterol sulfate) metered dose in April 2020. With Albuterol, Cipla has become the at partners to complete the development and full first Indian company to get an approval for a metered commercialisation of its specialty assets. This would 134 Creating Hope since 85 Years Management Discussion and Analysis 135 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 business. As per IQVIA MAT March ’20, Cipla continued Cipla Global Access by focusing on select DTM markets in the region and Sri Lanka. The ‘Breathe-Free’ initiative has reached out to remain the third-largest private market company in managing the footprint for growth. to more than 60,000 patients in Sri Lanka and Nepal. South Africa with a market share of 6.9%, growing six Cipla’s long-standing partnership with global funding times the market growth rate. organisations has been at the forefront of providing New launches and approvals access to affordable care and has played a pivotal role in Synchrobreathe: Cipla’s own expanding access to drugs for HIV/AIDS. Since its inception For the asthma portfolio, Cipla has launched its novel innovative next-generation Overall, the South Africa to the year 2001, when the Company offered a paradigm- product, Synchrobreathe in Colombia in October 2019, breath actuated inhaler changing triple anti-retroviral therapy for HIV/AIDS to in Nepal in April 2019 and its fluticasone inhaler in launched in Colombia and business grew at 8% in patients in Africa, and till today, Cipla has always followed Algeria in November 2019. The Company has received Nepal a humanitarian approach to medicines. The business the approval for Synchrobreathe in Oman in March local currency terms reported revenues of USD 58 million in FY 2019-20. 2020. with a strong growth in Sub-Saharan Africa To strengthen the COPD portfolio, Cipla has in-licensed Ultibro: Unique LAMA+LABA the Novartis' brand of Ultibro (LAMA+LABA combination) private market at 11.8% Cipla’s focus remains to expand its portfolio in prioritised combination for COPD, in- in Sri Lanka in Q3 of FY 2019-20. In Australia, the DTM markets of Kenya, Tanzania and Uganda, exploit licensed from Novartis and Company has in-licensed the Novartis respiratory and tender market at synergies with the South African business and drive launched in Sri Lanka and portfolio, including Ultibro, to ensure better access . profitable growth. Australia to advanced respiratory medications. The approval 3.2% has been received for Tiotropium in Morocco, and is A joint venture, Cipla Quality Chemicals Industries During the year, the OTC portfolio exceeded ZAR 1.0 expected to be launched in June 2020. Limited (CQCIL) was established to support Cipla’s billion in revenue and contributed 34% to overall private aspiration of ‘In Africa, For Africa’. The CQCIL plant is a Strategy ahead market revenue. In the addressable market under the Flohale: Fluticasone inhaler state-of-the-art manufacturing facility in Uganda with OTC portolio, Cipla OTC business emerged as the top launched in Algeria focus on antiretroviral (ARV), anti-malarial (artemisinin- The Company continues to focus on deepening its player in South Africa. based combination therapy; ACT) and hepatitis B presence in Australia, Brazil and China through the respiratory portfolio and through a combination of in- Cipla is partnering with the South African regulatory medicines, and supplies to the Ugandan markets and house pipeline products and partnerships. Cipla filed body SAHPRA to ensure faster product approvals exports to other African countries. Respiratory in emerging markets over 200+ products across key markets to capitalise its under the Starburst initiative by the regulator. This The business reported revenues of USD 66 million in Over the years, Cipla has established respiratory as a position in those markets. will help the Company expand its portfolio of lifesaving FY 2019-20 as sales were restricted owing to receivables key growth driver for emerging markets. The Company medicines in the country. Cipla received eight product challenges in a certain market. During the year, CQCIL continues to be a respiratory leader in Sri Lanka, Nepal, The Company incorporated a joint venture in China approvals under Project Starburst during the FY 2019-20. implemented the third shift for manufacturing ARVs for and Morocco. In its effort to capitalise on its respiratory and started the construction of a dedicated respiratory factory. The focus will continue to remain towards Mirren South Africa. Technical transfer of four products was capabilities, Cipla has launched multiple new products completed during the year. The facility successfully to strengthen the respiratory portfolio across key building strong and sustainable businesses in identified Mirren continues to be a key focus for the Company, and completed audits from WHO, NDA and ZAZIBONA markets. markets through portfolio building, in-licensing forms a part of the strategic focus on its expansion in the during the year. opportunities and partnerships. OTC category. Mirren achieved 100% GMP compliant With the vision to build broad portfolios, Cipla also status within a short span of nearly a year. [D] Emerging Markets The respiratory entered into exclusive licensing and distribution Local manufacturing places Cipla in a strong position To ensure access to lifesaving medicines to patients, franchise is key agreements for more than 30 products across key de-risking the supply chain. The Company can ensure Cipla continues to be present in geographies which markets (Australia and Latin America). These will help its ability to deliver key pain, cold and flu medicines are generally considered volatile, given their currency, business driver for bolster its revenues by the third year and help fill throughout the pandemic and winter season in South economic and geo-political challenges. The emerging portfolio gaps. The agreements for the top biosimilar Africa. markets region for Cipla comprises all markets outside emerging markets, with products (Adalimumab, Trastuzumab, Etarnercept and of India, North-America, South Africa/ sub-Saharan others) were signed with partners and filed in top DTM BrandMed Africa and Europe but includes North Africa and a contribution of ~60% markets across emerging markets (25 product-country Australia/New Zealand. Cipla is present in 51 countries combinations signed). Cipla Medpro announced the acquisition of a in this region, including direct to market operations in 11 across DTM markets. 30% stake in BrandMed (Pty) Limited in April 2019. countries. [E] Europe BrandMed offers connected healthcare solutions that Improving respiratory access predict risk, guide diagnosis and monitor NCDs such as Emerging markets contributed USD 206 million, declining Cipla’s Europe business continued to demonstrate ‘Breathe-free’ is an initiative by Cipla to counsel hypertension, diabetes, obesity, asthma and COPD. ~17% on a YoY basis. The decline was largely driven by sustainable growth, despite the challenges of Brexit and asthmatic and COPD patients on the management of geopolitical challenges in middle-eastern markets and a slowing economic outlook, with a robust 14% growth BrandMed is focused on developing an innovation led this disease, and the usage of inhalers. Cipla introduced currency devaluations across EMs. Cipla’s efforts are over FY 2018-19 to deliver USD 114 million in revenues. platform to provide comprehensive, contextual and this initiative to new countries (Myanmar and Morocco) towards building a strong and sustainable business The direct-to-market (DTM) business in the UK, Germany, standardised assessments at the point of care. and further strengthened the existing team in Nepal and 136 Creating Hope since 85 Years Management Discussion and Analysis 137 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Spain and Norway led with 44% primary growth over to be a preferred partner to many large generic The Company continues to expand its customer base in its portfolio. The Company has also started building a last year, alongside a strong growth in the focused B2B pharmaceutical companies globally. and aspires to be a preferred supplier to companies global manufacturing facility at Bangalore. It awaits the business relationships. The Europe business continued working on novel 505(b)(2) projects. Cipla has focused final approval of three key cosmetic products – Cutisera to demonstrate higher profitability in DTM countries. Cipla’s API business covers a broad spectrum of on productivity and yield improvements to provide (skin care product), Trichosera (hair care product) and therapies, with over 1000+ Drug Master Files (DMFs) better realisations to its partners, and has demonstrated Optisera (under-eye care product). Strategy ahead filed till date. FY 2019-20 saw 50+ DMF filings by Cipla in higher number of seeding and lock-ins for achieving various countries. The Company has a strong pipeline of sustainable growth. As the Company continues to Cipla will continue to invest and drive growth in the over 50 APIs across regulated markets, in various stages unlock its respiratory pipeline and strengthen its Human resource management and industrial DTM markets and acceleration of the portfolio in the of development. The Company is expected to continue oncology presence, it plans to enhance API R&D and relations European region. Through its extensive and deep the strong pipeline building momentum in the coming manufacturing capacities in these therapeutic areas and partnerships in various countries in Europe, Cipla Cipla’s constant endeavour is to outperform industry years, as well. backward integrate for manufacturing of key starting expects to service more patients. Respiratory, as a and internal benchmarks in workforce productivity and material and critical API intermediates to achieve better therapy, will continue to lead the growth, followed by Performance in FY 2019-20 performance. The professional objectives of individuals supply chain control. oncology, complex injectables and anti-retrovirals. contributing towards the growth of the Company across The FY 2019-20 revenues for the API business stood Cipla will continue to work closely with the health API manufacturing capabilities levels, are seamlessly linked to the organisational authorities in various countries of Europe to identify the at USD 106 million of which 44% was contributed by philosophy and objectives, which provides them with needs of the healthcare systems and patients, and to Europe, followed by 27% from emerging markets and Cipla has four cGMP compliant sites, approved by a sense of purpose and direction. The focus areas suitably address those. 26% from North America. The key therapy segments major international regulatory agencies including the for driving HR initiatives at the company level include that contributed to these were antiretroviral (27%), USFDA, EDQM (Europe), PMDA (Japan) WHO, TGA promoting diversity, human resource development, Key products respiratory (23%), gastrointestinal (14%) and central (Australia), and KFDA (Korea). These sites include succession planning, and protection of human rights. nervous system (CNV) (9%). This ~5% growth over last dedicated facilities for oncology, hormones and Cipla’s flagship product FPSM pMDI continued to gain year is a result of successful deliveries of differentiated corticosteroid APIs. Cipla offers a total capacity for At Cipla, we take an inclusive approach to diversity. momentum across markets, ending the calendar year product mix, improved traction in seeding and lock-ins, API manufacturing of over 1,000 MT, along with high We have 30% female representation in the Board and 2019 with ~20%5 share of the overall FPSM pMDIs market and products launched with key accounts. competency in handling a broader range of batch sizes 33.33% in Management Council, and the Company in Europe. Respiratory therapy overall contributed to and expertise in micronisation to meet required particle continues to support capabilities of differently-abled 68% of Cipla’s Europe business, with FPSM pMDI making sizes for respiratory APIs. people. Cipla ensures strict adherence to its internal up ~21% of the business. API Revenue, By Geography codes, delineating its zero-tolerance policy towards The Company has three API R&D centres, two pilot plants discrimination on any ground. In the UK, Cipla relaunched Soltel (salmeterol and two process safety screening labs. All facilities and pMDI), along with Seroflo (FPSM pMDI) and Kelhale India, 3% plants have zero liquid discharge waste water treatment An integrated talent management framework facilitates (beclometasone pMDI). These three brands have made facilities that include ETP with Multi Effect Evaporators cohesive talent actions with the existing processes of talent up 40% of the UK DTM business in a span of two years. EU, 44% (MEE), Agitated Thin Film Dryer (ATFD), Vertical Thin Film acquisition, onboarding, learning and development, Similarly, the respiratory franchise makes up 70% of NA, 26% Dryer (VTFD) and Reverse Osmosis (RO) facilities. performance management and succession planning. the Company’s German DTM business. Overall, the Cipla’s employee retention initiatives revolve around the DTM businesses in Europe, contributed to ~22% of the [H] Stempeutics five core pillars of the Cipla Engage programme. With EM, 27% total business. In DTM Spain, oncology leads with ~47% its performance management system, Cipla continues contribution to the total business. Stempeutics Research Private Limited (Stempeutics), a to successfully conduct periodic reviews of employee joint venture between Cipla and the Manipal Group, has [F] Active Pharmaceutical Ingredients (API) performance and enable spontaneous actionable been focused towards driving cutting-edge stem cell feedback. Cipla’s personnel capability building training API Revenue, By Therapy research and developing transformative therapeutics Capabilities sessions are conducted across levels, from trainees that meet unmet patient needs. Stempeutics has worked to the leadership level. The Occupational Health and Cipla’s API legacy spans over five decades of having with regulators for establishing a regulatory framework Othes, 18% Safety (OHS) system across all manufacturing facilities serviced the world’s largest pharmaceutical companies for bio cosmetics using stem cells secretome. On the has enabled the Company’s workers and employees with more than 200 generic and complex APIs. Cipla Cardiovascular, 4% Antiretroviral, operations front, the Company completed recruitment to operate in an audited, certified and safe working takes pride in its state-of-the- art API plants, which 27% of patients in Critical Limb Ischemia clinical trials – both environment. Cipla’s technology enabled incident meet stringent quality and current Good Manufacturing in CLI-BD and in CLI-PAD – and submitted the dossier Oncology, tracking system, MySetu, at the disposal of factory for CLI-BD to DCGI for full marketing approval. The Practices (cGMP) requirements, and are approved by 5% workers, has helped us become aware of workplace Respiratory, 23% the USFDA and other major international regulatory Company also completed recruitment of patients in CSN, 9% mishaps without lags and also identify associated risks agencies. Cipla’s APIs are supplied to 63 countries a Phase 3 osteoarthritis study and started recruiting for necessary mitigation measures. For more details on across the globe, helping local pharmaceutical patients for a Phase 3 diabetic foot ulcer study. It also Cipla’s approach towards Human Resources, refer to companies reach out to their patients. Due to its focus Gastrointestinal, added perianal fistula, a new unmet medical indication, Human Capital page number is - 74. on niche molecules and quality, the Company continues 14% 5 internal estimates 138 Creating Hope since 85 Years Management Discussion and Analysis 139 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Adherence to accounting standards framework as issued by the Committee of Sponsoring issues, and the actions taken on issues are highlighted in Organisations (COSO) of the Treadway Commission. by dedicated the previous reports. The Company continues adhering to standard accounting policies under the Indian Accounting outsourced teams. The Audit Committee deliberates with the management, Standards (Ind AS), applicable since 1st April, 2016. IND The Company has considers the systems as laid down and meets the AS 116 pertaining to Leases was the sole addition under The annual internal audit plan is carved out from internal auditors and statutory auditors to ascertain their section 133 of the Companies Act, 2013. These policies an Internal Audit a comprehensively defined Audit Universe which views on the internal control framework. The Company are to be read along with the relevant applicable rules encompasses all businesses, functions, risks, compliance recognises the fact that any internal control framework and accounting principles. Changes in policies, if any, (IA) function which requirements and control maturity. The internal audit would have some inherent limitations, and hence has are approved by the Audit Committee. plan is approved by the Audit Committee at the inculcated a process of periodic audits and reviews to functionally reports beginning of every year. Every quarter, the Audit ensure that such systems and controls are updated at Committee of the Board is presented with key control regular intervals. Threats, risks and concerns to the Chairman of The Cipla Enterprise Risk Management (ERM) programme covers key risks across all its business the Audit Committee, areas. The Investment & Risk Management Committee of the Board reviews and discusses the risk updates on thereby maintaining a quarterly basis. Effectiveness and efficiency During the reporting period, the Company witnessed of operations various shifts in its risk landscape. Specifically, at the end of Q4 of FY 2019-20, the world has witnessed the onset of a global pandemic of unprecedented magnitude. The Company has adapted its risk management framework to effectively respond to the challenges of these Prevention and detection of uncertain times. Please refer to Page No 48 for the risk frauds and errors management framework and key risks, including the mitigation measures. One of the key measures undertaken during the year Safeguarding of assets from was the formation of a Covid-19 task force, which is unauthorised use or losses tasked with maintaining business continuity to augment the existing risk management activities. During the reporting period, the Company strengthened its cybersecurity controls, embarked on multiple projects Compliance with applicable aimed at lowering its operational and strategic risk laws and regulations profiles, and focused on enabling swift action on risks emerging across businesses, to complement the ultimate goal of Caring For Life. Accuracy and completeness Internal control and its adequacy of accounting records Cipla has an adequate system of internal controls commensurate with the nature of its business, and the size and complexity of its operations. The Company has Timely preparation of reliable adopted policies and procedures covering all financial financial information and operating functions. These controls have been designed to provide a reasonable assurance over: its objectivity. The IA The current system of Internal Financial Controls (IFC) is aligned with the requirements of the Companies Act, function is supported 2013 and is in line with the globally accepted risk-based 140 Creating Hope since 85 Years Management Discussion and Analysis 141 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Board’s Report Reserves separate section on page no. 182 of this report. The Company has not transferred any amount to any A certificate from M/s BNP & Associates, confirming reserve for the financial year ended 31st March, 2020. compliance with the conditions of corporate Dear Members, governance, as stipulated under the Listing Regulations, is annexed as Annexure II to this report. The Board of Directors ('Board') are pleased to submit its report on the performance of the Company, along with the Nature of business audited standalone and consolidated financial statements for the year ended 31st March, 2020. The Company is engaged in the development, Directors’ Responsibility Statement manufacture, sale and distribution of pharmaceutical Financial Summary and State of Affairs generic and branded generic medicines. During the Pursuant to section 134(3)(c) of the Act it is confirmed H in Crore year, there has been no change in the nature of business that the directors have: Year ended 31 st March, 2019 Particulars Year ended 31 st March, 2020 of the Company. i. Followed applicable accounting standards in the Standalone Consolidated Standalone Consolidated preparation of the annual accounts and there are 12,374.01 16,362.41 Gross total revenue 12,659.15 17,131.99 no material departures for the same; 2,492.83 2,079.14 Profit before tax and exceptional items 2,964.31 2,178.18 Management Discussion and Analysis Report Profit for the year (after tax and Pursuant to Regulation 34 of the Listing Regulations, ii. Selected such accounting policies and applied them 1,888.41 1,527.70 attributable to shareholders) 2,318.17 1,546.52 Other comprehensive income for the year the Management Discussion and Analysis report for the consistently and made judgements and estimates 7.81 34.91 (not to be reclassified to P&L) (15.30) (9.42) year under review, is presented in a separate section, on that are reasonable and prudent so as to give Other comprehensive Income for the year page no. 121 of this report. a true and fair view of the state of affairs of the 31.75 (324.85) (to be reclassified to P&L) (49.13) (119.98) Company as on 31st March, 2020 and of the profit of Surplus brought forward from last balance the Company for the year ended 31st March, 2020; 9,214.31 8,988.78 sheet 10,828.56 10,251.31 Corporate Social Responsibility (CSR) 11,110.53 10,535.40 Profit available for appropriation 13,131.43 11,782.08 iii. Taken proper and sufficient care for maintenance of Appropriations: A detailed report on Cipla’s CSR initiatives has been adequate accounting records, in accordance with (241.57) (241.57) Dividend (564.26) (564.26) provided in the Social Capital section forming part of the provisions of the Act, for safeguarding the assets (40.40) (42.52) Tax on dividend (87.45) (99.94) the Integrated Report on page no. 100 and the Annual 10,828.56 10,251.31 Surplus carried forward 12,479.72 11,117.88 of the Company and for preventing and detecting Report on CSR initiatives, as required under section fraud and other irregularities; 135 of the Companies Act, 2013 (Act) is annexed as The financial results and the results of operations, including major developments, have been discussed in detail in Annexure I to this report on page no. 149. Details of CSR the Management Discussion and Analysis report. iv. Prepared the annual accounts on a going concern Committee composition, role and meetings etc. have basis; The standalone and the consolidated financial statements have been prepared in accordance with the Indian been provided in the Report on Corporate Governance Accounting Standards (Ind AS). on page no. 202. v. Laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating Share capital Business Responsibility Report effectively; and During the year under review, the Company issued of face value of H2 each. The dividend was paid to those In compliance with the provisions of Regulation 34 of vi. Devised proper systems to ensure compliance with and allotted fully paid up 5,34,063 equity shares shareholders whose name was registered in the Register the Listing Regulations, the Business Responsibility the provisions of all applicable laws and that such to its employees under the Employee Stock Option of Members as on 20th March, 2020 being the record date. Report (BRR) is presented in a separate section on systems were adequate and operating effectively. Scheme 2013-A. As a result, the issued, subscribed The Board does not recommend any final dividend, and page no. 175 of this report. Since the Company has and paid up share capital of the Company increased accordingly the total interim dividend of H4/- per equity adopted the International Integrated Reporting Council from H1,61,14,02,532/- (divided into 80,57,01,266 equity share declared by the Board at its meeting held on 12th Conservation of energy, technology (IIRC) framework for publishing the Annual Report, shares of H2/- each) to H1,61,24,70,658/- (divided into March, 2020 is to be considered as the final dividend for reports on the nine principles of the National Voluntary absorption, foreign exchange earnings and 80,62,35,329 equity shares of H2/- each). The equity FY 2019-20. The Company has paid approximately H322.49 Guidelines on social, environmental and economic outgo shares issued under the Employee Stock Option Scheme crore (excluding dividend distribution tax of H66.29 crore) responsibilities of business as framed by the Ministry of 2013-A rank pari-passu with the existing equity shares on account of dividend, which is equivalent to 13.91% of The details of energy conservation, technology Corporate Affairs, Government of India, is provided in of the Company. the standalone profit after tax of the Company. absorption and foreign exchange earnings and outgo relevant sections of the Integrated Report with suitable as required under section 134(3)(m) of the Act, read with references in the BRR. Dividend The Company is in compliance with its Dividend Rule 8(3) of the Companies (Accounts) Rules, 2014 is Distribution Policy as approved by the Board. In annexed as Annexure III to this report. The Board of Directors at its meeting held on compliance with the requirements under Regulation 43A Corporate Governance 12th March, 2020, approved payment of interim dividend of the Securities and Exchange Board of India (Listing of H3 per equity share and one-time special dividend of Obligations and Disclosure Requirements) Regulations, In compliance with Regulation 34 read with Schedule Employee Stock Option Scheme H1 per equity share of face value of H2 each. The total 2015 (Listing Regulations), the Policy is annexed as V of the Listing Regulations, a Report on Corporate The Company has an Employee Stock Option Scheme, dividend approved was H4 per equity share (i.e. 200%) Exhibit B to the Report on Corporate Governance. Governance for the year under review is presented in a namely, ‘Employee Stock Option Scheme 2013-A’ (ESOP 142 Caring For Life since 1935 Board’s Report 143 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 scheme) that helps the Company to retain and attract 31st March, 2020 in Form MGT-9 is annexed as Annexure V Prevention of Sexual Harassment of Women Material changes and commitments affecting the right talent. The Nomination and Remuneration to this report and has also been placed on the website at Workplace financial position between end of financial Committee (NRC) administers the ESOP scheme. There of the Company at https://www.cipla.com/investors/ year and date of report was no change in the ESOP scheme during the financial annual-reports. The Company has instituted a policy on Prevention of year under review. The ESOP scheme is in compliance Sexual Harassment at Workplace, which is available No material changes and commitments have occurred with the Securities and Exchange Board of India (Share on the Company website at https://www.cipla.com/ Vigil mechanism after the close of the year till the date of this report Based Employee Benefits) Regulations, 2014 (SBEB sites/default/files/1558508425_POSH-%20Cipla.pdf. which may affect the financial position of the Company. Regulations). Details of the Employee Stock Option Cipla is committed to foster an environment of honest All employees, consultants, trainees, volunteers, third Scheme 2013-A have also been provided in note no. parties and/or visitors at all business units or functions and open communication and discussion, consistent Significant and material orders passed by 42 of the standalone financial statement. During FY with our values. The Company has formulated a of the Company, its subsidiaries and/or its affiliated 2019-20, no employee was issued options equal to or Whistle-Blower Policy, which lays down the process to or group companies are covered by the said policy. regulators or courts or tribunals exceeding 1% of the issued share capital (AGM) of the Adequate workshops and awareness programmes convey genuine concerns to the management and seek No significant or material orders were passed by the Company at the time of grant. against sexual harassment are conducted across the resolution towards the same without fear of retaliation. regulators or courts or tribunals which could impact This policy covers reporting of any violation, wrongdoing organisation. In compliance with the requirements of the SBEB the going concern status of the Company and its future or non-compliance, including without limitation, those Regulations, a certificate from auditors confirming Your Company has constituted an Internal Complaints operations. relating to the Code of Conduct, policies and standard implementation of ESOP Scheme in accordance with Committee in compliance with the provisions of the procedures of Cipla, and any incident involving leak or the said regulations and shareholder’s resolution, will be Sexual Harassment of Women at Workplace (Prevention, suspected leak of unpublished price sensitive information Internal financial controls and their adequacy available electronically for inspection by the members Prohibition and Redressal) Act, 2013 and is accordingly (UPSI) or unethical use of UPSI, in accordance with SEBI during the annual general meeting of the Company. fully compliant. Cipla has laid down an adequate system of internal (Prohibition of Insider Trading) Regulations, 2015. controls, policies and procedures for ensuring orderly Details of the shares issued under ESOP scheme and the Details of complaints received/disposed during and efficient conduct of the business, including disclosures in compliance with SBEB Regulations, are Directors, employees and external stakeholders can FY 2019-20 are provided in the Report on Corporate adherence to the Company’s policies, safeguarding of uploaded on the Company’s website at https://www. report their genuine concerns either in writing or by Governance on page no. 211. its assets, prevention and detection of frauds and errors, cipla.com/investors/annual-reports. email to the Chairperson of the Ethics Committee or to accuracy and completeness of the accounting records the Chief Internal Auditor at [email protected] or to the and timely preparation of reliable financial disclosures. Chairperson of the Audit Committee at audit.chairman@ Related party transactions Human Resources cipla.com. An Ethics Committee consisting of the Global A detailed note on the procedure adopted by the The current system of internal financial controls is Chief People Officer (GCPO) as Chairperson, the Global Information required under section 197(12) of the Act Company in dealing with contracts and arrangements aligned with the statutory requirements and is in line Chief Financial Officer (GCFO), the Global General with the globally accepted risk-based framework issued read with rule 5(1) of the Companies (Appointment and with related parties has been provided in the Report on Counsel (GC) and the Global Chief Internal Auditor by the Committee of Sponsoring Organisations (COSO) Remuneration of Managerial Personnel) Rules, 2014 is Corporate Governance. investigate whistle-blower complaints. A report on of the Treadway Commission. The internal financial provided in Annexure IV to this report. functioning of the mechanism including the complaints All contracts, arrangements and transactions entered controls are adequate and operating effectively. Information required under section 197(12) of the Act read received and actions taken is presented to the Audit into by the Company with related parties during Effectiveness of internal financial controls is ensured with rule 5(2) and rule 5(3) of the Companies (Appointment Committee on a quarterly basis. The Whistle-Blower FY 2019-20 were in the ordinary course of business through management reviews, controlled self- and Remuneration of Managerial Personnel) Rules, 2014 Policy is available on the Company’s website at https:// and on an arm’s length basis. During the year, the assessment and independent testing by the Internal www.cipla.com/sites/default/files/2020-02/Whistle%20 forms part of this report. In terms of the provisions of Company did not enter into any transaction, contract Audit Team. section 136 of the Act, the Annual Report is being sent Blower%20Policy%20V3-%20Final.pdf. or arrangement with related parties that could be to members excluding the aforementioned information. considered material in accordance with the Company’s The Chairman on behalf of Audit Committee has The information will be available on the website of the Detailed updates on the functioning of the Whistle- confirmed the adequacy of internal financial controls in policy on dealing with related party transactions. Company at https://www.cipla.com/investors/annual- Blower Policy and compliance with the Code of Conduct the Audit Committee Report which forms part of Report Accordingly, the disclosure of related party transactions reports. have also been provided in the Report on Corporate of Corporate Governance on page no. 196. Governance, on page no. 207. in Form AOC-2 is not applicable. However, detailed disclosure on related party transactions as per IND AS- Particulars of loans, guarantees and 24 containing the name of the related party and details Risk management investments Failure to implement any corporate action of the transactions entered with such related party have been provided under Note No. 41 of the standalone The Board of Directors of the Company has formed an Investment and Risk Management Committee (IRMC) Particulars of loans, guarantees and investments under During the year under review, the Company issued financial statements on page no. 295. section 186 of the Act have been provided in Note shares under its ESOP scheme, paid the final dividend which oversees the Enterprise Risk Management (ERM) No. 44 to the standalone financial statements. for FY 2018-19 and Interim and Special Dividend for The policy on dealing with related party transactions is process. An update on ERM activities is presented and FY 2019-20. There were no instances where the Company available on the Company’s website https://www.cipla.com/ deliberated upon in the IRMC meetings on quarterly failed to implement any corporate action mentioned sites/default/files/2020-06/Policy%20on%20dealing%20 basis and atleast once in a year at the Board level. The Extract of annual return herewith, within the specified time limit. with%20Related%20Party%20Transactions.pdf. Audit Committee has additional oversight in the area Pursuant to the provisions of Section 92(3) and Section 134(3)(a) of the Act, extract of the annual return as on 144 Caring For Life since 1935 Board’s Report 145 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 of financial risks and controls. The major risks identified o Acquisition of a 30% stake in Brandmed (Pty) Mr S Radhakrishnan, Non-Executive Director, retires Report on Corporate Governance, which forms part of by the businesses and functions are systematically Limited by Cipla Medpro South Africa (Pty) Limited by rotation and, being eligible, has offered himself for this report. addressed through mitigating actions on a continuing to enhance its diversified portfolio in the non- re-appointment. Based on the recommendation of the basis. In terms of the provisions of Section 134 of the Act, communicable diseases area; Nomination and Remuneration Committee, the Board a detailed note on Risk Management has been provided recommends the re-appointment of Mr S Radhakrishnan Committees of the Board, number of meetings on page no. 48 of this report. o Acquisition of a 26% stake in AMPSolar Power as director, liable to retire by rotation. of the Board and Board committees Systems Private Limited to enhance the proportion of renewable (solar) based power consumption, and The Board recommends the aforementioned The Board currently has six committees, namely, the Audit Deposits to comply with regulatory requirement for captive appointments for approval of the members at the ensuing Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the During FY 2019-20, the Company did not accept any power consumption under electricity laws; and AGM. Brief resume, expertise in specific functional areas, Stakeholders Relationship Committee, the Investment and deposit within the meaning of sections 73 and 74 of the names of listed companies in which the above-named o Liquidation of Tasfiye Halinde Cİpla İlaç Tİcaret directors hold directorships, committee memberships/ Risk Management Committee and the Operations and Act read together with the Companies (Acceptance of Anonİm Şİrketİ, Turkey. chairmanships, disclosure of relationships between Administrative Committee. All the recommendations made Deposits) Rules, 2014 and accordingly no amount on directors inter-se, shareholding in Cipla etc., are furnished by the Committees of Board including the Audit Committee account of principal or interest on public deposits was Details of these subsidiaries and associates are set out in notice of the ensuing AGM. were accepted by the Board. outstanding as on 31st March, 2020. on page no. 361 of the Annual Report. Pursuant to section Criteria for determining qualification, positive attributes 129(3) of the Act read with rule 5 of the Companies The Board met six times during the year under review. and independence of a director is given under the Board evaluation (Accounts) Rules, 2014, a statement containing salient The maximum gap between two Board meetings did not features of the financial statement of the subsidiary Nomination, Remuneration and Board Diversity Policy, disclosed as Exhibit A to the Report on Corporate exceed 120 days. A detailed update on the Board, its and associate companies in Form AOC-1 is given on The evaluation of all the directors including the Chairman, Governance. committees, its composition, detailed charter including page no. 420 of the Annual Report. The statement also the Executive Vice-Chairperson and the Managing terms of reference, number of Board and Committee provides details of the performance and the financial st Director and Global Chief Executive Officer, Board As on 31 March, 2020, the Company has the following meetings held and attendance of the directors at position of each of the subsidiaries and associates. committees and the Board as a whole was carried out Key Managerial Personnel (KMPs) as per section 2(51) each meeting is provided in the Report on Corporate The consolidated financial statements presented in this based on the criteria and framework approved by the of the Act: Governance, which forms part of this report. Nomination and Remuneration Committee. A detailed annual report include financial results of the subsidiary disclosure on the parameters and the process of Board and associate companies. Sr. Name of the KMP Designation evaluation as well as the outcome has been provided in No Secretarial Standards Copies of the financial statements of the subsidiary the Report on Corporate Governance on page no. 190. Executive Vice- companies are available in the Investors section on the 1 Ms Samina Hamied The Company has complied with the applicable Chairperson Company’s website www.cipla.com. Managing Director Secretarial Standards, i.e. SS-1 and SS-2, relating to Subsidiaries, associates and joint ventures 2 Mr Umang Vohra and Global Chief ‘Meetings of the Board of Directors’ and ‘General Executive Officer Meetings’, respectively. At the beginning of the year, the Company had 49 Directors and Key Managerial Personnel Global Chief subsidiaries and 1 associate, as against 51 subsidiaries 3 Mr Kedar Upadhye Mr Peter Lankau, Independent Director, resigned from Financial Officer and 4 associates as on 31st March, 2020. During the year, Auditor and Auditor’s Report the Board of the Company effective 1st July, 2019 due to Company Secretary the following companies were incorporated, acquired, 4 Mr Rajendra Chopra & Compliance his other professional engagement in the same industry M/s Walker Chandiok & Co LLP, Chartered Accountants, liquidated or divested: officer in the USA resulting in conflict of interest. He confirmed (Firm Registration No 001076N/ N500013) was o Incorporation of Cipla Pharmaceuticals Limited in that there were no other material reasons for his Except for Mr Peter Lankau, Dr Peter appointed as the Statutory Auditor of the Company at India for setting up facilities for DPI dosage and resignation other than the one stated above. Mugyenyi and Mr S Radhakrishnan, none of the AGM held on 28th September, 2016 to hold the office for further expansion of MDI and FFS Respule the directors including the Managing Director till the conclusion of the 85th AGM of 2021. The Statutory Pursuant to the provisions of sections 149 and 152 Dosage, Cipla (Colombia) SAS in Colombia and and Global Chief Executive Officer and the Auditor has confirmed that they continue to remain of the Act, the recommendation of the Nomination Cipla (China) Pharmaceutical Co. Limited in China Whole-Time Director, received any remuneration or eligible to act as the Statutory Auditor of the Company. and Remuneration Committee and on the basis of for strengthening its business portfolio in foreign commission from any of the Company’s subsidiaries the performance evaluation report, the Board after markets; during the previous year. There are no instances of any fraud reported by the considering the integrity, expertise and experience of Auditors to the Audit Committee or to the Board pursuant Ms Naina Lal Kidwai, recommends her re-appointment o Incorporation of Cipla (Jiangsu) Pharmaceutical to section 143(12) of the Act. The Auditor’s Report for as Independent Director of the Company for a second Co, Limited as Joint venture between Cipla (EU) Declaration by independent directors FY 2019-20 does not contain any qualification, term of five consecutive years w.e.f. the expiry of her Limited and Jiangsu Acebright Pharmaceutical reservation or adverse remark. Co. Limited for exploring business opportunities and present term i.e. 6th November, 2020. All independent directors have submitted requisite manufacture of pharmaceutical products in China; declarations confirming that they continue to meet the The Board, on the basis of recommendation of the criteria of independence as prescribed under section Secretarial Auditor and its Audit Report o Acquisition of the remaining 40% stake in Cipla Nomination and Remuneration Committee, recommends 149(6) of the Act and Regulation 16(1)(b) of the Listing Pharma Lanka Private Limited (CPL) by Cipla (EU) the re-appointment of Ms Samina Hamied as a Regulations, and are independent. The independent The Secretarial Audit Report for the financial year Limited, to further strengthen its presence in Sri Whole-Time Director designated as Executive directors have also confirmed compliance with the ended 31st March, 2020 is annexed as Annexure VI to this Lanka. Upon acquisition CPL has become a wholly Vice-Chairperson of the Company for a period of five Code of Conduct laid down under Schedule IV of the report. The Report does not contain any qualification, owned subsidiary of Cipla (EU) Limited; years, w.e.f. 10th July, 2020. Act. Details on the same have also been provided in the reservation, disclaimer or adverse remark. 146 Caring For Life since 1935 Board’s Report 147 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 The Board, on the recommendation of the Key initiatives with respect to stakeholder Annexure I Audit Committee, has reappointed M/s BNP & relationship, customer relationship, Associates, Company Secretaries, Mumbai to environment, sustainability, health and Annual report on Corporate Social Responsibility (CSR) activities pursuant to Rule 8 of the conduct the secretarial audit of the Company safety Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended from time to time for FY 2020-21. They have their eligibility for the re-appointment. The key initiatives taken by the Company with respect I. Overview of Company's Corporate Social large. The CSR Policy of the Company including to stakeholder relationship, customer relationship, Responsibility the CSR activities undertaken by it is available at environment, sustainability, health and safety are https://www.cipla.com/sites/default/files/2019-01/ Cost Auditor and Cost Audit Report provided separately under various Capitals in the Cipla takes forward and grows its socially conscious Corporate%20Social%20Responsibility%20Policy. Integrated Report section of this report. legacy commitments to the communities. Cipla’s pdf The Board, on the recommendation of the Audit underlying belief is to make a positive contribution Committee, had appointed Mr D H Zaveri, practising to the society. Cipla strives to create a healthier Cost Accountant (Fellow Membership No. 8971) as cost Acknowledgements world and enrich lives of all its stakeholders and II. Composition of CSR Committee auditor to conduct the audit of Company’s cost records community at large through CSR initiatives. Some of We wish to place on record our appreciation to the The Composition of the CSR Committee as on the for the financial year ended 31st March, 2020. The Cost these initiatives were put in place long before the CSR governments of various countries where the Company date of the Director’s Report is as follows: Auditors have certified that their appointment is within law came into effect. The Company’s CSR initiatives has its operations. We thank Ministry of Chemicals & and related projects are undertaken through Cipla the limits of Section 141(3)(g) read with Section 148 of Fertilizers, India, Central Government, State governments Name Category Foundation and its implementing partners. Our the Act. The Cost Auditors will submit their report for and other regulatory bodies/ authorities, banks, initiatives are compliant of CSR requirements under Mr M K Hamied Non-Executive Vice FY 2019-20 on or before the due date. business partners, shareholders, medical practitioners the Section 135 of the Companies Act, 2013. (Chairman of the Chairman and other stakeholders for the assistance, co-operation The Cost Records of the Company are maintained in Committee) and encouragement extended to the Company. We The Company has a Board approved CSR policy accordance with the provisions of section 148(1) of would also like to place on record our deep sense of which was formulated with the following objective: Mr Adil Zainulbhai Independent Director the Act and the Cost Audit Report, for the year ended appreciation to Cipla employees for their contribution Ms Punita Lal Independent Director 31st March, 2019, was filed with the Central Government and services. o To undertake projects/programmes which will within the prescribed time. enhance the quality of life and social well-being Mr S Radhakrishnan Non-Executive Director of the communities in accordance with Schedule In accordance with the provisions of section 148 of On behalf of the Board Mr Umang Vohra Managing Director and VII of the Companies Act, 2013 ("Act") read with Global Chief Executive the Act read with the Companies (Audit and Auditors) the Companies (Corporate Social Responsibility Officer Rules, 2014, since the remuneration payable to the Cost Policy) Rules, 2014, as amended from time to Auditors for FY 2020-21 is required to be ratified by the time ("CSR Rules"). The composition of the CSR Committee is compliant with the Act and the CSR Rules. members, the Board recommends the same for approval o Key Focus areas as per the CSR Policy are: of the members at the ensuing AGM. The proposal forms Date: 15th May, 2020 Y K Hamied part of the notice of the AGM. Place: London Chairman i. Health III. Average Net Profit of the Company for ii. Education last three financial years (Average Net iii. Address Social Inequalities Profit calculated in accordance with the iv. Environment provisions of Section 198 of the Companies v. Rural Development Project vi. Others (Disaster Management & any other Act) activity under Schedule VII of the Act) H1,812.01 crore The CSR policy of the Company encompasses its philosophy towards Corporate Social Responsibility IV. Prescribed CSR Expenditure (two percent and lays down the guidelines and mechanism for of the amount as in item 3 above) undertaking socially useful programs for welfare & sustainable development of the community at H36.24 crore 148 Caring For Life since 1935 Board’s Report 149 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 1 V. Details of CSR spent during the financial year 2019-20 (Amount in J Crore) S. CSR project or activity Sector in which the Projects or Total Amount spent Cumulative Amount spent: a) Total amount to be spent during the financial year: H36.24 crore No. identified Project is covered (As Programs Amount in 2019-20 on expenditure (1)Direct or b) Amount unspent, if any: – Nil per Schedule VII of the (1) Local area or outlay the projects or upto the (2) through Companies Act, 2013, other programs reporting implementing as amended) Sub-heads: period c) Manner in which the amount spent during the financial year is detailed below: (2) State and agency (1) Direct 2019-20 (Amount in J Crore) district expenditure S. CSR project or activity Sector in which the Projects or Total Amount spent Cumulative Amount spent: on projects or No. identified Project is covered (As Programs Amount in 2019-20 on expenditure (1)Direct or programs per Schedule VII of the (1) Local area or outlay the projects or upto the (2) through (2) Overheads Companies Act, 2013, other programs reporting implementing 4 Training and Skill Promoting special 1. Nalagarh, 4.81 1) 1.40 3.23 Cipla as amended) Sub-heads: period agency (2) State and Enhancement education, and Ropar, Indore, 2) 0.08 Foundation (1) Direct 2019-20 district employment enhancing Mumbai, Rangpo expenditure (Skill development vocation skills 2. Himachal on projects or and entrepreneurship especially among Pradesh, Punjab, programs programmes for unemployed, children, women, Madhya Pradesh, (2) Overheads unskilled, and youth with and the differently Maharashtra, developmental disabilities) abled and livelihood Sikkim 1 Cipla Palliative Care and Promoting healthcare 1. Warje, Pune 35.69 1) 7.96 35.69 Cipla enhancement projects Training Centre including preventive 2. Maharashtra 2) 0.45 Foundation 5 Disaster Relief including Promoting health, 1. Rhenock, 1.38 1) 0.64 0.68 Cipla healthcare Covid response sanitation and Wayanad, 2) 0.04 Foundation eradicating hunger and Idukki, Satara, (Medical relief, Basic poverty Kolhapur & Sangli, assistance material, Health Madhubani, & Hygiene kits, Plantation, Darbhanga, Medical camps, procuring Patna, Borholla, 2 Promoting Healthcare Promoting healthcare 1. Baddi, Goa, 57.85 1) 16.95 46.51 Cipla safety gear for resident Silchar, Mumbai, addressing issues including sanitation Indore, Kurkumbh, 2) 0.96 Foundation doctor and staff tackling with Bhubaneshwar, around affordability and eradicating malnutrition Mumbai, infectious diseases, setting Puri accessibility of quality Patalganga, up of Covid testing facility, 2. Sikkim, Kerala, healthcare including Chandrapur, setting up Isolation ward with Maharashtra, palliative care and sanitation Pune, Delhi, East Intensive Care facilities to Bihar, Assam, Sikkim, Alappuzha, manage Covid-19 patients) Odisha (Healthcare services to the Kochi, Bengaluru, 6 Others community, Infrastructure Kolkata, Jaipur, i. Measures for the benefit of Promoting measures of 1. Malkapur, 0.01 1) 0.01 0.01 Cipla support to hospitals, Medical Guwahati, armed forces veterans reducing inequalities Buldhana 2) 0.001 Foundation support to Individuals, Bhatinda faced by socially and 2. Maharashtra Mobile Health care services, 2. Himachal economically backward Awareness for Hepatitis, Pradesh, Goa, groups Construction of Sanitation Madhya Pradesh, ii. Contribution to Cipla Health, Education, 1. Mumbai 2.50 1) 2.50 2.50 Cipla blocks, Developmental Maharashtra, Foundation towards Skilling and Disaster 2. Maharashtra 2) Nil Foundation Disabilities, Pain and Palliative Delhi, Sikkim, undertaking CSR initiatives Response Care, Strengthen the Kerala, Karnataka, as per focus areas and services of ICDS in villages, West Bengal, programme areas listed in Palliative care in humanitarian Rajasthan, Assam, Schedule VII, Section 135 to crises, Research studies and Punjab the Companies Act, 2013 education on Public Health iii. Environmental Sustainability, Ensuring Environmental 1. Indore, 0.22 1) 0.19 0.20 Cipla & Promoting Healthcare ecological balance and sustainability Bengaluru, Baddi 2) 0.01 Foundation including Preventive conservational of natural 2. Madhya Pradesh, Healthcare ) resources Karnataka, Himachal Pradesh, 3 Promoting Education Promoting education 1. Baddi, 17.54 1) 4.84 14.61 Cipla Limited Sub Total of Others 2.73 2.71 2.71 including special Education including special Chandigarh, 2) 0.28 & Cipla education Bengaluru, Goa, Foundation Grand Total (1+2+3+4+5+6) 120.00 36.31 103.43 (Mobile Science Van, Indore, Kurkumbh, Education of underprivileged Mumbai, children from troubled Patalganga, Pune, VI. CSR Expenditure for the year 2019-20 a CSR plan, apprised the Board of the same and background, Infrastructural Vikhroli, Rangpo, monitored the status reports of the projects/ support to School, East Sikkim, Kochi, During the year 2019-20, the Company spent programmes submitted to them on a periodic basis. Infrastructural support Kolkata H36.31 crore on various CSR initiatives, which is to Colleges, Meritorious 2. Himachal more than the statutory expenditure of 2% of Awards, Promoting Education, Pradesh, Promoting Education in Chandigarh , average net profit of the last three financial years govt. schools, Sponsorship Karnataka, Goa, required under the law. to Economically weaker Madhya Pradesh, Students, Sponsorship to Maharashtra, VII. Responsibility Statement Students, E- Learning & pre- Sikkim, Kerala, school education, Awareness West Bengal Pursuant to the Companies (Corporate Social programme for Road Safety Responsibility Policy) Rules, 2014, as amended from Chairman Managing Director and Rules) time to time, it is confirmed that the CSR Committee CSR Committee Global Chief Executive Officer has implemented and monitored the CSR initiatives of Cipla in line with the CSR objectives and policy Place: Mumbai Place: New Jersey, USA 1Information in line with BRR Principle 8, Question 4. th of the Company. The CSR Committee has prepared Date: 15 May, 2020 150 Caring For Life since 1935 Board’s Report 151 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure II Annexure III CERTIFICATE ON COMPLIANCE WITH THE CORPORATE GOVERNANCE REQUIREMENTS Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo UNDER SEBI (LISTING OBLIGATION AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 The information under section 134(3) (m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 for the year ended 31st March, 2020 is given here below and forms part of the Directors’ Report. To The Members of Cipla Limited A. CONSERVATION OF ENERGY1 iv. Auto Tube cleaning systems: Installation of Auto Tube cleaning systems at Kurkumbh for chilling The steps taken or impact on conservation of equipment’s to reduce the condenser approach energy temperature of systems thereby reduction of We have examined all relevant records of Cipla Limited ( further known as the Company) for the purpose of power consumption in chillers. More systems are certifying compliance of the disclosure requirements and corporate governance norms as specified for the Listed a. The Company is making continuous efforts yet to be installed at various sites. The installed Companies as prescribed in Regulations 17 to 27, clauses (b) to (i) of sub-regulation (2) of Regulation 46 and Schedule on ongoing basis to conserve the energy by systems amount to savings of approx. 1 lacs V of Chapter IV of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) adopting innovative measures to reduce wastage KWH. Regulations, 2015 (‘LODR’), for the financial year ended 31st March, 2020. We have obtained all the information and and optimise consumption. Some of the specific explanations to the best of our knowledge and belief, which were necessary for the purpose of this certification. measures undertaken are: v. Steam Consumption Optimisation: Extension of steam supply to Unit 2 from Unit-1 at Kurkumbh is We state that the compliance of conditions of Corporate Governance is the responsibility of the management, and i. Renewable energy utilization: under progress. This will lead to stoppage of FO our examination was limited to procedures and implementation thereof adopted by the Company for ensuring the fired boilers at Unit 2 thereby reduction in fossil compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the a) We have continued our endeavour for fuel consumption and economical steam rate financial statements of the Company. increasing the proportion on renewable power (solar / wind) for our Bangalore unit due to efficient loading of briquette fired boiler In our opinion, and to the best of our information and according to the explanations given to us, we certify that the (Virgonagar, Bommasandra) through the located in Unit-1. This installation can result in Company has complied with the conditions of Corporate Governance as specified for listed company. third party open access route and could savings of approx. J 1690 per ton in steam cost. achieve 85% of power consumption from vi. Variable Frequency Drive (VFD) system: We further state that such compliance is neither an assurance as to the future viability of the Company nor the green source. efficiency or effectiveness with which the management has conducted the affairs of the Company. Continuation of Installation of variable b) Solar roof tops commissioned at Baddi site frequency drive for various process and utility and Bommasandra. equipment’s across sites. For BNP & Associates c) During the FY 2019-20 we have secured vii. Energy Efficiency & Process optimization Company Secretaries total 233 lacs units Kilo Watt Hours (KWH) improvement program: [Firm Regn No. P2014MH037400] of power (223 through OA + 10 lacs through At Goa solar) and this has resulted in carbon foot Avinash Bagul print reduction of 19127 tons. (1) Installation of new highly efficient with low Partner Input KiloWatt per Tonnage water chiller for d) We further plan to continue our efforts FCS No.: 5578 Heating Ventilation & Air Conditioning done towards sourcing of energy through C P No.: 19862 as a replacement to the existing chiller. renewable sources, by installation of similar Place: Mumbai UDIN: F005578B000243013 solar roof tops at our Maharashtra, Goa (2) Installation of new inline centrifugal pumps Date: 15th May, 2020 PR No. 637/2019 and Sikkim sites in FY 2020-21. were done for efficient operation as they are maintenance free and easy to install. ii. Solid Briquette Boiler Installation: Procured a new solid briquette fired boiler at Goa At Indore location as an alternative to Furnace Oil (FO) fired boilers. These boilers are economical to (1) Installed On/Off logic to Air Handling Units operate considering the steam cost and to curb (AHUs) for energy savings in the chilling pollution. This installation can result in savings of systems. This led to achieve savings of approx. J 1500 per ton in steam cost. approx. 11 lac KWH. iii. Lighting system performance improvement At Kurkumbh program: Retrofitting of LED lights in existing (1) Optimisation of setpoints for AHU of AC/ light fixture at Indore, Baddi, Bommasandra, AHU of storage areas for efficient operation Goa, Indore, Sikkim and Virgonagar has resulted and reduction in energy consumption. in saving of approx. 6 lacs of KWH. 1Information in line with BRR Principle 6, Question 5 152 Caring For Life since 1935 Board’s Report 153 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 (2) Installation of pressure based VFD control newer active drug substances using innovative (II) The benefits derived like product improvement, cost reduction, product development or import system for warm water system. and advanced processing equipments. Focus substitution: areas for development are respiratory, anti- At Baddi retroviral, anti-psychotics and oncology. i. Development of novel, differentiated and affordable medicines, drug delivery systems to address patient need and improve patient benefit. (1) Area declassification done for storage ii. Development of complex generic formulations areas resulting into lower consumption of based on inhalable powder, metered dose ii. Successful commercial scale up of several new APIs and formulations, including inhalable powders, complex power in chilling systems. inhalers, Nanotechnology based products in generics, peptides, differentiated products and drug device combination products. oral solids & injections, liposomal injections, (2) Reduction in flame failure in boiler operation iii. Improved processes and enhanced productivity in both APIs and formulations. Improvement in operational long acting depot injections, Implants, Intra- by balancing primary & secondary air. efficiency through reduction in batch hours, increase in batch sizes, better solvent recovery and simplification vaginal contraceptive dosage forms, peptide of processes. viii. New technology absorption: products, micellar emulsions, SMEDDs, multi particulate extended release oral systems for iv. Development of novel polymorphs to gain early entry of drug products in regulated markets o Implementation of Systems, Applications & global markets. Products plant maintenance module at various v. Development of affordable and substitutable formulations by adopting new or alternate technologies for iii. Development of differentiated new products locations to improve operation Efficiency, life saving drugs to minimise import dependency. System Control with Operational Work Flow, to maximise therapeutic synergy (for example Better Visibility and tracking for Planning, multilayer tablets combining nanotechnology), (III) The details of Imported Technology (imported during the last three years reckoned from the Electronic Reporting and Analysis. minimise dosing errors and patient compliance beginning of the financial year) – No expenditure has been incurred on import of new technology during (for example, ready to use depot injectable the financial years 2017-18, 2018-19 and 2019-20. o Replacement of water ejector pump into oil ring formulation and drug-device combinations). vaccum pump. (IV) The expenditure incurred on Research & Development (Standalone): iv. Centre of Excellence for polymorphism as part Energy efficient water chiller at Goa in o of API R&D which has the latest equipment for H in Crore procurement. screening and developing novel polymorphs, a. Opex 976.11 o Power saving by installation of Thyristor panel co-crystals and particle engineering along with b. Depreciation 56.20 a dedicated team of polymorph specialists. to dehumidifier. Total 1,032.31 Recently, COE Polymorphism lab was expanded o Conversion of Boiler Fuel from High Speed with additional capabilities like, high throughput The total R&D expenditure as a percentage of total turnover is around 8.15%. Diesel to LPG in Sikkim plant to shift to cleaner screening platform (HTS) for polymorph fuel and thereby curb to pollution. automation, high throughput screening powder C. FOREIGN EXCHANGE EARNINGS AND OUTGO o Optimisation of compressed air pressure at x-ray diffraction (HT-PXRD), Spray drier and Hot-Stage microscope. generation. Separation of High/Low pressure The Exports Sales were H5,517.45 crore for FY 2019-20. The Company earned H6.37 crore towards technical lines. This will lower down the loading & v. Incorporation and successful implementation knowhow & licensing fees and H79.78 crore for other services. During the year, the foreign exchange outgo was unloading pattern of compressors. of software based simulations to reduce H590.26 crore and earnings in foreign exchange were H5603.60 crore. ix. Maintaining Unity Power Factor Incentive at all experimental work (for example: CFD, PBPK Cipla Manufacturing Locations. & PBBM modeling etc) and for prediction/ reproducibility of performance. Similarly, x. Maximum power demand optimisation done at software based simulations are successfully Baddi site. implemented for assessing process capabilities and for scale up. On behalf of the Board xi. Virgonagar, Bommasandra, Patalganga, Kurkumbh, Goa, Indore units are certified & vi. Evaluation of cost effective and high throughput awarded Energy Management System (ISO technologies, for example: Continuous 50001) by reputed Accreditation body. manufacturing and exploring utilisation of 100% aqueous based formulation manufacturing xii. Energy Audits have been conducted for all units avoiding organic solvents for existing and new Date: 15th May, 2020 Y K Hamied by reputed Energy consultants. formulation. Place: London Chairman vii. Patenting of newer processes/ newer products/ B. TECHNOLOGY ABSORPTION newer drug delivery systems/ newer medical devices/ newer usage of drugs for both local (I) The efforts made towards technology and international markets. absorption: viii. Development of methods to improve safety i. Development and scale-up of new formulations procedures, effluent control, pollution control, under various dosage forms for existing and etc. 154 Caring For Life since 1935 Board’s Report 155 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure IV Annexure V Details pertaining to remuneration as required under section 197(12) of the Companies Act, Extract of Annual Return 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial FORM NO. MGT-9 Personnel) Rules, 2014 as on the financial year ended 31st March, 2020 [Pursuant to Section 92(3) of the Companies Act, 2013 and i. The ratio of the remuneration of each Director to the median remuneration of the employees of the Company Rule 12(1) of the Companies (Management and Administration) Rules, 2014] for the FY 2019-20 and the percentage increase in remuneration of each Director, Global Chief Financial Officer and Company Secretary during FY 2019-20: I. Registration and other Details % increase in Ratio to median i) CIN L24239MH1935PLC002380 Name Designation remuneration in remuneration ii) Registration Date 17th August, 1935 the FY 2019-20 iii) Name of the Company Cipla Limited Dr Y K Hamied Chairman 57 : 1 0.74 % iv) Category Public Company Mr M K Hamied Vice-Chairman 58 : 1 0.24 % Sub-Category of the Company Limited by shares Ms Samina Hamied Executive Vice-Chairperson 188 : 1 5.23 % v) Address of the Registered office and contact details Cipla House, Peninsula Business Park, Ganpatrao Mr S Radhakrishnan Non-Executive Director 188 : 1 35.09 % Kadam Marg, Lower Parel, Mumbai - 400013 Mr Umang Vohra Managing Director and Global 378 : 1 - 9.74 % Tel: (022) 2482 6000 Chief Executive Officer Fax: (022) 2482 6120 Email: [email protected] Mr Ashok Sinha Independent Director 13 : 1 4.35 % Website: www.cipla.com Dr Peter Mugyenyi Independent Director 13 : 1 7.87 % vi) Whether listed company Yes Mr Adil Zainulbhai Independent Director 13 : 1 26.26 % vii) Name, Address and Contact details of Registrar & KFin Technologies Private Limited Ms Punita Lal Independent Director 11 : 1 - 1.23 % Transfer Agent Selenium Tower B, Plot No.: 31 & 32, Gachibowli, Ms Naina Lal Kidwai Independent Director 13 : 1 5.88 % Financial District, Nanakramguda, Serilingampally, Mr Peter Lankau* Independent Director 3 : 1 - 77.27 % Hyderabad - 500032, Telangana Mr Kedar Upadhye Global Chief Financial Officer 100 : 1 1.19 % Tel: (040) 6716 2222 / 6716 1511 Mr Rajendra Chopra Company Secretary 43 : 1 5.95 % Fax: (040) 2300 1153 * Resigned from the position of Director w.e.f 1st July, 2019 Email: [email protected] ii. The percentage increase in the median remuneration of employees in the financial year: 26.87% II. Principal business activities of the Company iii. Number of permanent employees on the rolls of the Company as on 31st March, 2020: 21645 Sr. Name and Description of main NIC Code of the product / % to total turnover of the No. products / services service Company iv. For the FY 2019-20, the average annual increase in the remuneration of employees (excluding the remuneration of managerial personnel) was 11.93% and for the managerial remuneration there was a decline of 5.27% i) Pharmaceuticals 210 100 v. It is affirmed that the remuneration is as per the Nomination, Remuneration and Board Diversity Policy of the III. Particulars of Holding, Subsidiary and Associate Companies1 Company. Sr. Name and address of the CIN/GLN Holding/ % of Applicable Notes: No. Company Subsidiary shares section of the (1) There has been no change in the payment criteria for remuneration to non-executive / independent directors. The variation reflected in the /Associate held Companies column % increase in remuneration in FY 2019-20 is either due to the tenure of directorship, change in the committee composition, membership, Act, 2013 chairpersonship or payment of sitting fees for attendance at meetings. Subsidiaries (held directly) (2) The % increase in the average managerial remuneration for FY 2019-20 include perquisite value of stock options exercised during the financial 1 Goldencross Pharma Limited U24239MH2000PLC123766 Subsidiary 100.00% 2(87) year. Had the perquisite value of stock options (which were granted in earlier years but exercised during FY 2019-20) not been considered, the (formerly known as Goldencross % decrease in the average managerial remuneration for FY 2019-20 would have been 4.14%. Pharma Private Limited) (3) Mr S Radhakrishnan completed his term as a Whole-Time Director on 11th November, 2017 and continues as a non-executive director of the Unit No.SB-901 & SB-902, Empire Company w.e.f. 12th November, 2017. The remuneration includes perquisite value of stock options granted in earlier years and exercised in Tower Building, Gut No.31, Cloud FY 2019-20. City Campus, Thane Belapur Road, Airoli, Navi Mumbai, Thane - 400708, Maharashtra, India 1GRI 102-45 156 Caring For Life since 1935 Board’s Report 157 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Sr. Name and address of the CIN/GLN Holding/ % of Applicable Sr. Name and address of the CIN/GLN Holding/ % of Applicable No. Company Subsidiary shares section of the No. Company Subsidiary shares section of the /Associate held Companies /Associate held Companies Act, 2013 Act, 2013 2 Meditab Specialities Limited U23240MH1996PLC104442 Subsidiary 100.00% 2(87) 11. Saba Investment Limited NA Subsidiary 51.00% 2(87) (formerly known as Meditab Office No. 601, Level 6, Emaar Specialities Private Limited) Square Building 3, Downtown Unit No.SB-901 & SB-902, Empire Dubai, Dubai PO BOX 4254, UAE Tower Building, GutNo.31, Cloud Subsidiaries (held indirectly) City Campus, Thane Belapur 12. Medispray Laboratories Private U52311GA1992PTC002801 Subsidiary 100.00% 2(87) Road, Airoli, Navi Mumbai, Thane - Limited 400708, Maharashtra, India Plot No.344/345, Kundaim 3. Cipla BioTec Limited U24239GA2008PLC007374 Subsidiary 100.00% 2(87) Industrial Estate, Kundaim, L-147/ B, Verna Industrial Area, Goa - 403 115, India Verna, South Goa, Goa - 403722, 13. Sitec Labs Limited (formerly known U74999MH2000PLC129210 Subsidiary 100.00% 2(87) India as Sitec Labs Private Limited) 4. Cipla Health Limited^^ U24100MH2015PLC267880 Subsidiary 95.46% 2(87) Unit No.SB-901 & SB-902,Empire FOFB-11, B Wing, Fourth Floor, Art Tower Building, GutNo.31,Cloud Guild House Phoenix Marketcity, City Campus, Thane Belapur Rd, L.B.S Marg, Kurla (West), Airoli Navi Mumbai Thane MH Mumbai - 400070, Maharashtra, 400708, India India 14. Cipla (UK) Limited* NA Subsidiary 100.00% 2(87) 5. Cipla Pharmaceuticals Limited U24239MH2019PLC333266 Subsidiary 100.00% 2(87) Dixcart House, Addlestone Road, Unit No. SB-901 & SB-902, Empire Bourne Business Park, Addlestone, Tower, Gut No.31, Cloud City Surrey, KT15 2LE, United Kingdom Campus, Airoli, Navi Mumbai, 15. Cipla Australia Pty. Limited NA Subsidiary 100.00% 2(87) Thane - 400708, Maharashtra, BSA Partnership Pty Ltd, Level 15, India 461 Bourke Street, Melbourne, VIC, 6. Jay Precision Pharmaceuticals U33111MH2012PTC234037 Subsidiary 60.00% 2(87) 3000, Australia Private Limited 16. Meditab Holdings Limited NA Subsidiary 100.00% 2(87) Government Indl Estate, Plot No. C/o IQ EQ Corporate Services 40/41 ABCD, Charkop, Kandivali (Mauritius) Ltd, 33 Edith Cavell (West), Mumbai - 400 067, Street, Port Louis, 11324, Mauritius Maharashtra, India 17. Cipla USA Inc. NA Subsidiary 100.00% 2(87) 919 North Market Street, Suite 950, 7. Cipla (Mauritius) Limited* NA Subsidiary 100.00% 2(87) Wilmington, New castle Delaware C/o IQ EQ Corporate Services 19801, USA (Mauritius) Limited, 33 Edith Cavell 18. Cipla Kenya Limited NA Subsidiary 100.00% 2(87) Street, Port Louis, 11324, Mauritius Purshottam Place, 8th Floor, Cipla 8. Cipla Medpro South Africa (Pty) NA Subsidiary 100.00% 2(87) Limited, Museum Hill, Westlands Limited Road, Westlands, Nairobi, 46986 - 1474 South Coast Road, Mobeni, 00100, Kenya. Durban, Kwa-Zulu Natal 4052, 19. Cipla Malaysia Sdn. Bhd. NA Subsidiary 100.00% 2(87) South Africa Suite 1005, 10th Floor, Wisma 9. Cipla Holding B.V. NA Subsidiary 100.00% 2(87) Hamzah-Kwong Hing, No. 1, Leboh Cipla Eurla, Antonie Van Ampang, 50100, Kuala Lumpur, Leeuwenhoeklaan 9, Building A8, Malaysia nd 2 Floor, 3721 MA Bilthoven, The 20. Cipla Europe NV NA Subsidiary 100.00% 2(87) Netherlands De Keyserlei 58-60, Box 19, 10. Cipla (EU) Limited NA Subsidiary 100.00% 2(87) 2018 Antwerpen Belgium Dixcart House, Addlestone Road, 21. Inyanga Trading 386 Proprietary NA Subsidiary 100.00% 2(87) Bourne Business Park, Addlestone, Limited* Surrey, KT15 2LE, United Kingdom Parc du Cap, Building 9, Mispel Street Bellville, Western Cape, 7530, South Africa 158 Caring For Life since 1935 Board’s Report 159 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Sr. Name and address of the CIN/GLN Holding/ % of Applicable Sr. Name and address of the CIN/GLN Holding/ % of Applicable No. Company Subsidiary shares section of the No. Company Subsidiary shares section of the /Associate held Companies /Associate held Companies Act, 2013 Act, 2013 22. Cipla Medpro Holdings NA Subsidiary 100.00% 2(87) 32. Cipla Brasil Importadora E NA Subsidiary 100.00% 2(87) Proprietary Limited* Distribuidora De Medicamentos Parc du Cap, Building 9, Mispel Ltda. Street Bellville, Western Cape, City of Vargem Grande Paulista, 7530, South Africa State of Sao Paulo, at Estrada da 23. Cape to Cairo Exports Proprietary NA Subsidiary 100.00% 2(87) Lagoinha, No. 489, block 2, Bairro Limited++ da Lagoa, CEP 06730-000, Brazil Parc du Cap, Building 9, Mispel 33. Cipla Philippines Inc. NA Subsidiary 100.00% 2(87) Street Bellville, Western Cape, 7530, Level 40, PBCom Tower, 6795 South Africa Ayala Avenue Corner V. A., Rufino 24. Cipla Dibcare Proprietary Limited* NA Subsidiary 100.00% 2(87) Street, Makati City, Metro Manila, Parc du Cap, Building 9, Mispel 1226, Philippines Street Bellville, Western Cape, 34. InvaGen Pharmaceuticals Inc. NA Subsidiary 100.00% 2(87) 7530, South Africa One Commerce Plaza 99 25. Cipla Life Sciences Proprietary NA Subsidiary 100.00% 2(87) Washington Ave, Ste 805-A Albany, Limited New York, 12210-2822, USA Parc du Cap, Building 9, Mispel 35. Exelan Pharmaceuticals Inc. NA Subsidiary 100.00% 2(87) Street Bellville, Western Cape, 919 North Market Street, Suite 950, 7530, South Africa Wilmington, New castle Delaware 26. Cipla-Medpro Proprietary Limited NA Subsidiary 100.00% 2(87) 19801, USA Parc du Cap, Building 9, Mispel 36. Cipla Biotec South Africa (Pty) NA Subsidiary 100.00% 2(87) Street Bellville, Western Cape, Limited 7530, South Africa Building 2, Maxwell Office Park, 27. Cipla-Medpro Distribution Centre NA Subsidiary 100.00% 2(87) Magwa Crescent West, Waterfall Proprietary Ltd. City Midrand, Gauteng, South Parc du Cap, Building 9, Mispel Africa Street Bellville, Western Cape, 37. Anmaraté (Pty) Limited NA Subsidiary 100.00% 2(87) 7530, South Africa Parc du Cap, Building 9, Mispel 28. Cipla Medpro Botswana NA Subsidiary 100.00% 2(87) Street Bellville, Western Cape, Proprietary Limited 7530, South Africa P.O. Box 40185, Gaborone, 38. Cipla Technologies LLC, NA Subsidiary 100.00% 2(87) Botswana 919 North Market Street, Suite 950, 29. Cipla OLTP (Pty) Limited (formerly NA Subsidiary 100.00% 2(87) Wilmington, New castle Delaware known as Cipla Nutrition Pty Ltd) 19801, USA Parc du Cap, Building 9, Mispel 39. Madison Pharmaceuticals Inc. NA Subsidiary 100.00% 2(87) Street Bellville, Western Cape, 919 North Market Street, Suite 950, 7530, South Africa Wilmington, New castle Delaware 30. Medpro Pharmaceutical NA Subsidiary 100.00% 2(87) 19801, USA Proprietary Limited 40. Cipla Gulf FZ- LLC NA Subsidiary 100.00% 2(87) Parc du Cap, Building 9, Mispel Unit No. 111, 1st floor Street Bellville, Western Cape, DSP Laboratory Complex 7530, South Africa Dubai, United Arab Emirates 31. Breathe Free Lanka (Private) NA Subsidiary 100.00% 2(87) 41. Mirren (Pty) Limited NA Subsidiary 100.00% 2(87) Limited 18 Golden Drive, Morehill No. 47, Alexandra Place, Colombo Benoni,1501, South Africa 07, Sri Lanka 42. Cipla Maroc SA NA Subsidiary 60.00% 2(87) Casablanca-Bureau n°7-1, 7ème étage, 33 Avenue Hassan Sghir, Morocco 160 Caring For Life since 1935 Board’s Report 161 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Sr. Name and address of the CIN/GLN Holding/ % of Applicable Sr. Name and address of the CIN/GLN Holding/ % of Applicable No. Company Subsidiary shares section of the No. Company Subsidiary shares section of the /Associate held Companies /Associate held Companies Act, 2013 Act, 2013 43. Cipla Pharma Lanka (Private) NA Subsidiary 100.00% 2(87) 54. AMPSolar Power Systems Private U74996DL2019PTC345639 Associate 26.00% 2(6) Limited< Limited No 345- 4/1, Galle Roads, 309, 3rd Floor, Rectangle One, Colombo 03, Sri Lanka Behind Sheraton Hotel, Saket, New 44. Cipla Quality Chemical Industries NA Subsidiary 51.18% 2(87) Delhi - 110 017, India Limited 55. Brandmed (Pty) Limited NA Associate 30.00% 2(6) Plot 1-7, First Ring Road, Luzira 22 1st Avenue Houghton Estate Industrial Park, P.O. Box 34871, 2198, South Africa Kampala, Uganda * in process of liquidation 45. Cipla Middle East Pharmaceuticals NA Subsidiary 51.00% 2(87) < Under amalgamation with Breathe Free Lanka (Private) Limited FZ-LLC ++ Under de-registration SD 2-50, Floor 03, DSP Laboratory ^^ 95.46% is held by Cipla Limited and 4.54% is held through Cipla Health Employees Stock Option Trust complex, Dubai, United Arab Emirates IV. Share Holding Pattern 46. Quality Chemicals Limited NA Subsidiary 51.00% 2(87) (Equity Share Capital Breakup as percentage of Total Equity) Quality Chemicals House, Plot i) Category-wise Share Holding 64/65 Katwe Road, P.O. Box 3381, Category of No. of Shares held at the beginning of the year No. of Shares held at the end of the year % Change Kampala, Uganda Shareholders (As on 1st April, 2019) (As on 31st March, 2020) during 47. Medica Pharmaceutical Industries NA Subsidiary 50.49% 2(87) Demat Physical Total % of Demat Physical Total % of the year Company Limited Total Total Al-Jabal Group building, Noakshot Shares Shares Street, Behind Canada Dry A. Promoters Factory, Sanaa, Yemen (1) Indian 48 Cipla (China) Pharmaceutical Co., NA Subsidiary 100.00% 2(87) a) Individual / HUF 114708572 - 114708572 14.24 114708572 - 114708572 14.23 -0.01 Limited b) Central Govt. ------nd Room 203, 2 F, Building No.1, 1479 c) State Govt(s) ------Zhangheng Rd., Shanghai, China d) Bodies Corp. 5869837 - 5869837 0.73 5869837 - 5869837 0.73 - 49. Cipla Algérie NA Subsidiary 40.00% 2(87) e) Banks / FI ------18, Rue de Zone Industrielle, Route f) Any other ------De La Gare, Haouche Mahieddine, Sub-total (A) (1) 120578409 - 120578409 14.97 120578409 - 120578409 14.96 -0.01 Reghala, Algeria (2) Foreign 50. Cipla (Jiangsu) Pharmaceutical NA Subsidiary 80.00% 2(87) (a) NRIs – Individuals 174907187 - 174907187 21.71 174907187 - 174907187 21.69 -0.01 Co., Limited (b) Other – Individuals ------No.168 Binjiang Road, Binjiang (c) Bodies Corp. ------Fine Chemical Park, Qidong, (d) Banks / FI ------Jiangsu Province of China, China (e) Any other ------Sub-total (A) (2) 174907187 - 174907187 21.71 174907187 - 174907187 21.69 -0.01 51. Cipla Colombia SAS NA Subsidiary 100.00% 2(87) Total shareholding Cra 13 # 85 -39 ofc 505, Bogota, of Promoter (A) = (A) Colombia, 110221. (1) + (A)(2) 295485596 - 295485596 36.67 295485596 - 295485596 36.65 -0.02 Associates (held indirectly) B. Public 52. Stempeutics Research Private U73100KA2006PTC038256 Associate 40.78% 2(6) Shareholding Limited 1) Institutions 3rd Floor, #143, 212-215, EPIP a) Mutual Funds / UTI 82716685 - 82716685 10.27 136411887 - 136411887 16.92 6.65 Industrial Area Hoodi Village, b) Banks / FI 2826999 4100 2831099 0.35 2171342 4100 2175442 0.27 -0.08 K.R.Puram, Hobli Bengaluru – c) Central Govt. ------560066, Karnataka, India d) State Govt(s) ------53. Avenue Therapeutics, Inc. NA Associate 33.3% 2(6) e) Venture Capital Funds ------1140 Avenue of the Americas, Floor f) Insurance 9 New York, 10036, USA Companies 27344189 - 27344189 3.39 42435406 - 42435406 5.26 1.87 162 Caring For Life since 1935 Board’s Report 163 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Category of No. of Shares held at the beginning of the year No. of Shares held at the end of the year % Change ii) Shareholding of Promoters and Promoter group Shareholders (As on 1st April, 2019) (As on 31st March, 2020) during Sr. Shareholder’s Name Shareholding at the beginning of the year Shareholding at the end of the year % change in Demat Physical Total % of Demat Physical Total % of the year No. (As on 1st April, 2019) (As on 31st March, 2020) shareholding Total Total No. of Shares % of total % of Shares No. of Shares % of total % of Shares during the Shares Shares Shares Pledged / Shares Pledged / year^ g) Foreign of the encumbered of the encumbered Company to total Company to total Institutional Investors 5357355 - 5357355 0.66 100676 - 100676 0.01 -0.65 shares shares h) Foreign Venture Capital Funds ------1) Dr Y K Hamied 163967687 20.35 - 163967687 20.34 - 0.01 i) Others (specify) ------2) M K Hamied 34567572 4.29 - 34567572 4.29 - - •Foreign Portfolio 3) Alps Remedies Private Limited 492985 0.06 - 492985 0.06 - - Investors 209026785 - 209026785 25.94 144742733 - 144742733 17.95 -7.99 4) Sophie Ahmed 45982000 5.71 - 45982000 5.70 - 0.01 •Alternate 5) Shirin Hamied 6363000 0.79 - 6363000 0.79 - - Investment Funds 1290798 - 1290798 0.16 1324616 - 1324616 0.16 - 6) Kamil Hamied 10939500 1.36 - 10939500 1.36 - - Sub-total (B)(1) 328562811 4100 328566911 40.78 327186660 4100 327190760 40.58 -0.20 7) Samina Hamied 17909500 2.22 - 17909500 2.22 - - 2) Non-Institutions 8) Rumana Hamied 9886500 1.23 - 9886500 1.23 - - a) Bodies Corp. 9) MN Rajkumar Garments LLP 5376852 0.67 - 5376852 0.67 - - i) Indian 32163137 242812 32405949 4.02 33405642 242812 33648454 4.17 0.15 10) Shree Riddhi Chemicals LLP 0 0 - 0 0 - - ii) Overseas 11729 - 11729 0.00 1306 - 1306 0.00 0.00 12) Hamsons Laboratories LLP 0 0 - 0 0 - - b) Individuals 9) Farida Hamied 0 0 - 0 0 - - i) Individual 13) Neo Research Labs Private shareholders holding Limited 0 0 - 0 0 - - nominal share Total 295485596 36.67 - 295485596 36.65 - 0.02 capital upto H1 lakh 47971131 2155354 50126485 6.22 49229897 1743564 50973461 6.32 0.10 ^The change in total percentage of shareholding is due to increase in the overall paid-up share capital of the Company. ii) Individual shareholders holding iii) Change in Promoter and Promoter Group’s Shareholding nominal share capital in excess of There was no change in the Promoter and Promoter group shareholding during the FY 2019-20. H1 lakh 68767359 10954037 79721396 9.89 69937849 7395425 77333274 9.59 -0.30 c) Others (specify) iv) Shareholding Pattern of top ten Shareholders i) Qualified Foreign Investor ------(other than Directors, Promoters and Holders of GDRs and ADRs) i) Trusts 5905369 - 5905369 0.73 9391048 - 9391048 1.16 0.43 Sr. Name of the Shareholder Shareholding Cumulative Shareholding iii) Non Resident Indians / Foreign No. during the Year Nationals / Foreign No. of % of total No. of % of total Bodies 5222409 388200 5610609 0.70 5744567 388200 6132767 0.76 0.06 Shares shares of the Shares shares of the iv) Clearing Members 3413113 - 3413113 0.42 2225483 - 2225483 0.28 -0.15 Company Company v) Overseas 1 ICICI Prudential Mutual Fund Corporate Bodies 375 - 375 0.00 375 - 375 0.00 - vi) NBFCs Registered At the beginning of the year 27505977 3.42 27505977 3.42 with RBI 75022 - 75022 0.01 23690 - 23690 0.00 -0.01 Bought during the year 29284512 3.63 56790489 7.04 vii) Investor Sold during the year 6114592 0.76 50675897 6.29 Education and At the end of the year 50675897 6.29 50675897 6.29 Protection Fund 2 Life Insurance Corporation of India Authority Ministry of At the beginning of the year 25017146 3.10 25017146 3.10 Corporate Affairs 3783374 - 3783374 0.47 3235083 - 3235083 0.40 -0.07 Sub-total (B)(2) 167313018 13740403 181053421 22.46 173194940 9770001 182964941 22.69 0.23 Bought during the year 14562317 1.81 39579463 4.91 Total Public Sold during the year 21100 0.003 39558363 4.91 Shareholding (B)=(B) At the end of the year 39558363 4.91 39558363 4.91 (1) + (B)(2) 495875829 13744503 509620332 63.25 500381600 9774101 510155701 63.28 0.03 3 HDFC Mutual Fund C. Shares held by At the beginning of the year 20249660 2.52 20249660 2.52 Custodian for GDRs & ADRs 595338 - 595338 0.07 594032 - 594032 0.07 - Bought during the year 5676303 0.70 25925963 3.22 Grand Total (A+B+C) 791956763 13744503 805701266 100.00 796461228 9774101 806235329 100.00 - Sold during the year 1381205 0.17 24544758 3.04 At the end of the year 24544758 3.04 24544758 3.04 164 Caring For Life since 1935 Board’s Report 165 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Sr. Name of the Shareholder Shareholding Cumulative Shareholding v) Shareholding of Directors and Key Managerial Personnel No. during the Year Sr. Name Shareholding Date Increase / Reason Cumulative No. of % of total No. of % of total No. (Decrease) in Shareholding during Shares shares of the Shares shares of the shareholding the year (1st April, 2019 Company Company to 31st March, 2020) 4 Aditya Birla Mutual Fund No. of % of total No. of % of total At the beginning of the year 298299 0.04 298299 0.04 shares at the shares shares shares st Bought during the year 20740895 2.57 21039194 2.61 beginning (1 of the of the April, 2019) Company Company^ Sold during the year 1361634 0.17 19677560 2.44 / end of the At the end of the year 19677560 2.44 19677560 2.44 year (31st 5 SBI Mutual Fund March, 2020) At the beginning of the year 8793771 1.09 8793771 1.09 1) Dr Y K Hamied 163967687 20.35 31/03/2019 - - 163967687 20.35 Bought during the year 10942785 1.36 19736556 2.45 163967687 20.34^ 31/03/2020 - - 163967687 20.34^ Sold during the year 2896312 0.36 16840244 2.09 2) Mr M K Hamied 34567572 4.29 31/03/2019 - - 34567572 4.29 At the end of the year 16840244 2.09 16840244 2.09 34567572 4.29 31/03/2020 - - 34567572 4.29 6 Government Pension Fund Global 3) Ms Samina 17909500 2.22 31/03/2019 - - 17909500 2.22 At the beginning of the year 9591180 1.20 9591180 1.20 Hamied 17909500 2.22 31/03/2020 - - 17909500 2.22 Bought during the year 4089501 0.50 13680681 1.70 4) Mr S 142321 0.02 31/03/2019 - - 142321 0.02 Sold during the year 1205711 0.15 12474970 1.55 Radhakrishnan$ Allotment At the end of the year 12474970 1.55 12474970 1.55 - - 16/09/2019 50000 pursuant to 192321 0.02 7 NPS Trust ESOS 2013-A At the beginning of the year 5333447 0.07 5333447 0.07 Allotment Bought during the year 3499921 0.43 8833368 1.09 - - 13/11/2019 50000 pursuant to 242321 0.03 Sold during the year 19926 0.00 8813442 1.09 ESOS 2013-A At the end of the year 8813442 1.09 8813442 1.09 242321 0.03 31/03/2020 - - 242321 0.03 8 UTI Mutual Fund 5) Mr Umang 192256 0.02 31/03/2019 - - 192256 0.02 At the beginning of the year 7376111 0.92 7376111 0.92 Vohra Allotment Bought during the year 4081522 0.50 11457633 1.42 - - 13/11/2019 55799 pursuant to 248055 0.03 ESOS 2013-A Sold during the year 2751396 0.34 8706237 1.08 248055 0.03 31/03/2020 - - 248055 0.03 At the end of the year 8706237 1.08 8706237 1.08 6) Mr Kedar 20280 0.00 31/03/2019 - - 20280 0.00 9 HDFC Life Insurance Company Limited Upadhye Allotment At the beginning of the year 4533688 0.56 4533688 0.56 - - 16/09/2019 20284 pursuant to 40564 0.00 Bought during the year 3555829 0.44 8089517 1.00 ESOS 2013-A Sold during the year 469562 0.06 7619955 0.95 40564 0.00 31/03/2020 - - 40564 0.00 At the end of the year 7619955 0.95 7619955 0.95 $38,125 shares are held jointly with his wife 10 Reliance Mutual Fund ^The change in total percentage of shareholding is due to increase in the overall paid-up share capital of the Company. At the beginning of the year 10225129 1.27 10225129 1.27 Bought during the year 10635032 1.32 20860161 2.59 Sold during the year 13864771 1.72 6995390 0.87 At the end of the year 6995390 0.87 6995390 0.87 Shareholding is consolidated based on PAN irrespective of the schemes / sub-accounts. Note: The above information is based on the weekly beneficiary position received from the depositories. 166 Caring For Life since 1935 Board’s Report 167 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 V) Indebtedness ii) Remuneration to other directors Indebtedness of the Company including interest outstanding/accrued but not due for payment: H in Crore Sr. Fee for attending board / Total H in Crore Name of the Director Commission Others No. committee meeting Amount Secured Loans Unsecured Deposits Total excluding deposits Loans Indebtedness 1) Independent Directors Mr Ashok Sinha 0.08 0.40 - 0.48 Indebtedness at the beginning of the financial Dr Peter Mugyenyi(1) year 0.05 0.41 - 0.46 Mr Adil Zainulbhai 0.11 0.36 - 0.47 i) Principal Amount - - - - Ms Punita Lal 0.05 0.35 - 0.40 ii) Interest due but not paid - - - - Ms Naina Lal Kidwai 0.10 0.35 - 0.45 iii) Interest accrued but not due - - - - Mr Peter Lankau(1) (2) - 0.10 - 0.10 Total (i+ii+iii) - - - - Total (1) 0.39 1.97 - 2.36 Change in Indebtedness during the financial 2) Other Non-Executive Directors year Dr Y K Hamied 0.03 2.00 - 2.03 •Addition - 13.88 13.88 Mr M K Hamied 0.08 2.00 - 2.08 •Reduction - (7.82) - (7.82) Mr S Radhakrishnan 0.10 2.00 4.63(3) 6.73 Net Change - 6.06 - 6.06 Total (2) 0.21 6.00 4.63 10.84 Indebtedness at the end of the financial year Total (B) = (1+2) 0.60 7.97 4.63 13.20 i) Principal Amount - 6.06 - 6.06 Ceiling as per the Act (being 1% of the net profits of the Company calculated as per section 30.34 ii) Interest due but not paid - - - - 198 of the Act) iii) Interest accrued but not due - 0.01 - 0.01 Total Managerial Remuneration (A+B) 33.51 Total (i+ii+iii) - 6.07 - 6.07 Overall Ceiling as per the Act (being 11% of Net Profits of the Company calculated as per 333.72 section 198 of the Act) (1) USD equivalent to INR paid to the Directors. VI. Remuneration of Directors and Key Managerial Personnel (2) Resigned from the position of Director w.e.f 1st July, 2019 i) Remuneration to Managing Director, Whole-time Directors and/or Manager (3) Perquisite value of stock options granted in earlier years during his tenure as Whole Time Director but exercised in FY 2019-20 H in Crore iii) Remuneration to Key Managerial Personnel other than MD/Manager/WTD Name of MD/WTD/ Manager H in Crore Particulars of Remuneration Sr. Ms Samina Mr Umang Vohra Total Key Managerial Personnel Hamied (Managing Director Particulars of Remuneration No. Amount Sr. Mr Kedar Upadhye Mr Rajendra Chopra Total (Executive Vice- and Global Chief No. (Global Chief (Company Secretary) Amount Chairperson) Executive Officer) Financial Officer) Gross salary Gross salary (A) 1) (a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 4.20 6.73 10.93 1) (a) Salary as per provisions contained in Section 17(1) of the Income-tax 1.70 1.09 2.79 1961 Act, 1961 (b) Value of perquisites u/s 17(2) of the Income-tax Act, 1961 0.02 0.00(1) 0.02 (b) Value of perquisites u/s 17(2) of the Income-tax Act, 1961 0.00(1) - 0.00 (c) Profits in lieu of salary u/s 17(3) of the Income-tax Act, 1961 - - - (c) Profits in lieu of salary u/s 17(3) of the Income-tax Act, 1961 - - - 2) Stock Option - 2.60(2) 2.60 2) Stock Option 0.94 - 0.94 3) Sweat Equity - - 3) Sweat Equity - - - 4) Commission as % of profit 2.30 - 2.30 4) Commission - - - 5) -Other employer contribution to provident fund and other funds 0.23 0.23 0.46 5) Others (B) - - - -Variable Bonus - 4.00 4.00 - Employer contribution to provident fund and other funds 0.05 0.05 0.11 Total (A) 6.74 13.57 20.31 - Variable Bonus 0.90 0.39 1.29 Ceiling as per the Companies Act, 2013 (“the Act”) (being 10% of the net profit of the Company calculated as per section 303.38 Total (A+B) 3.60 1.53 5.13 198 of the Act) (1) Since the value of perquisite is only H39,600/-, the amount has been shown as H0.00 crore. (1)Since the value of perquisite is only H28,800/-, the amount has been shown as H0.00 crore. (2)Value of perquisites u/s 17(2) of the Income-tax Act, 1961 does not include perquisite value of stock options exercised during FY 2019-20. The same VII. Penalties / Punishment / Compounding of Offences (under the Companies Act, 2013): None has been shown separately in point no. (2). On behalf of the Board, Date: 15th May, 2020 Y K Hamied Place: London Chairman 168 Caring For Life since 1935 Board’s Report 169 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure VI Requirements) Regulations, 2015 (‘the Listing (iii) The Securities and Exchange Board of India Regulation’); (Issue and Listing of Debt Securities) Regulations, Secretarial Audit Report 2008 For the financial year ended 31st March, 2020 (b) The Securities and Exchange Board of India (Substantial Acquisition of Shares and (iv) The Securities and Exchange Board of India [Pursuant to section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014] Takeovers) Regulations, 2011; (Delisting of Equity Shares) Regulations, 2009; and (c) The Securities and Exchange Board of India To, (Prohibition of Insider Trading) Regulations, (v) The Securities and Exchange Board of India The Members 2015; (Issue of Capital and Disclosure Requirements) Cipla Limited Regulations, 2018; Cipla House (d) The Securities and Exchange Board of Peninsula Business Park, Ganpatrao Kadam Marg India (Share Based Employee Benefits) Lower Parel, Mumbai - 400013 Regulations, 2014; 2. Board processes: Company has proper board-processes and compliance We have conducted the Secretarial Audit of the (e) The Securities and Exchange Board of India We further report that: compliance of applicable statutory provisions and the mechanism in place to the extent, in the manner and (Registrars to an Issue and Share Transfer 2.1 The Board of Directors of Company as on adherence to good corporate practices by Cipla Limited subject to the reporting made hereinafter: Agents) Regulations, 1993. 31st March 2020 is duly constituted with proper having CIN L24239MH1935PLC002380 (hereinafter balance of executive directors, non-executive called ‘the Company’) covering the financial year ended 1. Compliance with specific statutory (vi) The Secretarial Standards 1 & 2 issued by the directors and independent directors as stated below: on 31st March, 2020 (the ‘audit period’). Secretarial provisions Institute of Company Secretaries of India. Audit was conducted in a manner that provided us a (vii) The following specific acts, laws, rules, (i) Two executive directors i.e. Mr Umang Vohra reasonable base for evaluating the corporate conducts We further report that: regulations applicable to the Company based and Ms Samina Hamied. / statutory compliances and expressing our opinion 1.1 We have examined the books, papers, minute on the nature of its business activities: thereon. (ii) Three non-executive directors i.e. Dr Y K Hamied, books, forms and returns filed and other records Chairman, Mr M K Hamied, Vice Chairman and maintained by the Company for the audit period (a) The Drugs and Cosmetics Act, 1940; We are issuing this report based on: Mr S Radhakrishnan. according to the provisions of: (b) The Narcotic Drugs and Psychotropic (i) Our verification of the books, papers, minute books, (iii) Five independent directors including two women (i) The Companies Act, 2013 (‘the Act’) and the Substances Act, 1985; forms and returns filed and other records maintained independent Directors i.e. Mr Adil Zainulbhai, rules made thereunder; by the Company, which we have audited by way of (c) The Drugs (Prices Control) Order, 2013 Mr Ashok Sinha, Dr Peter Mugyenyi, Ms Punita physical inspection as well as relying on documents (ii) The Securities Contracts (Regulation) Act, 1956 Lal and Ms Naina Lal Kidwai. shared electronically, where physical access was not 1.2 We report that during the audit period, the Company and the rules made thereunder; possible on account of lockdown due to COVID-19. has complied with the provisions of the Act, rules, 2.2 The processes relating to the following changes in (iii) The Depositories Act, 1996 and the regulations regulations, guidelines, standards, etc. mentioned the composition of the Board of Directors, during (ii) The certificate confirming compliance of all and byelaws framed thereunder; above. the year, were carried out in compliance with the applicable laws submitted to the Board of Directors provisions of the Act and the Listing Regulation: on a quarterly basis by the management. (iv) The Foreign Exchange Management Act, 1999 1.3 We are informed that, during the year, there were and the rules and regulations made thereunder no transaction undertaken by the Company which (i) Resignation of Mr Peter Lankau from the position (iii) Representations made and information provided by to the extent of Foreign Direct Investments and required compliance of the following Act, rules and of Independent Director of the Company w.e.f the Company, its officers, agents, and authorised Overseas Direct Investment; regulations made thereunder: 1st July, 2019. representatives during our conduct of secretarial audit. (v) The following regulations and guidelines (i) The Foreign Exchange Management Act, 1999 (ii) Re-appointment of Mr Umang Vohra as director prescribed under the Securities and Exchange to the extent of the rules and regulations made liable to retire by rotation at the 83rd AGM. We hereby report that in our opinion, during the Board of India Act, 1992 (‘SEBI Act’): for External Commercial Borrowings only; audit period covering the financial year ended on (iii) Appointment of Mr Ashok Sinha, Dr Peter 31st March, 2020, the Company has complied with the (a) The Securities and Exchange Board of (ii) The Securities and Exchange Board of India Mugyenyi, Mr Adil Zainulbhai, Ms Punita Lal statutory provisions listed hereunder and also that the India (Listing Obligations and Disclosure (Buy-back of Securities) Regulations, 2018; as Independent Directors for the second consecutive term of five years at the 83rd AGM. 170 Caring For Life since 1935 Board’s Report 171 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 2.3 Adequate notice of the board and board committee 3.4 We have not verified the correctness and limits approved by the shareholders as well as stated under Schedule VII of the Act and meetings was given to all the directors. The agenda appropriateness of financial records and books of as permissible under the Act and rules made is accordingly compliant of the provisions of and detailed notes on agenda were sent at least Accounts of the Company. thereunder; Section 135 of the Act; seven days in advance. In case of circulation of (vi) The Company has not accepted any public (xiii) The Board had carried out an annual evaluation agenda or detailed notes on agenda at shorter 3.5 We have obtained the management’s representation deposits under the Act; of its own performance and of its Committees notice, due consent of the respective directors was on the compliance of laws, rules and regulations as well as performance of each individual taken for such circulation at shorter notice. The and happening of events, wherever required. (vii) The Company has not advanced any loan directors. The Chairman, the Executive Vice Company has a system in place where the directors 3.6 This report is neither an assurance as to the future and/or given any security or guarantee to any Chairperson and the Managing Directors and can seek further information and clarifications viability of the Company nor of the efficacy or Director of the Company or any other person CEO were also evaluated on certain additional on the agenda items before the meeting and for effectiveness with which the management has in whom the Director is interested; parameters. meaningful participation at the meeting conducted the affairs of the Company. (viii) The Company did not avail any secured loan (xiv) The Company did not have any pending 2.4 All the decisions at Board meetings and committee and accordingly was not required to create investors complaint and all requests from meetings were unanimous consent and that there 4. Compliance mechanism any charge on the assets of the Company; investors including the request for share was no instance of dissent in any of the business 4.1 We further report that the systems and processes in transfer, transmissions, transposition, issue of matters at the Board or Board committee meetings. (ix) Pursuant to shareholders approval at the the Company are adequate and commensurate with Annual General Meeting dated 16 August, duplicate shares, payment of unpaid dividend the size and operations of the Company to monitor etc. were processed within the permissible 3. Management responsibility 2019, the Company is authorised to issue equity and ensure compliance with applicable laws, rules, shares / other securities convertible into equity timelines; regulations and guidelines. 3.1 Maintenance of secretarial records is the shares up to an amount of Rs. 3000 crore. (xv) The Company has transferred all unpaid/ responsibility of the management of the Company. 4.2 We further report that, during the audit period: However, the Company did not issue any unclaimed dividend for the financial year Our responsibility is to express an opinion on these share/ other convertible security under the ended 31st March, 2012 which remained secretarial records based on our audit. (i) All the business activities undertaken by the said authorisation; unclaimed/unpaid for 7 years, to the Investors Company were authorised under Clause III Education and Protection fund (IEPF), in 3.2 We have followed the audit practices and the (i.e. Objects Clause) of the Memorandum of (x) All the investments made within or outside compliance with the provisions of Section 125 processes as were appropriate to obtain reasonable Association of the Company; India were in compliance with the Act, the assurance about the correctness of the contents Listing Regulation and the Foreign Exchange of the Act; of the secretarial records. The verification was (ii) The Company has filed all applicable forms, Management Act, 1999 and the rules and (xvi) During the year the Company had granted done on test basis to ensure that correct facts are returns, disclosures etc. pursuant to the regulations made thereunder; 4,89,195 options and allotted 5,34,063 equity reflected in the secretarial records and compliance provision of the applicable laws; (xi) The Company did not enter into any material shares to its employees under The Employee procedures. We have carried out audit by way of (iii) The Company has maintained all registers and transaction with any related party that required Stock Options Scheme 2013- A (ESOP Scheme). physical inspection as well as relying on documents records as are required to maintained under approval of the shareholders under the All the grants, vestings and exercies of stock shared electronically, where physical access was not the applicable laws; provisions of the Act or the Listing Regulation. options as well as the disclosures with respect possible on account of lockdown due to COVID-19. All transactions with related parties were to the stock options in the Board Report were We believe that the processes and practices we (iv) All meetings of shareholder, board and approved/ reported to the Audit Committee in compliance of the applicable provisions followed provide a reasonable basis for our opinion. committees of the Company were duly and and were compliant of the provisions of the of the The Securities and Exchange Board validly conducted, and the minutes and 3.3 While forming an opinion on compliance and issuing Act and the Listing Regulation; of India (Share Based Employee Benefits) necessary records were properly maintained; this report, we have also considered compliance Regulations, 2014. All the shares allotted (xii) The Company has spent 2% of its average net pursuant to the ESOP Scheme were duly related action taken by the Company after (v) The remuneration paid to the managerial st profits for the last three financial years on listed on the BSE Limited and the National 31 March, 2020 but before the issue of this report. personnel of the Company were within the the Corporate Social Responsibility initiatives Stock Exchange of India Limited, where the 172 Caring For Life since 1935 Board’s Report 173 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 securities of the Company are listed within the 4.3 We further report that during the audit period no prescribed timeline. The ESOP Scheme of the specific event occurred which could have any major Business Responsibility Report Company was compliant of the provisions of bearing on the Company’s affairs. the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, At Cipla, we recognize our position of responsibility as based on the National Voluntary Guidelines (NVG). 2014. part of a global community and commit ourselves to This includes our initiatives towards Employee Well- (xvii) In compliance with the provisions of the operating our business in a sustainable manner. In line being, Environmental Responsibility and Community Securities and Exchange Board of India For BNP & Associates with our philosophy of ‘Caring for Life’, we ensure that Wellness. The Business Responsibility Report (BRR) is (Prohibition of Insider Trading) Regulations, Company Secretaries prime focus is given to enhance sustainable business aligned with National Voluntary Guidelines (NVGs) on 2015, the Code on Prevention of Insider [Firm Regn. No. P2014MH037400] operations. In our response to building a robust business Social, Environmental and Economic Responsibilities of Trading was duly implemented. The Company model, we ensure the inclusion of a multi-stakeholder Business, issued by Ministry of Corporate Affairs, and has adequate internal controls to ensure approach towards capitalizing future opportunities and is in accordance with clause (f) of sub regulation (2) compliance with the provisions of the Securities addressing the triple bottom line. Our practice towards of regulation 34 of Securities and Exchange Board of and Exchange Board of India (Prohibition of social responsibility and environmental stewardship India (Listing Obligations and Disclosure Requirements) Insider Trading) Regulations, 2015 and the Avinash Bagul is also showcased through an interconnected model Regulations, 2015. Code on Prevention of Insider Trading; Partner FCS : 5578 / CP No.19862 (xviii) We have not found any fraud to be reported Date: 15th May, 2020 UDIN:F005578B000242496 under the provisions of Act or applicable laws. Place: Mumbai PR No. 637/2019 Our business performance and impacts are disclosed based on the 9 Principles as mentioned in the NVGs. PRINCIPLE 1 PRINCIPLE 2 PRINCIPLE 3 Ethics Transparency & Product Life Cycle Sustainability Employee Well-Being Accountability PRINCIPLE 4 PRINCIPLE 5 PRINCIPLE 6 Stakeholder Engagement Human Rights Environment PRINCIPLE 7 PRINCIPLE 8 PRINCIPLE 9 Policy Advocacy Inclusive Growth and Equitable Customer Value Creation Development 174 Caring For Life since 1935 Business Responsibility Report 175 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Section A: General Information about the Company Section C: Other Details 1. Does the Company have any Subsidiary 3. Do any other entity/entities (e.g. suppliers, 1. Corporate Identity Number (CIN) of the L24239MH1935PLC002380 Company/ Companies? distributors etc.) that the Company does Company business with, participate in the BR initiatives st 2. Name of the Company Cipla Limited As on 31 March, 2020, the Company has 51 of the Company? If yes, then indicate the 3. Registered address Cipla House, Peninsula Business subsidiaries and 4 associates. percentage of such entity/entities? [Less than Park, Ganpatrao Kadam Marg, Lower Parel, 30%, 30-60%, more than 60%] Mumbai - 400013 2. Do the Subsidiary Company/Companies 4. Website www.cipla.com participate in the BR Initiatives of the parent The Company encourages its other stakeholders 5. E-mail ID [email protected] company? If yes, then indicate the number of i.e. suppliers, distributors and other stakeholders 6. Financial Year reported 1st April, 2019 to 31st March, 2020 such subsidiary company(s) in the value chain to participate in its BR initiatives, however it does not track the actual participation 7. Sector(s) that the Company is engaged in The Company is engaged in business of pharmaceuticals Almost all the subsidiaries & associates of Cipla are and therefore for reporting purposes the percentage (industrial activity code-wise) under Group 210 and Class 2100 as per the National aligned with the Company’s BR Initiatives. Industrial Classification 2008 (NIC) by the Central of such entities who participate in BR initiatives is Statistical Organisation, Ministry of Statistics and less than 30%. Programme Implementation. 8. List three key products/services that the Seroflo, Synchrobreathe, Budesonide, Decitabine Section D: BR Information Company manufactures/provides (as in Balance Sheet)1 1. Details of Director/ Directors responsible for BR 9. Total number of locations where business Cipla has presence in over 80 countries, globally. activity is undertaken by the Company2 a) Details of the Director/ Directors responsible for implementation of the BR policy/ policies Number of international locations: South Africa, USA, Uganda, Middle East, Europe, Sri Lanka and Australia. DIN Number: 02296740 Number of national locations: Cipla has over 40 state-of- Name: Mr Umang Vohra the-art manufacturing facilities for API and formulations, Designation: Managing Director and Global Chief Executive Officer across the states of Maharashtra, Goa, Madhya Pradesh, b) Details of the BR Head Karnataka, Himachal Pradesh and Sikkim. Sr. Particulars Details 10. Markets served by the Company The major markets that Cipla serves are India, South No. Africa, USA, Uganda, Middle East, Europe, Sri Lanka and Australia. 1. DIN Number (if applicable) Not applicable 2. Name Mr Rajendra Chopra 3. Designation Company Secretary 4. Telephone Number +022 2482 6000 Section B: Financial Details of the Company 5. E-mail ID [email protected] Sr. Particulars Details as on 31st March 2020 (H in Crore) No. 2. Principle-wise (as per NVGs) BR Policy/ policies (Reply in Y/N) 1. Paid up capital (H) 161.25 2. Total Turnover (H) 12,659.15 No. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 3. Total profit after taxes (H) 2,318.17 1. Do you have policy/policies for…. Yes 4. Total Spending on Corporate Social Responsibility (CSR) as 36.31 (2% of PAT) percentage of Profit after taxes (%) 2. Has the policy been formulated in consultation Yes 5. List of activities in which expenditure in 4 above has been incurred Health, Education, Skilling & Disaster Response with relevant stakeholders? 3. Does the policy conform to any national / Yes international standards? If yes, specify. Cipla’s Corporate Responsibility Policy is based on the National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business as issued by Ministry of Corporate Affairs, Government of India, in July 2011. Cipla’s Environment Policy is as per the requirements of ISO 14001, Environment Management System. 4. Has the policy been approved by the Board? If 1 GRI 102-2 yes, has it been signed by the MD /owner/CEO/ Yes 2 GRI 102-4 appropriate Board Director? 176 Caring For Life since 1935 Business Responsibility Report 177 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 No. Questions P1 P2 P3 P4 P5 P6 P7 P8 P9 ii. Reduction during usage by consumers (energy, 4. Please indicate the number of permanent water) has been achieved since the previous employees with disability. 5. Does the Company have a specified committee The implementation of these policies is discussed segment year? of the Board/ Director/Official to oversee the Human Capital (Reference Pg. 075) wise by different committees at regular intervals. Cipla has a multi-product, multi-facility implementation of the policy? 5. Do you have an employee association that is production system and hence, it is not possible to 6. Indicate the link to view the policy online? https://www.cipla.com/investors/corporate-governance recognised by management? determine product-wise resource consumption. 7. Has the policy been formally communicated to all Yes Variations in resource consumption patterns Human Capital (Reference Pg. 083) relevant internal and external stakeholders? have been observed in manufacturing units The policy has been communicated to employees through based on product mix, batch size and time 6. What percentage of your permanent the Intranet and external stakeholders through the cycle, among others. Further, as consumption of employees are a member of this recognised Company’s website (www.cipla.com) resource per unit depends on the product mix, it employee association? 8. Does the Company have in-house structure to Yes is difficult to set specific standards to ascertain Human Capital (Reference Pg. 083) implement its policy/policies? reduction achieved at product level. 9. Does the Company have a grievance redressal 7. Please indicate the Number of complaints 3. Does the Company have procedures in place for mechanism related to the policy / policies to relating to child labour, forced labour, Yes sustainable sourcing (including transportation)? address stakeholders’ grievances related to involuntary labour, sexual harassment in the last financial year and pending, as on the end policy/policies? Relationship Capital (Reference Pg. 095) of the financial year. 10. Has the Company carried out independent audit/ Yes 4. Has the Company taken any steps to procure Human Capital (Reference Pg. 082) evaluation of the working of this policy by an goods and services from local & small producers, The policies are evaluated internally internal or external agency? including communities surrounding their place 8. What percentage of you under mentioned of work? If yes, what steps have been taken to employees were given safety & skill up- 3. Governance related to BR improve their capacity and capability of local and gradation training in the last year? small vendors? a. Indicate the frequency with which the Board b. Does the Company publish a BR or a Sustainability Human Capital (Reference Pg. 079) of Directors, Committee of the Board or CEO to Report? What is the hyperlink for viewing this Relationship Capital (Reference Pg. 098) assess the BR performance of the Company. Within report? How frequently it is published? 3 months, 3-6 months, Annually, More than 1 year. 5. Does the Company have mechanism to recycle Yes, the Company publishes BR which covers the 9 products and waste? If yes, what is the percentage PRINCIPLE 4 The BR performance is evaluated annually. NVGs Principles. Our 2019-20 Annual Report is in line of recycling waste and products? Businesses should respect the interests of, and be with the 178 Caring For Life since 1935 Business Responsibility Report 179 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 5. Has the Company undertaken any other PRINCIPLE PRINCIPLE PRINCIPLE 5 initiatives on – clean technology, energy 8 9 Businesses should respect and promote human rights. efficiency, renewable energy, etc.? Y/N. Businesses should support inclusive growth and Businesses should engage with and provide value equitable development to their customers and consumers in a responsible 1. Does the policy of the Company on human Natural Capital (Reference Pg. 114) manner rights cover only the Company or extend to the Conservation of Energy, Technology Absorption 1. Does the Company have specified Group/Joint Ventures/Suppliers/Contractors/ and Foreign Exchange Earnings and Outgo programmes/initiatives/projects in pursuit of 1. What percentage of customer complaints/ NGOs/Others? (Reference Pg 153) the policy related to Principle 8? If yes details consumer cases are pending as on the end of thereof. financial year? Human Capital (Reference Pg. 082) 6. Are the Emissions/Waste generated by the Corporate Governance Report (Reference Pg. 207) Company within the permissible limits given Social Capital (Reference Pg. 101) Relationship Capital (Reference Pg. 095) by CPCB/SPCB for the financial year being 2. How many stakeholder complaints have been 2. Does the Company display product reported? 2. Are the programmes/projects undertaken received in the past financial year and what through in-house team/own foundation/ information on the product label, over and above what is mandated as per local laws? percent was satisfactorily resolved by the Natural Capital (Reference Pg. 113) external NGO/Government structures/any management? other organisation? Relationship Capital (Reference Pg. 095) 7. Number of show cause/ legal notices received Human Capital (Reference Pg. 082) from CPCB/SPCB which are pending (i.e. not Social Capital (Reference Pg. 101) 3. Is there any case filed by any stakeholder resolved to satisfaction) as on end of Financial 3. Have you done any impact assessment of against the Company regarding unfair trade Year. PRINCIPLE your initiative? practices, irresponsible advertising and/ 6 or anti-competitive behavior during the last Business should respect, protect, and make efforts Natural Capital (Reference Pg. 113) Social Capital (Reference Pg. 101) five years and pending as on end of financial to restore the environment year? 4. What is your Company’s direct contribution to PRINCIPLE 1. Does the policy related to Principle 6 cover 7 community development projects-Amount in Relationship Capital (Reference Pg. 094-095) only the Company or extends to the Group/ Businesses, when engaged in influencing public and INR and the details of the projects undertaken? Joint Ventures/Suppliers/Contractors/NGOs/ regulatory policy, should do so in a responsible 4. Did your company carry out any consumer others. manner Social Capital (Reference Pg. 101) survey/ consumer satisfaction trends? Annexure 1 - CSR activities (Reference Pg. 150) Natural Capital (Reference Pg. 113) Relationship Capital (Reference Pg. 092) 1. Is your Company a member of any trade and 2. Does the Company have strategies/ initiatives chamber or association? If Yes, Name only 5. Have you taken steps to ensure that to address global environmental issues such those major ones that your business deals this community development initiative is as climate change, global warming, etc.? with: successfully adopted by the community? Natural Capital (Reference Pg. 113) Relationship Capital (Reference Pg. 090) Social Capital (Reference Pg. 102) 3. Does the Company identify and assess potential environmental risks? 2. Have you advocated/lobbied through above associations for the advancement Natural Capital (Reference Pg. 113) or improvement of public good? Yes/No; 4. Does the Company have any project related if yes specify the broad areas (drop box: to Clean Development Mechanism? If so, Governance and Administration, Economic provide details thereof, in about 50 words or Reforms, Inclusive Development Policies, so. Also, if Yes, whether any environmental Energy security, Water, Food Security, compliance report is filed? Sustainable Business Principles, Others) Cipla currently does not undertake any project in Relationship Capital (Reference Pg. 090) line with the Clean Development Mechanism. 180 Caring For Life since 1935 Business Responsibility Report 181 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 performance and governance of the Company on behalf maintain momentum across the global markets in which it Report on Corporate Governance of the shareholders and other stakeholders. The Board operates, augmenting the capabilities in operations and exercises independent judgement and plays a vital role support functions, and building a strong talent-focused in the oversight of the Company’s affairs. The Board organisation that is ready to take on the challenges. also ensures adherence to the standards of Corporate Cipla’s Philosophy on Corporate Governance Competent leadership and management Governance and transparency in the Company’s Management Council: The Management Council serves as functioning. the apex leadership team to set and deliver the strategic The corporate governance philosophy at Cipla stems We believe that a dynamic, diverse and experienced long- term growth agenda for Cipla, build and sustain from the set of principles and framework embedded in its Board with a focus on excellence plays a pivotal role in Board committees: To effectively discharge its obligations OneCipla as our way of life. The Management Council values. Cipla’s corporate governance aspirations. In view of this, and to comply with the statutory requirements, the Board continues to include the following members: MD & GCEO we endeavour to maintain a Board composition that has constituted six Board committees. The committees deal (Chair), Global Chief Financial Officer, Global Chief People Our legacy of deep commitment to compassion and brings healthy balance of skills, experience, independence, with specific areas that are assigned to them for either Officer, Global Chief Technology Officer, Global Head care for patients resonates throughout the organisation. assurance, growth mind-set and deep knowledge of the final decision-making or appropriate recommendations of Quality, Medical Affairs and Pharmacovigilance. For Our vision of providing high quality life-saving drugs at sector. to the Board. All the committees have a clearly laid down further strong delivery of our organisational and business affordable prices since our inception, has evolved into charter and are responsible for discharging their roles and objectives, Management Council was expanded to include our endearing purpose, ‘Caring for Life’. This purpose Empowerment responsibilities as per their charter. The details about these the CEO India Business, CEO Cipla South Africa & Regional ultimately guides our organisational decisions and committees have been discussed in detail in subsequent Head Africa and Access, Global Chief Scientific Officer The empowerment of leaders and employees is an anchors our every action. sections in this report. and Global Head Supply Chain. important step in enabling high performance and Creating Value developing leadership capabilities within the Company. Chairman: The Chairman acts as the leader of the Board Business Council: A Business Council comprising select Our leadership essentials focused on people, performance and presides over the meetings of the Board and the business and functional heads was formed. The Head of At Cipla, we aim to abide by the highest standards of good and health are strongly embedded in our First Principles. shareholders. He ensures that Company strategies are Global Strategy is the convener of the quarterly Business governance and ethical behaviour across all levels within They define a common vocabulary and approach for based on our underlying principle, Caring for Life, and Council meetings. the organisation with a zero-tolerance policy towards any building leadership within the Company. reflect our core values. The Chairman is supported by Operating committees: The Company has various deviation from these standards. Our ethical framework the Executive Vice-Chairperson, who takes a lead role in Sustainability cross-functional committees that ensure robust delivery focuses on long-term shareholder value creation managing Board meetings and interactions, determining the Board’s composition and facilitating effective of business objectives and operationalisation of strategic through responsible decision making. Cipla’s corporate At Cipla, sustainability is about effectively managing the communication among the directors. plans. They also ensure that the Company maintains its governance framework is founded on the following pillars: triple bottom line i.e. the financial, social and environmental growth momentum within the defined risk management aspects, whilst focusing on business continuity. We are Transparency Executive Vice-Chairperson: The Executive framework and governance principles. These committees committed to pursuing our economic growth while Vice-Chairperson engages with the management to drive include the Compliance Committee, Eagle 3.0 – Business For us, transparency is key to healthy self-sustaining concurrently watching our ecological footprint and and monitor key initiatives in line with Cipla’s approved reimagination Committee, Finance Leadership team, growth and promotes self-enforcing checks and balances. increasing our positive social impact. corporate strategy and business objectives to ensure Disclosure Committee, Portfolio Selection Committee, It also fosters deep and long-standing trust among our long term value creation. She drives Board engagement Capex Committee, Ethics Committee, Global Finance Compliance and risk management stakeholders. We strive to demonstrate the highest levels by setting the agenda, facilitating critical discussions and Committee, Operations Committee, etc. They are headed by relevant Management Council members to achieve of transparency, over and above statutory requirements, Full adherence to all regulatory and statutory requirements the cadence for Board meetings. She is also responsible for promoting the depth of Board conversations while their desired objectives. through accurate and prompt disclosures. in letter and spirit is a key guiding principle at Cipla. nurturing a culture where the Board works harmoniously Our global footprint and the associated operating for the long-term benefit of the Company and all its Shared Goal Process: Shared goals at Cipla essentially Fairness environment is characterised by several risks, which can stakeholders. She supports the Chairman on matters amplify the interdependence between and across the potentially impact our current and future earnings. The risk We practice fair play and integrity in our transactions with pertaining to governance, including the Board’s Company to deliver the business outcomes. Goals are management function targets to maintain a live register of all stakeholders, both within and outside the organisation. composition, Board meetings and Board effectiveness. “shared” when two or more functional/business leaders important risks along with implementing a plan to monitor We conduct ourselves in the most equitable manner. She continues to be the bridge between the management, have a significant impact on the delivery of the goal. Shared and mitigate them. We believe that effective compliance the promoters and the Board. goals foster collaboration, accountability and ownership Accountability and risk management activities will drive the sustainability of the goals by securing the alignment to the goals and of corporate performance. Managing Director and Global Chief Executive Officer eliminating siloes and building better appreciation of other For us, accountability is about holding ourselves firmly (MD & GCEO): The MD & GCEO works under the supervision priorities. These shared goals focus on both performance responsible for what we believe in and for delivering Governance Structure of the Board and is responsible for managing the affairs and long-term health outcomes for the organisation. The what we have promised. We ensure this by promoting of the Company. He is responsible for the business shared goals are defined on the basis of Cipla’s FY 2021- a mind-set of end-to-end ownership throughout the With a strong governance philosophy, we have a performance, driving growth, and implementation of the 22 winning aspiration and the MD & GCEO’s long-term and organisation. By means of openness and transparency, multi-tiered governance structure with defined roles and strategic decisions taken at the Board level. As the MD & short-term objectives for the year. For each of the shared we consider ourselves accountable to the entire universe responsibilities of every constituent of the governance GCEO of the Company, his priorities include articulating goals, we have set out key performance indicators (KPI) and of stakeholders including our patients, employees, system. Cipla’s long term strategy based on organic and inorganic related targets that we aim to meet. The KPIs and targets shareholders, vendors, government agencies, society, initiatives, defining the innovation agenda for the are embedded into the goal sheets of all the members of the medical community, customers and business partners, and Board of Directors: The Board of Directors is responsible Company, balancing growth imperatives with margin and Management Council and are also cascaded to all leaders supply chain participants. for the strategic supervision, overseeing the management return on capital thresholds, executing Cipla’s roadmap to and their respective teams who have significant amount of 182 Creating Hope Since 85 Years Report on Corporate Governance 183 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 cross-functional overlap, to ensure that everyone is moving Ms Samina Hamied, Executive Vice-Chairperson its core focus areas, augmenting capability, and building Kampala – a centre of excellence in medical research, together in the same direction. the right organisation. Recognised as an action-oriented training and healthcare. He was among the pioneers Representing the third generation of Cipla’s industry leader, Mr Vohra is a firm believer in the power who introduced the use of ARV in Africa, as well as the founding family, Ms Samina Hamied is the Executive of agile business models, disruptive technologies, development of an effective model for scaling up ARVs in Board of Directors Vice-Chairperson of the Company. Ms Hamied is a MSc data-driven analytics and a future-ready workforce with a resource limited countries. in International Accounting and Finance from the London 1 view to making a difference to the lives of patients. Profile of Directors School of Economics and Political Science. She worked Dr Mugyenyi has been a Principal Investigator on dozens in the UK and the US with leading global firm Goldman Mr S Radhakrishnan, Non-Executive Director Dr Y K Hamied, Non-Executive Chairman of landmark research projects, some of which were funded Sachs before joining the Cipla leadership team in 2011 as a by the National Institutes of Health (NIH), European A qualified chartered accountant, Mr S Radhakrishnan is Dr Y K Hamied is the Non-Executive Chairman of the member of the management team. Union, WHO and the Medical Research Council (MRC). a Non-Executive Director of the Company. He possesses Company. He represents the second generation of His research and publications cover a wide spectrum of In 2013, she was designated as “Head Strategic Projects rich experience in financial, commercial, legal and allied Cipla’s founding family. A world-renowned scientist, HIV/AIDS, related diseases and other medical conditions. – Cipla New Ventures”. She was appointed as an areas. He has been with Cipla for over 36 years and has Dr Hamied obtained his PhD in Organic Chemistry in 1960 Specific areas of his research include paediatric and adult Executive Director of the Company w.e.f. 10th July, 2015 played a pivotal role in the overall journey and growth of from the University of Cambridge under the tutelage of HIV treatment, drug trials, HIV resistance, HIV prevention, and subsequently she was elevated as the Executive the organisation. Nobel Laureate Lord Alexander Todd. immunological studies including HIV vaccine trials, Vice-Chairperson of the Company, w.e.f. 1st September, Mr S Radhakrishnan retired from his position of pharmacokinetic, molecular and epidemiological studies, 2016. She has been instrumental in driving the Company’s Dr Hamied has been an insightful R&D leader, a courageous Whole-Time Director in November 2017 and thereafter as well as the social and economic impact of HIV. industry captain, and an outspoken statesman of global current transformation agenda. Ms Hamied has played continues as a Non-Executive Director of the Company. a key role in successfully incubating and shaping Cipla pharma. From affordable drugs in HIV to enabling one of the Internationally, he has served as a board member on Health Limited, and spearheading Cipla’s ambitious foray many institutions and organisations in Africa, UK, India world’s largest portfolio of drugs and devices in inhalation Mr Ashok Sinha, Independent Director into the US market with strategic acquisitions. and the USA. Other roles include membership of various therapy, his pioneering work and immense contribution to Mr Ashok Sinha is an Independent Non-Executive Director advisory boards including HIV Vaccine Trials Network, healthcare have been celebrated around the world. Ms Hamied has built a top-class leadership pipeline for of the Company. He has a BTech in Electrical Engineering USA, Massachusetts General Hospital and Institute of the Company as it continues to spread its wings globally. from the Indian Institute of Technology (IIT), Kanpur, In 2005, Dr Hamied was conferred the Padma Bhushan Medicine of the National Academies, USA, and the As Executive Vice-Chairperson, she focuses on Board and a Post Graduate Diploma in Management from the by the Government of India for his distinguished service Joint United Nations Programme on HIV/AIDS (UNAIDS) and governance issues, in addition to furthering Cipla’s Indian Institute of Management (IIM), Bangalore, with to the pharmaceutical industry. In 2013, he was named 90-90-90 initiative to end the HIV epidemic, among others. strategic priorities through key global partnerships, specialisation in Finance. as one of India’s 25 Greatest Global Living Legends by He is also on the board of our Ugandan subsidiary i.e. Cipla corporate culture, hiring right talent, and public advocacy. NDTV, and in 2014, the University of Cambridge honoured He has been conferred with the distinguished alumnus Quality Chemical Industries Limited as an Independent Non–Executive Director. him with a DSc the highest honour that the University can Recognised as the promoter face of Cipla, she has been award from both IIT Kanpur and IIM Bangalore. He has also been conferred with the India Chief Financial Officer bestow. In 2017, Columbia University’s Mailman School of feted for her diverse work experience and business Mr Adil Zainulbhai, Independent Director Public Health conferred the ‘Public Health Hero Award’ on knowledge. In 2017, she received the ‘Most Powerful Award 2001 for Information and Knowledge Management Dr Hamied, and in 2018 India Today named him one of Women in Business’ award from Business Today. In 2018, by the Economic Intelligence Unit (EIU) India and American Mr Adil Zainulbhai is an Independent Non-Executive ‘20 Global Indians’ who have challenged convention and Forbes named Ms Hamied in their list of top 25 emergent Express. He is also a recipient of award from TMG Director and the Lead Independent Director of the created history. women business leaders in Asia. For 2 consecutive years - (Technology Media Group) for Customer Management. Company. He is the Chairman of the Quality Council of 2018 and 2019 – Fortune India named her among the most India (QCI) and Board Advisor to the US India strategic Mr Sinha has a wealth of experience, competencies and Dr Hamied has also been the recipient of several lifetime powerful women in business. partnership forum. He is also on the Board of Reliance expertise from his leadership journey as the Chairman achievement awards. An Honorary Fellow of the Royal Industries, Larsen & Toubro as well as the Chairman and Managing Director of Bharat Petroleum Corporation Society of Chemistry, Dr Hamied has frequent presence Mr Umang Vohra, MD & GCEO of Network18 Media and Investment Limited and TV18 Ltd. (BPCL). He spent 33 years in BPCL and served on the on high-level international panels on healthcare. Broadcast Limited. He is involved in many philanthropic Mr Umang Vohra joined Cipla Limited in 2015 and has Board of BPCL for 15 years – first as Director (Finance) for causes and is also on the Board of Piramal Foundation. Mr M K Hamied, Non-Executive Vice-Chairman been the MD & GCEO of the Company since September 10 years from 1996 and then as its Chairman and Managing 2016. After gaining degrees in engineering, marketing and Director for 5 years from August 2005. Mr Zainulbhai graduated in Mechanical Engineering from Mr M K Hamied is the Non-Executive Vice-Chairman of finance, Mr Vohra worked with Eicher Motors, PepsiCo and Dr Peter Mugyenyi, Independent Director the Indian Institute of Technology. He also has an MBA the Company and represents the second generation Dr Reddy’s Laboratories. Through his previous roles in from Harvard Business School. He retired as Chairman of India and the US, he has built a distinguished career of Cipla’s founding family. A science graduate from Dr Peter Mugyenyi is an Independent Non-Executive McKinsey, India after 34 years at McKinsey, the last ten were spanning almost two decades with deep understanding Bombay University, Mr Hamied has vast and varied Director of the Company. A Bachelor of Medicine and in India. Prior to returning to India, he led the Washington and experience of various aspects of the global experience in all functions of the Company including Surgery (MB ChB), Fellow of the Royal College of Physicians office of McKinsey and founded its Minneapolis office. pharmaceutical business. production, technical areas, quality management of Ireland (FRCPI); Fellow of the Royal College of Physicians and general administration. He retired as Executive As Cipla’s MD & GCEO, Mr Vohra’s priorities have been (Edinburgh) (FRCP Edin) and Doctor of Science [ScD(h)]. Mr Zainulbhai co-edited the book, ‘Reimagining st Vice-Chairman of the Company on 31 March, 2014; from Cipla’s strategic growth, defining and executing Cipla’s Dr Mugyenyi is an Ugandan paediatrician, researcher India’ which featured 60 authors including prominent st 1 April, 2014, he has continued as the Non-Executive roadmap to maintain momentum in home markets whilst and specialist on HIV/AIDS and related conditions. He is businessmen, academics, economists, authors and Vice-Chairman. strengthening its presence in other regions, consolidating the Executive Director of Joint Clinical Research Centre, journalists. 1GRI 405-1 184 Creating Hope Since 85 Years Report on Corporate Governance 185 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Ms Punita Lal, Independent Director Government of India for her contribution to trade and Board Skills/ Expertise/ Competencies industry. Ms Punita Lal is an Independent Non-Executive Director Area Particulars Ms Kidwai has authored three books; “Survive or of the Company. She has 30 years of experience in Understanding of diverse business environments, regulatory framework, Sink - An Action Agenda for Sanitation, Water, Pollution Global Economics strategy, marketing and leadership in the corporate world economic & political conditions and cultures globally and Green Finance”, “Contemporary Banking in India” across Asia, spanning multiple disciplines, geographies Protection of stakeholders’ interest, observing best governance practices, and “30 Women in Power: Their Voices, Their Stories.” Corporate Governance and cultures. Ms Lal has a BA(Hons) in Economics from identifying key governance risks St Stephen’s College, Delhi and an MBA from the Indian Ms Kidwai possesses rich experience in the areas of General Management, Human General know-how of business management, talent management and Institute of Management, Kolkata. banking and finance. She has been a past president of Resource and Leadership development, workplace health & safety FICCI; is one of the Government of India’s representatives Pharmaceuticals, Science and Significant background and experience in pharmaceuticals sector, science As a senior business leader, she has many accolades to on the BRICs Business Council and the INDO-ASEAN Technology and technology domain her credit, including being chosen as one of India’s top Business Council, the Rajasthan Chief Minister’s Economic Proficiency in financial management, financial reporting process, budgeting, Finance & Accounts 20 Businesswomen by Business Today in 2006, and being transformation Advisory Council, the Investment Advisory treasury operations, audit, capital allocation awarded Corporate Woman of the Year in 2009 by the Committee of the Army Group Insurance Fund; on the Manufacturing, Quality and Supply Operational expertise and technical know-how in the area of manufacturing, FICCI Women’s Organisation. She is currently practising as Governing Board of Lady Shriram College as well as on Chain quality and supply chain an Independent Strategy and Marketing Consultant. the Harvard Business School South Asia Advisory Board. Experience in strategizing market share growth, building brand awareness, Sales, Marketing, Commercial Composition of the Board enhancing enterprise reputation Ms Naina Lal Kidwai, Independent Director Examining M&A deals for inorganic growth in line with the Company’s growth Cipla’s Board represents an appropriate mix of executive, M&A and Business Development Ms Naina Lal Kidwai is an Independent Non-Executive strategy non-executive and independent directors, which is Director of the Company. An MBA from Harvard Business compliant with the Companies Act, 2013 and the Securities The skills / expertise / competencies mentioned above were re-affirmed by the Board of Directors in its meeting School, she makes regular appearances in listings of and Exchange Board of India (Listing Obligations and held on February 2020. The skills which are currently available with the Board members have been mapped below: international women in business by Fortune and other Disclosure Requirements) Regulations, 2015 (hereinafter publications. A recipient of many awards and honours Sales, referred as “Listing Regulations”) and is also in line with General in India, she was awarded the Padma Shri by the Marketing, Management Pharmaceuticals, Manufacturing the best practices of Corporate Governance. Global Corporate Finance & Commercial, Name Human Science & Quality & Economics Governance Accounts M&A and Resource and Technology Supply Chain Classification of the Board Business Leadership Development Number of Number of Total no. of % of Total no. of Dr Y K Hamied √ √ √ √ √ √ Category of Director Directors Directors Directors Directors Mr M K Hamied √ √ √ √ √ √ Ms Samina Hamied √ √ √ √ √ Executive Directors 1 1 2 20 Mr Umang Vohra √ √ √ √ √ √ √ Mr S Radhakrishnan √ √ √ √ √ Non-Executive Directors 3 0 3 30 Mr Ashok Sinha √ √ √ √ √ √ Independent Directors 3 2 5 50 Mr Peter Mugyenyi √ √ √ √ √ Total 10 100 Mr Adil Zainulbhai √ √ √ √ √ √ √ Ms Punita Lal √ √ √ √ √ The statutory details of the directors, including the directorships held by them in other listed companies and their Ms Naina Lal Kidwai √ √ √ √ √ committee memberships/chairpersonships in other public companies, are listed in Annexure A. Mr Peter Lankau, Independent Director resigned from the Board of the Company effective 1st July, 2019 due to Board Membership Criteria and Selection Process To ensure a transparent selection process, the his other professional engagements in the same industry in the USA resulting in conflict of interest. Mr Lankau guidance on eligibility criteria and attributes for an has confirmed that there were no other material reasons for his resignation other than the one stated above. The Nomination and Remuneration Committee individual’s appointment on the Board, including Consequently, he also ceased to be a member of the Investment and Risk Management Committee w.e.f. (hereinafter referred as ‘NRC’) is responsible for independent directors, has been defined in the 1st July, 2019. The Board placed on record its sincere appreciation for his contributions as a member on the Board. identifying and evaluating a suitable candidate for the Nomination, Remuneration and Board Diversity Policy Board. While selecting a candidate, the NRC reviews of the Company provided in Exhibit A to this report. The Board Skill Matrix and evaluates the Board’s composition and diversity candidate is, inter alia, screened based on background, knowledge, skills, abilities (including their ability to The Board of Directors of the Company comprises of qualified members who possess relevant skills, expertise and to ensure that the Board and its committees have an exercise sound judgement), professional experience and competence for the effective functioning of the Company. The Board of Directors in its meeting held in February appropriate mix of skills, experience, independence functional expertise, and educational and professional 2019 had identified the following skills / expertise / competencies fundamental for the effective functioning of the and knowledge for continued effectiveness. background. Company: We acknowledge the importance of diversity in the The NRC recommends the appointment of a candidate Boardroom as a driver of effectiveness. For the based on the defined criteria and attributes. The Board, Board, diversity encompasses plurality in perspective, on recommendation of the NRC and profile of the experience, education, background, ethnicity, candidate, recommends the appointment to the members nationality, age, gender and other personal attributes. of the Company, wherever applicable, for their approval. 186 Creating Hope Since 85 Years Report on Corporate Governance 187 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Role of the Board of Directors2 o Any issue which involves possible public or product 16(1)(b) of the Listing Regulations. The declaration of d. To preside over meetings of the Board liability claims of substantial nature, if any independence received from the Independent Directors and shareholders when the Chairman and The Board of Directors is the apex body constituted are noted and taken on record by the Board. Vice-Chairman are not present, or where they are by the shareholders and is vested with the powers of o Significant labour problem and their proposed an interested party. governance, giving strategic and operational direction solutions In the opinion of the Board of Directors, the Independent and to control the affairs of the Company. In order Directors fulfil the criteria of independence as stated o Minutes of meetings of the Board and its committees, e. To help the Board and the NRC in identifying suitable to make an informed decision, the Board of Directors under 149(6) as well as the rules made thereunder of the resolutions passed by circulation, and Board minutes candidate for the position of director and Board have access to all relevant information and are free to Companies Act 2013, regulation 16(1)(b) of the Listing of unlisted subsidiary companies succession planning. approach the employees of the Company as well as Regulations and are independent of the management. its subsidiaries. Driven by the principles of Corporate o The information on recruitment and remuneration In compliance with rule 6(1) of the Companies f. Advocacy with key external stakeholders. Governance Philosophy, the Board strives to work in of senior officers just below the level of Board of (Appointment and Qualification of Directors) Rules, 2014, best interest of the Company and its stakeholders. Directors, including appointment or removal of the Independent Directors have registered themselves g. To help the Company in further strengthening the Chief Financial Officer and the Company Secretary The matters required to be placed before the Board, on the data bank maintained by the Indian Institute of Board effectiveness and Governance practices, Corporate Affairs. including suggestions on agenda items for Board / inter-alia, include: o Transactions that involve substantial payment committee meetings on behalf of the independent towards goodwill, brand equity, or intellectual o Annual operating plans, capital budgets and None of the Independent Directors of the Company directors. property updates therein serve as an Independent Director in more than 7 listed companies or as a Whole-Time Director in any listed o Human resource updates and strategies h. To be a permanent invitee in all Board committee o Supervision of financial and tax management companies meetings. strategies o Quarterly compliance certificate which includes As a process at the time of appointment / non-compliance, if any, of regulatory, statutory o Reviewing and guiding the corporate strategy re-appointment, each Independent Director is issued i. To perform such other duties as may be delegated nature or listing requirements and shareholders a formal letter of appointment containing the terms of by the Board from time to time. o Proposals requiring strategic guidance and service appointment, roles and duties, the evaluation process, approval of the Board Meeting of Independent Directors o Appointment and remuneration of directors, key applicability of Code of Conduct of the Company and o Regular business / function updates managerial personnel and senior management; Code of Conduct on Prevention of Insider Trading etc. The draft letter of appointment is available Pursuant to Schedule IV of the Companies Act, 2013, the o Update on Corporate Social Responsibility (CSR) o Performance evaluation of the Board, its committees on the Company’s website, at https://www.cipla. Independent Directors meet without the presence of the activities and each director com/sites/default/files/2019-09/Draft%20Terms%20 management and non-executive directors. During the and%20Conditions%20of%20appointment%20of%20 year under review, the Independent Directors met four o Significant changes in accounting policies and o Formation/re-constitution of committees independent%20directors.pdf times i.e. on 21st May, 2019, 6th August, 2019, 5th November, internal controls 2019 and 4th February, 2020. The Independent Directors o Quarterly treasury operations Lead Independent Director inter alia discuss matters arising out of the agenda of the o Takeover of a company or acquisition of a controlling or substantial stake in another company o Significant transactions or arrangements by Mr Adil Zainulbhai was designated as the Lead Board and Board committees, Company’s performance, subsidiary companies Independent Director w.e.f. 11th August, 2017 for an identify areas where they need clarity or information o Details of joint venture or collaboration agreements initial term of two years with the authority to renew from management. o Statutory disclosures received from the directors the appointment for a further period of two years. o Sale of investment, subsidiaries, assets which are In its meeting held on 7th August, 2019, the Board had They review the performance of the Board as a whole material in nature and not in the normal course of o Related party transactions unanimously extended Mr Zainulbhai’s term for a as well as that of Non-Independent Directors and the business o Report on action taken on previous Board meeting further period of two years i.e. from 11th August, 2019 to Chairman by considering the views of Executive and o Quarterly and annual consolidated and standalone decisions 10th August, 2021. Non-Executive Directors. They also assess the quality, results & financial statements of the Company quantity, effectiveness and promptness of the flow of Independent Directors The roles and responsibilities of Lead Independent information between the Company’s management and Material important show cause, demand, Director includes the following: o The Nomination, Remuneration and Board Diversity the Board. They periodically met the Statutory Auditor prosecution notices and penalty notices, if any Policy sets out the criteria for appointment of a. To preside over all meetings of Independent and the Internal auditor without the presence of the o Fatal or serious accidents, dangerous occurrences, Independent Directors. Each Independent Director, Directors. management to understand the overall quality of audit, material effluent or pollution problems, if any at the time of appointment, and thereafter at the quality of financials, key financial matters and corrective beginning of each financial year submits a declaration b. To provide objective feedback of the Independent actions to be taken for strengthening the internal o Any material default in financial obligations to and confirming their independence as well as compliances Directors as a group to the Board on various controls of the Company and their general feedback. by the Company or substantial non-payment for under section 149(6) and the rules made thereunder, matters. The Lead Independent Director briefs the Board on the services provided by the Company Schedule IV of the Companies Act, 2013 and Regulation proceedings of the meeting and the matters requiring c. To liaise between the Promoters, Chairman / attention at the Board or management level. Vice-Chairman, CEO and Independent Directors on 2GRI 103-1, GRI 103-2, GRI 103-3. contentious matters for consensus building. 188 Creating Hope Since 85 Years Report on Corporate Governance 189 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 The attendance of the Independent Directors at the Directors are provided regular updates on the business o Executive Vice-Chairperson – Managing the succession planning in its quarterly meetings and meetings of the Independent Directors is provided units / subsidiary companies, business performance, shareholders, Board, management and employee expressed its satisfaction on the progress and the status. below: operations, finance and risk management framework relationships, leading the Board effectively in etc. The Statutory Auditors and the Internal auditor meet developing and delivering the Company's strategy Board Meetings & Procedure Number of meetings Sr. with the Independent Directors to discuss Company’s and business plans. Number of Directors attended (total held The Board and the Board committee meetings No affairs without the presence of management. during tenure) o MD & GCEO – He was additionally evaluated are pre-scheduled and an annual calendar of the meetings is circulated to the directors well in advance 1 Mr Adil Zainulbhai 4(4) During FY 2019-20, the Company comprehensively against the Key Performance Indicators (hereinafter to facilitate planning of their schedule and to ensure 2 Mr Ashok Sinha 4(4) updated the familiarisation programme to cover referred as ‘KPIs’) set at the beginning of the financial meaningful participation in the Board and committee its enhanced initiatives and inclusion of brief topics year, which, inter alia, included both long-term and 3 Mr Peter Mugyenyi 4(4) meetings. However, in case of urgent matters, the discussed during FY 2019-20. Details of the familiarisation short-term financial and non-financial performance 4 Ms Punita Lal 3(4) Board’s approval is taken by passing resolutions by programme for the Independent directors are put up parameters. The financial parameters included 5 Ms Naina Lal Kidwai 4(4) circulation. The Board, Audit Committee and the NRC (1) on the Company’s website https://www.cipla.com/sites/ targets on revenue, EBITDA, PAT etc. the 6 Mr Peter Lankau 0(1) are facilitated with the annual agenda plan in advance. default/files/2020-05/Familiriasation%20Programme%20 non-financial parameters covered areas such The annual agenda plan helps the Board and Board (1)Resigned from the position of Director w.e.f 1st July, 2019 2019-20%20updated.pdf as strategy and portfolio, talent and leadership committees to ensure that they are able to discharge management, succession planning, operations their role and responsibilities effectively and take up all The average attendance of the Independent Directors Board Evaluation and quality, etc. The Board and the NRC regularly important issues systematically over a period of time. at their meetings during FY 2019-20 was 90.47%. reviewed the progress on the KPIs. Pursuant to the provisions of Companies Act, 2013, The annual agenda plan is finalised with inputs from the Familiarisation Programme for Board Members Listing Regulations, the Board had carried out an annual In order to ensure confidentiality, the Board's evaluation management and is approved by the Board. evaluation of its own performance and of its committees Induction was undertaken by way of a questionnaire through an as well as the performance of each individual directors. online tool by an independent agency. All the directors The management team is invited to provide update on the Company's performance in key areas such as the Cipla has a robust induction process that enables participated in the evaluation process. The responses Board Evaluation Criteria major business segments, key functions and subsidiaries. newly appointed directors to familiarise themselves received from the Board members were compiled by an independent agency and a consolidated report The Global Chief Financial Officer is an invitee at all the with the Company, its management, its operations Feedback was sought based on the evaluation criteria was submitted by the agency to the Board through the Board meetings of the Company. and the industry in which the Company operates. approved by the NRC for evaluating the performance of Company Secretary. All the directors of the Company are made aware of the Board, its committees and individual directors. The The Company Secretary finalises the agenda for the their roles and duties at their time of appointment / Chairman, Executive Vice-Chairperson, MD & GCEO The evaluation report was also discussed at the meetings in consultation with the Chairman and the re-appointment through a formal letter of appointment, and the Independent Directors were evaluated on a meeting of the Board of Directors, committees and the Executive Vice-Chairperson, the Lead Independent which also stipulates other terms and conditions of their Independent Directors. The Board deliberated over the few additional parameters. The criteria for performance Director and the MD & GCEO and the same is circulated appointment. suggestions and inputs to augment its own effectiveness evaluation included the following: to the Board/committee members in advance. With and optimise the individual strengths of the directors. respect to the agenda for the committee meetings, the The Company has an orientation process which includes o The Board – Structure, composition of the Board, The directors were satisfied with the Company’s standard chairperson of the respective committee is consulted one-to-one interactive sessions with the Management Board meeting schedule, agenda and collaterals, of governance, its transparency, meeting practices while finalising the agenda. In special and exceptional Council members. The directors are apprised about Board meeting practices and overall effectiveness and overall Board effectiveness. In order to further circumstances, additional item(s) are taken up as the nature of industry, business model, existing group of the Board. strengthen the Board's effectiveness, the directors had structure, Cipla’s Code of Conduct, Cipla’s Insider ‘any other item’ with the permission of the respective inter alia, suggested to have interactive sessions with Trading Code, brief profile of other Board members, o Board committees – Composition, their role and chairpersons and consent of majority of the Board / external pharma analysts, visits to key markets, etc. The responsibilities, information flow and effectiveness respective committee members present at the meeting. Memorandum and Articles of Association, financial Board’s suggestions have been noted and taken up for results of past one year, committee charters, Whistle of the meetings, recommendations to the Board, implementation. The agenda of the Board and committee meetings is Blower policy, CSR policy, Policy on dealing with effectiveness of committee chairpersons etc. circulated electronically through a secured IT platform. related party transactions, etc. The Company also The suggestions from the previous Board evaluation, The online platform enables the Board members to arranges factory visits for the directors to gain a better o Individual Directors – Attendance at the meetings, which included further strengthening the Board's access the historical agendas, minutes, constitutional understanding of Cipla’s business. preparedness for discussion, quality of contribution, effectiveness included, inter alia, institutionalising the engagement with fellow Board members, key process for oversight of affairs of subsidiary companies documents, committee charters, dossiers, Cipla’s During the year under review, no new director was managerial personnel and senior management, etc. by the Board, increasing engagement with senior polices on corporate governance related matters and appointed on the Board and accordingly none of the management and discussions on specific businesses the annual reports etc. director undergone the Induction Programme. o The Chairman – Leadership of the Board, promoting and regions, etc., were implemented during the year. effective participation of all Board members in the Post-Meeting Follow-up System Regular familiarisation decision-making process etc. Succession Planning of the Board and Senior Management The Company has an effective post-meeting follow-up As part of their ongoing training, business / functional o Independent Directors – Independence from the system. The Company tracks important decisions taken heads make regular strategic presentations to the Board. Company, exercising independent judgement The NRC reviews and manages the succession planning and discussions held at the Board and Board committee Board members are regularly updated regarding key in decision-making, contributing strongly to the of top leadership positions in the Company. It defines meetings till their closure. After each Board and Board developments in the Company and on any important objectivity of the Board’s deliberations based on the leadership competencies and takes suitable steps committee meeting, action points arising out of it are regulatory amendments applicable to the Company. The their external expertise, etc. to build robust succession plans. The NRC reviewed immediately informed to the respective owners for 190 Creating Hope Since 85 Years Report on Corporate Governance 191 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 required action. An action taken report is placed before Minutes of the Board & Committee meetings Notes: o All the directors are entitled to reimbursement each Board and Board committee meetings. of reasonable expenses incurred during the The Company Secretary records the minutes of the o As per the Nomination Remuneration and Board performance of their duty as a director. Number of Board Meetings held proceedings of each Board and Board committee Diversity policy, the Non-Executive Directors / Independent Directors are entitled to such o As per the shareholders resolution dated nd meetings. Draft minutes are circulated to the Board The Board met six times during FY 19-20 i.e. on 22 May, commission as approved by the Board within the 28th September, 2016 and the employment agreement th th th and the respective committee members for their inputs 2019, 7 August, 2019, 6 November, 2019, 5 February, overall limits approved by the shareholders. In no dated 12th August, 2016, Mr Umang Vohra was th and comments. The finalised minutes are entered in 2020, 12 March, 2020. The Board also met for a strategy case, the commission shall exceed 1% of the profits appointed as MD & GCEO for a term of five years th th the respective minute’s books within 30 days from the meeting from 4 December, 2019 to 6 December, 2019. of the Company computed as per the applicable w.e.f. 1st September, 2016. The appointment can be conclusion of the meeting. A certified copy of the signed provisions of the Companies Act, 2013. terminated by either party by giving not less than six Board meeting on Strategy minutes are also circulated to the Board and respective months’ prior notice. The Company may relieve him o The Board of Directors in its meeting held on In the Annual Strategy Meeting the Board reviewed its committee members in compliance with the Secretarial by paying pro-rata of his fixed salary in lieu of the 22nd May, 2018 had approved the policy on payment business strategy and updated the same to address Standard - 1. notice. There is no separate provision for payment of commission to the Independent Directors of the the change in business dynamics and environment. of severance fees. Company which is: Besides Board members, the meeting was attended by Attendance of the Directors Subject to other terms of agreement entered the Management Council members and select senior Annual Fixed Commission of 30 lacs Information about the attendance of directors at the o H between him and the Company, Mr Umang Vohra management employees. An external expert was is also eligible for stock options administered in also invited to the strategy meeting to get an external Board meetings either in person or through video o Additional compensation of H10 lacs for foreign 5 grants over a period of 4 years, of such number perspective of e-commerce industry and its implication conference during FY 2019-20 and at the last Annual directors of shares having an annual earn-out of up to on the pharma industry. General Meeting (AGM) is stated in Annexure A. o Additional H10 lacs to the Chairman of the Audit H3,50,00,000 (Rupees Three Crores and Fifty Lacs) Committee* to be calculated on the basis of the market value Remuneration to Directors o Additional H5 lacs to the members of the Audit of the shares at close of business as of the date Committee preceding the date of grant, at face value of H2/- The details of remuneration to directors during FY 2019-20 are given below: under the Employee Stock Option Scheme 2013-A. In o Additional H5 lacs to the Chairman of NRC* H in Crore line with the above, Mr Umang Vohra, was granted 1,50,118 stock options on 5th November, 2019 at an Retiral o Additional H1 lacs to the members of NRC Sitting Variable exercise price of H2/- per option. 50% of the stock Directors Salary Commission Perquisites Allowances Benefits Total Fees(1) Bonus *Committee Chairman would not be entitled for additional options will vest after a period of one year i.e. on and others commission as member of such Committee and vice versa. 5th November, 2020 and the balance 50% i.e. 75,059 Dr Y K Hamied 0.03 - 2.00 - - - - 2.03 will vest in the second year from the date of grant Mr M K Hamied 0.08 - 2.00 - - - - 2.08 o During the year, Mr S Radhakrishnan, i.e. on 5th November, 2021. Ms Samina Hamied - 1.88 2.30 0.02 2.32 - 0.23(2) 6.74 Non-Executive Director of the Company, exercised o Ms Samina Hamied was appointed as Mr Umang Vohra - 1.95 - 2.60(3) 4.78 4.00 0.23(2) 13.57 his stock options which were granted to him in earlier Whole-Time Director of the Company for a term Mr S Radhakrishnan 0.10 - 2.00 4.63(4) - - - 6.73 years when he was a Whole–Time Director of the of 5 years w.e.f 10th July, 2015. As per the letter of Mr Ashok Sinha 0.08 - 0.40 - - - - 0.48 Company. With the exception of Mr S Radhakrishnan appointment issued to Ms Samina Hamied, the Dr Peter Mugyenyi (5) 0.05 - 0.41 - - - - 0.46 there were no other Non-Executive Directors having appointment can be terminated by either party Mr Adil Zainulbhai 0.11 - 0.36 - - - - 0.47 any pecuniary relationship or transactions with the by giving three months’ notice to the other party Ms Punita Lal 0.05 - 0.35 - - - - 0.40 Company during FY 2019-20, except their sitting fees or pro-rata fixed salary in lieu of notice. There is for attending the Board and committee meetings Ms Naina Lal Kidwai 0.10 - 0.35 - - - - 0.45 no separate provision for payment of severance (5)(6) and commission. Mr Peter Lankau - - 0.10 - - - - 0.10 fees. The term of Ms Samina Hamied as a (1) The amount is inclusive of the sitting fees paid for attendance at the committee meetings. o The non-executive directors are entitled to receive Whole-Time Director is getting completed on (2) Exclusive of provision for leave encashment and contribution to the approved Group Gratuity Fund which are determined on an overall basis. sitting fees of H50,000/- per meeting of the Board 9th July, 2020. The Board of Directors at its (3) Includes perquisite value of stock options exercised during the year. and committees, except the Operations and meeting held on 15th May, 2020 has approved her (4) Perquisite value of stock options granted in earlier years during his tenure as Whole Time Director but exercised in FY 2019-20. Administrative Committee. re-appointment for a further term of 5 years (5) USD equivalent to INR paid to the Directors. w.e.f. 10th July, 2020. The detailed proposal for her o The sitting fee is paid immediately after the (6) Mr Peter Lankau resigned from the position of Director w.e.f 1st July, 2019 appointment is provided in the Notice of the Annual respective Board and Board committee meeting General Meeting. to those directors who attend the meetings. The commission is payable at the end of the financial Disclosure of relationships between Directors year after the annual financial statements are inter-se approved by the Board. Except for Dr Y K Hamied and Mr M K Hamied, who are o Dr Y K Hamied, Mr M K Hamied, Ms Samina Hamied brothers and Ms Samina Hamied, who is daughter of and the Independent Directors are not entitled to Mr M K Hamied and niece of Dr Y K Hamied, none of the stock options. directors are relatives of any other director. 192 Creating Hope Since 85 Years Report on Corporate Governance 193 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Number of shares and convertible instruments thereon before submission to the Board for (2) Reviewing, with the management, performance (3) To review Annual statement of funds utilised for held by Non- Executive Directors approval, with particular reference to: of internal auditors, adequacy of the internal purposes other than those stated in the offer control systems, internal controls of different document / prospectus / notice. The shareholding of Non-Executive Directors as on (a) matters required to be included in the functions and businesses; 31st March, 2020 is as follows: director’s responsibility statement to be (4) To look into the reasons for substantial defaults included in the Board’s report in terms of (3) Reviewing the adequacy of internal audit in the payment to the depositors, debenture Sr. clause (c) of sub-section (3) of section 134 function, if any, including the structure of the holders, shareholders (in case of non-payment Name of Director No of shares held No of the Companies Act, 2013; internal audit department, staffing and seniority of declared dividends) and creditors; of the official heading the department, scope of 1 Dr Y K Hamied 163967687 (b) changes, if any, in accounting policies and internal audit, reporting structure coverage and (E) Miscellaneous 2 Mr M K Hamied 34567572 practices and reasons for the same; frequency of internal audit; 3 Mr S Radhakrishnan* 242321 (1) Approval or any subsequent modification of (c) major accounting entries involving estimates (4) Discussion with internal auditors of any transactions with related parties; *38,125 shares are held jointly with his wife based on the exercise of judgment by significant findings and follow up there on; (2) To review statement of significant related party Board committees management; (5) Reviewing the findings of any internal transactions (as defined by audit committee), investigations by the internal auditors into (d) significant adjustments made in the financial submitted by management. The Board committees are set up by the Board and matters where there is suspected fraud or statements arising out of audit findings; are governed by their respective terms of reference irregularity or a failure of internal control (3) Scrutiny of inter-corporate loans and which exhibit their scope and responsibilities. Presently, (e) compliance with listing and other legal systems of a material nature and reporting the investments of the Company; the Board has six committees: Audit Committee, NRC, requirements relating to financial matter to the Board; Stakeholders Relationship Committee, Investment (4) Valuation of undertakings or assets of the statements; (6) Review with the management letters of internal and Risk Management Committee, Corporate Social Company, wherever it is necessary; control weaknesses issued by the internal Responsibility Committee and Operations and (f) disclosure of any related party transactions; auditors. Administrative Committee. The committees operate (5) To review the functioning of the vigil policy / (g) modified opinion(s) in the draft audit report; under the direct supervision of the Board. Generally, (7) Evaluation of internal financial controls and risk whistle blower mechanism; Committee meetings are held prior to the Board meeting (3) Reviewing, with the management, the quarterly management systems (6) Review of utilization of loan / investment by and the chairperson of the respective committees report financial statements before submission to the holding company to subsidiary companies to the Board about the deliberations and decisions Board for approval; (C) Insider Trading exceeding 100 crore or 10% of subsidiary’s taken by the committees. H (4) Recommendation for appointment, (1) To recommend to the Board revision in Insider asset size of the subsidiary, whichever is lower Audit Committee remuneration and terms of appointment of Trading Policy and to supervise implementation including existing loans / advances / investments statutory auditors; of the Insider Trading Code. existing as on the date of coming into force of Composition of the Audit Committee this provision. (5) Approval of payment to statutory auditors for (2) The Chairman of the Audit Committee to note the status reports detailing the dealings The Audit Committee currently comprises of four any other services rendered by the statutory (7) Discharge such duties and functions as by Designated Persons in securities of the Non-Executive Directors, of whom three, including auditors; indicated in the Securities and Exchange Board Company. the Chairman of the Committee, are Independent of India (Listing Obligations and Disclosure (6) Reviewing and monitoring the auditor’s Directors. The Committee is headed by Mr Ashok Sinha (3) To provide directions on any penal action to be independence and performance, and Requirements) Regulations, 2015, the Companies and has Mr Adil Zainulbhai, Ms Naina Lal Kidwai and initiated, in case of any violation of the Insider effectiveness of audit process; Act, 2013 and the rules made thereunder from Mr S Radhakrishnan as its members. The Company Trading Regulations by any person. time to time. Secretary of the Company is the secretary to the (7) Discussion with statutory auditors before the Committee. The composition of the Committee meets audit commences, about the nature and scope (D) Public issue funds (8) Discharge such other functions as may be the requirements of section 177 of the Companies Act specifically delegated to the Committee by the of audit as well as post-audit discussion to (1) Reviewing, with the management, the statement 2013 and the Listing Regulations. Board from time to time. ascertain any area of concern; of uses / application of funds raised through an Role of Audit Committee (8) Approval of appointment of chief financial issue (public issue, rights issue, preferential issue, (9) Delegate any of the terms mentioned officer after assessing the qualifications, etc.), the statement of funds utilised for purposes hereinabove to any officer / employee of the The role of the Audit Committee is as follows: experience and background, etc. of the other than those stated in the offer document / Company or to any other person. candidate; prospectus / notice and the report submitted by (A) Accounts and Audit the monitoring agency monitoring the utilisation Meetings of Audit Committee (9) To review management discussion and analysis of proceeds of a public or rights issue, and (1) Oversight of the Company’s financial reporting of financial condition and results of operations. making appropriate recommendations to the The Audit Committee met six times during FY 2019-20 process and the disclosure of its financial st th th Board to take up steps in this matter; i.e. on 21 May, 2019, 6 August, 2019, 9 September, information to ensure that the financial (B) Internal Controls and Internal Audit 2019, 25th September, 2019, 5th November, 2019 and statement is correct, sufficient and credible; (2) To review Quarterly statement of deviation(s) 4th February, 2020. In addition, the Committee also held (1) Review the appointment, removal and terms of including report of monitoring agency, if pre audit conference call before the quarterly Audit (2) Reviewing, with the management, the annual remuneration of the chief internal auditor and applicable, submitted to stock exchange(s). Committee meetings to discuss key accounting matters, financial statements and auditor's report other internal auditors. 194 Creating Hope Since 85 Years Report on Corporate Governance 195 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 internal audit reports, internal controls, etc. These calls Audit Committee meetings to provide necessary Statutory Auditors and relied on their report and the Committee discussed the Internal Audit Reports with helped the Committee to optimise its time on quarterly clarifications, wherever necessary. The Statutory financial expertise of the management, while using the Chief Internal Auditor and the management on financial results at the meeting and invest more time on Auditor is also an invitee at all committee meetings its best judgement. The Committee believes that the a periodic basis. The Internal Audit was conducted discharging the responsibilities assigned to it under the for relevant agenda items which inter-alia include financial statements provide a true and fair view of as per the risk based internal audit plan approved terms of reference. financial statements, cost statements, internal the Company’s financial position. by the Committee. The Company has strengthened audit reports, update on internal financial controls, its’ framework of internal controls for better The composition and attendance of members at the vigil mechanism, approval and review of related The Statutory Auditor is responsible for independent transparency and accountability by rationalising committee meetings is given below: party transactions, review of utilisation of loans audit, overall audit strategy, period and length of and streamlining controls. These controls were also audit, audit observations significant to financial / investments / advances by the Company to its tested to assess design and operating effectiveness. Number of statements, internal financial control testing, and subsidiaries, fraud monitoring, key audit matters etc. The Committee was satisfied with the improvement meetings issuing reports thereon. The Committee discussed in the audits and the controls maturity journey. Name Category attended II. Charter with the Statutory Auditor, the statutory audit plan, The Committee evaluated the performance of the (total held the audit findings, financial reporting process and The Committee is guided by the charter approved by Internal Auditor with the management and was during tenure) the overall quality of the financial reporting and the Board of Directors of the Company. The charter generally satisfied with his performance. compliances and was satisfied with the Company’s Independent is reviewed annually and was last amended on functioning in this regard. There is no qualification The Committee has reviewed the internal financial Mr Ashok Sinha Director 6(6) 6th February, 2019 to incorporate changes in or adverse remark in the Statutory Auditors’ Report controls that ensures that the Company’s accounts (Chairman) regulatory provisions. The charter is available on Independent for FY 2019-20. are properly maintained and that the transactions Mr Adil Zainulbhai 5(6) the website of the Company under the Investors Director are recorded in the books of accounts in accordance section. The Audit Committee is responsible for the Ms Naina Lal Independent with the applicable accounting standards, laws 6(6)(1) recommendation of appointment, remuneration and Kidwai Director III. Meetings / Responsibilities and Auditors and regulations. The Committee affirms that there reviewing the scope of audit of Statutory Auditor. Non-Executive / is no material weakness in the Company’s internal M/s. Walker Chandiok & Co, LLP, will continue as Mr S Non- The Committee met six times in FY 2019-20 and financial control system. 5(6) the Statutory Auditor of the Company upto the Radhakrishnan Independent also held discussions through pre-audit calls. The 85th Annual General Meeting. The Committee Director Chairman – Audit Committee regularly met with the The Committee reviewed the functioning of the MD & GCEO, the Global Chief Financial Officer, the evaluated the auditors’ performance while ensuring whistle blower mechanism and noted that cases (1) attended one meeting through video conferencing Chief Internal Auditor, the Company Secretary and the independence of the Statutory Auditor. The received were carefully evaluated and investigated other members of the management team to discuss Audit Committee has also reviewed and approved and appropriate action were/were being taken The average attendance of the members at the Audit significant / critical matters in greater detail. The the non-audit services availed from the Statutory wherever necessary. The whistle blower had access Committee meetings during FY 2019-20 was 91.67%. pre-audit calls and the Chairman’s meeting with the Auditor and confirm that such services did not affect to the Chairman of the Audit Committee and the the independence of the auditor in any manner and The Chairman of the Committee was present at the last management help Audit Committee to optimize its Committee was assured that none of the whistle were either mandatorily required to be procured AGM held on 16th August, 2019. time and quality of discussion on important agenda blowers were victimised. items at the meeting. from Statutory Auditor or were in the best interests Audit Committee Report of the Company. The Independent Directors met The Committee periodically reviewed all related The Chairman of the Committee, after each the Statutory Auditors without the presence of the party transactions and ratified the same, wherever The Report of the Audit Committee Chairman is as committee meeting, briefs the Board about their management. necessary. The majority of the related party follows: discussions on critical matters, outcome and the transactions were between the Company and committee recommendations etc. The Board Mr D H Zaveri was appointed as the Cost Auditor of its subsidiaries/associates. All the related party To the Members of the Company, favourably considered all recommendations of the Company for FY 2019-20. transactions were in the ordinary course of business the Committee. The Committee was facilitated with The Audit Committee is pleased to present its report for and at arm's length basis. The Committee granted an annual agenda plan, which comprised items During the year, the Committee considered the cost st omnibus approval for the related party transactions the year ended 31 March, 2020: audit report which stated that proper cost records requiring the Committees’ review, monitoring and proposed to be entered by the Company during have been maintained by the Company in respect I. Constitution approval at each committee meeting. FY 2019-20. The Company did not enter into of product / service under reference. any related party transactions that required The Audit Committee is a four-member committee, The management presented the Company’s financial statements and is responsible for the preparation M/s BNP & Associates were appointed as the shareholders’ approval. During the year the comprising of three Independent Directors, of financial statements, financial reporting process Secretarial Auditor of the Company for FY 2019- Committee amended the Policy on Related including the Chairman and one Non-Executive and the Company’s internal financial controls. 20. The Secretarial Audit Report confirms that the Party Transactions to align it with the regulatory Director, all of whom have requisite knowledge The Committee reviewed and then recommended Company is compliant with the statutory provisions. amendment and simplify the process. The Committee about core principles of accounting, financial to the Board the quarterly and annual financial also reviewed in detail the process of identification management and internal controls. The composition The Chief Internal Auditor is responsible for internal results / statements, prepared in accordance of related parties and approval of related party of Audit Committee complies with the statutory audit and testing of internal controls and procedures. with the Act, the Listing Regulations, Indian transactions. requirements of Companies Act, 2013 and the Listing The Chief Internal Auditor conducted internal Accounting Standards (Ind – AS), and other legal Regulations. The Executive Vice-Chairperson, the audits and submitted his report on quarterly basis The Company continued to strengthen its and regulatory requirements. To ensure fairness, MD & GCEO, the Global Chief Financial Officer with management comments and implementation commitment towards good governance. The accuracy, quality and transparency of the financial and the Chief Internal Auditor are invitees at the timelines for the Committee to review. The Company has a Code of Conduct for Prevention statements, the Committee discussed these with the 196 Creating Hope Since 85 Years Report on Corporate Governance 197 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 of Insider Trading (‘Insider Trading Code’) and also (a) The quantum of options to be granted under (i) The grant, vest and exercise of option in Act, 2013 and the rules made thereunder from Code of Conduct for Fair Disclosure, pursuant to an ESOS per employee and in aggregate; case of employees who are on long leave; time to time. the SEBI (Prohibition of Insider Trading) Regulations, 2015. The Company amended its Insider Trading (b) The procedure for Exercise of options and (j) Approving forms, writings and/or (2) Delegate any of the terms mentioned Code to include provisions for protection against allotment of Shares in pursuance of the agreements for use in pursuance of the hereinabove to any officer / employee of the victimisation of employees who report violation of ESOS; ESOS; and Company or to any other person. insider trading regulations. On a quarterly basis, (c) The conditions under which vested (k) Taking all necessary actions and give all Meetings of Nomination and Remuneration the Committee reviewed the Report on Insider options in employees may lapse in case of such directions as may be necessary or Committee Trading. The Code of Conduct and other policies termination of employment for misconduct. desirable and also to settle any question are available on the website of the Company.3 st The procedure and conditions for vesting or difficulty or doubts that may arise with The NRC met four times during FY 2019-20 i.e. on 21 May, th th th The Committee has been vested with the adequate of options in case of termination of regards to ESOS. 2019, 6 August, 2019, 5 November, 2019 and 4 February, 2020. The composition and attendance of members at powers to seek support and the other resources employment; (B) Nomination related from the Company. The Committee has access to the Committee meetings is given below: (d) The exercise period within which the the information and records as well the authority to (1) Review and recommend the structure, size and employee should exercise the option and Number of obtain professional advice from external sources, if composition (including the skills, knowledge, that the option would lapse on failure to meetings attended required. experience and diversity) of the Board. Name Category exercise the option within the exercise (total held during The Committee also carried out its annual period; (2) Identify persons who are qualified to become tenure) evaluation and discussed the evaluation report Directors and who may be appointed in Senior Independent of its performance. The Committee believes it has (e) The specified time period within which the Management in accordance with the criteria Ms Punita Lal Director 3(4) performed effectively and has carried out the role employee shall exercise the vested options laid down and recommend to the Board for (Chairperson) assigned to it. In February 2020, the Committee in the event of termination or resignation of Mr Adil Independent their appointment and removal. 4(4) reviewed the compliance status of its Charter (i.e. an employee; Zainulbhai Director its role and responsibilities) and noted that it has (3) Formulate policy on Board diversity, criteria Non- comprehensively covered all the responsibilities (f) The right of an employee to exercise all for performance evaluation of directors, Board Executive/ Mr M K assigned to it under the Charter. the options vested in him at one time or at and Board Committees and for determining Non- 4(4) Hamied various points of time within the exercise qualifications, positive attributes and Independent Place: Mumbai Ashok Sinha period; independence of directors. Director Date: 14th May, 2020 Chairman - Audit Committee Dr Peter Independent (g) The procedure for making a fair and 4(4) (C) Human Resources and Remuneration related Mugyenyi Director Nomination and Remuneration Committee reasonable adjustment to the number of options and to the exercise price in case (1) Recommend to the Board a policy relating to The average attendance of the members at the NRC Composition of the Nomination and Remuneration of corporate actions such as rights issues, remuneration for the directors, key managerial meetings during FY 2019-20 was 93.75%. Committee bonus issues, merger, sale of division and personnel and other employees. The Chairperson of the Committee was present at the The NRC currently comprises of four Non-Executive others. In this regard following shall be (2) Recommend remuneration of Executive and th taken into consideration by the committee: last AGM held on 16 August, 2019. Directors, of whom three members including the Non-Executive Directors and relative of Chairperson of the Committee are Independent (i) the number and the price of ESOS shall Directors. Nomination and Remuneration Committee Directors. The Committee is headed by Ms Punita Lal be adjusted in a manner such that total Report: and has Mr M K Hamied, Mr Adil Zainulbhai and Dr Peter (3) Review key human resource related matters value of the ESOS remains the same Mugyenyi as its members. The Company Secretary of the including organization structure, top 25 talent The Report of the Chairperson of NRC is as follows: after the corporate action. Company is the secretary to the NRC. The composition succession planning, employee attrition / retention / development plans, cultural To the Members of the Company, of the Committee meets the requirements of Section 178 (ii) for this purpose global best practices transformation initiatives, annual increment of the Companies Act 2013 and the Listing Regulations. in this area including the procedures The NRC is pleased to present its report for the year approach including variable pay, results of followed by the derivative markets in ended 31st March, 2020: Role of Nomination and Remuneration Committee employee survey, etc. India and abroad shall be considered. I. Constitution The role of the NRC is as follows: (4) Recommend to the Board, all remuneration, in (iii) the vesting period and the life of the whatever form, payable to senior management. (A) Employee Stock Option Scheme (“ESOS”) related options shall be left unaltered as far The NRC is a four-member Committee, comprising of three Independent Directors including the as possible to protect the rights of the (D) Miscellaneous (1) Implementation, administration and option holders. Chairperson and one Non-Executive Director. superintendence of the ESOS and for formulation (1) Discharge such duties and functions as The NRC composition complies with the statutory of the detailed terms and conditions of the ESOS (h) The procedure for cashless exercise of indicated in the Securities and Exchange Board requirements of Companies Act, 2013 and the including but not limited to – options; of India (Listing Obligations and Disclosure Listing Regulations. The Company Secretary acts 3 Information in line with BRR Principle 1, Question 1 Requirements) Regulations, 2015, the Companies as Secretary to the Committee. The Executive 198 Creating Hope Since 85 Years Report on Corporate Governance 199 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Vice-Chairperson, the MD & GCEO, the Global Chief (c) The Chairperson of the Committee also work towards the implementation of those (5) Review adherence to service standards and People Officer are invitees at the NRC meetings to conducted individual conversations with suggestions as may be considered appropriate standard operating procedures adopted by provide necessary clarification. The management directors and select members of the senior by the Board. Company relating to the various services rendered team recuse themselves on the agenda items where management as a part of the succession by the Registrar and Transfer Agent; they have conflict of interest. planning process. 6. The Committee carried out its annual evaluation and discussed the evaluation report of its (6) Oversee the performance of the Registrar and During the year, the Committee reviewed and The Committee periodically reviewed with performance. The Committee believes it has Transfer Agent and recommends measures for noted the composition of the Board and that of the the management human resource related performed effectively and has carried out overall improvement in the quality of investor Committees and noted that it is statutorily compliant. matters inter-alia including talent pipeline, the role assigned to it. In February 2020, the services; employee engagement initiatives such as Committee reviewed the compliance status of II. Charter MiVoice, Inclusion and Diversity council, its Charter (i.e. its role and responsibilities) and (7) Review various measures and initiatives taken by the campus hiring, progress and execution Company for reducing the quantum of unclaimed The NRC is guided by the charter adopted by the noted that it has comprehensively covered all plan for various HR projects. The Company dividends and ensuring timely receipt of dividend Board of Directors. The Charter is available on the the responsibilities assigned to it under the undertook several initiatives during the year warrants/ annual reports/ statutory notices by the website of the Company under the Investors section. Charter. including process improvement, digitisation, shareholders; III. Meetings/Responsibilities shared services, policy reviews, Learning Management System, Talent Management Punita Lal (8) Review measures taken by Company for effective The Committee met four times in the FY 2019-20. Framework etc. The Committee also Place: Singapore Chairperson - Nomination and exercise of voting rights by shareholders; th The Committee was facilitated with an annual reviewed the manpower budget trends of Date: 14 May, 2020 Remuneration Committee (9) Review the engagement with security holders agenda plan, which comprised items requiring the the Company for FY 2019-20 and headcount Stakeholders Relationship Committee including institutional investors and identify the Committees’ review and monitoring periodically. movements. The Committee was satisfied actionable points for implementation; After each meeting, the Chairperson of the with the progress on these initiatives, which Composition of Stakeholders Relationship Committee Committee briefed the Board about their discussions also led to Cipla being certified as a “Great (10) Review movement in shareholdings and ownership The Stakeholders Relationship Committee currently on critical matters. Place to Work” once again in 2020. structure; comprises of three non-executive directors, of whom two 3. Based on the recommendation of the Committee, The Committee inter-alia considered the following members, including the Chairperson are Independent (11) Evaluate its performance annually; matters during FY 2019-20: the Board re-affirmed the matrix setting out Directors. The Committee is currently headed by the skills/expertise/competence required for Ms Naina Lal Kidwai and has Mr S Radhakrishnan as well as (12) Review and reassess the adequacy of Charter 1. The Objectives (Key performance indicator) the Board in the context of the business and Mr Adil Zainulbhai as its members. The Company on annual basis and recommend any proposed of the MD & GCEO were finalised by the sector. The matrix inter-alia included areas such Secretary of the Company is the secretary to the changes for approval of the Board; Committee and approved by the Board as global economics, corporate governance, Committee. and his performance was evaluated against pharma expertise, finance & accounts, M&A (13) Delegate any of the terms mentioned hereinabove the approved objectives. On the basis of and business development. Role of the Stakeholders Relationship Committee to any officer / employee of the Company or to any performance and the recommendation of the other person; Committee, the Board approved a variable 4. The Company has an Employee Stock Option The role of the Stakeholder Relationship Committee is bonus for FY 2019-20 for the MD & GCEO and Scheme named as Employee Stock Option as follows: (14) Perform such other functions as may be required senior management, wherever applicable. Scheme 2013-A (“ESOS 2013-A”) for the benefit under the relevant provisions of the Companies of its employees and the employees of its (1) Approve and review the mechanism adopted for Act, 2013, the Rules made there under, the Securities 2. (a) The leadership of the Company defines its subsidiary companies. During FY 2019-20, the redressing the grievance(s) of the security holders and Exchange Board of India (Listing Obligations ability to stay relevant in changing times Committee granted 4,89,195 stock options to and the status of such redressal; and Disclosure Requirements) Regulations, 2015 and therefore succession planning for the 77 eligible employees, of which 1,50,118 stock and various circulars issued by the regulatory (2) Resolve the grievances of the security holders Board and promoters was one of the crucial options were granted to the MD & GCEO as per authorities thereof, as amended from time to time including grievances relating to transfer/ matters taken up by the Committee. The the terms of his appointment approved by the and discharge such other functions as may be transmission of shares, non-receipt of annual Committee oversaw key processes through shareholders. specifically delegated to the Committee by the report, non-receipt of declared dividends, issue of which the Company inducts new members Board from time to time. to its Board, worked closely with the Board 5. The Committee reaffirmed the parameters in the new/duplicate certificates and general meetings.; on the leadership succession plan and form of a simplified questionnaire for carrying The Committee carried out its annual evaluation and (3) Approve issuance of duplicate share certificate(s) prepared contingency plans for succession out evaluation of Board, Board committees and and new share certificates on split / consolidation / discussed the evaluation report of its performance. The in case of any exigencies. individual directors. Based on said parameters, removal / rematerialisation, etc.; Committee believes it has performed effectively and has the evaluation of the Board, Board committees carried out the role assigned to it. In February, 2020, (b) The Committee devoted considerable time and the individual directors was undertaken (4) Approve and register the transfer, transmission, the Committee reviewed the compliance status of its on succession planning for critical positions in January 2020 and the relevant report were deletion of name, transposition and rematerialisation Charter (i.e. role and responsibilities) and noted that the within the Company. Currently, the Company discussed at the Board and Board committee requests; Committee was fully compliant with its Charter. has in place succession planning for the top meetings. The Committee also noted the critical positions including its Management suggestions of the Board members to further Council members. strengthen the Board effectiveness and will 200 Creating Hope Since 85 Years Report on Corporate Governance 201 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Meetings of Stakeholders Relationship Committee resolved and there were no pending investor grievances made thereunder from time to time and such other Investment and Risk Management Committee as on 31st March, 2020. functions as may be delegated to the Committee by The Stakeholders Relationship Committee met four times the Board from time to time. Composition of Investment and Risk Management during FY 2019-20 i.e. on 21st May, 2019, 7th August, 2019, Committee The Investors’ complaints were pertaining to transfer, 5th November, 2019 and 4th February, 2020. The v) Take all necessary actions as may be necessary transmission, updation of details, dividend and annual The Investment and Risk Management Committee composition and attendance of members at the report related matters. Additionally, the Company has or desirable and also to settle any question or Committee meetings is given below: difficulty or doubts that may arise with regards to currently comprises of five directors of whom three also appointed an independent consultant to verify and members are Non-Executive Directors out of which two assist the Company in effectively resolving the investor Corporate Social Responsibility activities/Policy of Number of are Independent Directors. The Committee is headed by grievances. the Company. meetings attended Ms Samina Hamied and has Mr Ashok Sinha, Ms Naina Name Category (total held during The Committee carried out its annual evaluation and Lal Kidwai, Mr S Radhakrishnan and Mr Umang Vohra as Mr Rajendra Chopra, Company Secretary, acts as tenure) discussed the evaluation report of its performance. The its members. The Company Secretary of the Company is the Company’s Compliance Officer. He is responsible Independent Committee believes it has performed effectively and the secretary to the Committee. Ms Naina Lal for ensuring prompt and effective services to the Director 4(4) has carried out the role assigned to it. In February 2020, Kidwai(1) shareholders and for monitoring the dedicated email (Chairperson) the Committee reviewed the compliance status of its Role of Investment and Risk Management Committee address for receiving investor grievances. Non-Executive Charter (i.e. its role and responsibilities) and noted that Mr S / Non- it has comprehensively covered all the responsibilities The role of the Investment and Risk Management 3(4) Radhakrishnan Independent Corporate Social Responsibility Committee assigned to it under the Charter. Committee is as follows: Director Composition of Corporate Social Responsibility Non-Executive (1) To review and provide recommendation on Committee Meetings of Corporate Social Responsibility Committee Mr M K / Non- investments, acquisitions or divestment by Cipla 1(1) Hamied(2) Independent The Corporate Social Responsibility Committee currently The Corporate Social Responsibility Committee met Limited in any legal entity to the Board. Director four times during FY 2019-20. i.e. on 21st May, 2019, comprises of five directors, of whom two including the (2) To review and provide recommendation on Mr Adil Independent 6th August, 2019, 5th November, 2019 and 4th February, 3(3) Chairman, are non-executive directors and two are investments, acquisitions or divestment by any of Zainulbhai(3) Director 2020. The composition and attendance of members at Independent Directors. Cipla subsidiaries in any legal entity outside Cipla the Committee meetings is given below: (1) Chairperson w.e.f 23rd May, 2019 group to Cipla Board of Directors. rd The Committee is headed by Mr M K Hamied and has (2) Ceased to be chairman and member w.e.f 23 May, 2019 (3) To approve purchase, sell or disposal of Intellectual rd Mr Adil Zainulbhai, Ms Punita Lal, Mr S Radhakrishnan Number of (3) Member w.e.f 23 May, 2019 Property Rights or other assets and entering into and Mr Umang Vohra as its members. The Company meetings in-licensing deals by Cipla or review and provide Secretary of the Company is the secretary to the Name Category attended (total The average attendance of the members at the recommendation to any of its subsidiaries / Committee. The composition of the Committee meets held during Stakeholders Relationship Committee meetings during associates / joint ventures for H175 crore or more the requirements of section 135 of the Companies Act, tenure) FY 2019-20 was 91.67%. but upto H525 crore. The proposals exceeding H525 2013. Ms Rumana Hamied, Managing Trustee – Cipla Non-Executive crore shall be approved by the Board directly for Foundation and Mr Anurag Mishra, Head – Cipla / Non- The Chairperson of the Committee was present at the Mr M K Cipla and the Board will provide its recommendation Foundation are permanent invitees at the Corporate Independent 4(4) last AGM held on 16th August, 2019. Hamied for any of the above for the subsidiaries / associates Social Responsibility Committee meetings. Director / joint ventures. (Chairman) The Stakeholders Relationship Committee has adopted Role of Corporate Social Responsibility Committee Mr Adil Independent (4) Subject to approval of the shareholders, as may 4(4) an Investor Grievance Redressal Policy and Investor Zainulbhai Director be required under the applicable laws for the time FAQs handbook to effectively redress investor The role of the Corporate Social Responsibility Independent being in force, to approve sell, lease or disposal Ms Punita Lal 3(4) grievances and improve the services provided to Committee is as follows: Director of any undertaking or substantially the whole investors. The Investor FAQs handbook serves as ready Non-Executive of undertaking by Cipla or review and provide reference material to shareholders holding/dealing in i) Formulate and recommend to the Board, the Mr S / Non- 3(4) recommendation to any of its subsidiaries / Cipla shares. It is designed to assist shareholders on Corporate Social Responsibility Policy and the Radhakrishnan Independent associates / joint ventures for an amount exceeding matters such as transmission of shares, dematerialisation activities to be undertaken by the Company. Director H50 crore but within the limits mentioned under of shares, dividend, IEPF, etc. The handbook and Mr Umang ii) Recommend the amount of expenditure to be MD & GCEO 4(4) section 180(1)(a) of the Companies Act, 2013. Investor Grievance Redressal Policy is uploaded on the Vohra incurred on the activities. Company’s website under the Corporate Governance (5) Monitoring short term and long term strategic priorities of the Company. tab of the Investors section. iii) Monitor the Corporate Social Responsibility Policy The average attendance of the members at the from time to time. Corporate Social Responsibility Committee meetings (6) Review and recommend to the Board annual capital During the year under review, the Company received iv) Discharge such duties and functions as indicated in during FY 2019-20 was 90.00%. expenditure budget of the Company. 16 investor grievances. All of them were satisfactorily the section 135 of the Companies Act, 2013 and Rules 202 Creating Hope Since 85 Years Report on Corporate Governance 203 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 (7) Review and recommend to the Board any Number of co-operative bank(s) in any part of the country Company and nominate managers for such unbudgeted capital expense. meetings attended including foreign bank(s) authorised by Reserve office. Name Category (total held during Bank of India to do banking business in the (8) Monitor with adequate frequency the key ongoing (7) To nominate director / representative on the tenure) country and in any country outside India with capex projects including post-implementation bank(s) authorised to do banking business in subsidiaries, joint ventures and associates and Mr Peter Independent review/governance. 0(1) that country. to approve and vote on all resolutions of the Lankau(1) Director Companies, body corporates or entities or (9) Monitor and review the risk management plan. (5) To approve, finalise and authorise the execution bodies, where the Company is a shareholder (1) Resigned from the position of Director w.e.f 1st July, 2019 of any deed, document, letter or writing or member and where specific shareholder (10) Review cyber security related matters. in connection with the aforesaid activities, resolution is required. The average attendance of the members at the (11) Discharge such duties and functions as may be including borrowing / credit facilities, creation Investment Risk Management Committee meetings (8) To handle and deal with the following matters, delegated to the Committee by the Board under the of charge. during FY 2019-20 was 90.48%. in case any specific authorization, approval applicable laws from time to time. (6) To approve revision in authorised signatories or resolution is required from the Board of Operations and Administrative Committee Directors or a committee thereof: (12) Delegate any of the terms mentioned hereinabove for any of the above matters. to any officer / employee of the Company or to any Composition of Operations and Administrative (B) Employee Stock Option Scheme related (a) Obtain / renew / surrender license / Letter other person. Committee of Permission or such other registration of (1) Issue and allot equity shares of the Company the Company with any regulatory / statutory The Committee carried out its annual evaluation and The Operations and Administrative Committee currently pursuant to the Employee Stock Option authorities and execute legal undertaking / discussed the evaluation report of its performance. The comprises four Directors of whom two members are Scheme(s) for the time being in force. legal agreement or any document required Committee believes it has performed effectively and Non-Executive Directors. The Committee is headed (2) To seek listing of shares issued as above on one for this purpose. has carried out the role assigned to it. In February 2020, by Ms Samina Hamied and has Mr M K Hamied, or more Stock Exchanges in India and all such the Committee reviewed the compliance status of its Mr S Radhakrishnan and Mr Umang Vohra as its members. shares being pari-passu with the existing equity (b) Approve for participation into any tender, Charter (i.e. its role and responsibilities) and noted that Role of the Operations and Administrative Committee shares of the Company in all respects. bid, auction by the Company. it has comprehensively covered all the responsibilities assigned to it under the Charter. (A) Treasury related (3) To do all such acts, deeds and things, as may (c) Register / de-register the Company be necessary and incidental to allotment and with any Central / State Government Meetings of Investment and Risk Management (1) To grant loan at a rate of interest not lower than listing of shares. authorities, Semi-Government authorities, Committee the rate as prescribed under the Companies regulatory authorities, statutory authorities, Act, 2013 or any other relevant law and give (C) General Authorisations quasi-judicial authorities, local authorities, The Investment and Risk Management Committee guarantee or provide security in connection tax authorities including sales tax, service met four times during FY 2019-20 i.e. on 21st May, 2019, (1) To purchase, sell, take on lease / license, with the loan. tax, goods and service tax, value added 6th August, 2019, 5th November, 2019 and 4th February, transfer or otherwise deal with any movable / tax, labour law authorities, administrative 2020. The composition and attendance of members at immovable assets or property for a maximum (2) To deal in government securities, units of authorities, business associations and any the Committee meetings is given below: value of H50 crore. mutual funds, fixed income and money market other bodies. instruments, fixed deposits and certificate (2) To constitute, reconstitute, modify, dissolve any Number of of deposit programme of banks and other trust or association for Company / business (d) Nominate or revoke nomination of a meetings attended Name Category instruments / securities / treasury products of related matters and to appoint, reappoint, representative under Foods Safety and (total held during banks and financial institutions within the limits remove, replace the trustees or representatives. Standards Act, 2006, Manager under tenure) approved by the Board from time to time. Factories Act, 1948, managers for branch Executive Vice (3) To issue voting instructions to the Depositary Ms Samina office and such similar requirement under Chairperson 4(4) (3) To deal in foreign exchange and financial of the Global Depositary Shares in respect of Hamied any other applicable law. (Chairperson) derivatives linked to foreign exchange and the resolutions at the General Meeting / Postal interest rates including but not limited to foreign Mr Ashok Independent Ballot of the Company. (e) Appoint any Merchant Banker, Chartered 4(4) exchange spot, forwards, options, currency Accountant, Advocate, Counsels, Company Sinha Director (4) To authorize affixing the common seal of the swaps and interest rate swaps as per the Foreign Secretary, Engineer, Technician, Consultants Ms Naina Lal Independent Company and re-locate / move the common 4(4) Exchange and Interest Rate Risk Management and / or Professionals for undertaking Kidwai Director seal to any place other than the registered Policy. any assignment for and on behalf of the Non-Executive office of the Company. Company requiring specific approval of the Mr S / Non- (4) To open, operate, close, change in authorisation 3(4) (5) To grant / revoke general and specific power Board of Directors under any law. Radhakrishnan Independent / signatory for any current / deposit / cash credit of attorney / letter of authorisation in favour Director account(s), safe deposit vault(s), electronic of employees of the Company as and when (f) Apply for and surrender any electricity, Mr Umang bank account(s), internet bank account(s) / power or water connection. MD & GCEO 4(4) required for business purposes. Vohra facility, subsidiary general ledger account(s), dematerialisation / depository account(s) with (6) To grant approval for setting up and closure of (9) To do all such acts, deeds and things as may any nationalised bank(s), scheduled bank(s), branch / representative / liaison office of the be required for the smooth conduct of the 204 Creating Hope Since 85 Years Report on Corporate Governance 205 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 operations of the Company and which does stakeholders, the Company, inter-alia, has the following Name of the Policy Website Link The highlights of the Code of Conduct are as follows: not require specific approval of the Board of policies and codes in place. All the policies have been https://www.cipla.com/sites/ • Compliance with all the applicable laws, policies, Directors of the Company or which has not uploaded on the website of the Company. Anti-Trust and Fair default/files/2019-06/1553587611_ procedures and internal controls while conducting been delegated by the Board specifically to any Competition Policy Anti-Trust-and-Fair- the business of the Company as well as that of other Committee of the Board. Name of the Policy Website Link Competition-Policy.pdf group companies; https://www.cipla.com/sites/ https://www.cipla. (10) To discharge such other functions as may be default/files/1530274684_ Anti-Bribery and com/sites/default/ • Treat each other with respect and dignity without specifically delegated to the Committee by the Code of Conduct Cipla---Code-of-Conduct-FC. Anti-Corruption files/2019-06/1553587868_ any discrimination, harassment or violation of Board / shareholders from time to time. PDF.pdf Policy Anti-Bribery-and-Anti- human rights; https://www.cipla.com/ Corruption-Policy.pdf (11) To delegate any of the terms mentioned Code of Conduct sites/default/files/2020-02/ https://www.cipla.com/ • Commitment to protect safety, health and wellbeing hereinabove to any officer / employee of the Policy for for Prevention of Code%20of%20Conduct%20 sites/default/files/2020-02/ of the employees; Company or to any other person. determination Insider Trading for%20Prevention%20of%20 Policy%20for%20 of Materiality • Compliance with the Code of Conduct for Prevention Insider%20Trading_1.pdf Determination%20of%20 Meetings of the Operations and Administrative of Events or of Insider Trading; Materiality%20of%20Event%20 Committee Code of Practices https://www.cipla.com/ Information and Procedures sites/default/files/2019-07/ or%20Information%20.pdf • Record and report all transactions accurately and https://www.cipla. completely as per applicable accounting standards; Eleven meetings of the Operations and Administrative for Fair Disclosure Cipla_Limited_Code_of_Fair_ Policy for com/sites/default/ Committee were held during FY 2019-20 i.e. on of Unpublished Disclosures_01_04_19.pdf determining • Guidelines for engaging in political activity and files/2019-08/1443000071_ 17th April, 2019, 17th May, 2019, 14th June, 2019, 15th July, 2019, Price Sensitive Material interaction with health care professionals; Policy-for-determining- 14th August, 2019, 16th September, 2019, 16th October, Information Subsidiaries Material-Subsidiaries.pdf • Zero tolerance towards corrupt practices and 2019, 13th November, 2019, 13th December, 2019, https://www.cipla. Corporate https://www.cipla.com/ anti-money laundering activities; 28th January, 2020 and 4th March, 2020. The composition com/sites/default/ Responsibility Policy on dealing sites/default/files/2020-02/ files/2019-01/Corporate%20 and attendance of members at the Committee meetings Policy with Related Party Policy%20on%20dealing%20 Members of the Board and senior management Responsibility%20Policy.pdf is given below: Transactions with%20Related%20Party%20 personnel have affirmed their compliance with the https://www.cipla.com/ Number of Corporate Social Transactions_1.pdf Code of Conduct for FY 2019-20. A declaration to this sites/default/files/2019-01/ meetings attended Responsibility https://www.cipla.com/ effect signed by Mr Umang Vohra, MD & GCEO which Name Category Corporate%20Social%20 (total held during Policy Archival Policy sites/default/files/2019-01/ forms part of the report. Responsibility%20Policy.pdf tenure) Archival%20Policy.pdf https://www.cipla.com/ Policy on https://www.cipla.com/sites/ Whistle-Blower Policy/ Vigil Mechanism Executive Dividend sites/default/files/2019-01/ prevention of default/files/1558508425_ Ms Samina Vice- 9(11) Distribution Policy Dividend%20Distribution%20 sexual harassment POSH-%20Cipla.pdf The Code of Conduct also has a Whistle-Blower Policy that Hamied Chairperson Policy.pdf at workplace applies to all associates, Board members, contractors, (Chairperson) https://www.cipla.com/sites/default/ consultants, trainees, service providers of our Company, Investor Grievance 4 Non- files/2020-02/Investor_Grievance_ Code of Conduct our subsidiaries, affiliates, group companies and persons Redressal Policy Executive Redressal_Policy_v16.pdf or entities contractually obligated across the globe. It Mr M K The Code of Conduct is a comprehensive guide to the / Non- 10(11) https://www.cipla. contains a reporting mechanism, the manner in which Hamied Nomination, Company and its group companies for conducting their Independent com/sites/default/ all reported concerns are dealt with, confidentiality Remuneration and businesses and inter-alia include various policies such as Director files/2019-07/1560495705_ of the investigations and processes, protection of the Board Diversity Whistle – Blower Policy, Prevention of Sexual Harassment Non- Revised%20Remuneration%20 whistle-blower against any retaliation, and guidelines Policy Policy, Insider Trading Code, Environment, Health and Executive Policy_0.pdf for retention of records during the investigation/ Mr S Safety Policy, Anti – Bribery and Anti – Corruption Policy / Non- 11(11) https://www.cipla. reporting of the case etc. The Audit Committee oversees Radhakrishnan Environment, and Conflict of Interest Policy. The Code is administered Independent com/sites/default/ the functioning of the vigil mechanism and receives a Health and Safety by the Ethics Committee which comprises of Global Director files/2019-07/1530518599_ehs- summary of the whistleblowing incidents and actions (EHS) Policy Chief People Officer, Global Chief Financial Officer, Mr Umang policy-2006%201.pdf taken by the Ethics Committee on a quarterly basis. The MD & GCEO 9(11) Global General Counsel and Chief Internal Auditor. Vohra https://www.cipla.com/ whistle-blower can report his concerns either in writing sites/default/files/2019 The Code is applicable to the Board members, or by email to the Chairperson of the Ethics Committee Conflict of Interest The average attendance of the members at the 06/1554391523_1530187477_ employees, trainees, consultants and contractors of or to the Chief Internal Auditor at [email protected]. Policy Operations and Administrative Committee meetings Conflict%20of%20Interest%20 the Company and its subsidiaries, affiliates, group The whistle-blower can also approach the Chairperson during FY 2019-20 was 88.64%. Policy%20-%20V1%20fc.pdf companies and persons or entities contractually of the Audit Committee at [email protected], https://www.cipla.com/ obligated across the globe. The vendors, suppliers and whenever required. Policies Whistle Blower sites/default/files/2020-02/ other parties dealing with the Company are encouraged During the year, the Whistle blower policy was amended Policy Whistle%20Blower%20 to adhere the Company Code of Conduct5. In accordance with Cipla’s philosophy for adhering to Policy%20V3-%20Final.pdf to broaden its scope for raising any incident involving ethical and governance standards and ensure fairness, 4GRI 103-1, GRI 103-2, GRI 103-3 accountability, responsibility and transparency to all its 5Information in line with BRR Principle 1, Question 1 and Principle 5, Question 1 206 Creating Hope Since 85 Years Report on Corporate Governance 207 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 the leak or suspected leak of unpublished price sensitive victimisation of employees reporting concerns relating Inc. and InvaGen Pharmaceuticals Inc. However, the Directors, the Statutory Auditor is competent, qualified information (‘UPSI’) or any unethical use of UPSI in to insider trading laws. Company does not have any material subsidiary and is independent of the Board and the management, accordance with SEBI (Prohibition of Insider Trading) pursuant to regulation 24 of the Listing Regulations and and there is no conflict of interest between them. The Regulations. It included a time limit of 90 days for To ensure strict enforcement of the Code and its is not required to appoint independent director on the Company or its subsidiary companies has not availed administration, a Monitoring Committee has been completing the investigation and providing access to Board of its material subsidiary. any of the prohibited non-audit services mentioned constituted by the Board comprising the MD & GCEO, the Audit Committee chairperson, whenever required. under clause (a) to (i) of section 144 of the Companies the Global Chief People Officer, the Global Chief The financial statements of the subsidiaries are reviewed Act 2013 from the Statutory Auditor or any of their Financial Officer, Company Secretary and Compliance During the year, the Company received 45 complaints, by the Audit Committee. The minutes of the meetings of network firms. The other permitted non-audit services Officer. The Committee meets on a quarterly basis to of which 31 complaints were resolved satisfactorily the subsidiaries together with a summary of key decisions provided by the Statutory Auditor were approved by st review the list of DPs, trading by DPs, implementation as on 31 March, 2020. Due to covid-19 pandemic the taken at the Board of the subsidiary companies are the Audit Committee and were not material in nature. balance complaints are pending for investigation by of policies under the Insider Trading Regulations, etc. A placed before the Board of Directors of the Company. the Company. No person has been denied access to the report on insider trading, covering trading by DPs and The management of the unlisted subsidiaries brings to Audit Committee. various initiatives/actions taken by the Company under the notice of the Board of Directors all the significant Compliance management the Insider Trading Regulations is also provided to the transactions or arrangement entered into by the unlisted The Company has adopted a compliance management Code of Conduct for Prevention of Insider Audit Committee and its Chairman on a quarterly basis. subsidiaries of the Company on a quarterly basis. Trading & Code of Practices and Procedures for tool which provides system driven alerts to the Fair Disclosure of Unpublished Price Sensitive The Company has not disposed of shares in its material respective owners for complying with the applicable Information (UPSI) Share Transfer System subsidiary resulting in reduction of its shareholding to laws and regulations. A certificate of compliance of less than 50% (either on its own or together with its other all applicable laws and regulations applicable to the The Company has appointed KFin Technologies Private The Code of Conduct for Prevention of Insider Trading subsidiaries) or has ceased to exercise control over the Company is submitted by the Global General Counsel to Limited (formerly known as Karvy Fintech Private Limited) (“Code”) is applicable to the designated persons (DPs) material subsidiary. Further, the Company has not sold, the Board of Directors on a quarterly basis. (KFin) as the Registrar and Share Transfer Agent. and their immediate relatives. It inter alia lays down the disposed of and leased out its assets amounting to more procedures to be followed by DPs while trading/dealing In compliance with regulation 40(9) of the Listing than 20% of the assets of the material subsidiary on an in Cipla shares and while sharing UPSI. The code Unclaimed dividend and transfer of dividend Regulations, the Company obtains a certificate from aggregate basis during FY 2019-20. includes the obligations and responsibilities of DPs, and shares to IEPF a practicing Company Secretary on a half-yearly obligation to maintain the digital database, mechanism Investment / acquisition / divestment proposals by any basis certifying that all certificates have been issued Pursuant to the provisions of the Companies Act 2013 for prevention of insider trading and handling of of the subsidiaries of the Company in any legal entity within thirty days of the date of lodgement for transfer, read with the Investor Education and Protection Fund UPSI, process to familiarise with the sensitivity of UPSI, outside Cipla group requires recommendation of the subdivision, consolidation, renewal, exchange or Authority (Accounting, Audit, Transfer and Refund) Rules, transactions which are prohibited and manner in which Investment and Risk Management Committee to the endorsement of calls/allotment monies. A copy of the 2016, as amended, (‘Rules’), the dividend which remains permitted transactions in the securities of the Company Board of Directors of Cipla Limited. Purchase / sell / unclaimed or unpaid for a period of seven years from the shall be carried out etc. certificate, so received, is submitted to NSE, BSE and the disposal of Intellectual Property Rights or other assets Luxembourg stock exchanges. and entering into in-licensing deals by subsidiaries / date of transfer to the Unpaid Dividend Account of the The Company also has a policy for investigations during associates / joint ventures above certain threshold Company and shares on which dividends are unclaimed W.e.f. 1st April, 2019, in compliance with regulation 40 of leaks/suspected leak of UPSI which, inter alia, provides require recommendation of the Investment and Risk or unpaid for a consecutive period of seven years or the Listing Regulations, the Company is not accepting for the investigation process to be undertaken and Management Committee / Board of Directors as more are liable to be transferred to IEPF. The Company any new request for effecting transfer of securities in reporting of the investigation, etc. applicable. has transferred eligible dividend and shares to IEPF physical mode except in the case of transmission or authority within statutory timelines for the FY 2019-20. A policy on legitimate purpose forms part of the transposition of securities. Code of Practices and Procedures for Fair Disclosure, Auditors Unclaimed final dividend for the financial year ended which is to be followed by insiders while sharing UPSI. However, in terms of SEBI press release dated 31st March, 2013 will become due for transfer to IEPF on Promoters, directors, employees and other persons 27th March, 2019, the transfer deed(s) that are lodged In its meeting held on 14th May, 2020, the Audit Committee 22nd September, 2020. are encouraged to report any instances of misuse prior to deadline of 1st April, 2019 and returned due to evaluated the performance of the Statutory Auditor and of UPSI under the Whistle-Blower Policy. SEBI vide deficiency in the document may be re-lodged for transfer the Internal Auditor and was generally satisfied with Shareholders can check the details of any unclaimed its notification dated 17th September, 2019, amended even after the deadline. Accordingly, the Company is their performance. The Statutory Auditor has confirmed shares and unclaimed dividend on the Company’s the SEBI (Prevention of Insider Trading) Regulations, not accepting any new request for effecting transfer of that they are eligible to continue as the Statutory website, i.e. www.cipla.com under Unclaimed Data tab 2015 to introduce a Voluntary Information Disclosure securities in physical mode after the abovementioned Auditor of the Company. In the opinion of the Board of of the Investors section. mechanism where in any individual could report deadline. suspected violation of insider trading laws to SEBI. The amendment required companies to ensure that their Code provides for protection against victimisation of Monitoring Governance of Subsidiary employees who report instances of violation to SEBI Companies under the new mechanism. The Company’s Whistle Blower policy already provided for protection to Pursuant to regulation 16(1)(c) of the Listing Regulations, whistle blowers, however the Company amended its the Company has 3 material subsidiaries as on Code to incorporate provisions for protection against 31st March, 2020 i.e. Cipla (EU) Limited, Cipla USA 208 Creating Hope Since 85 Years Report on Corporate Governance 209 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Status of unclaimed dividend and shares which have been transferred to IEPF are given hereunder: o The Company has complied with the requirements V of the Listing Regulations. The Company is in of the stock exchanges, SEBI and other statutory compliance with all the applicable provisions and Unclaimed Whether it can authorities on all matters related to capital markets Status Can be claimed from Actions to be taken requirement of Corporate Governance Report. dividend be claimed during the last three years and accordingly Transferred to Claim to be forwarded in no penalties or strictures were imposed on the o A certificate from a Company Secretary in practice Office of Registrar Up to and the General prescribed Form No. II of the Company by the stock exchanges, SEBI or any other that none of the directors are disqualified or of Companies, CGO including the Revenue Companies Unpaid Dividend statutory authority. debarred from being appointed or continuing as Yes Complex, CBD, Financial Year Account of (Transfer to General Revenue a director of the Company by Securities Exchange Belapur, Navi Mumbai - 1994-95 the Central Account of the Central o The securities of the Company were not suspended Board of India / Ministry of Corporate Affairs or 400 614 Government Government) Rules, 1978 from trading at any time during the year. any other authority is provided in Annexure B which forms part of this report File online application o The Company has managed foreign exchange risk For the Financial in e-form 5 and send IEPF Authority to pay the claim with appropriate hedging activities in accordance o During FY 2019-20, the Board of Directors Years 1995- this form IEPF-5 to the amount to the shareholder Transferred with the risk management framework of the has accepted all the recommendations of the 96 to 2011-12 Registered Office of the based on the e-verification to the IEPF Yes Company. The Company’s approach to managing committees of the Board. and shares Company addressed report submitted by the authority currency risk is to leave no material residual risk. transferred to to the Nodal Officer Company and the documents The Company uses forward exchange contracts o Disclosures on complaints under the Sexual IEPF along with complete submitted by the investor and/or options to hedge against its net foreign Harassment of Women at Workplace (Prevention, documents currency exposures. All material foreign exchange Prohibition and Redressal) Act, 2013, during Amount lying transactions are fully covered. Materially, there FY 2019-20: - For the Financial Application to KFin in respective KFin Technologies are no uncovered exchange rate risks relating to Years 2012-13 to Yes Technologies Private Limited Unpaid Dividend Private Limited the Company’s imports and exports. The Company Particulars Number 2019-20 along with KYC documents Accounts does not enter into any derivative instruments for Number of complaints filed during 09 trading or speculative purposes. The details of the financial year st foreign exchange exposures as on 31 March, 2020 Number of complaints disposed 07 are disclosed in Note No. 45 to the standalone of during the financial year Details of date of declaration and due date for transfer to IEPF: financial statements. Number of complaints pending as st 02 Financial Year Dividend per share (in H) Date of declaration Due date for transfer to IEPF o Total fees for all services paid by the Company on 31 March, 2020 2012-13 2/- 22nd August, 2013 22nd September, 2020 and its subsidiaries on a consolidated basis to the Statutory Auditor and all the entities in the network 2013-14 2/- 03rd September, 2014 03rd October, 2021 Compliance of non-mandatory requirements firm / network entity of which Statutory Auditor is a 2014-15 2/- 27th August, 2015 27th September, 2022 part are provided in Note No. 39 to the consolidated Cipla has always followed the highest standards th th 2015-16 2/- 28 September, 2016 28 October, 2023 financial statements. of Corporate Governance and has benchmarked 2016-17 2/- 11th August, 2017 10th September, 2024 its governance and disclosure practices against o The cost of raw materials forms a large portion of 2017-18 3/- 30th August, 2018 29th September, 2025 national and international codes, guidelines or the Company’s operating expenses. The Company th th principles. Enhancing the standards of disclosures 2018-19 3/- 16 August, 2019 15 September, 2026 monitors the price of key commodities closely and transparency, we voluntary followed the below 4/- (Interim Dividend H3/- and formulates procurement strategies based 2019-20 12th March, 2020 14th April, 2027 regulations, guidelines or principles: plus Special dividend H1/-) on actual price movements and trends as well as external regulatory environment. The Company has a. It is in the regime of financial statements with adequate governance structure to align and review unmodified audit opinion. Other Disclosures executed in deviation of the terms approved by the procurement strategies in line with external and Audit Committee the transactions are subsequently internal dynamics. The Company has not entered b. It complies with the requirement of having separate o During FY 2019-20, there were no materially ratified. All related party transactions are placed into any material derivative contracts to hedge persons to the post of Chairman and Managing significant related party transactions (‘RPTs’) that exposure to fluctuations in commodity prices. Director / CEO. before the Audit Committee on a quarterly basis for may have potential conflict with the interests of Accordingly, no disclosure is required pursuant to their review and approval, as applicable. The details the Company. All contracts, arrangements and SEBI circular dated 15th November, 2018. c. The Chief Internal Auditor functionally reports of related party transactions as per IND AS-24 are transactions entered by the Company with related directly to the Audit Committee. o During FY 2019-20, the Company has not raised parties during FY 2019-20 were in the ordinary discussed in detail in Note No. 41 to the standalone funds through preferential allotment or qualified d. The Company is substantially in compliance with the course of business and on an arm’s length basis. financial statements. institutions placement. G-20 OECD Principles of Corporate Governance. o Prior omnibus approval of the Audit Committee is o The Board of Directors have approved and adopted o The Company is in compliance with the mandatory e. The Company is substantially in compliance with the obtained for related party transactions which are “Policy on dealing with Related party transactions” requirements of Corporate Governance as National guidelines on responsible business conduct repetitive in nature. In case any transaction exceeds and the same is updated from time to time, basis the specified in Regulations 17 to 27; clauses (b) to (i) principles issued by the Ministry of Corporate the limits approved by the Audit Committee or is amendment in the regulatory provision. of sub-regulation (2) of Regulation 46 and Schedule Affairs. 210 Creating Hope Since 85 Years Report on Corporate Governance 211 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 f. The Annual Report is made in accordance with Editions) and Sakaal (Mumbai edition). The annual / o Website o Shareholder feedback survey the Global Reporting Initiative (GRI) standards in half yearly / quarterly results were sent to the stock rd accordance to Core option. exchanges and are also displayed on the Company’s The Company’s website contains a separate section At its 83 Annual General Meeting, the Company website – www.cipla.com. In accordance with SEBI for investors. Information on various topics such as conducted a shareholder feedback survey. A report g. For the third year in a row, the Annual Report is circular dated 26th March, 2020, publication of the Board of Directors, committees of the Board, on the AGM feedback survey was placed before the prepared in accordance with the International advertisements in newspaper were exempted for all Management Council, Investor FAQs, Policies, Stakeholders Relationship Committee in November Integrated Reporting Council’s Integrated reporting events scheduled till 15th May, 2020 under regulation Annual Reports, Intimation to stock exchanges are 2019. The Committee noted that the average ( The Company disseminates the requisite corporate (i) Alteration of Memorandum of Association Certification by Global Chief Executive announcements including the Listing Regulation (ii) Adoption of new Articles of Association Officer and Global Chief Financial Officer compliances through NSE Electronic Application Processing System (NEAPS) / BSE Corporate (iii) Authorisation for issuance of equity shares / other securities convertible into equity shares upto H2000 crores The Global Chief Executive Officer and Global Chief Compliance & Listing Centre. The NEAPS / BSE’s (iv) Authorisation for issuance of debt securities upto H2000 crores Financial Officer of the Company have certified to the Listing Centre is a web-based application and (v) Continuation of Dr Y K Hamied as Director Board on the financial statements as required under periodical fillings like shareholding pattern, (vi) Continuation of Mr M K Hamied as Director Regulation 17(8) read with Part B of Schedule II of the corporate governance report, financial results, Listing Regulations. The certification by Global Chief material / price sensitive information, etc., are filed o The following Special Resolutions were passed at the Company’s AGM held on 16th August, 2019: Executive Officer and Global Chief Financial Officer is electronically on such designated platforms. enclosed as Annexure D (i) Re-appointment of Mr Ashok Sinha as an Independent Director of the Company o Annual Report (ii) Re-appointment of Dr Peter Mugyenyi as an Independent Director of the Company Shareholder Information and Communication: The Annual Report for FY 2019-20 is uploaded on (iii) Re-appointment of Mr Adil Zainulbhai as an Independent Director of the Company the Company’s website and will be circulated to (iv) Re-appointment of Ms Punita Lal as an Independent Director of the Company o Financial Results members and others entitled thereto in electronic (v) Authorisation for issuance of equity shares / other securities convertible into equity shares up to H3000 mode. The Annual Report will also be submitted to During the year, financial results were published in crores the stock exchanges. the following newspapers: Business Standard (All 212 Creating Hope Since 85 Years Report on Corporate Governance 213 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 o No resolution was passed through postal ballot during FY 2019-20. Market Price Data for the period from 1st April, 2019 to 31st March, 2020 o None of the business proposed to be transacted at the ensuing AGM require passing of resolution through postal BSE Limited National Stock Exchange of India Limited Luxembourg Stock Exchange ballot Month Equity Shares GDRs (FY 2019-20) High Low Number of High Low Number of High Low (H) (H) Shares Traded (H) (H) Shares Traded (USD) (USD) General Shareholder Information April 575.65 515.90 8011573 575.95 516.30 61037752 8.16 7.53 May 585.50 530.30 3071978 586.00 529.60 53873732 8.29 7.75 o Date, Time and Venue of the AGM Thursday, 27th August, 2020 at 3.00 p.m. June 574.30 529.00 980623 575.00 528.65 28483771 8.20 7.66 July 566.05 506.40 1143664 566.50 506.00 30720927 8.11 7.52 The Company is conducting the annual general meeting through Video August 526.50 449.50 2668292 527.00 449.20 53033646 7.42 6.46 Conferencing / Other Audio-Visual means. For further details please refer September 482.55 418.00 1341229 482.50 418.00 40541060 6.66 6.00 to the Notice of AGM. October 480.00 389.55 2748385 478.95 389.55 73260629 6.68 5.75 o Financial Calendar 1st April to 31st March of the next calendar year November 492.00 435.60 10297388 492.30 435.40 89312346 6.77 6.21 December 487.00 444.55 1646369 487.00 444.60 42561498 6.74 6.30 o Adoption of Financial Results (Tentative Schedule, subject to change) January 487.25 442.40 1469417 487.45 442.10 51466102 6.83 6.26 For the quarter ending 30th June, 2020 Friday, 7th August, 2020 February 462.85 398.00 2427844 464.35 398.05 68312558 6.32 5.57 For the quarter and half year ending Friday, 6th November, 2020 March 471.00 356.75 3649932 472.00 355.30 118849332 6.11 4.90 30th September, 2020 For the quarter and nine months Friday, 5th February, 2021 Performance in comparison to NSE Nifty – Performance in comparison to BSE SENSEX – ending 31st December, 2020 FY 2019-20 FY 2019-20 For the fourth quarter and financial Friday, 14th May, 2021 Year ending 31 st March, 2021 120 120 o Trading window closure for financial From the 1st day from close of quarter till the completion of 48 hours after 110 110 results the UPSI becomes generally available o Date of Book Closure Thursday, 13th August, 2020 to Thursday, 27th August, 2020, both days 100 100 inclusive 90 90 o Dividend and Dividend Payment Not Applicable Date 80 80 o Listing on Stock Exchanges Equity Shares: 70 70 1. BSE Limited Phiroze Jeejeebhoy Towers, Jul-19 Jul-19 Jun-19 Jun-19 Apr-19 Apr-19 Oct-19 Oct-19 Jan-20 Jan-20 Sep-19 Sep-19 Dec-19 Dec-19 Aug-19 Aug-19 Nov-19 Nov-19 Feb-20 Feb-20 Mar-20 Mar-20 Dalal Street, Mumbai - 400001 May-19 May-19 Cipla Share Price Nifty Cipla Share Price BSE Sensex 2. National Stock Exchange of India Limited Exchange Plaza, Plot no. C/1, G Block, Bandra Kurla Complex, Bandra Address for Correspondence (East), Mumbai – 400 051 Contact details Address Global Depository Receipts (GDRs): For Corporate Mr Rajendra Chopra Cipla Limited Governance, IEPF and Company Secretary & Compliance Cipla House, Societe De La Bourse De Luxembourg, Societe Anonyme, 35A other Secretarial matters Officer Peninsula Business Park, Boulevard Joseph II, L-1840 Luxembourg Email: [email protected] Ganpatrao Kadam Marg, The Company has paid the requisite annual listing fees to the National For Financial Statements Mr Naveen Bansal Lower Parel, Stock Exchange of India Limited and BSE Limited for FY 2020-21. The related matters and Head Investor Relations Mumbai – 400 013 Company has also paid requisite annual listing fees to the Luxembourg Institutional Investors Email: [email protected] Tel: (022) 2482 6000/6222 Stock Exchange for FY 2019-20. For Corporate Ms Heena Kanal Fax: (022) 2482 6120 o Stock Code 500087 on BSE Limited Communication related Vice-President, Corporate CIPLA EQ on National Stock Exchange of India Limited matters Communications o DR Symbol / CUSIP CIPLG / 72977209 Email: [email protected] o ISIN Number for NSDL & CDSL INE059A01026 For share transfer, KFin Technologies Private Limited Selenium Tower B, transmission, National (Share Transfer Agents) Plot No.: 31 & 32, Electronic Clearing Email: [email protected] Gachibowli, Financial District, Service (NECS), Nanakramguda, dividend, Serilingampally, Hyderabad – 500 032, dematerialisation, etc. Telangana Tel: (040) 6716 2222 / 1511 Fax: (040) 2300 1153 214 Creating Hope Since 85 Years Report on Corporate Governance 215 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Distribution of shareholding as on 31st March, 2020 (Class-wise distribution of equity shares) List of credit ratings obtained / revision Category No. of Folios % of Total No. of Shares % of Total During FY 2019-20, credit rating of the following instruments was done by India Ratings & Research Private Limited: 1 - 5000 240086 98.83 31094091 3.86 5001 - 10000 897 0.37 6571188 0.82 10001 - 20000 569 0.23 8112734 1.01 Instrument Type Rating/Outlook Rating Action Credit rating agency 20001 - 30000 273 0.11 6684885 0.83 Proposed non-convertible debentures Provisional IND AAA/Stable India Ratings and 30001 - 40000 177 0.07 6244881 0.77 (NCDs)* Affirmed Research Private 40001 - 50000 135 0.06 6116755 0.76 Commercial paper (CP)* IND A1+ Limited 50001 - 100000 270 0.11 19161043 2.38 *No NCDs or commercial papers have been issued by the Company during the FY 2019-20. 100001 & Above 510 0.21 722249752 89.58 TOTAL 242917 100.00 806235329 100.00 Plant locations of Cipla Limited as on 31st March, 2020 Plant Type Plant Address Shareholding Pattern as on 31st March, 20206 Active Pharmaceutical Ingredients Virgonagar, Old Madras Road, Bengaluru – 560 049, Karnataka (API) Manufacturing Facility Bommasandra-Jigani Link Road, Industrial Area, KIADB 4th Phase, Bengaluru – 560 099, Karnataka Active Pharmaceutical Ingredients MIDC, Patalganga-410220, District: Raigad, Maharashtra 22.86 Promoter and Promoter Group Indian Institutional Investors (API) and Formulations MIDC Industrial Area, Kurkumbh-413802, Daund, District: Pune, Maharashtra Manufacturing Facility 0.07 36.65 Foreign Institutional Investors GDR Formulations Manufacturing Verna Industrial Estate, Verna-403722, Salcette, Goa 22.45 Others Facility Village Malpur Upper, P.O. Bhud, Nalagarh, Baddi–173 205, District: Solan, 17.97 Himachal Pradesh Village Kumrek, Rangpo-737132, District: East Sikkim, Sikkim Indore SEZ, Phase II, Sector III, Pharma Zone, P.O. Pithampur–454 774, Dematerialisation of Shares and Liquidity District: Dhar, Madhya Pradesh Taza Block, Amba Tareythang Illaka, Rorathang- 737 133, District: East Sikkim, As on 31st March, 2020, 79,64,61,228 shares of the share capital was held in dematerialised form. Break-up of shares Sikkim held in physical and dematerialised form as on 31st March, 2020: Shareholding No. of Folios % of Total No. of Shares % of Total Plant locations of subsidiary companies of Cipla Limited as on 31st March, 2020 Physical Mode 735 0.30 9774101 1.21 Plant Type Plant Address Dematerialised Mode 242182 99.70 796461228 98.79 Formulations Manufacturing Plot Number 344-345, Kundaim Industrial Estate, Kundaim, Goa – 403115 Facility Plot Number 346-348, Kundaim Industrial Estate, Kundaim, Goa – 403115 Total 242917 100.00 806235329 100.00 L-2, L-1/1, L-1/2/2, Additional MIDC Area, Satara - 415004 The equity shares of the Company are liquid and traded The Company has not issued any American Depository Plot No. 352, Kundaim Industrial Estate, Kundaim, Goa – 403115 in dematerialized form on BSE Limited and National Receipts (ADRs)/Warrants/ convertible instruments. J-4/2, Additional MIDC Area, Satara – 415004 Stock Exchange of India Limited. Tarpin Block, Rorathang, East District, Sikkim – 737133 During the year, the Company has granted stock options Plot 1-7, 1st Ring Road, Luzira Industrial Park P.O Box 34871, Kampala-Uganda Outstanding GDRs/ADRs/Warrants to its employees and those of its subsidiaries under Cipla Limited Employee Stock Option Scheme 2013-A. 7 Oser Avenue, Hauppauge, NY, USA, ZIP – 11788 The GDRs are listed on Luxembourg Stock Exchange The Company allots equity shares from time to time on 600 Old Willets, Path Hauppauge, NY, USA, ZIP – 11788 and the underlying equity shares are listed on BSE exercise of stock options by the employees pursuant to 550 South Research Place, Central Islip, NY, USA, ZIP – 11722 Limited and National Stock Exchange of India Limited. the provisions of the Securities and Exchange Board of 18 Golden Drive Morehill Benoni 1501 Each GDR represents one underlying equity share of the India (Share Based Employee Benefits) Regulations, 2014 1474 South Coast Road, Mobeni, Durban, Kwa-Zulu Natal, 4052 Company. The Company is governed by the rules and and the terms and conditions of Cipla Limited Employee regulations of the Luxembourg Stock Exchange. As on BP 4491 - 11850, Oum Azza, Ain Aouda, Rabat – Morocco Stock Option Scheme 2013-A. As on 31st March, 2020, 31st March, 2020, 5,94,032 GDRs were outstanding. Manufacturing of medical devices Plot No. 38 &39, Opp. Sagar Petrol Pump, Western Express Highway, Sativali, 58,61,104 stock options were outstanding under Cipla Tal. Vasai (E), Dist. Thane- 401208 Limited Employee Stock Option Scheme 2013-A. 6GRI 102-5, GRI 102-10 and GRI 102-45 216 Creating Hope Since 85 Years Report on Corporate Governance 217 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Analytical Research & PEE – DEE Infotech, Plot No.: GEN – 40, TTC, MIDC Behind Millennium Park, Bioequivalence Division Near NELCO, Mahape, New Mumbai – 400 710 2 5 5 st (2) Nil Nil Nil Nil Nil Nil Nil Pathology Lab & Screening Area 1 Floor, Jayshree Plaza, L.B.S. Marg, Bhandup West, Near Dreams Mall, Nil Mumbai, Maharashtra 400078 Analytical Research Division EL-87, Electronic Zone, MIDC Industrial Area, Mahape, Navi Mumbai, Chairpersonships (Stability Samples Storage) Maharashtra 400701 March, 2020 st Testing Laboratory (Testing of Building A8, Antonie Van Leeuwenhoeklaan 9, 3721 MA, Bilthoven, The Netherlands 31 1 7 5 9 3 Nil Nil Nil Nil Nil pharmaceutical product) Nil Indian public companies as on Chairpersonships held in other Memberships No. of Committee memberships/ Declaration of Compliance with the Code of Conduct I hereby confirm that the Company has obtained from all the members of the Board and senior management March, st personnel, affirmation that they have complied with the Code of Conduct laid down by the Company for the financial ------year ended 31st March, 2020. -- For Cipla Limited (1) J. K. Cement Limited Cement K. J. The Tata Power Company Limited RelianceIndustries Ltd Network18 Media & Investments Ltd Ltd Broadcast TV18 LarsenToubro & Ltd CEAT Ltd CEAT Max Financial Services Ltd Larsenand Toubro Ltd • • • • • • Name of other listed companies where he/she is a Director as on 31 2020 2020 • • Date: 15th May, 2020 Umang Vohra Place: New Jersey, USA Managing Director and Global Chief Executive Officer 1 1 1 2 8 7 4 March, Nil Nil Nil Nil st No. of Directorships held in other Indian companies as 31 on 2020 2019 held on held No No Yes Yes Yes Yes Yes Yes Yes Yes Yes August, th 16 at last AGM Attendance (4) (4) (5) (3) 0(1) 6(6) 6(6) 6(6) 6(6) 4(6) 5 (6) 6(6) 6(6) 6(6) 6(6) (total held in No. of Board during tenure) during the FY 2019-20 meeting attended attended meeting st 2020 Tenure March, 6.1 9.4 2.5 3.7 5.8 6.8 5.4 4.8 4.4 47.8 42.7 as on 31 on as (in years) (in July, 2019. st th th Date of Original 12 13 2016 2017 2015 2014 2014 2010 1977 August, January, July, 2014 July, 2015 July, 2013 July, 1972 th February, th rd st th th November, th September, November, November, 16 th st 10 21 Appointment 16 10 12 23 1 6 Independent Directors Category Executive Directors Non- / Executive Non -Independent Directors (6) All the directorships held by the directors in other listed companies are in the capacity of Independent capacityDirectors. of the in companies listed are other in directors the by held directorships the All Committeesconsidered for the purpose are those prescribed under theand Listingconferencing. unlistedvideo Regulations through Indian meetings publicviz. three Audit limitedCommitteeattended year, companies and the Stakeholders during held including Relationship meetings Board Ciplasix of Committee Limited. Out conferencing. video oflisted through Indian meeting public one companiesattended year, the during held meetings Board six the of Out conferencing. video through meeting two attended year, the during held meetings Board six the of Out 1 Directorw.e.f positionResigned the of from Ms Punita Lal Punita Ms (DIN: 03412604) Mr Umang Vohra (DIN:02296740) Mr Ashok Sinha (DIN:00070477) Mr M K Hamied K M Mr (DIN: 00029084) Mr Peter Lankau Peter Mr Name (DIN:07688110) Mr S Radhakrishnan (DIN:02313000) Ms Samina Hamied (DIN:00027923) Mugyenyi Peter Dr (DIN:06799942) Zainulbhai Adil Mr (DIN:06646490) Ms Naina Lal Kidwai (DIN: 00017806) Dr Y K Hamied K Y Dr (DIN:00029049) Annexure A – Statutory details of Board of Directors A – Annexure Statutory (1) (2) (3) (4) (5) (6) The average attendance at the meetings of the Board of Directors during FY 2019-20 was 93.44% 218 Creating Hope Since 85 Years Report on Corporate Governance 219 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure B Annexure C CERTIFICATE OF NON-DISQUALIFICATION OF DIRECTORS Independent Assurance Statement (Pursuant to Regulation 34(3) and Schedule V Para C clause (10)(i) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015) Scope and Approach Responsibility (CSR) expenses incurred by the Company and contributions to the Cipla Foundation, are based To, DNV GL Business Assurance India Private Limited on audited financial statements presented in the Report, The Members of (‘DNV GL’) was engaged by the management of which is subject to a separate independent statutory Cipla Limited Cipla Limited (‘Cipla’, Corporate Identity Number audit process and was not included in our scope of Cipla House, L24239MH1935PLC002380) to undertake an work. As part of our assurance process, we did not Peninsula Business Park, independent assurance of the Company’s sustainability engage with any external stakeholders. Ganpatrao Kadam Marg, performance in its printed Annual Report 2019-20 (‘the Lower Parel – 400 013 Report’). The disclosures in this Report are prepared Mumbai based on the Guiding Principles and Content Elements Responsibilities of the Management of Cipla of the International 220 Creating Hope Since 85 Years Report on Corporate Governance 221 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 remotely with the facilities at Verna in Goa, Indore in the Report based on the GRI Standards chosen by attention that Cipla has missed out any known material Completeness Madhya Pradesh, Kurkumbh in Maharashtra, Rangpoo Cipla to bring out its non-financial performance. issues, nor the Report does not meet the requirements in Sikkim and Durban in South Africa. We adopted a risk- related to the Principle of Materiality. How much of all the information that has been identified based approach, i.e. we concentrated our verification During the assurance process, we did not come across as material to the organisation and its stakeholders is efforts on the issues of high material relevance to limitations to the scope and boundary of the agreed Responsiveness reported Company’s pharmaceutical business and its key assurance engagement. The extent to which an organization responds to The Report has adequately addressed the disclosure stakeholders. We undertook the following activities: stakeholder issues. requirements of 222 Creating Hope Since 85 Years Report on Corporate Governance 223 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure D Exhibit A Certificate by CEO/CFO to the Board of Directors Nomination, Remuneration and Board Diversity Policy We, Mr Umang Vohra, Managing Director and Global Chief Executive Officer and Mr Kedar Upadhye, Global Chief PREAMBLE AND TITLE and clarification or other governmental instruction Financial Officer hereby certify that: and/or mandatory standards as may be applicable This Policy shall be called the Nomination, Remuneration to the Company from time to time. A. We have reviewed financial statements and the cash flow statements (standalone and consolidated) for the year and Board Diversity Policy (the “Policy”). ended 31st March, 2020 and that to the best of our knowledge and belief: b) “Company” means Cipla Limited. The Board of Directors (the “Board”) at their meeting (1) these statements do not contain any materially untrue statement or omit any material fact or contain held on 22nd May, 2019 has approved and adopted c) “Employee” means any person who is in the statements that might be misleading; this revised Policy, on the recommendation of the permanent employment of the Company. Nomination and Remuneration Committee (“NRC”), in (2) these statements together present a true and fair view of the Company’s affairs and are in compliance with d) “Senior Management Personnel” means officers/ compliance with the requirements under the provisions existing accounting standards, applicable laws and regulations. personnel of the Company who are members of its of the Companies Act, 2013 and rules made thereunder Core Management Team (i.e. Management Council (the “Act”), and the Securities and Exchange Board of B. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year Members) excluding Board members comprising all India (Listing Obligations and Disclosure Requirements) which are fraudulent, illegal or violative of the Company’s code of conduct. members of management one level below the chief Regulations, 2015 (“the Listing Regulations”) as amended executive officer / managing director / whole time C. We accept responsibility for establishing and maintaining internal controls for financial reporting and that we from time to time. director / manager (including chief executive officer have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting / manager, in case they are not part of the Board) and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such and shall specifically include chief financial officer internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these OBJECTIVE and company secretary (except administrative deficiencies. This Policy is intended to achieve the following objectives: support staff/executive assistants), including the Functional Heads. D. We have indicated to the auditors and the Audit Committee that: a) To lay down criteria and terms and conditions with regard to identifying persons who are qualified to (1) there has not been any significant changes in internal control over financial reporting during the year under Words and expressions not defined in this policy shall become Directors (Executive and Non-executive reference; have the same meaning as contained in the Act and the including Independent Directors), Key Managerial Listing Regulations. (2) there has been no significant change in the accounting policies requiring disclosures except as mandated by Personnel and persons who may be appointed in the Section 133 of the Companies Act, 2013 (“the Act”), read with Rule 3 of the Companies (Indian Accounting senior management positions. Standard) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016, and APPLICABILITY OF PARTS b) To provide framework for remuneration of the (3) there has not been during the year, any instances of significant fraud of which we had become aware Directors, Key Managerial Personnel and Senior a) Part I provides for criteria for appointment of and the involvement therein, if any, of the management or an employee having a significant role in the Management Personnel and align with the Directors, Key Managerial Personnel, Senior Company’s internal control system over financial reporting. Company’s business strategies, values, key priorities Management Personnel and other employees; and goals. b) Part II deals with remuneration of Directors, c) To provide for rewards linked directly to the effort, Key Managerial Personnel, Senior Management For Cipla Limited For Cipla Limited performance, dedication and achievement of Personnel and other employees (parameters, Company’s targets by the employees. components and limit). d) To lay down approach for Board diversity. PART I: APPOINTMENT Umang Vohra Kedar Upadhye Managing Director and Global Chief Financial Officer GENERAL CRITERIA Global Chief Executive Officer SCOPE a) The Board shall comprise of optimum number of Place: New Jersey, USA Place: Mumbai This Policy does not cover temporary or contractual Directors as is necessary to effectively manage Date: 15th May, 2020 employees, trainees, apprentices, consultants engaged the affairs of the Company. Subject to a minimum on a retainer basis or otherwise and casual labour. of 3 and maximum of 15, the Board shall have an appropriate combination of Executive, Non-Executive, Independent and Women. DEFINITIONS b) The NRC shall be responsible for identifying suitable a) “Applicable Law” includes any statute, law, candidate for appointment as Director of the regulation, ordinance, rule, judgment, order, decree, Company. While evaluating a person for appointment bye-law, clearance, directive, guideline, notification / re-appointment as Director, the Committee shall 224 Creating Hope Since 85 Years Report on Corporate Governance 225 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 consider and evaluate number of factors including o Should not hold any Board / employment position Chairperson to the Board. The removal shall shall have the authority to revise the remuneration from but not limited to background, knowledge, skills, with a competitor in the geographies where the be finally approved by the shareholders’ basis time to time. abilities (ability to exercise sound judgement), Company is operating. However, the Board may in recommendation of the Board. professional experience and functional expertise, special circumstances waive this requirement. The Managing Director / Whole-time Director (other educational and professional background, personal c) The removal of KMP and senior management than promoters) shall also be eligible for the grant of accomplishment, age, experience of pharma sector o Has attained minimum age of 25 years and is not personnel shall be approved by the Board basis stock options, under the applicable Employee Stock / industry, marketing, technology, finance and other older than 70 years. recommendation of the NRC and MD&GCEO. Option Scheme of the Company, as may be decided by disciplines relevant to the business etc. and such the Nomination and Remuneration Committee from time o Does not hold independent directorship in more other factors that the Committee might consider to time. than seven listed entities. PART II: REMUNERATION relevant and applicable from time to time towards achieving a diverse Board. o Does not hold directorship in more than three listed BOARD MEMBERS REMUNERATION TO NON-EXECUTIVE entities if serving as a whole time director in any c) The proposed candidate shall possess appropriate a) The overall limits of remuneration of the Board DIRECTORS listed entity. expertise, experience and knowledge in one or more members including executive Board members (i.e. Pursuant to the provisions of section 197 of the Act and fields of finance, law, management, sales, marketing, managing director, whole-time director, executive An Independent Director shall be under the obligation the shareholders’ approval, the Board has approved administration, medical science, pharmaceutical, directors etc.) are governed by the provisions to inform the Board of Directors of any change in the following remuneration for Non-Executive Directors corporate governance or such other areas related of section 197 of the Act read with the Rules and circumstances which may affect his/her independence. (including Independent Directors): to the Company's business as determined by the Schedules made thereunder and shall be approved NRC. The re-appointment / extension of term of the Director by the shareholders of the Company. Non-Executive Directors shall be entitled to sitting fees shall be on the basis of their performance evaluation of H50,000 per Board meeting and per Board committee d) During the term of the office, every director shall - b) Within the overall limit approved by the shareholders, report. meetings except for Operations and Administrative on the recommendation of the NRC, the Board Committee. i. uphold ethical standards of integrity and APPOINTMENT OF KEY MANAGERIAL PERSONNEL shall determine the remuneration. The Board can probity; AND SENIOR MANAGEMENT PERSONNEL (NOT BEING determine different remuneration for different The Non-Executive Directors shall be entitled to such ii. act objectively and constructively; A DIRECTOR) directors on the basis of their role, responsibilities, commission as approved by the Board within the duties, time involvement etc. overall limits approved by the shareholders. In no case iii. exercise responsibilities in a bona-fide manner a) The Managing Director and Global Chief Executive the commission shall exceed 1% of the profits of the in the interest of the Company; Officer (“MD & GCEO”) shall be responsible for c) While determining the remuneration to Directors, Company computed as per the applicable provisions of identifying suitable candidate for the position of Key KMP, Senior Management Personnel and other iv. shall be free from any disqualifications as the Act Managerial Personnel i.e. Chief Financial Officer, employees, the following shall be ensured: stipulated under the Act as well as the Listing Company Secretary and other Senior Management The sitting fee shall be payable immediately after the Regulations; o the level and composition of remuneration is Personnel; Board / Board committee meeting to those directors reasonable and sufficient to attract, retain and v. shall be able to devote sufficient time and who attend the meeting. The Commission shall be b) The appointment of Key Managerial Personnel and motivate directors, KMP, senior management efforts in discharge of duties and responsibilities payable at the end of the financial year after approval Senior Management Personnel shall be approved and other employees of the quality required to effectively. of the annual financial statements by the Board. by the Board on recommendation of the NRC and run the Company successfully; APPOINTMENT OF MANAGING DIRECTOR/ the MD & GCEO; The Promoter Directors and the Independent Directors o Relationship of remuneration to performance is WHOLE-TIME DIRECTOR will not be entitled for grant of Stock Options. APPOINTMENT OF OTHER EMPLOYEES clear and meets appropriate benchmarks and The Board based on the recommendation of the NRC All the Directors shall be entitled to reimbursement The appointment of other employees shall be made on o Remuneration to directors, KMP, senior shall be responsible for identifying suitable candidate of reasonable expenditure incurred by him/her for the basis of the experience, qualification, expertise of management and other employees involves a for the position of Managing Director/Whole-time attending Board/Committee meetings, general meetings, the individual as well as the roles and responsibilities balance of fixed and incentive pay reflecting Director. court convened meetings, meetings with shareholders/ required for the position and shall be approved by the short and long term performance objectives creditors/management, site visits, induction and training The terms and conditions of the appointment shall be in Human Resource Department under the overall control appropriate to the working of the Company and programmes and in obtaining professional advice from accordance with the provisions of Applicable Law. of the MD & GCEO. its goals. independent advisors in furtherance of his/her duties as APPOINTMENT OF INDEPENDENT DIRECTOR REMOVAL OF DIRECTORS, KMP OR SENIOR a director. MANAGEMENT PERSONNEL REMUNERATION TO MANAGING DIRECTOR/ While evaluating a person for appointment / WHOLE-TIME DIRECTOR re-appointment as an Independent Director, the a) The removal of directors, KMP or senior management REMUNERATION TO KEY MANAGERIAL Committee shall ensure that the proposed candidate personnel may be warranted due to reasons such The shareholders shall approve maximum permissible PERSONNEL, SENIOR MANAGEMENT satisfies the following additional criteria: as disqualification prescribed under the applicable amount which can be paid to the Managing Director/ PERSONNEL AND OTHER EMPLOYEES (NOT laws, performance, disciplinary reasons, etc. Whole-time Director. Within the overall limits approved BEING A DIRECTOR) o Meet the baseline definition and criteria of by the shareholders, on the recommendation of the “independence” as set out in section 149 of the Act, b) The removal of any director can be recommended Nomination and Remuneration Committee, the Board The MD & GCEO shall propose the remuneration for the the Listing Regulations and other applicable laws. by NRC in consultation with the Chairman / Vice KMPs and Senior Management Personnel to the NRC. 226 Creating Hope Since 85 Years Report on Corporate Governance 227 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 The Board shall have the final authority to approve the amongst other relevant factors. The NRC will ensure remuneration based on recommendation of NRC. that no person is discriminated against on grounds Exhibit B of religion, race, gender, pregnancy, childbirth Dividend Distribution Policy The remuneration including revision in remuneration or related medical conditions, national origin or of other employees shall be decided by the Human ancestry, marital status, age, sexual orientation or Resources Department in consultation with the matrix any other personal or physical attribute which does TITLE PARAMETERS FOR DIVIDEND PAYOUT manager within the overall framework of compensation not speak to such person’s ability to perform as a and appraisal practices of the Company and under the This Policy shall be called ‘Dividend Distribution Policy’. Board member. a. The circumstances under which the shareholders overall authority of the MD & GCEO. may or may not expect dividend: c) All appointments to the Board (as recommended by The remuneration may include basic salary, allowances, COMMENCEMENT The Company intends to offer maximum return on the NRC) shall be made on merit while taking into perquisites, performance linked incentive, retirement investment to the shareholders keeping in mind the account suitability for the role, Board balance and This Policy shall come into force for accounting periods benefits, joining / retention bonus, long-term or underlying growth and future of the Company. However, composition, the required mix of skills, background beginning from 1st April 2016. retention incentives, leave travel concessions, ex-gratia the Board may consider not declaring any dividend or and experience (including consideration of diversity / one-time payments, medical benefits, housing / other declare a lower rate of dividend based on the following: and ethnicity). Other relevant matters such as loans at concessional rates, severance package or any independence and the ability to fulfil required OBJECTIVE other component / benefits. 1. Prospective growth opportunities/threats/ time commitments in the case of Independent and a. This Policy is framed in accordance with the concerns of the Company; The Key Managerial Personnel, Senior Management Non-Executive Directors will also be taken into requirement under Regulation 43A of the Securities 2. Inadequacy or absence of profits; Personnel and other employees of the Company (not account. and Exchange Board of India (Listing Obligations being a Director) shall also be eligible for grant of stock and Disclosure Requirements) Regulations, 2015 d) The NRC shall monitor and periodically review the 3. Higher working capital requirements for options, wherever deemed fit, under the applicable (including any amendments thereof). Board Diversity and recommend to the Board so as business operations of the Company. Employee Stock Option Scheme of the Company, as to improve one or more aspects of its diversity and may be decided by the NRC from time to time. b. The Company shall make appropriate disclosures as b. Financial Parameters including Internal Factors measure progress accordingly. required under the Listing Regulations. that shall be considered while declaration of dividend: DIRECTORS AND OFFICERS LIABILITY e) The Company will be able to ensure Board diversity if shareholders are able to judge for themselves DEFINITIONS INSURANCE POLICY The financial parameters which would be considered whether the Board as constituted is adequately a. “Board” means the Board of Directors of Cipla while declaration of dividend by the Board are as All directors and officers (including Key Managerial diverse. The Company shall continue to provide Limited. follows: Personnel and Senior Management Personnel) of the sufficient information to the shareholders about the Company would be covered by the requisite Directors qualifications, expertise and characteristics of each b. “Company” means Cipla Limited. 1. Profits of the Company; Board Member. and Officers Liability Insurance Policy. 2. Past dividend pattern; c. “Policy” means this Policy, as amended from time to time. 3. Major capital expenditure to be incurred by the BOARD DIVERSITY ADMINISTRATION, REVIEW AND Company; AMENDMENT OF THE POLICY d. “Listing Regulations” means the Securities and a) The Company acknowledges the importance of Exchange Board of India (Listing Obligations 4. Cash flow requirements of the Company; diversity in its broadest sense in the Boardroom The NRC shall monitor and periodically review the Policy and Disclosure Requirements) Regulations, 2015 5. Debt-equity ratio of the Company; as a driver of Board effectiveness. Diversity and recommend the necessary changes to the Board (including any amendments thereof). encompasses diversity of perspective, experience, for its approval. 6. Cost of borrowing of the Company, keeping in education, background, ethnicity and personal e. “Financial year” shall mean the period starting from view the growth opportunities; The Global Chief Financial Officer and the Company st st attributes. The Company recognizes that gender 1 day of April and ending on 31 day of March 7. Debt obligations of the Company; diversity is a significant aspect of diversity and Secretary are jointly authorised to amend the policy every year. acknowledges the role that women with the right to give effect to any changes/amendments notified 8. Investments in new business; skills and experience can play in contributing to by Ministry of Corporate Affairs or the Securities and DECLARATION OF DIVIDEND 9. Provisioning for financial implications arising diversity of perspective in the Boardroom. Exchange Board of India or any other regulatory out of unforeseen events and/or contingencies; authority. The amended policy shall be placed before The declaration of dividend (including interim dividend) b) The NRC shall review and evaluate Board 10. Reputation of the Company the Board for noting and ratification. would be subject to compliance with the applicable composition to ensure that the Board and its provisions of the Companies Act, 2013 and rules made 11. Restrictions/covenants if any, contained in any Committees have the appropriate mix of skills, The Board shall have the power to amend any of the thereunder as amended from time to time. lender agreements or any other arrangement experience, independence and knowledge to ensure provisions of this Policy, substitute any of the provisions or agreement entered into by the Company. their continued effectiveness. In doing so, it will take with a new provision or replace this Policy entirely with into account diversity, including diversity of gender, a new Policy. 228 Creating Hope Since 85 Years Report on Corporate Governance 229 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 c. External Factors that shall be considered while 4. Additional investment in existing business(es); declaration of dividend: Independent Auditor’s Report 5. Declaration of dividend; Certain external factors could compel the Board To the Members of Cipla Limited Basis for Opinion of the Company to reflect on the dividend payout 6. Capitalisation of shares; for any financial year of the Company. Some of the 3. We conducted our audit in accordance with the 7. Buy back of shares; Report on the Audit of the Standalone external factors affecting the Company’s dividend Standards on Auditing specified under Section Financial Statements 143(10) of the Act. Our responsibilities under payment are: 8. General corporate purposes, including those standards are further described in the contingencies; 1. Regulatory requirements; Opinion Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We 9. Any other permitted usage as per the Companies 1. We have audited the accompanying standalone 2. Economic environment; are independent of the Company in accordance Act, 2013. financial statements of Cipla Limited (‘the with the Code of Ethics issued by the Institute of 3. Political/geographical situations; Company’), which comprise the Balance Sheet as e. Parameters with regard to various classes of Chartered Accountants of India (‘ICAI’) together at 31 March 2020, the Statement of Profit and Loss shares: with the ethical requirements that are relevant to 4. Inflation rate; (including Other Comprehensive Income), the Cash our audit of the financial statements under the Presently, the issued share capital of the Company Flow Statement and the Statement of Changes in 5. Industry Outlook for future years. provisions of the Act and the rules thereunder, and comprises of only one class of equity shares of H2 Equity for the year then ended, and a summary we have fulfilled our other ethical responsibilities d. Utilization of Retained Earnings: each. In the event of the Company issuing any other of the significant accounting policies and other in accordance with these requirements and the class(es) of shares, the Board shall consider and explanatory information. Code of Ethics. We believe that the audit evidence The Company believes in cash retention for growth, specify the other parameters to be adopted with 2. In our opinion and to the best of our information we have obtained is sufficient and appropriate to expansion and diversification including acquisitions respect to such class(es) of shares. to be made by it, and also as a means to meet and according to the explanations given to us, the provide a basis for our opinion. contingency. The retained earnings of the Company aforesaid standalone financial statements give the may be used in any of the following ways: AMENDMENTS information required by the Companies Act, 2013 Key Audit Matters (‘Act’) in the manner so required and give a true The Board shall have the power to amend any of the 1. Capital expenditure for working capital; and fair view in conformity with the accounting 4. Key audit matters are those matters that, in our provisions of this Policy, substitute any of the provisions principles generally accepted in India including professional judgment, were of most significance in 2. Organic and/or inorganic growth; with a new provision or replace this Policy entirely with Indian Accounting Standards (‘Ind AS’) specified our audit of the standalone financial statements of a new Policy. 3. Investment in new business(es); under Section 133 of the Act, of the state of affairs the current period. These matters were addressed in (financial position) of the Company as at 31 March the context of our audit of the standalone financial 2020, its profit (including other comprehensive statements as a whole, and in forming our opinion income), its cash flows and the changes in equity thereon, and we do not provide a separate opinion for the year ended on that date. on these matters. 5. We have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Drugs (Prices Control) Orders Act (DPCO) matters: Our audit of DPCO matters included, but was not The Company is regulated by National Pharmaceutical limited to, the following procedures: Pricing Authority, Government of India (NPPA). There a) Obtained an understanding of the management’s are a number of legal and regulatory cases, of which the process for updating the status of the matters, most significant is under Drugs (Prices Control) Orders assessment of accounting treatment in accordance Act (DPCO) as disclosed in Note 39 to the standalone with Ind AS 37, and for measurement of amounts financial statements, relating to overcharging of certain involved; drugs under DPCO. b) Evaluated the design and tested the operating According to NPPA’s public disclosure, the total demand effectiveness of key controls around above process; against the Company aggregates to H2,655.13 crore as at 31 March 2020, of which: c) Inspected correspondence with the Company’s a) H2,447.39 crore relates to matters pending at external legal counsel in order to corroborate our Honourable Bombay High Court, wherein the understanding of these matters, accompanied by Company has deposited H175.08 crore being discussions with both internal and external legal 50% of the total demand of H350.15 crore as at counsels. Tested the objectivity and competence of 1st August, 2003 under protest pursuant to direction such management experts involved; of Honourable Supreme Court of India; and 230 Creating Hope Since 85 Years Independent Auditor’s Report 231 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report Key audit matter How our audit addressed the key audit matter Key audit matter How our audit addressed the key audit matter b) H207.74 crore relates to other matters, wherein d) Obtained direct confirmation from the external The Company also has development and d) Performed substantive testing by selecting based on facts and legal advice, the Company legal counsel handling DPCO matters with commercialisation arrangements relating to research samples of revenue transactions pertaining to has recorded a charge of H7.00 crore (including respect to the legal determination of the liability and development of new products in the pharmaceutical sale of products during the year, and verified interest) during the year ended 31 March 2020 and arising from such litigation, conclusion of the sector. This includes in-licensing and out-licensing the underlying supporting documents including carries a total provision of H104.26 crore (including matters in accordance with the requirements of arrangements and other types of complex agreements. contracts, agreements, sales invoices and dispatch/ interest) as at 31 March 2020. Ind AS 37 and disclosures to be made in the shipping documents; financial statements. Evaluated the response We identified the recognition of revenue from The amounts involved are material and the application received from the external legal counsel to ensure operations as a key audit matter because: e) Performed cut-off testing procedures by testing of accounting principles as given under Ind AS 37, that the conclusions reached our supported by samples of revenue transactions recorded during Provisions, Contingent Liabilities and Contingent sufficient legal rationale; a) Accrual towards rebates, discounts, returns and the year in specific periods before and after year Assets (‘Ind AS 37’), in order to determine the amounts allowances is complex and requires significant end to conclude there has not been overstatement/ to be recognised as liability or to be disclosed as a e) Assessed the appropriateness of methods used, judgments and estimates in relation to complex understatement of revenue recorded for the year; contingent liability, is inherently subjective and needs and the reliability of underlying data for the contractual agreements/commercial terms across careful evaluation and significant judgement to be calculations made for quantifying the amounts various geographies. Any change in these estimates f) Obtained management workings for amounts applied by the management. involved. Tested the arithmetical accuracy of such can have a significant financial impact. recognised towards discount schemes, returns, calculations; and and rebates during the year and as at year end. On Considering the materiality and the inherent subjectivity b) The nature of development and commercialisation a sample basis, tested the underlying calculations which involves significant management judgment in f) Evaluated the Company’s disclosures for adequate arrangements are often inherently complex for amounts recorded as accruals and provisions predicting the outcome of the matter, DPCO matters disclosure regarding the significant litigations of and unusual, requiring significant management towards the aforementioned obligations, as per have been considered to be a key audit matter for the the Company. judgment to be applied in respect of revenue the terms of related schemes, contracts and current period audit. recognition. regulations, and traced the underlying data to Based on the audit procedures performed, the source documents; judgements made by the management were reasonable c) The Company considers revenue as key benchmark and disclosures made in respect of these matters were for evaluating performances and hence, there is g) Evaluated historical accuracy of the Company’s appropriate in the context of the standalone financial risk of revenue being overstated due to pressure to estimates of year-end accruals pertaining to statements taken as a whole. achieve targets, earning expectations or incentive aforesaid arrangements made in the previous Revenue from operations: (Refer note 1 and 27 to the Our audit included, but was not limited to, the following schemes linked to performance for a reporting years to identify any management bias; Standalone financial statements) procedures: period. h) Tested all the manual sales-related adjustments The Company recognises revenue from the sales of a) Obtained an understanding of the management’s d) Considering the widespread impact of the outbreak made to revenue comprising of variable pharmaceutical products to resellers or distributors, out process for revenue recognition (from sale to due to COVID-19, point of transfer of goods control consideration under Ind AS 115 to ensure the licensing arrangements and service fee. The Company customers, out-licensing arrangements and service (transit days) and probability of collection from appropriateness of revenue recognition during the recognises revenue from product sales when control fee), judgments in estimation and accounting customers was required to be re-assessed in certain year; and of the product transfers, generally upon shipment or treatment of discount schemes, returns, rebates geographies. delivery to a customer. The Company records product and regulatory compliance requirements; i) Evaluated the adequacy of disclosures in the sales net of estimated incentives/discounts, returns, standalone financial statements. rebates and other related charges. The actual point in b) Evaluated the design and tested the operating time when revenue is recognised varies depending on effectiveness of the Company’s internal controls, Based on audit procedures performed, we determined the specific terms and conditions of the sales contracts including general IT controls, key IT application that the revenue recognition and measurement is entered with customers. controls exercised by the management, over appropriate in the context of the standalone financial recognition of revenue and measurement of various statements taken as a whole. Further, the Company has a large number of customers discount schemes, returns and rebates; Recoverability of investments in subsidiaries: Our audit included, but was not limited to, the following operating in various geographies and sales contracts procedures: with customers have a variety of different terms relating c) Evaluated the terms of the licensing arrangements The Company has investments of H6,354.76 crore in to the recognition of revenue, the entitlement to sales to determine satisfaction of performance subsidiaries being carried at cost in accordance with a) Obtained an understanding of the management’s rebates, the right to return and price adjustments. Sales obligations under the contracts for appropriate Ind AS 27, Separate Financial Statements. The Company process for identification of impairment indicators arrangements in certain jurisdictions lead to material revenue recognition and tested allocation of assesses the recoverable amounts of each investment and tested the design and operating effectiveness deductions to gross sales in arriving at revenue. consideration between performance obligations to when impairment indicators exist by comparing the fair of internal controls over such identification and verify deferral of revenue in respect of unsatisfied value (less costs of disposal) and carrying amount of impairment measurement through fair valuation of performance obligations; that investment as on the reporting date. identified investments; 232 Creating Hope Since 85 Years Independent Auditor’s Report 233 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report Key audit matter How our audit addressed the key audit matter Key audit matter How our audit addressed the key audit matter The Company has recorded an impairment loss on b) Involved auditor’s experts to assess the Inventory existence: Our audit of existence of inventory included, but was investment in Cipla Biotec Limited (formerly known as appropriateness of the valuation methodologies not limited to, the following procedures: Cipla Biotec Private Limited) of H32.36 crore during used by the management; As at 31 March 2020, the Company held inventories of the year ended 31 March 2020. Refer note 5 to the H3,021.36 crore as disclosed in Note 10 to the standalone a) Obtained an understanding of the management’s standalone financial statements. c) Reconciled the cash flows to the business plans financial statements. Inventories mainly consist of raw process for inventory counts, including the changes approved by the respective Board of Directors of and packing material, work-in-progress, stock-in-trade, required thereto as a result of COVID-19 related Management’s assessment of whether there are the identified investee companies; finished goods and stores, spares and consumables. Due restrictions, and evaluated the design and tested impairment indications and estimate of the recoverable to inherent nature of the business and its widespread the operating effectiveness of key controls with amounts of the identified investments determined d) Evaluated and challenged management’s reach globally, inventories are kept at a number of respect to physical verification of inventory; through discounted cash flow valuation method assumptions such as implied growth rates during locations which include plants, loan licensing facilities, requires significant management judgment in carrying explicit period, terminal growth rate, targeting depots, cold storages and third-party warehouses. b) Inspected the instructions given by supervisory out the impairment assessment. The key assumptions savings and discount rate for their appropriateness As per the Company’s annual inventory verification teams to the management count teams; used in management’s assessment of the recoverable based on our understanding of the business of plan, management has performed physical verification c) Reviewed the management’s process for ensuring amounts include, but are not limited to, projections the respective investee companies, past results of the inventory at all locations, with the help of third that there was no movement of stock during the of future cash flows, growth rates, discount rates, and external factors such as industry trends party experts where required, under the supervision physical verification of inventory; estimated future operating and capital expenditure. and forecasts, including the possible impact of of finance team, over the period from January 2020 to COVID -19 pandemic on such assumptions; Changes to these assumptions could lead to material mid-March 2020. d) Appointed independent auditor’s experts for changes in estimated recoverable amounts, resulting in e) Obtained and evaluated sensitivity analysis observing inventory counts at certain locations; either impairment or reversals of impairment taken in Due to outbreak of the COVID-19, there has been performed by the management on key assumptions prior years. a lockdown enforced in various geographies near e) Observed live video feeds of inventory counts of implied growth rates during explicit period, year end and several restrictions were imposed by for certain locations subsequent to year-end and terminal growth rates and discount rates; Considering the materiality of amounts involved, and the respective governments across the globe on gathered video evidence of warehouses, inventory the inherent subjectivity involved in estimating future travel and movement considering public health and f) Tested the mathematical accuracy of the counts, and other safeguarding procedures, and cash flows which required significant management safety measures which resulted into complexities for management computations with regard to cash performed roll-back procedures; judgment, assessment of impairment losses to be us to observe the physical verification of inventory flows and sensitivity analysis; recognised, if any, on the carrying value of aforesaid conducted by the management. This was resolved by f) Performed roll-forward procedures on inventory investments has been considered to be a key audit g) Performed independent sensitivity analysis of applying alternate audit techniques with the help of counts performed on locations before the lockdown matter for the current period audit. aforesaid key assumptions to assess the effect audio/video devices and use of other auditors, etc., as had commenced; of reasonably possible variations on the current further described in our audit procedures. g) Recounted a sample of inventory items at each estimated recoverable amount for each of the As a result of the above-mentioned complexities and location to confirm management count; identified investments to evaluate sufficiency due to the size, number of locations and geographical of headroom between recoverable value and h) Obtained direct confirmations from the third-party spread of the inventories as at year end, we determined carrying amount; and warehouses and loan licensing units with respect to the existence of inventory to be a key audit matter for the existence of the inventories; and h) Evaluated the adequacy of disclosures given in the current period audit. the standalone financial statements, including i) Ensured that the differences noted in management’s disclosure of significant assumptions, judgements physical verification of inventory from book records and sensitivity analysis performed, in accordance were adequately adjusted in books of account. with applicable accounting standards. Based on the audit procedures performed, the Based on the audit procedures performed, we management’s assertion on existence of inventories determined that the management’s assertion on was determined to be appropriate in the context of the the recoverability of investments in subsidiaries is standalone financial statements taken as a whole. appropriate in the context of the standalone financial statements taken as a whole. 234 Creating Hope Since 85 Years Independent Auditor’s Report 235 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report Information other than the Financial implementation and maintenance of adequate misstatement resulting from fraud is higher 13. We also provide those charged with governance Statements and Auditor’s Report thereon internal financial controls, that were operating than for one resulting from error, as fraud may with a statement that we have complied with relevant effectively for ensuring the accuracy and involve collusion, forgery, intentional omissions, ethical requirements regarding independence, and 6. The Company’s Board of Directors is responsible completeness of the accounting records, relevant misrepresentations, or the override of internal to communicate with them all relationships and for the other information. The other information to the preparation and presentation of the financial control; other matters that may reasonably be thought to comprises the information included in the Annual statements that give a true and fair view and are bear on our independence, and where applicable, Report, but does not include the standalone free from material misstatement, whether due to o Obtain an understanding of internal controls related safeguards. financial statements and our auditor’s report fraud or error. relevant to the audit in order to design audit thereon. procedures that are appropriate in the 14. From the matters communicated with those charged 8. In preparing the financial statements, management circumstances. Under Section 143(3)(i) of the with governance, we determine those matters Our opinion on the standalone financial statements is responsible for assessing the Company’s ability Act, we are also responsible for expressing our that were of most significance in the audit of the does not cover the other information and we do not to continue as a going concern, disclosing, as opinion on whether the Company has adequate financial statements of the current period and express any form of assurance conclusion thereon. applicable, matters related to going concern internal financial controls with reference to are therefore the key audit matters. We describe and using the going concern basis of accounting financial statements in place and the operating these matters in our auditor’s report unless law or In connection with our audit of the standalone unless management either intends to liquidate the effectiveness of such controls; regulation precludes public disclosure about the financial statements, our responsibility is to read the Company or to cease operations, or has no realistic matter or when, in extremely rare circumstances, other information and, in doing so, consider whether alternative but to do so. o Evaluate the appropriateness of accounting we determine that a matter should not be the other information is materially inconsistent policies used and the reasonableness of communicated in our report because the adverse with the standalone financial statements or our 9. Board of Directors is also responsible for overseeing accounting estimates and related disclosures consequences of doing so would reasonably be knowledge obtained in the audit or otherwise the Company’s financial reporting process. made by management; expected to outweigh the public interest benefits of appears to be materially misstated. If, based on the such communication. work we have performed, we conclude that there is o Conclude on the appropriateness of a material misstatement of this other information, Auditor’s Responsibilities for the Audit of the management’s use of the going concern basis we are required to report that fact. We have Financial Statements of accounting and, based on the audit evidence Report on Other Legal and Regulatory nothing to report in this regard. obtained, whether a material uncertainty exists Requirements 10. Our objectives are to obtain reasonable assurance related to events or conditions that may cast about whether the financial statements as a whole significant doubt on the Company’s ability to 15. Based on our audit, we report that the Company Responsibilities of Management and Those are free from material misstatement, whether continue as a going concern. If we conclude that has paid remuneration to its directors during the Charged with Governance for the Standalone due to fraud or error, and to issue an auditor’s a material uncertainty exists, we are required year in accordance with the provisions of and limits Financial Statements report that includes our opinion. Reasonable to draw attention in our auditor’s report to the laid down under Section 197 read with Schedule V assurance is a high level of assurance, but is not a related disclosures in the financial statements to the Act. 7. The accompanying standalone financial statements guarantee that an audit conducted in accordance or, if such disclosures are inadequate, to have been approved by the Company’s Board of with Standards on Auditing will always detect a modify our opinion. Our conclusions are based 16. As required by the Companies (Auditor’s Report) Directors. The Company’s Board of Directors is material misstatement when it exists. Misstatements on the audit evidence obtained up to the date Order, 2016 (‘the Order’) issued by the Central responsible for the matters stated in Section 134(5) can arise from fraud or error and are considered of our auditor’s report. However, future events Government of India in terms of Section 143(11) of of the Act with respect to the preparation of these material if, individually or in the aggregate, they or conditions may cause the Company to cease the Act, we give in the Annexure I a statement on standalone financial statements that give a true could reasonably be expected to influence the to continue as a going concern; and the matters specified in paragraphs 3 and 4 of the and fair view of the financial position, financial economic decisions of users taken on the basis of Order. performance including other comprehensive these financial statements. o Evaluate the overall presentation, structure 17. Further to our comments in Annexure I, as required income, changes in equity and cash flows of the and content of the financial statements, 11. As part of an audit in accordance with Standards by Section 143(3) of the Act, based on our audit, we Company in accordance with the accounting including the disclosures, and whether the on Auditing, we exercise professional judgment report, to the extent applicable, that: principles generally accepted in India, including financial statements represent the underlying and maintain professional skepticism throughout transactions and events in a manner that the Ind AS specified under Section 133 of the Act. a) We have sought and obtained all the the audit. We also: achieves fair presentation. This responsibility also includes maintenance of information and explanations which to the best adequate accounting records in accordance with o Identify and assess the risks of material 12. We communicate with those charged with of our knowledge and belief were necessary for the provisions of the Act for safeguarding of the misstatement of the financial statements, governance regarding, among other matters, the purpose of our audit of the accompanying assets of the Company and for preventing and whether due to fraud or error, design and the planned scope and timing of the audit and standalone financial statements; detecting frauds and other irregularities; selection perform audit procedures responsive to those significant audit findings, including any significant and application of appropriate accounting b) In our opinion, proper books of account as risks, and obtain audit evidence that is sufficient deficiencies in internal control that we identify policies; making judgments and estimates required by law have been kept by the Company and appropriate to provide a basis for our during our audit. that are reasonable and prudent; and design, opinion. The risk of not detecting a material so far as it appears from our examination of those books; 236 Creating Hope Since 85 Years Independent Auditor’s Report 237 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Annexure I to the Independent Auditor’s Report of even date to the Members of Cipla Limited, on the standalone financial statements for the year ended 31 March 2020 Annexure I c) The standalone financial statements dealt with ii. As detailed in note 51 to the standalone by this report are in agreement with the books financial statements, the Company did Based on the audit procedures performed for the (b) The schedule of repayment of principal has of account; not have any long-term contracts for purpose of reporting a true and fair view on the been stipulated and the receipts of the principal which there were material any material standalone financial statements of the Company amount are regular; d) In our opinion, the aforesaid standalone foreseeable losses as at 31 March 2020; and taking into consideration the information and financial statements comply with Ind AS explanations given to us and the books of account and (c) There is no overdue amount in respect of loan specified under Section 133 of the Act; iii. There has been no delay in transferring other records examined by us in the normal course of granted to such company. amounts, required to be transferred, to the audit, and to the best of our knowledge and belief, we e) On the basis of the written representations (iv) In our opinion, the Company has complied with Investor Education and Protection Fund report that: received from the directors and taken on by the Company during the year ended the provisions of Sections 185 and 186 of the Act record by the Board of Directors, none of the 31 March 2020; and (i) (a) The Company has maintained proper records in respect of loans, investments, guarantees and directors is disqualified as on 31 March 2020 showing full particulars, including quantitative security. from being appointed as a director in terms of iv. The disclosure requirements relating to details and situation of property, plant and (v) In our opinion, the Company has not accepted Section 164(2) of the Act; holdings as well as dealings in specified equipment. bank notes were applicable for the period any deposits within the meaning of Sections 73 to f) We have also audited the internal financial from 8 November 2016 to 30 December 2016, (b) The Company has a regular program of 76 of the Act and the Companies (Acceptance of controls with reference to financial statements which are not relevant to these standalone physical verification of its property, plant and Deposits) Rules, 2014 (as amended). Accordingly, of the Company as on 31 March 2020 in financial statements. Hence, reporting equipment under which property, plant and the provisions of clause 3(v) of the Order are not conjunction with our audit of the standalone under this clause is not applicable. equipment are verified in a phased manner applicable. financial statements of the Company for the over a period of three years, which, in our (vi) We have broadly reviewed the books of account year ended on that date and our report dated opinion, is reasonable having regard to the size maintained by the Company pursuant to the 15 May 2020 as per Annexure II expressed of the Company and the nature of its assets. Rules made by the Central Government for the unmodified opinion; and In accordance with this program, certain For Walker Chandiok & Co LLP maintenance of cost records under sub-section (1) property, plant and equipment were verified g) With respect to the other matters to be included Chartered Accountants of Section 148 of the Act in respect of Company’s during the year and no material discrepancies in the Auditor’s Report in accordance with rule Firm’s Registration No.: 001076N/N500013 products/services and are of the opinion that, were noticed on such verification. 11 of the Companies (Audit and Auditors) Rules, prima facie, the prescribed accounts and records have been made and maintained. However, we 2014 (as amended), in our opinion and to the Ashish Gupta (c) The title deeds of all the immovable properties have not made a detailed examination of the cost best of our information and according to the Partner (which are included under the head ‘property, records with a view to determine whether they are explanations given to us: Membership No.: 504662 plant and equipment’) are held in the name of accurate or complete. UDIN: 20504662AAAABP8396 the Company. i. The Company, as detailed in note 39 to the standalone financial statements, has (ii) In our opinion, the management has conducted (vii) (a) The Company is regular in depositing Place: New Delhi disclosed the impact of pending litigations physical verification of inventories at reasonable undisputed statutory dues including provident Date: 15 May 2020 on its financial position as at 31 March 2020; intervals during the year, except for goods-in- fund, employees’ state insurance, income-tax, transit. No material discrepancies were noticed on goods and service tax, sales-tax, service tax, the aforesaid verification, discrepancies noticed on duty of customs, duty of excise, value added such verification have been properly dealt with in tax, cess and other material statutory dues, the books of account. as applicable, to the appropriate authorities. Further, no undisputed amounts payable in (iii) The Company has granted interest free unsecured respect thereof were outstanding at the year- loans to one company covered in the register end for a period of more than six months from maintained under Section 189 of the Act; and with the date they become payable. respect to the same: (b) There are no dues in respect of sales-tax, (a) In our opinion the terms and conditions of such service tax and duty of customs, that have loans are not, prima facie, prejudicial to the not been deposited with the appropriate interest of the Company. authorities on account of any dispute. The dues outstanding in respect of income-tax, duty of excise, goods and service tax and value added tax on account of any dispute, are as follows: 238 Creating Hope Since 85 Years Independent Auditor’s Report 239 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure I to the Independent Auditor’s Report of even date to the Members of Cipla Limited, Annexure I to the Independent Auditor’s Report of even date to the Members of Cipla Limited, on the standalone financial statements for the year ended 31 March 2020 on the standalone financial statements for the year ended 31 March 2020 Annexure I Annexure I Name of the statute Nature of Amount Amount Period to which the Forum where Name of the statute Nature of Amount Amount Period to which the Forum where dues (in J paid amount relates dispute is dues (in J paid amount relates dispute is crores) under (F.Y. except pending crores) under (F.Y. except pending Protest (in otherwise stated) Protest (in otherwise stated) J crores) J crores) Income Tax Act, 1961 Income tax 378.74 218.69 A.Y. 2008-09, A.Y. CIT Appeals Rajasthan Vat Act, 2003 VAT 0.83 0.29 2002-03 and 2011-12 Rajasthan Tax 2009-10, A.Y. 2013- Board – Ajmer 14, A.Y. 2015-16 and Uttar Pradesh Vat Act, 2008 VAT 0.09 0.04 2011-12 Uttar Pradesh A.Y. 2016-17 Appellate Income Tax Act, 1961 Income tax 55.96 55.82 A.Y. 2014-15 Income Tax Authority Appellate West Bengal Vat Act, 2003 VAT 2.72 0.26 2001-02 to 2015-16 Tribunal/ Tribunal Commissioner The Central Excise Act, 1944 Excise duty 0.17 0.08 2016-17 to 2018-19 Additional (Note: F.Y. represents Financial Year and A.Y. represents Assessment Year) Commissioner The Central Excise Act, 1944 Excise duty 10.47 1.61 2011-12 to 2013-14 CESTAT (EZB) and 2016-17 (viii) The Company has not defaulted in repayment have been disclosed in the standalone financial The Central Excise Act, 1944 Excise duty 74.85 3.61 2008-09 to 2015-16 CESTAT (SZB) of loans or borrowings to any bank or financial statements as required by the applicable Ind AS. The Central Excise Act, 1944 Excise duty 66.47 3.33 1992-1993 to 1999- CESTAT (WZB) institution or government during the year. The (xiv) During the year, the Company has not made any 2000 and 2004-05 Company did not have any outstanding debentures preferential allotment or private placement of to 2016-17 during the year. shares or fully or partly convertible debentures. The Central Excise Act, 1944 Excise duty 12.68 - 1999-00 to 2005-06 Commissioner (ix) The Company did not raise moneys by way of Accordingly, provision of clause 3(xiv) of the Order (Common initial public offer or further public offer (including are not applicable. Adjudicating debt instruments) and did not have any term officer) (xv) In our opinion, the Company has not entered loans outstanding during the year. Accordingly, The Central Excise Act, 1944 Excise duty 3.69 0.24 2008-09 to 2016-17 Commissioner into any non-cash transactions with the directors the provisions of clause 3(ix) of the Order are not (Appeals) or persons connected with them covered under applicable. The Central Excise Act, 1944 Excise duty 0.02 0.01 2001-02 to 2006-07 Hon’ble Section 192 of the Act. Bombay High (x) According to the information and explanation given (xvi) The Company is not required to be registered Court to us, no material fraud by the Company or on the under Section 45-IA of the Reserve Bank of India The Central Excise Act, 1944 Excise duty 0.94 0.04 2009-10 and 2011-12 Deputy Company by its officers or employees has been Act, 1934. Commissioner noticed or reported during the period covered by The Central Excise Act, 1944 Excise duty 0.12 - 2015-16 to 2016-17 Revision our audit. Authority Bihar Vat Act, 2005 VAT 0.97 - 2014-15 Patna (xi) Managerial remuneration has been paid and For Walker Chandiok & Co LLP Appellate provided by the Company in accordance with the Chartered Accountants Authority requisite approvals mandated by the provisions of Firm’s Registration No.: 001076N/N500013 Goa Vat Act, 2005 VAT 0.12 - 2006-07 Directorate, Section 197 of the Act read with Schedule V to the Goa Act. Gujarat Vat Act, 2005 VAT 0.38 0.13 2013-14 GVAT tribunal (xii) In our opinion, the Company is not a Nidhi Company. Ashish Gupta Karnataka Vat Act, 2003 VAT 0.93 0.27 2012-13 Joint Accordingly, provisions of clause 3(xii) of the Order Partner Commissioner are not applicable. Membership No.: 504662 in Appeal UDIN: 20504662AAAABP8396 Maharashtra Vat Act, 2002 VAT 0.04 - 2002-03 Joint (xiii) In our opinion all transactions with the related Commissioner. parties are in compliance with Sections 177 and 188 Place: New Delhi Maharashtra Vat Act, 2002 VAT 0.41 0.07 2007-08 and 2013- Deputy of Act, where applicable, and the requisite details Date: 15 May 2020 14 Commissioner 240 Creating Hope Since 85 Years Independent Auditor’s Report 241 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure II to the Independent Auditor’s Report of even date to the members of Cipla Limited, Annexure II to the Independent Auditor’s Report of even date to the members of Cipla Limited, on the standalone financial statements for the year ended 31 March 2020 on the standalone financial statements for the year ended 31 March 2020 Annexure II extent applicable to an audit of internal financial with generally accepted accounting principles, and Opinion controls with reference to financial statements, that receipts and expenditures of the company are and the Guidance Note issued by the ICAI. Those being made only in accordance with authorisations 8. In our opinion, the Company has, in all material Independent Auditor’s Report on the Internal Standards and the Guidance Note require that we of management and directors of the company; respects, adequate internal financial controls with Financial Controls under Clause (i) of sub- comply with ethical requirements and plan and and (3) provide reasonable assurance regarding reference to financial statements and such controls section 3 of Section 143 of the Companies perform the audit to obtain reasonable assurance prevention or timely detection of unauthorised were operating effectively as at 31 March 2020, about whether adequate internal financial controls acquisition, use, or disposition of the company's Act, 2013 (‘the Act’) based on internal control over financial reporting with reference to financial statements were assets that could have a material effect on the criteria established by the Company considering 1. In conjunction with our audit of the standalone established and maintained and if such controls financial statements. the essential components of internal control stated financial statements of Cipla Limited (‘the operated effectively in all material respects. in the Guidance Note on audit of Internal Financial Company’) as at and for the year ended 31 March Control over Financial Reporting issued by the ICAI. 4. Our audit involves performing procedures to obtain Inherent Limitations of Internal Financial 2020, we have audited the internal financial audit evidence about the adequacy of the internal Controls with Reference to Financial controls with reference to financial statements of financial controls with reference to financial the Company as at that date. Statements statements and their operating effectiveness. Our audit of internal financial controls with reference 7. Because of the inherent limitations of internal For Walker Chandiok & Co LLP Responsibilities of Management and Those to financial statements includes obtaining an financial controls with reference to financial Chartered Accountants Firm’s Registration No.: 001076N/N500013 Charged with Governance for Internal understanding of such internal financial controls, statements, including the possibility of collusion or improper management override of controls, Financial Controls assessing the risk that a material weakness exists, and testing and evaluating the design and material misstatements due to error or fraud may operating effectiveness of internal control based occur and not be detected. Also, projections of any 2. The Company’s Board of Directors is responsible Ashish Gupta on the assessed risk. The procedures selected evaluation of the internal financial controls with for establishing and maintaining internal financial Partner depend on the auditor’s judgement, including the reference to financial statements to future periods controls based on internal control financial Membership No.: 504662 assessment of the risks of material misstatement of are subject to the risk that the internal financial reporting criteria established by the Company UDIN: 20504662AAAABP8396 considering the essential components of internal the financial statements, whether due to fraud or controls with reference to financial statements control stated in the guidance note on audit of error. may become inadequate because of changes in Place: New Delhi Internal Financial Control over Financial Reporting conditions, or that the degree of compliance with 5. We believe that the audit evidence we have Date: 15 May 2020 (“the Guidance Note”) issued by the Institute of the policies or procedures may deteriorate. obtained is sufficient and appropriate to provide Chartered Accountants of India (“ICAI”). These a basis for our audit opinion on the Company’s responsibilities include the design, implementation internal financial controls with reference to financial and maintenance of adequate internal financial statements. controls that were operating effectively for ensuring the orderly and efficient conduct of the Company’s business, including adherence to the Meaning of Internal Financial Controls with Company’s policies, the safeguarding of its assets, Reference to Financial Statements the prevention and detection of frauds and errors, the accuracy and completeness of the accounting 6. A company's internal financial controls with records, and the timely preparation of reliable reference to financial statements is a process financial information, as required under the Act. designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external Auditor’s Responsibility for the Audit of the purposes in accordance with generally accepted Internal Financial Controls with Reference to accounting principles. A company's internal Financial Statements financial controls with reference to financial statements include those policies and procedures 3. Our responsibility is to express an opinion on that (1) pertain to the maintenance of records that, the Company's internal financial controls with in reasonable detail, accurately and fairly reflect reference to financial statements based on our the transactions and dispositions of the assets of the audit. We conducted our audit in accordance company; (2) provide reasonable assurance that with the Standards on Auditing issued by the ICAI transactions are recorded as necessary to permit prescribed under Section 143(10) of the Act, to the preparation of financial statements in accordance 242 Creating Hope Since 85 Years Independent Auditor’s Report 243 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Standalone Balance Sheet Standalone Statement of Profit and Loss as at 31st March, 2020 for the year ended 31st March, 2020 H in Crores H in Crores As at As at Particulars Notes For the year ended For the year ended 31st March, 2020 31st March, 2019 Particulars Notes 31st March, 2020 31st March, 2019 Assets (1) Non-current assets (1) Income (a) Property, plant and equipment 2.1 3,686.18 3,992.13 (b) Right-of-use assets 2.2 132.49 - (a) Revenue from operations (c) Capital work-in-progress 2.3 255.73 241.32 (i) Revenue from sale of products 27 12,220.22 11,968.44 (d) Investment properties 3 126.44 61.85 (e) Intangible assets 4 205.87 135.33 (ii) Other operating revenue 28 438.93 405.57 (f) Intangible assets under development 4 64.00 56.01 12,659.15 12,374.01 (g) Financial assets (i) Investments 5 6,355.32 3,803.61 (b) Other income 29 892.85 577.52 (ii) Loans 6 41.89 207.91 Total income 13,552.00 12,951.53 (iii) Other financial assets 7 7.01 4.77 (h) Income tax assets (net) 8 353.74 272.45 (2) Expenditure (i) Other non-current assets 9 149.93 164.78 (a) Cost of materials consumed 30 2,999.17 3,112.25 Total non-current assets 11,378.60 8,940.16 (2) Current assets (b) Purchases of stock-in-trade 31 1,363.12 1,259.21 (a) Inventories 10 3,021.36 2,868.41 (c) Changes in inventories of finished goods, work-in- 32 (b) Financial assets (i) Investments 11 834.43 2,011.58 progress and stock-in-trade (43.08) 136.70 (ii) Trade receivables 12 3,560.27 3,168.73 (d) Employee benefits expense 33 1,911.08 1,839.84 (iii) Cash and cash equivalents 13 261.54 64.47 (iv) Bank balances other than cash and cash equivalents 14 261.53 110.09 (e) Finance costs 34 36.05 16.97 (v) Loans 15 4.49 5.04 (f) Depreciation, impairment and amortisation expense 35 599.78 569.72 (vi) Other financial assets 16 382.49 379.63 (c) Other current assets 17 698.61 868.70 (g) Other expenses 36 3,721.57 3,524.01 Total current assets 9,024.72 9,476.65 Total expenditure 10,587.69 10,458.70 (3) Assets classified as held-for-sale 2.1 2.34 2.00 Total assets 20,405.66 18,418.81 (3) Profit before tax 2,964.31 2,492.83 Equity and liabilities (4) Tax expense (net) 8 (1) Equity (a) Current tax 545.96 576.43 (a) Equity share capital 18 161.25 161.14 (b) Other equity 19 17,241.71 15,620.77 (b) Deferred tax 100.18 27.99 Total equity 17,402.96 15,781.91 (5) Profit for the year 2,318.17 1,888.41 (2) Share application money pending allotmenti 0.00 - (3) Liabilities (6) Other comprehensive income/(loss) Non-current liabilities (a) Items that will not be reclassified to profit or loss (a) Financial liabilities (i) Other financial liabilities 20 104.59 53.36 (i) Re-measurements of post-employment benefit 40(e) (b) Provisions 21 105.14 108.12 (c) Deferred tax liabilities (net) 8 112.97 42.84 obligations (22.35) 12.00 (d) Other non-current liabilities 22 60.71 64.50 (ii) Income tax relating to these items 7.05 (4.19) Total non-current liabilities 383.41 268.82 (b) Items that will be reclassified to profit or loss Current liabilities (a) Financial liabilities (i) Gains/(losses) on cash flow hedges (72.13) 48.81 (i) Borrowings 23 6.06 - (ii) Income tax relating to these items 23.00 (17.06) (ii) Trade payables 24 Total outstanding dues of micro enterprises and small enterprises 77.46 28.01 Other comprehensive income/(loss) for the year (64.43) 39.56 Total outstanding dues of creditors other than micro enterprises (7) Total comprehensive income for the year 2,253.74 1,927.97 and small enterprises 1,534.66 1,453.34 (iii) Other financial liabilities 25 313.90 222.68 (8) Earnings per equity share of face value of J2 each 48 (b) Other current liabilities 26 141.14 183.91 Basic (in H) 28.76 23.45 (c) Provisions 21 541.50 428.55 (d) Income tax liabilities (net) 8 4.57 51.59 Diluted (in H) 28.72 23.41 Total current liabilities 2,619.29 2,368.08 The accompanying notes form an integral part of these 1-52 Total liabilities 3,002.70 2,636.90 Total equity and liabilities 20,405.66 18,418.81 standalone financial statements. i. Represents H7,820 The accompanying notes form an integral part of these standalone financial 1-52 As per our report of even date attached For and on behalf of the Board of Directors statements. As per our report of even date attached For and on behalf of the Board of Directors For Walker Chandiok & Co LLP For Walker Chandiok & Co LLP Chartered Accountants Umang Vohra Samina Hamied Chartered Accountants Umang Vohra Samina Hamied Firm Reg. No.: 001076N/N500013 Managing Director and Executive Firm Reg. No.: 001076N/N500013 Managing Director and Executive Global Chief Executive Officer Vice-Chairperson Global Chief Executive Officer Vice-Chairperson DIN: 02296740 DIN: 00027923 DIN: 02296740 DIN: 00027923 Ashish Gupta Kedar Upadhye Rajendra Chopra Ashish Gupta Kedar Upadhye Rajendra Chopra Partner Global Chief Financial Officer Company Secretary Partner Global Chief Financial Officer Company Secretary Membership No.: 504662 Membership No.: 504662 New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 244 Creating Hope Since 85 Years Standalone Balance Sheet and Consolidated Statement of Profit and Loss 245 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Standalone Statement of Changes in Equity Standalone Statement of Cash Flows for the year ended 31st March, 2020 for the year ended 31st March, 2020 H in Crores (a) Equity share capital (Refer note 18) For the year ended For the year ended Particulars H in Crores 31st March, 2020 31st March, 2019 As at As at Cash flow from operating activities Particulars st st 31 March, 2020 31 March, 2019 Profit before tax 2,964.31 2,492.83 Balance at the beginning of the year 161.14 161.02 Adjustments for: Changes in equity share capital during the year on exercise of Depreciation, impairment and amortisation expense 599.78 569.72 employee stock options (ESOSs) 0.11 0.12 Interest expense 36.05 16.97 Balance at the end of the year 161.25 161.14 Unrealised foreign exchange (gain)/loss (net) (73.60) 12.61 Share based payment expense 18.56 22.01 Allowances for credit loss (net) 103.50 42.88 (b) Other equity (Refer note 19) Provision for dimunition in value of investments 32.36 - H in Crores Interest income (51.63) (37.54) Attributable to the owners of the Company Interest income on income tax refund (9.28) (22.09) Dividend income (565.51) (241.50) Other Reserves and surplus Fair value loss/(gain) on financial instruments at fair value through reserve Other profit or loss 20.91 (19.11) Particulars Employee Cash Securities equity Sundry balance written back (2.41) (26.60) Capital General stock Retained flow premium Corporate guarantee commission (18.35) (19.92) reserve reserve options earnings hedge reserve Net gain on sale of current investments carried at fair value through reserve reserve profit or loss (114.02) (96.39) Balance as at 1st April, 2018 0.08 1,542.15 3,141.73 53.76 9,214.31 0.47 13,952.50 Net gain on sale/liquidation of investments in subsidiaries (0.07) (11.02) Profit for the year - - - - 1,888.41 - 1,888.41 Net (gain)/loss on sale/disposal of property, plant and equipment (2.86) 2.93 Other comprehensive income Rent income (9.16) (5.35) (net of tax) - - - - 7.81 31.75 39.56 Operating profit before working capital changes 2,928.58 2,680.43 Payment of dividend (including Adjustments for working capital: tax on dividend) (refer note 47B) - - - - (281.97) - (281.97) (Increase)/decrease in inventories (152.95) 169.57 Exercise of employee stock options - 32.44 - (32.44) - - - Increase in trade and other receivables (260.07) (802.82) Share based payments expense - - 0.89 21.38 - - 22.27 Increase/(decrease) in trade payables and other liabilities 167.56 (127.75) st Balance as at 31 March, 2019 0.08 1,574.59 3,142.62 42.70 10,828.56 32.22 15,620.77 Cash generated from operations 2,683.12 1,919.43 Profit for the year - - - - 2,318.17 - 2,318.17 Income taxes paid (including tax deducted at source) (664.98) (451.38) Other comprehensive income/ Net cash flow generated from operating activities (a) 2,018.14 1,468.05 (loss) (net of tax) - - - - (15.30) (49.13) (64.43) Cash flow from investing activities Payment of dividend (including Purchase of property, plant and equipment (including capital work- tax on dividend) (refer note 47B) - - - - (651.71) - (651.71) in-progress and capital advance/payables) (304.05) (251.37) Exercise of employee stock options - 27.44 - (27.44) - - - Share based payments expense - - - 18.91 - - 18.91 Purchase of intangible assets (including intangible asset under Balance as at 31st March, 2020 0.08 1,602.03 3,142.62 34.17 12,479.72 (16.91) 17,241.71 development) (145.66) (60.68) Proceeds from sale of property, plant and equipment 10.15 1.74 The accompanying notes form an integral part of these standalone financial statements (Note 1-52). Investments in associates (Refer note 5) (9.00) - Investment in subsidiaries (Refer note 5) (2,503.47) (250.57) As per our report of even date attached For and on behalf of the Board of Directors Proceeds from sale/liquidation/capital reductionof investment in subsidiaries (Refer note 5) 93.48 105.91 For Walker Chandiok & Co LLP Sale/(purchase) of current investments (net) 1,270.27 (856.34) Chartered Accountants Umang Vohra Samina Hamied Change in other bank balance and cash not available for immediate use (151.67) (100.45) Firm Reg. No.: 001076N/N500013 Managing Director and Executive Interest received 38.95 17.85 Global Chief Executive Officer Vice-Chairperson Dividend received from subsidiaries 565.51 241.50 DIN: 02296740 DIN: 00027923 Dividend received from current investmenti - 0.00 Rent received 9.16 5.35 Ashish Gupta Kedar Upadhye Rajendra Chopra Net cash flow used in investing activities (b) (1,126.33) (1,147.05) Partner Global Chief Financial Officer Company Secretary Membership No.: 504662 New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 246 Creating Hope Since 85 Years Standalone Statement of Changes in Equity and Consolidated Statement of Cash Flows 247 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Standalone Statement of Cash Flows Notes to the standalone financial statements for the year ended 31st March, 2020 H in Crores Corporate information o Lease liability and Right of use of assets – measured at fair value; and For the year ended For the year ended Particulars Cipla Limited (Corporate identity number: st st o Share-based payments – measured at fair 31 March, 2020 31 March, 2019 L24239MH1935PLC002380) ("Cipla" or “the Company”) value. Cash flow from financing activities having registered office at Cipla house, Peninsula Proceeds from issue of equity shares (ESOSs) 0.11 0.12 Business Park, Ganpatrao Kadam Marg, Lower Parel, (iii) Consistency of accounting policy Proceeds/(repayment) from/(to) current borrowings (net) 6.06 (174.43) Mumbai – 400013, is a public company incorporated Repayment of non-current borrowings - (0.07) and domiciled in India. The Company is in the business The accounting policies are applied consistently Interest paid (9.69) (16.97) of manufacturing, developing, and marketing wide to all the periods presented in the financial Payment of lease liabilities (38.66) - range of branded and generic formulations and Active statements, except where a newly issued Dividend paid (564.26) (241.57) Pharmaceutical Ingredients (APIs). The Company has accounting standard is initially adopted or Tax paid on dividend (87.45) (40.40) its wide network of manufacturing, trading and other a revision to an existing standard requires a incidental operations in India and International markets. Net cash flow used in financing activities (c) (693.89) (473.32) change in the accounting policy hitherto in use. Equity Shares of the Company are listed on Bombay Net increase /(decrease) in cash and cash equivalents (a+b+c) 197.92 (152.32) Stock Exchange Limited and National Stock Exchange (iv) New and amended standards adopted by the Cash and cash equivalents at the beginning of the year 64.47 217.45 of India Limited. Global Depository Receipts are listed Company Exchange difference on translation of foreign currency cash and cash on Luxembourg Stock Exchange. equivalents (0.85) (0.66) The Company has applied the following Cash and cash equivalents at the end of the year (refer note 13) 261.54 64.47 Note 1 – Significant accounting policies and standards and amendments for the first time Note: key accounting estimates and judgements for their annual reporting period commencing 1 The above statement of cash flow has been prepared under the 'Indirect method' as set out in Indian Accounting Standard (Ind AS) 7-Statement April 2019: of Cash Flows. 1.1 Basis of preparation i. Represents H47,733 o Ind AS 116, Leases (i) Compliance with Indian Accounting Standards Reconciliation of borrowings H in Crores (Ind-AS) o Amendment to Ind AS 12, Income Taxes, Appendix C, Uncertainty over Income Tax For the year ended For the year ended Particulars The financial statements of the Company as at 31st March, 2020 31st March, 2019 Treatments and Dividend distribution tax and for the year ended 31st March, 2020 have Opening balance been prepared and presented in accordance o Amendment to Ind AS 19, Employee Benefits, Current borrowings - 174.43 with Indian Accounting Standards (“Ind-AS”) Plan amendment, curtailment, or settlement Current maturity of non-current borrowings - 0.07 - 174.50 notified under Section 133 of the Companies Act, o Amendment to Ind AS 109, Financial Movement of borrowings (net) 2013 (“the Act”) [Companies (Indian Accounting Repayment of non-current borrowings - (0.07) Standards) Rules, 2015], as amended from time Instruments, Prepayment Features with Proceeds/(repayment) from/(to) current borrowings (net) 6.06 (174.43) to time and other relevant provisions of the Act Negative Compensation 6.06 (174.50) and accounting principles generally accepted Closing balance o Amendment to Ind AS 28, Investment in in India. Current borrowings 6.06 - Associates and Joint Ventures, Long-term 6.06 - (ii) Basis of measurement Interests in Associates and Joint Ventures The accompanying notes form an integral part of these standalone financial statements (Note 1-52). The financial statements have been prepared These amendments did not have any impact on a historical cost basis and on accrual basis, on the amounts recognised in prior periods As per our report of even date attached For and on behalf of the Board of Directors except for the following: and are not expected to significantly affect the For Walker Chandiok & Co LLP current or future periods. Chartered Accountants Umang Vohra Samina Hamied o Financial assets and liabilities are measured Firm Reg. No.: 001076N/N500013 Managing Director and Executive at fair value or at amortised cost depending (v) Functional currency and rounding of amounts Global Chief Executive Officer Vice-Chairperson on classification; The financial statements are presented in Indian DIN: 02296740 DIN: 00027923 o Derivative financial instruments and Rupee (H) which is also the functional currency contingent consideration is measured at of the Company. All amounts disclosed in the fair value; financial statements and notes have been Ashish Gupta Kedar Upadhye Rajendra Chopra o Assets held for sale – measured at fair rounded-off to the nearest crore or decimal Partner Global Chief Financial Officer Company Secretary value less cost to sell; Membership No.: 504662 thereof as per the requirement of Schedule o Defined benefit plans – plan assets III, unless otherwise stated. Amount less than New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 measured at fair value; H50,000/- is presented as H0.00 crore. 248 Creating Hope Since 85 Years Standalone Statement of Cash Flows and Notes to the Consolidated Financial Statements 249 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements 1.2 Current and non-current classification 1.3 Use of estimates and judgements involve complex issues, which can only possible, probable or remote. The Company be resolved over extended time periods. also exercises judgement in measuring All assets and liabilities have been classified as The preparation of financial statements requires The recognition of taxes that are subject and recognising provisions and the current and non-current as per the Company's management of the Company to make judgements, to certain legal or economic limits or exposures to contingent liabilities related normal operating cycle and other criteria set out in estimates and assumptions that affect the reported uncertainties is assessed individually by to pending litigation or other outstanding the Schedule III of the Act and Ind AS 1, Presentation assets and liabilities, revenue and expenses management based on the specific facts claims subject to negotiated settlement, of Financial Statements. and disclosures relating to contingent liabilities. and circumstances. mediation, government regulation, as well Management believes that the estimates used in as other contingent liabilities. Judgement is Assets: the preparation of the financial statements are In assessing the realisability of deferred necessary in assessing the likelihood that a prudent and reasonable. Estimates and underlying tax assets, management considers whether An asset is classified as current when it satisfies any pending claim will succeed, or a liability will assumptions are reviewed by management at each some portion or all of the deferred tax of the following criteria: arise, and to quantify the possible range reporting date. Actual results could differ from assets will not be realised. The ultimate of the financial settlement. Because of a) it is expected to be realised in, or is intended for these estimates. Any revision of these estimates is realisation of deferred tax assets is the inherent uncertainty in this evaluation sale or consumption in, the Company’s normal recognised prospectively in the current and future dependent upon the generation of future process, actual outcome may be different periods. operating cycle; taxable income during the periods in from the originally concluded position. which the temporary differences become Following are the critical judgements and estimates: b) it is held primarily for the purpose of being deductible. Management considers the 1.3.2 Estimates traded; 1.3.1 Judgements scheduled reversals of deferred income tax (i) Useful lives of property, plant and c) it is expected to be realised within twelve liabilities, projected future taxable income equipment and intangible assets months after the reporting date; or (i) Leases and tax planning strategies in making this assessment. Based on the level of historical Property, plant and equipment and d) it is cash or a cash equivalent unless it is Ind AS 116 “Leases” requires lessees to taxable income and projections for restricted from being exchanged or used to intangibles assets represent a significant determine the lease term as the non- future taxable income over the periods in settle a liability for at least twelve months after proportion of the asset base of the cancellable period of a lease adjusted which the deferred income tax assets are the reporting date. Company. The charge in respect of periodic with any option to extend or terminate the deductible, management believes that the depreciation is derived after determining lease, if the use of such option is reasonably company will realise the benefits of those Liabilities: an estimate of an asset’s expected useful certain. The Company makes an assessment deductible differences. The amount of the on the expected lease term on a lease-by- life and the expected residual value at the A liability is classified as current when it satisfies deferred income tax assets considered lease basis and thereby assesses whether end of its life. The useful lives and residual any of the following criteria: realisable, however, could be reduced in it is reasonably certain that any options values of Company's assets are determined the near term if estimates of future taxable to extend or terminate the contract will by the management at the time the asset a) it is expected to be settled in the Company’s income during the carry forward period be exercised. In evaluating the lease term, is acquired and reviewed periodically, normal operating cycle; are reduced. the Company considers factors such as including at each financial year end. The b) it is held primarily for the purpose of being any significant leasehold improvements (iii) Research and developments costs lives are based on historical experience traded; undertaken over the lease term, costs with similar assets as well as anticipation of c) it is due to be settled within twelve months after relating to the termination of the lease and Management monitors progress of internal future events, which may impact their life, the reporting date; or the importance of the underlying asset to research and development projects by using such as changes in technology. Company’s operations taking into account a project management system. Significant d) the Company does not have an unconditional (ii) Sales returns the location of the underlying asset and judgement is required in distinguishing right to defer settlement of the liability for at the availability of suitable alternatives. The research from the development phase. least twelve months after the reporting date. The Company accounts for sales returns lease term in future periods is reassessed Development costs are recognised as an Terms of a liability that could, at the option accrual by recording an allowance to ensure that the lease term reflects the asset when all the criteria are met, whereas of the counterparty, result in its settlement by for sales returns concurrent with the current economic circumstances. research costs are expensed as incurred. the issue of equity instruments do not affect its recognition of revenue at the time of a Management also monitors whether the classification. product sale. This allowance is based on (ii) Income taxes recognition requirements for development the Company’s estimate of expected sales Current assets and liabilities include the current costs continue to be met. This is necessary Significant judgments are involved in returns. The Company deals in various portion of assets and liabilities, respectively. due to inherent uncertainty in the economic determining the provision for income products and operates in various markets. All other assets and liabilities are classified as success of any product development. taxes including judgment on whether tax Accordingly, the estimate of sales returns non-current. Deferred tax assets and liabilities positions are probable of being sustained is determined primarily by the Company’s are always disclosed as non-current. (iv) Provisions and contingent liabilities in tax assessments. A tax assessment can historical experience in the markets in The Company exercises judgement in which the Company operates. With respect determining if a particular matter is to established products, the Company 250 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 251 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements considers its historical experience of updated and changes in the forward- In most cases, determining the applicable more details). The Company had applied for the sales returns, levels of inventory in the looking estimates are analysed. discount rate involves estimating the one-time transition exemption of considering distribution channel, estimated shelf life, appropriate adjustment to market risk the carrying cost on the transition date i.e., product discontinuances, price changes of In case of other assets, the Company and the appropriate adjustment to 1st April, 2015 as the deemed cost under competitive products, and the introduction determines if there has been a significant asset-specific risk factors. Ind AS and regarded thereafter as historical increase in credit risk of the financial of competitive new products, to the extent cost. When parts of an item of property, plant asset since initial recognition. If the credit each of these factors impact the Company’s (vi) Fair value of financial instruments and equipment have different useful lives, they risk of such assets has not increased business and markets. are accounted for as separate items (major significantly, an amount equal to twelve- Management uses valuation techniques components) of property, plant and equipment. (iii) Expected credit loss month ECL is measured and recognised as in measuring the fair value of financial loss allowance. However, if credit risk has instruments where active market quotes are The cost of an item of property, plant and The Company applies expected credit increased significantly, an amount equal to not available. Details of the assumptions equipment is recognised as an asset if, and only losses (“ECL”) model for measurement lifetime ECL is measured and recognised as used are given in the notes regarding if, it is probable that future economic benefits and recognition of loss allowance on the financial assets and liabilities. In applying loss allowance. associated with the item will flow to the Company following: the valuation techniques, management and the cost of the item can be measured (iv) Accounting for defined benefit plans makes maximum use of market inputs and o Trade receivables and lease reliably. Items such as spare parts, stand-by uses estimates and assumptions that are, as receivables. In accounting for post-retirement benefits, equipment and servicing equipment that meet far as possible, consistent with observable several statistical and other factors that the definition of property, plant and equipment o Financial assets measured at amortised data that market participants would use in attempt to anticipate future events are used are capitalised at cost and depreciated over cost (other than trade receivables and pricing the instrument. Where applicable to calculate plan expenses and liabilities. their useful life. Costs in the nature of repairs lease receivables). data is not observable, management uses These factors include expected return on and maintenance are recognised in the profit o Financial assets measured at fair value its best estimate about the assumptions plan assets, discount rate assumptions and or loss as and when incurred. The present value through other comprehensive income that market participants would make. These rate of future compensation increases. of the expected cost for the decommissioning (“FVTOCI”). estimates may vary from the actual prices To estimate these factors, actuarial of an asset after its use is included in the cost of consultants also use estimates such as that would be achieved in an arm’s length In accordance with Ind AS 109, the Company the respective asset if the recognition criteria withdrawal, turnover, and mortality rates transaction at the reporting date. applies ECL model for measurement and for a provision is met. which require significant judgment. The recognition of impairment loss on the trade 1.4 Property, plant and equipment actuarial assumptions used by the Company Advances paid towards the acquisition of receivables or any contractual right to may differ materially from actual results in property, plant and equipment outstanding receive cash or another financial asset that (i) Recognition and measurement future periods due to changing market and at each reporting date is disclosed as capital result from transactions that are within the economic conditions, regulatory events, All items of property, plant and equipment, advance under non-current assets. scope of Ind AS 115. judicial rulings, higher or lower withdrawal including freehold land, are initially recorded Capital work-in-progress included in non- For this purpose, the Company follows rates, or longer or shorter participant life at cost. Cost of property, plant and equipment current assets comprises of direct costs, related ‘simplified approach’ for recognition of spans. comprises purchase price, non-refundable incidental expenses and attributable interest. impairment loss allowance on the trade taxes, levies and any directly attributable cost (v) Impairment Capital work-in-progress are not depreciated receivable balances. The application of of bringing the asset to its working condition as these assets are not yet available for use. simplified approach does not require An impairment loss is recognised for the for the intended use. The cost includes the cost of replacing part of the property, plant and the Company to track changes in credit amount by which an asset’s or cash- (ii) Depreciation risk. Rather, it recognises impairment generating unit’s carrying amount exceeds equipment and borrowing costs that are directly loss allowance based on lifetime ECLs at its recoverable amount to determine attributable to the acquisition, construction Depreciation on the property, plant and each reporting date, right from its initial the recoverable amount. Management or production of a qualifying property, equipment (other than freehold land) is provided recognition. estimates expected future cash flows from plant and equipment. Subsequent to initial based on useful life of the assets as prescribed each asset or cash generating unit and recognition, property, plant and equipment in Schedule II to the Act. Depreciation on As a practical expedient, the Company determines a suitable interest rate in order other than freehold land are measured at property, plant and equipment, which are uses a provision matrix to determine to calculate the present value of those cost less accumulated depreciation and any added/disposed-off during the year, is provided impairment loss allowance on portfolio of cash flows. In the process of measuring accumulated impairment losses. Freehold on pro-rata basis with reference to the month of its trade receivables. The provision matrix expected future cash flows, management land has an unlimited useful life and therefore addition/deletion, in the profit or loss. is based on its historically observed default makes assumptions about future operating is not depreciated. The carrying values of rates over the expected life of the trade results. These assumptions relate to future property, plant and equipment are reviewed For certain class of assets, based on the receivables and is adjusted for forward- events and circumstances. The actual for impairment when events or changes in technical evaluation and assessment, the looking estimates. At every reporting date, results may vary and may cause significant circumstances indicate that the carrying value Company believes that the useful lives adopted the historical observed default rates are adjustments to the Company’s assets. may not be recoverable (Refer note 1.8 for by it best represent the period over which 252 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 253 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements an asset is expected to be available for use. purchased transaction is considered to (v) De-recognition with the expenditure will flow to the Company and Accordingly, for these assets, the useful lives be probable. Following initial recognition, the cost of the item can be measured reliably. All estimated by the Company are different from intangible assets are carried at cost less Intangible assets are de-recognised either on other repairs and maintenance costs are expensed their disposal or where no future economic those prescribed in the Schedule II. accumulated amortisation and accumulated when incurred. When part of an investment benefits are expected from their use. Losses impairment loss, if any. Subsequent expenditures property is replaced, the carrying amount of the The residual values, useful lives and methods of arising on such de-recognition are recorded are capitalised only when they increase the replaced part is de-recognised. depreciation of property, plant and equipment future economic benefits embodied in the in the profit or loss and are measured as the are reviewed at each financial year end and, if specific asset to which they relate. difference between the net disposal proceeds, Investment properties are depreciated using the expectations differ from previous estimates, the if any, and the carrying amount of respective straight-line method over their estimated useful change(s) are accounted for as a change in an (ii) In-process research and development intangible assets as at the date of de- lives. accounting estimate in accordance with Ind AS assets (“IPR&D”) or Intangible assets under recognition. 8, Accounting Policies, Changes in Accounting development Investment properties generally have a useful life Estimates and Errors. 1.6 Assets classified as held for sale of 5-60 years. The useful life has been determined Acquired research and development based on technical evaluation performed by the intangible assets that are under development Assets are classified as held for sale if their carrying The estimated useful lives are as follows: management’s expert. are recognised as In-process research and amount will be recovered principally through a sale Property, plant and Useful life development assets (“IPR&D”) or Intangible transaction rather than through continuing use 1.8 Impairment of non-financial assets equipment assets under development. IPR&D assets are and a sale is considered highly probable. They are not amortised, but evaluated for potential measured at the lower of their carrying amount The Company assesses, at each reporting date, Buildings impairment on an annual basis or when there and fair value less costs to sell. whether there is an indication that an asset may be - Factory and administrative 30 to 60 years are indications that the carrying value may impaired. If any indication exists, or when annual buildings not be recoverable. Subsequent expenditure An impairment loss is recognised for any initial or impairment testing for an asset is required, the - Ancillary structures 3 to 10 years on an in-process research or development subsequent write-down of the asset to fair value Company estimates the asset’s recoverable amount. less costs to sell. A gain is recognised for any An asset’s recoverable amount is the higher of an Plant and equipment 2 to 25 years project acquired separately or in a business combination and recognised as an intangible subsequent increases in fair value less costs to sell asset’s cash-generating unit’s (CGU) fair value less Furniture, fixtures and office 3 to 8 years asset is: of an asset, but not in excess of any cumulative costs of disposal and its value-in-use. Recoverable equipment impairment loss previously recognised. A gain or amount is determined for an individual asset, unless Vehicles 8 years o recognised as an expense when incurred, if loss not previously recognised by the date of the the asset does not generate cash inflows that are it is research expenditure; sale of the asset is recognised at the date of de- largely independent of those from other assets or (iii) De-recognition recognition. o capitalised if the cost can be reliably Groups of assets. When the carrying amount of an An item of property, plant and equipment, measured, the product or process is Assets are not depreciated or amortised while they asset or CGU exceeds its recoverable amount, the is de-recognised upon disposal or when no technically and commercially feasible and are classified as held for sale. Interest and other asset is considered impaired and is written down to future economic benefits are expected from the Company has sufficient resources to expenses attributable to the liabilities of a disposal its recoverable amount. Non-financial assets other its use or disposal. Any gain or loss arising on complete the development and to use and group classified as held for sale continue to be than goodwill that suffered an impairment are de-recognition of the asset (calculated as the sell the asset. recognised. reviewed for possible reversal of the impairment at difference between the net disposal proceeds the end of each reporting period. and the carrying amount of the asset) is (iii) Expenditure on regulatory approval Assets classified as held for sale are presented included in the profit or loss. separately from the other assets in the balance Impairment losses, including impairment on Expenditure for obtaining regulatory approvals sheet. The liabilities of a disposal group classified inventories, are recognised in the profit or loss. and registration of products for overseas 1.5 Intangible assets as held for sale are presented separately from markets is charged to the profit or loss. 1.9 Borrowing costs other liabilities in the balance sheet. (i) Recognition and measurement (iv) Amortisation Borrowing costs consists of interest, ancillary costs 1.7 Investment properties Intangible assets such as marketing intangibles, and other costs in connection with the borrowing The Company amortises intangible assets with of funds and exchange differences arising from trademarks, technical know-how, brands and Property that is held for long-term rental yields a finite useful life using the straight-line method computer software acquired separately are or for capital appreciation or both, and that is foreign currency borrowings to the extent they are over the following useful lives: measured on initial recognition at cost. Further, not occupied by the Company, is classified as regarded as an adjustment to interest costs. payments to third parties for in-licensed o Marketing intangibles, Trademarks, investment properties. Investment property is Borrowing costs attributable to acquisition and/or products, generally take the form of up-front Technical know- how and Brands 2-10 years measured initially at its cost, including related and milestones payments which are capitalised construction of qualifying assets are capitalised as o Computer software 3 to 6 Years transaction costs and borrowing costs where a part of the cost of such assets, up to the date following a cost accumulation approach applicable. Subsequent expenditure is capitalised such assets are ready for their intended use. Other to variable payments (milestones) for the The amortisation period and the amortisation to the asset’s carrying amount only when it is borrowing costs are charged to the profit or loss. acquisition of intangible assets when receipt method for intangible assets with a finite useful probable that future economic benefits associated of economic benefits out of the separately life are reviewed at each reporting date. 254 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 255 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements 1.10 Foreign currency transactions and balances 1.12 Government grants applicable trade discounts, allowances, goods and Licensing arrangements performance services tax (GST) and amounts collected on behalf obligations generally include intellectual Foreign exchange gains and losses resulting from Government grants are recognised where there of third parties. property (“IP”) rights, certain R&D and contract the settlement of such transactions and from is reasonable assurance that the grant will be manufacturing services. The Company accounts the translation of monetary items denominated received and all attached conditions will be (i) Sale of products: for IP rights and services separately if they are in foreign currency at prevailing reporting date complied with. When the grant relates to an asset, distinct – i.e., if they are separately identifiable The majority of customer contracts that exchange rates are recognised in profit or loss. it is recognised as income in equal amounts over from other items in the arrangement and if the the Company enters into consist of a single Non-monetary items are measured at historical the expected useful life of the related asset and customer can benefit from them on their own or performance obligation for the delivery of cost (translated using the exchange rates at the presented within other income. with other resources that are readily available pharmaceutical products. The Company transaction date), except for non-monetary items to the customer. The consideration is allocated recognise revenue from product sales when measured at fair value which are translated using When loans or similar assistance are provided between IP rights and services based on their control of the product transfers, generally upon the exchange rates at the date when fair value was by the government or related institutions, with an relative stand-alone selling prices. shipment or delivery, to the customer, or in determined. interest rate below the current applicable market certain cases, upon the corresponding sales by rate, the effect of this favorable interest is regarded Revenue from IP rights is recognised at the 1.11 Inventories customer to a third party. The Company records as a government grant. point in time when control of the distinct license product sales net of estimated incentives/ Raw materials and packing materials are valued is transferred to the customer, the Company discounts, returns, and other related charges. at lower of cost and net realisable value after The loan or assistance is initially recognised and has a present right to payment and ownership These are generally accounted for as variable providing for obsolescence, if any. However, these measured at fair value and the government grant is are transferred to the customer. consideration estimated in the same period items are considered to be realisable at cost if the measured as the difference between initial carrying the related sales occur. The methodology Revenue from sales-based milestones and finished products, in which they will be used, are value of the loan and the proceeds received. The and assumptions used to estimate rebates royalties promised in exchange for a license of expected to be sold at or above cost. loan is subsequently measured at amortised cost. and returns are monitored and adjusted IP is recognised only when, or as, the later of regularly in the light of contractual and legal subsequent sale or the performance obligation Stores, spares and consumables, work-in-progress, Export entitlement from Government authorities are obligations, historical trends, past experience to which some or all of the sales-based royalty stock-in-trade and finished goods are valued at recognised in the profit or loss as other operating and projected market conditions. The revenue has been allocated, is satisfied. The Company lower of cost and net realisable value. revenue when the right to receive is established for such variable consideration is included estimates variable consideration in the form of as per the terms of the scheme in respect of the Cost includes expenditures incurred in acquiring in the Company’s estimate of the transaction sales-based milestones by using the expected the inventories, production or conversion costs exports made by the Company with no future price only if it is highly probable that a value or most likely amount method, depending and other costs incurred in bringing them to their related cost and where there is no significant significant reversal of revenue will not occur on which method the Company expects to existing location and condition. In the case of uncertainty regarding the ultimate collection of the once any uncertainty is resolved. In making this better predict the amount of consideration to finished goods and work-in-progress, cost includes relevant export proceeds. assessment the Company considers its historical which it will be entitled. an appropriate share of overheads based on record of performance on similar contracts. normal operating capacity. Cost of inventories is 1.13 Revenue recognition (iv) Service fee determined on a weighted moving average basis. (ii) Sales by clearing and forwarding agents: A contract with a customer exists only when the Revenue from services rendered, is recognised Stores and spares are inventories that do not parties to the contract have approved it and are Revenue from sales of generic products in in the profit or loss as the underlying services qualify to be recognised as property, plant and committed to perform their respective obligations, India is recognised upon delivery of products are performed. Upfront non-refundable equipment and consists of packing materials, the Company can identify each party’s rights to distributors by clearing and forwarding payments received under these arrangements engineering spares (such as machinery spare regarding the distinct goods or services to be agents of the Company. Control in respect of are deferred and recognised as revenue over parts) and consumables (such as lubricants, cotton transferred (“performance obligations”), the ownership of generic products are transferred the expected period over which the related waste and oils), which are used in operating Company can determine the transaction price for by the Company when the goods are delivered services are expected to be performed. machines or consumed as indirect materials in the to distributors from clearing and forwarding the goods or services to be transferred, the contract manufacturing process. agents. Clearing and forwarding agents are (v) Interest income has commercial substance and it is probable that generally compensated on a commission basis The factors that the Company considers in the Company will collect the consideration to which Interest income from a financial asset is as a percentage of sales made by them. determining the provision for slow moving, obsolete it will be entitled in exchange for the goods or recognised when it is probable that the and other non-saleable inventory include estimated services that will be transferred to the customer. (iii) Out licensing arrangements: economic benefits will flow to the Company shelf life, planned product discontinuances, price and the amount of income can be measured changes, ageing of inventory and introduction of Revenues are recorded in the amount of Revenues include amounts derived from reliably. Interest income is accrued on a time competitive new products, to the extent each of consideration to which the Company expects to be product out-licensing agreements. The basis, by reference to the principle outstanding these factors impact the Company’s business and entitled in exchange for performance obligations Company enters into collaborations and out- and at the effective interest rate applicable, markets. The Company considers all these factors upon transfer of control to the customer and is licensing arrangement of the Company’s which is the rate that discounts estimated future and adjusts the inventory provision to reflect its measured at the fair value of the consideration products to other parties. cash receipts through the expected life of the actual experience on a periodic basis. received or receivable, net of returns, sales tax and 256 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 257 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements financial asset to that asset’s net carrying administered provident fund. A part of the employees. Liability in respect of compensated example profitability and sales growth). All share- amount on initial recognition. Company's contribution is transferred to absences becoming due or expected to be based remuneration is ultimately recognised as an Government - administered pension fund. availed more than one year after the reporting expense in profit or loss. If vesting periods or other (vi) Dividends The contributions made by the Company date is estimated on the basis of an actuarial vesting conditions apply, the expense is allocated and the shortfall of interest, if any, are valuation performed by an independent over the vesting period, based on the best available Dividend income from investments is recognised recognised as an expense in the Profit or actuary using the projected unit credit method estimate of the number of share options expected when the right to receive payment has been Loss under "Employee benefits expense". at the year-end. Actuarial gains/losses are to vest. established, provided that it is probable that immediately taken to the profit or loss and are the economic benefits will flow to the Company b) Gratuity obligations not deferred. Non-market vesting conditions are included in and the amount of income can be measured assumptions about the number of options that reliably. Post-retirement benefit plans such as (v) Termination benefits are expected to become exercisable. Estimates gratuity is determined on the basis 1.14 Employee benefits are subsequently revised if there is any indication of actuarial valuation made by an Termination benefits are recognised in the that the number of share options expected to vest independent actuary as at the reporting profit or loss when: (i) Short-term employee benefits differs from previous estimates. Any adjustment to date. Re-measurement, comprising cumulative share-based compensation resulting o the Company has a present obligation as a Short-term employee benefits are expensed actuarial gains and losses, the effect from a revision is recognised in the current period. result of past event; as the related service is provided. A liability of the changes to the asset ceiling (if The number of vested options ultimately exercised applicable) and the return on plan assets is recognised for the amount expected to be o a reliable estimate can be made of the by holder does not impact the expense recorded in (excluding net interest), is recognised in paid if the Company has a present legal or amount of the obligation; and any period. constructive obligation to pay this amount as a other comprehensive income in the period result of past service provided by the employee in which they occur. Re-measurement o it is probable that an outflow of resources Market conditions are taken into account when and the obligation can be estimated reliably. recognised in other comprehensive income embodying economic benefits will be estimating the fair value of the equity instruments is included in retained earnings and will not required to settle the obligation. granted. (ii) Defined contribution be reclassified to profit or loss. 1.15 Share-based payments Upon exercise of share options, the proceeds Post retirement contribution plans such as The present value of the defined benefit received, net of any directly attributable transaction Employees’ Pension Scheme, Labour welfare obligation is determined by discounting Equity settled share-based payment transactions costs, are allocated to share capital up to the fund, Employee State Insurance Corporation the estimated future cash outflows by nominal (or par) value of the shares issued with any The Company operates equity-settled share-based (ESIC) are charged to the profit or loss for the reference to market yields at the end of excess being recorded as share premium. year when the contributions to the respective the reporting period on government bonds remuneration plans for its employees. funds accrue. The Company does not have any 1.16 Taxes that have terms approximating to the terms All services received in exchange for the grant of obligation other than the contribution made. of the related obligation. any share-based payment are measured at their Income tax expense comprises of current tax (iii) Defined benefit plans The net interest cost is calculated by fair values on the grant date and is recognised as expense and deferred tax expense/benefit. Current applying the discount rate to the net an employee expense, in the profit or loss with a and deferred taxes are recognised in profit or loss, a) Employees provident fund balance of the defined benefit obligation corresponding increase in equity, over the period except when they relate to items that are recognised that the employees become unconditionally entitled in other comprehensive income or directly in equity, In accordance with The Employees and the fair value of plan assets. This cost to the options. The increase in equity recognised in in which case, the current and deferred tax are Provident Fund and Miscellaneous is included in employee benefit expense in connection with share-based payment transaction also recognised in other comprehensive income or Provision Act, 1952, all eligible employees the profit or loss. is presented as a separate component in equity directly in equity. of the Company are entitled to receive Changes in the present value of the under “Employee stock options reserve”. The benefits under the provident fund plan in defined benefit obligation resulting from amount recognised as an expense is adjusted to (i) Current income tax: which both the employee and employer plan amendments or curtailments are reflect the actual number of stock options that vest. (at a determined rate) contribute monthly Current income tax is the amount of tax recognised immediately in profit or loss as to “Cipla Limited Employee’s Provident payable on the taxable income for the year as past service cost. Grant date is the date when the Company and Fund Trust”, a Trust set up by the Company employees have shared an understanding of terms determined in accordance with the provisions to manage the investments and distribute (iv) Other benefit plan and conditions on the arrangement. of the applicable income tax law. The current the amounts to employees at the time tax is calculated using tax rates that have of separation from the Company or Liability in respect of compensated absences Where employees are rewarded using share-based been enacted or substantively enacted, at retirement, whichever is earlier. This plan is becoming due or expected to be availed within payments, the fair value of employees’ services the reporting date, and any adjustment to tax a defined obligation plan as the Company one year from the reporting date is recognised is determined indirectly by reference to the fair payable in respect of previous years. Current is obligated to provide its members a rate on the basis of undiscounted value of estimated value of the equity instruments granted. This fair tax assets and tax liabilities are offset where of return which should, at a minimum, meet amount required to be paid or estimated value is appraised at the grant date and excludes the entity has a legally enforceable right to the interest rate declared by Government value of benefit expected to be availed by the the impact of non-market vesting conditions (for offset and intends either to settle on a net basis, 258 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 259 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements or to realise the asset and settle the liability associates, except to the extent that both of the At the date of commencement of the lease, Lease liability and ROU asset have been simultaneously. following conditions are satisfied: the Company recognises a right-of-use asset separately presented in the Balance Sheet (“ROU”) and a corresponding lease liability for and lease payments have been classified as (ii) Deferred tax: o When the Company is able to control the all lease arrangements in which it is a lessee, financing cash flows. timing of the reversal of the temporary except for leases with a term of twelve months Deferred tax is recognised using the Balance difference; and (ii) Company as a lessor sheet approach on temporary differences or less (short-term leases) and low value leases. For these short-term and low value leases, the arising between the tax bases of assets and o it is probable that the temporary difference Leases for which the Company is a lessor is Company recognises the lease payments as an liabilities and their carrying amounts. will not reverse in the foreseeable future. classified as a finance or operating lease. operating expense on a straight-line basis over Whenever the terms of the lease transfer the term of the lease. Deferred tax assets are recognised to the Dividend distribution tax arising out of payment substantially all the risks and rewards of extent that it is probable that taxable profit of dividends to shareholders under the Indian Certain lease arrangements include the options ownership to the lessee, the contract is will be available against which the deductible Income tax regulations and tax on dividend to extend or terminate the lease before the end classified as a finance lease. All other leases temporary differences, and the carry forward received from foreign affiliates in which the of the lease term. ROU assets and lease liabilities are classified as operating leases. of unused tax credits and unused tax losses Company holds more than 26% shares is not includes these options when it is reasonably can be utilised, except when the deferred tax considered as tax expense for the Company When the Company is an intermediate lessor, certain that they will be exercised. The right- asset relating to the deductible temporary and all such taxes are recognised in the it accounts for its interests in the head lease of-use assets are initially recognised at cost, difference arises from the initial recognition statement of changes in equity as part of the and the sublease separately. The sublease is which comprises the initial amount of the lease of an asset or liability in a transaction that is associated dividend payment and receipt. classified as a finance or operating lease by not a business combination and, at the time of liability adjusted for any lease payments made reference to the right of-use asset arising from the transaction, affects neither the accounting Deferred tax assets and liabilities are offset at or prior to the commencement date of the the head lease. For operating leases, rental profit nor taxable profit or loss. when there is a legally enforceable right to lease plus any initial direct costs less any lease income is recognised on a straight-line basis offset current tax assets and liabilities. incentives. They are subsequently measured over the term of the relevant lease. The carrying amount of deferred tax assets is at cost less accumulated depreciation and reviewed at each reporting date and reduced 1.17 Leases impairment losses. (iii) Arrangements in the nature of lease to the extent that it is no longer probable that Right-of-use assets are depreciated from the sufficient taxable profit will be available to The determination of whether an arrangement is The Company enters into agreements, commencement date on a straight-line basis allow all or part of the deferred tax asset to (or contains) a lease is based on the substance of comprising a transaction or series of related over the shorter of the lease term and useful life be utilised. Un-recognised deferred tax assets the arrangement at the inception of the lease. The transactions that does not take the legal form of the underlying asset. Right of use assets are are re-assessed at each reporting date and arrangement is, or contains, a lease if fulfillment of a lease but conveys the right to use the asset evaluated for recoverability whenever events are recognised to the extent that it has become of the arrangement is dependent on the use of in return for a payment or series of payments. or changes in circumstances indicate that their probable that future taxable profits will allow a specific asset or assets and the arrangement In case of such arrangements, the Company the deferred tax asset to be recovered. conveys a right to use the asset or assets, even if that carrying amounts may not be recoverable. applies the requirements of Ind AS 116 “Leases” right is not explicitly specified in an arrangement. For the purpose of impairment testing, the to the lease element of the arrangement. For Deferred tax assets and liabilities are measured recoverable amount (i.e., the higher of the fair the purpose of applying the requirements using substantively enacted tax rates expected (i) Company as a lessee value less cost to sell and the value-in-use) is under Ind AS 116 “Leases”, payments and other to apply to taxable income in the years in which determined on an individual asset basis unless consideration required by the arrangement are The Company’s lease asset classes primarily the temporary differences are expected to be the asset does not generate cash flows that separated at the inception of the arrangement consist of leases for land, buildings and recovered or settled. are largely independent of those from other into those for lease and those for other computers. The Company assesses whether assets. In such cases, the recoverable amount is elements. a contract contains a lease, at inception of Minimum Alternate Tax (MAT) credit is determined for the Cash Generating Unit (CGU) recognised as an asset only when and to a contract. A contract is, or contains, a lease to which the asset belongs. (iv) Transition to Ind AS 116 the extent it is reasonably certain that the if the contract conveys the right to control Company will pay normal income tax during the use of an identified asset for a period of The lease liability is initially measured at Effective 1st April, 2019, the Company has the specified period. Such asset is reviewed at time in exchange for consideration. To assess amortised cost at the present value of the adopted Ind AS 116 "Leases" using the modified each reporting date and the carrying amount whether a contract conveys the right to control future lease payments. The lease payments are retrospective method. The Company has of the MAT credit asset is written down to the the use of an identified asset, the Company discounted using the interest rate implicit in the applied the standard to its leases with the extent there is no longer a convincing evidence assesses whether: (i) the contract involves the lease or, if not readily determinable, using the cumulative impact recognised on the date of to the effect that the Company will pay normal use of an identified asset (ii) the Company has incremental borrowing rates in the country of initial application (1st April, 2019). Accordingly, income tax during the specified period. substantially all of the economic benefits from domicile of these leases. Lease liabilities are previous period information has not been use of the asset through the period of the lease remeasured with a corresponding adjustment restated. The Company recognises deferred tax and (iii) the Company has the right to direct the to the related right of use asset if the Company liability for all taxable temporary differences st use of the asset. changes its assessment if whether it will exercise On 1 April, 2019, the Company has recognised associated with investments in subsidiaries and an extension or a termination option. a lease liability measured at the present 260 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 261 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements value of the remaining lease payments, and 1.18 Cash and cash equivalents 1.21 Fair value measurement (c) Subsequent measurement right-of-use (ROU) asset at an amount equal to lease liability (adjusted for any related Cash and cash equivalents comprise cash on hand The Company measures financial instruments at For purposes of subsequent measurement, financial assets are classified in below prepayments). Accordingly, on transition to Ind and cash at bank including fixed deposit with fair value at each reporting date. original maturity period of three months or less and categories: AS 116, the Company recognised lease liabilities Financial instruments short-term highly liquid investments with an original and corresponding equivalent ROU assets. o Debt instruments at amortised cost. The Company has elected not to apply the maturity of three months or less. A financial instrument is any contract that gives rise requirements of Ind AS 116 to short-term leases to a financial asset of one entity and a financial o Debt instruments at fair value through 1.19 Provisions and certain leases for which the underlying liability or equity instrument of another entity. other comprehensive income (FVTOCI). asset is of low value. Provisions are recognised when the Company has a (i) Financial assets o Derivatives and equity instruments at present legal or constructive obligation as a result In the profit or loss for the current period, fair value through profit or loss (FVTPL). of past events, it is probable that an outflow of (a) Classification operating lease expenses which were resources will be required to settle the obligation o Equity instruments measured at fair recognised as other expenses in previous and the amount can be reliably estimated. The Company classifies its financial assets value through other comprehensive periods is now recognised as depreciation Provisions are not recognised for future operating in the following measurement categories: income (FVTOCI). expense for the right-of-use asset and finance losses. cost for imputed interest on lease liability. The o those to be measured subsequently (d) Equity investments adoption of this standard did not have any Where there are a number of similar obligations, at fair value (either through other All equity investments in scope of Ind- significant impact on the profit for the year and the likelihood that an outflow will be required in comprehensive income, or through AS 109 are measured at fair value. Equity earnings per share. settlement is determined by considering the class profit or loss); and instruments which are held for trading are of obligations as a whole. A provision is recognised The following is the summary of practical o those to be measured at amortised classified as FVTPL. For all other equity even if the likelihood of an outflow with respect expedients elected on initial application: cost. The classification depends on the instruments, the Company decides to to any one item included in the same class of entity’s business model for managing classify the same either as at FVTOCI or obligations may be small. o Applied a single discount rate to a portfolio the financial assets and the contractual FVTPL. The Company makes such election of leases of similar assets in similar terms of the cash flows. Provisions are measured at the present value of on an instrument-by instrument basis. The economic environment with a similar end classification is made on initial recognition management’s best estimate of the expenditure For assets measured at fair value, gains date; and is irrevocable. required to settle the present obligation at the end and losses will either be recorded in profit o Applied the exemption not to recognise of the reporting period. The discount rate used to or loss or other comprehensive income. If the Company decides to classify an right-of-use assets and liabilities for leases determine the present value is a pre-tax rate that For investments in equity instruments that equity instrument as at FVTOCI, then all fair with less than 12 months of lease term on reflects current market assessments of the time are not held for trading, this will depend value changes on the instrument, excluding the date of initial application; value of money and the risks specific to the liability. on whether the Company has made an dividends, are recognised in the OCI. There The increase in the provision due to the passage of irrevocable election at the time of initial is no recycling of the amounts from OCI to o Excluded the initial direct costs from the time is recognised as interest expense. recognition to account for the equity profit or loss, even on sale of investment. measurement of the right-of-use asset at investment at FVTOCI. However, the Company may transfer the 1.20 Contingencies the date of initial application; cumulative gain or loss within equity. (b) Initial recognition and measurement Disclosure of contingent liabilities is made when o Applied the practical expedient to Equity instruments included within the there is a possible obligation or a present obligation Purchases or sales of financial assets that grandfather the assessment of which FVTPL category are measured at fair value that may, but probably will not, require an outflow require delivery of assets within a time frame transactions are leases. Accordingly, Ind with all changes recognised in the profit or established by regulation or convention in AS 116 is applied only to contracts that of resources. Where there is possible obligation or a loss. Transaction cost of financial assets at the market place (regular way trades) are were previously identified as leases under present obligation in respect of which the likelihood FVTPL are expensed in profit or loss. recognised on the trade date, i.e., the date Ind AS 17. of outflow of resources is remote, no provision or disclosure is made. that the Company commits to purchase (e) Investments in subsidiaries and associates Comparatives as at and for the year ended or sell the asset. All financial assets are 31st March, 2019 have not been retrospectively Contingent assets are not recognised in the recognised initially at fair value plus, in the Investments in subsidiaries and associates are carried at cost less accumulated adjusted and therefore will continue to be financial statements. However, contingent assets case of financial assets not recorded at impairment losses, if any. Where an reported under the accounting policies are assessed continually and if it is virtually certain fair value through profit or loss, transaction costs that are attributable to the acquisition indication of impairment exists, the carrying included as part of our Annual Report for year that an inflow of economic benefits will arise, the of the financial asset. amount of the investment is assessed and ended 31st March, 2019. asset and related income are recognised in the period in which the change occurs. 262 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 263 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements written down immediately to its recoverable purpose, the Company follows a ‘simplified upon initial recognition as at fair value (e) De-recognition amount. On disposal of investments in approach’ for recognition of impairment through profit or loss. Financial liabilities subsidiaries and associates, the difference loss allowance on the trade receivable are classified as held for trading if they are A financial liability is de-recognised between net disposal proceeds and the balances. The application of this simplified incurred for the purpose of repurchasing in when the obligation under the liability is carrying amounts are recognised in the approach does not require the Company the near term. This category also includes discharged or cancelled or expires. When profit or loss. Upon first-time adoption to track changes in credit risk. Rather, it derivative financial instruments entered into an existing financial liability is replaced of Ind AS, the Company has elected to recognises impairment loss allowance by the Company that are not designated as by another from the same lender on measure its investments in subsidiaries and based on lifetime ECLs at each reporting hedging instruments in hedge relationships substantially different terms, or the terms associates at the Previous GAAP carrying date, right from its initial recognition. as defined by Ind-AS 109. Separated of an existing liability are substantially amount as its deemed cost on the date of As a practical expedient, the Company embedded derivatives are also classified as modified, such an exchange or modification transition to Ind AS i.e., 1st April, 2015. uses a provision matrix to determine held for trading unless they are designated is treated as the de-recognition of the impairment loss allowance on portfolio of as effective hedging instruments. original liability and the recognition of a (f) De-recognition its trade receivables. The provision matrix new liability. The difference in the respective is based on its historically observed default Gains or losses on liabilities held for trading carrying amounts is recognised in the profit The Company de-recognises a financial rates over the expected life of the trade are recognised in the profit or loss. or loss. asset only when the contractual rights receivables and is adjusted for forward- to the cash flows from the asset expires Financial liabilities designated upon initial (iii) Derivative financial instruments looking estimates. At every reporting date, or it transfers the financial asset and recognition at fair value through profit or the historical observed default rates are substantially all the risks and rewards of loss are designated as such at the initial The Company uses derivative financial updated and changes in the forward- ownership of the asset. date of recognition, and only if the criteria instruments, such as foreign exchange forward looking estimates are analysed. in Ind AS 109 are satisfied. For liabilities and currency option contracts to hedge its When the Company has transferred its rights foreign currency risks. Such derivative financial (ii) Financial liabilities designated as FVTPL, fair value gains/ to receive cash flows from an asset or has losses attributable to changes in own credit instruments are initially recognised at fair value entered into a pass-through arrangement, (a) Classification risk are recognised in OCI. These gains/ on the date on which a derivative contract it evaluates if and to what extent it has losses are not subsequently transferred to is entered into and are subsequently re- retained the risks and rewards of ownership. Financial liabilities are classified, at initial the profit or loss. However, the Company measured at fair value. Derivatives are carried When it has neither transferred nor retained recognition, as financial liabilities at fair may transfer the cumulative gain or loss as financial assets when the fair value is positive substantially all of the risks and rewards of value through profit or loss, loans and within equity. All other changes in fair value and as financial liabilities when the fair value is the asset, nor transferred control of the borrowings, payables, or as derivatives of such liability are recognised in profit or negative. asset, the Company continues to recognise designated as hedging instruments in an loss. (iv) Cash flow hedge the transferred asset to the extent of the effective hedge, as appropriate. Company’s continuing involvement. In that (d) Loans and borrowings (b) Initial recognition and measurement The Company classifies its foreign exchange case, the Company also recognises an After initial recognition, interest-bearing forwards and currency option contracts that associated liability. The transferred asset All financial liabilities are recognised loans and borrowings are subsequently hedge foreign currency risk associated with and the associated liability are measured initially at fair value and, in the case of measured at amortised cost using the highly probable forecasted as cash flow on a basis that reflects the rights and loans and borrowings and payables, net of effective interest rate (EIR) method. Gains hedges and measures them at fair value. The obligations that the Company has retained. directly attributable transaction costs. and losses are recognised in profit or loss effective portion of changes in the fair value of derivatives that are designated and qualify Continuing involvement that takes the form when the liabilities are de-recognised The Company’s financial liabilities include as cash flow hedges is recognised in other of a guarantee over the transferred asset as well as through the EIR amortisation trade and other payables, loans and comprehensive income and accumulated under is measured at the lower of the original process. borrowings including bank overdrafts, hedging reserve. The gain or loss relating to the carrying amount of the asset and the financial guarantee contracts and Amortised cost is calculated by taking ineffective portion is recognised immediately in maximum amount of consideration that the derivative financial instruments. into account any discount or premium on the profit or loss and is included in the ‘Other Company could be required to repay. acquisition and fees or costs that are an income/ expenses’ line item. Amounts previously (c) Subsequent measurement (g) Impairment of financial assets integral part of the EIR. The EIR amortisation recognised in other comprehensive income The measurement of financial liabilities is included as finance costs in the profit or and accumulated in equity relating to effective In accordance with Ind AS 109, the Company depends on their classification, as loss. portion (as described above) are reclassified to applies the expected credit loss (ECL) described below: the profit or loss in the periods when the hedged model for measurement and recognition This category generally applies to interest- item affects profit or loss, in the same line as of impairment loss on trade receivables Financial liabilities at fair value through profit bearing loans and borrowings. the recognised hedged item. When the hedging or any contractual right to receive cash or loss include financial liabilities held for or another financial asset. For this trading and financial liabilities designated 264 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 265 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements instrument expires or is sold or terminated or o the amount determined in accordance with Note 2.1: Property, plant and equipment when a hedge no longer meets the criteria for the expected credit loss model as per Ind H in Crores hedge accounting, any cumulative deferred AS 109; and Freehold Leasehold Buildings Plant and Furniture Office Particulars Vehicles Total gain/loss at that time remains in equity until the land Land and flatsi equipmentii and fixtures equipments o the amount initially recognised less, forecast transaction occurs. When the forecast Gross block where appropriate, cumulative amount of transaction is no longer expected to occur, Balance as at 1st April, 2018 39.15 22.81 1,969.58 3,256.47 101.53 86.24 5.91 5,481.69 income recognised in accordance with the the cumulative gain/loss that was reported in Additions during the year - 0.15 46.56 351.27 3.72 5.68 0.53 407.91 principles of Ind AS 115. equity are immediately reclassified to profit or Transfer to investment property (refer note 3) - - (64.69) (0.78) (0.92) (1.06) - (67.45) loss. The fair value of financial guarantees is Assets classified as held for saleiii - - - (23.27) - - - (23.27) Deletions and adjustments during the year - - (0.11) (9.16) (0.64) (0.55) (0.30) (10.76) (v) Offsetting financial instruments determined based on the present value of the difference in cash flows between the Balance as at 31st March, 2019 39.15 22.96 1,951.34 3,574.53 103.69 90.31 6.14 5,788.12 Financial assets and liabilities are offset and contractual payments required under the Additions for the year - - 16.63 253.24 4.35 4.52 0.77 279.51 the net amount is reported in the balance sheet debt instrument and the payments that would Transition impact of IndAS 116 (Refer note 2.2) - (22.96) - - - - - (22.96) where there is a legally enforceable right to be required without the guarantee, or the Transfer to investment property (refer note 3) - - (71.24) (1.01) (1.00) (1.15) - (74.40) offset the recognised amounts and there is an estimated amount that would be payable to Deletions and adjustments during the year - - (0.27) (22.08) (0.68) (0.83) (0.12) (23.98) st intention to settle on a net basis or realise the a third party for assuming the obligations. Balance as at 31 March, 2020 39.15 - 1,896.46 3,804.68 106.36 92.85 6.79 5,946.29 asset and settle the liability simultaneously. The Where guarantees in relation to loans or other Depreciation and impairment st legally enforceable right must not be contingent payables of associates are provided for no Accumulated balance as at 1 April, 2018 - 0.73 157.87 1,079.30 37.69 45.28 2.46 1,323.33 on future events and must be enforceable in compensation, the fair values are accounted Depreciation charge for the year - 0.25 59.18 420.53 10.59 13.17 0.74 504.46 Transfer to investment property (refer note 3) - - (3.19) (0.24) (0.28) (0.72) - (4.43) the normal course of business and in the event for as contributions and recognised as part of Assets classified as held for saleiii - - - (21.27) - - - (21.27) of default, insolvency or bankruptcy of the the cost of the investment. Deletions and adjustments during the year - - (0.11) (5.00) (0.42) (0.44) (0.13) (6.10) Company or the counterparty. 1.22 Recent accounting pronouncements Accumulated balance as at 31st March, 2019 - 0.98 213.75 1,473.32 47.58 57.29 3.07 1,795.99 (vi) Financial guarantee contracts (Standards issued but not effective) Depreciation charge for the year - - 57.99 396.09 10.08 11.38 0.68 476.22 Impairment charge for the yeariv - - 0.07 14.88 - 0.01 - 14.96 Financial guarantee contracts are recognised Ministry of Corporate Affairs (“MCA”) notifies new Transition impact of IndAS 116 (refer note 2.2) - (0.98) - - - - - (0.98) as a financial liability at the time the guarantee standards or amendments to the existing standards. Transfer to investment property (refer note 3) - - (4.94) (0.61) (0.44) (1.07) - (7.06) is issued. The liability is initially measured at fair There is no such notification which would have been Deletions and adjustments during the year - - (0.03) (17.75) (0.49) (0.67) (0.08) (19.02) st value and subsequently at the higher of applicable from 1 April, 2020. Accumulated balance as at 31st March, 2020 - - 266.84 1,865.93 56.73 66.94 3.67 2,260.11 Net block As at 31st March, 2020 39.15 - 1,629.62 1,938.75 49.63 25.91 3.12 3,686.18 As at 31st March, 2019 39.15 21.98 1,737.59 2,101.21 56.11 33.02 3.07 3,992.13 i. The gross value of buildings and flats include the cost of shares in co-operative housing societies. ii. The above additions to property, plant and equipment during the year includes H45.28 crore (31st March, 2019: H34.25 crore) used for research and development. iii. Power plant at Goa amounting to H18.74 crore impaired in earlier years has been classified as assets held-for-sale, with reversal of corresponding impairment provision. Plant and equipment classified as held-for-sale during the reporting period is measured at the lower of its carrying value and fair market value less cost to sell at the time of classification. Fair market value for such assets is valued at H2.34 crore as at 31st March, 2020 (31st March, 2019: H2.00 crore). iv. The impairment charge of H14.96 crore for the year ended 31st March, 2020, includes impairment of certain assets that has been assessed as non-usable by the management and has been recorded at scrap value less cost to sell. 266 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 267 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 2.2: Lease accounting Note 2.2: Lease accounting (Contd.) Following are the changes in the carrying value of right of use assets for the year ended 31st March, 2020: Rental expense recorded for short-term leases was H27.04 crore for the year ended 31st March, 2020. H in Crores Buildings The aggregate depreciation on ROU assets has been included under depreciation and amortisation expense. Particulars Land Computers Total and Flats Balance recognised as at 1st April, 2019 7.00 72.03 19.73 98.76 Range of Right-of- use asset Transfer from Property, plant and equipment on remaining term implementation of Ind AS 116 21.98 - - 21.98 Leasehold land 3 to 94 years Transfer from Deferred lease and prepaid rent on Buildings and flats 1 to 7 years implementation of Ind AS 116 35.45 - 3.57 39.02 Computers 1 to 3 years Additions during the year 3.24 5.33 11.67 20.24 Deletions during the year - (8.76) - (8.76) Depreciation charge for the year (1.78) (20.96) (16.01) (38.75) Note 2.3 Details of capital work-in-progress H in Crores Balance as at 31st March, 2020 65.89 47.64 18.95 132.49 As at As at st Particulars The difference between the lease obligation recorded as of 31 March, 2019 under Ind AS 17 disclosed under Note 38 31st March, 2020 31st March, 2019 of the 2019 Annual Report and the value of the lease liability as of 1st April, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance Opening balance 241.32 435.28 with Ind AS 116 and discounting the lease liabilities to the present value under Ind AS 116. Additions during the year 297.15 219.40 Capitalised during the year (282.74) (407.91) The weighted average incremental borrowing rate applied to lease liability is in the range of 8.50% to 12.00%. Impairment during the yeari - (5.45) Closing balance 255.73 241.32 The following is the break-up of current and non-current lease liabilities as of 31st March, 2020. H in Crores i. The impairment loss during the previous year relates to certain capital work-in-progress that has been assessed as non-usable by the management and has been recorded at the scrap value less cost to sell. As at Particulars 31st March, 2020 Note 3: Investment properties Current lease liabilities 25.31 H in Crores Rental income (includes income from Non-current lease liabilities 49.35 operating sublease H1.33 crore) recognised As at As at Total 74.66 Particulars in profit or loss for investment properties 31st March, 2020 31st March, 2019 aggregates to H8.78 crore (31st March, 2019: The following is the movement in lease liabilities for the year ended 31st March, 2020 Gross block H3.77 crore) H in Crores Opening balance 67.78 0.33 Estimation of fair value For the year ended Particulars Transfer from property, plant 31st March, 2020 and equipment 74.40 67.45 The fair valuation of the assets is based on Balance recognised as at 1st April, 2019 98.76 Closing balance 142.18 67.78 the perception about the macro and micro Additions during the year 17.00 Accumulated depreciation economic factors presently governing the construction industry, location of property, Deletions during the year (8.76) Opening balance 5.93 0.01 existing market conditions, degree of st Prepaid rent as on 31 March, 2020 (3.32) Transfer from property, plant development of infrastructure in the Finance cost accrued during the year 9.64 and equipment 7.06 4.43 area, demand supply conditions, internal Payment of lease liabilities (38.66) Depreciation for the year amenities, common amenities, etc. Balance at the end 74.66 (refer note 35) 2.75 1.49 This value is based on valuation conducted Closing balance 15.74 5.93 The table below provides details regarding the contractual maturities of lease liabilities as of 31st March, 2020 on an by an external valuation specialist. The fair undiscounted basis: Net block 126.44 61.85 value measurement is categorised in level 3 H in Crores Fair value 159.21 75.26 fair value hierarchy. As at Particulars 31st March, 2020 Less than one year 32.54 One to five years 57.90 More than five years 11.94 Total 102.38 268 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 269 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 4: Intangible assets Note 4: Intangible assets (Contd.) H in Crores Contingent consideration (On achievement of sale target as per agreement): Marketing Technical Particulars Software Trademarks Brands Total intangibles know-how As at 31st March, 2020, the fair value of the contingent consideration was assessed as H Nil in respect of above Gross block acquisitions as the sales targets are not probable and estimable. Determination of the fair value as at balance sheet Balance as at 1st April, 2018 185.53 71.42 4.67 10.45 1.08 273.15 date is based on discounted cash flow method. Contingent consideration is arrived basis weighted average probability Additions for the year 3.30 28.68 - - - 31.98 approach of achieving various financial and non-financial performance targets. Basis the future projections and the Deletions and adjustment during the year ------performance of the products, the contingent consideration is subject to revision on a yearly basis. Balance as at 31st March, 2019 188.83 100.10 4.67 10.45 1.08 305.13 Additions for the year (Refer note below) 13.73 10.31 - 113.63 - 137.67 Note 5: Non-current investments Deletions and adjustment during the year (0.32) - - - - (0.32) H in Crores Balance as at 31st March, 2020 202.24 110.41 4.67 124.08 1.08 442.48 As at As at Amortisation and impairment Particulars No. of units No. of units 31st March, 2020 31st March, 2019 Accumulated balance as at 1st April, 2018 82.76 23.11 2.37 2.68 0.56 111.48 Amortisation charge for the year 37.62 16.84 0.48 1.04 0.11 56.09 (A) Investments in Subsidiaries (Unquoted) Impairment charge for the yeari - - 1.82 - 0.41 2.23 I. Equity shares - carried at cost Accumulated balance as at 31st March, 2019 120.38 39.95 4.67 3.72 1.08 169.80 Equity shares of Goldencross Pharma Limited Amortisation charge for the year 39.86 20.17 - 3.04 - 63.07 of H10 each, fully paid (formerly known as Impairment charge for the yeari - 1.15 - 2.88 - 4.03 Goldencross Pharma Private Limited) 45,966 191.12 45,966 191.12 Deletions and adjustment (0.29) - - - - (0.29) Equity shares of Cipla Pharmaceuticals Limited st Accumulated balance as at 31 March, 2020 159.95 61.27 4.67 9.64 1.08 236.61 of H10 each, fully paidi 2,00,00,000 20.00 - - Net block Equity shares of Meditab Specialities Limited of As at 31st March, 2020 42.29 49.14 - 114.44 - 205.87 H1 each, fully paidii (formerly known as Meditab st As at 31 March, 2019 68.45 60.15 - 6.73 - 135.33 Specialities Private Limited) 71,18,416 382.57 61,72,237 158.42 i. The carrying amount of certain marketing intangibles and trademarks has been reduced to its recoverable amount by recognition of an impairment Meditab Specialities Limitedii loss in profit or loss. (Equity component of inter corporate deposits) Intangible assets under development (formerly known as Meditab Specialities Private H in Crores Limited) (Refer note no. 41) - 107.50 - 158.20 As at As at Equity shares of Cipla (Mauritius) Limited of Particulars 31st March, 2020 31st March, 2019 USD 1 each, fully paidv - - 2,00,000 1.20 Opening balance 56.01 27.32 Equity shares of Cipla (EU) Limited of GBP 1 vi Additions during the year 145.66 60.67 each, fully paid 28,43,55,015 2,582.41 5,20,70,000 488.93 Capitalised during the year (137.67) (31.98) Equity shares of Cipla-Medpro South Africa Closing balance 64.00 56.01 (Proprietary) Limited of R 0.1 Cent each, fully paid 45,07,40,684 2,081.09 45,07,40,684 2,081.09 Equity shares of Cipla Holding B.V. of EUR 100 Acquisition of trademarks: each, fully Paidvii 1,00,367 80.48 2,15,367 172.69 During the year, the Company completed the following significant acquisitions of intangible assets and intangible Equity shares of Cipla BioTec Limited of H10 assets under development amounting to H113.63 crore in form of trademarks. The Company has recorded the each, fully paidiv (formerly known as Cipla acquired assets as intangible assets under Ind AS 38 “Intangible Assets” on the assessment that fair value of the BioTec Private Limited) Net of impairment gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets which is H283.67 crore (31st March, 2019 - H251.41 crore) 25,87,08,433 91.84 25,87,08,433 124.20 controlled by the Company and future economic benefits are probable. Equity shares of Saba Investment Limited of USD 1 each, fully paid 1,74,27,511 230.79 1,74,27,511 230.79 Product Date of agreement J in Crores Type of deal Equity shares of Jay Precision Pharmaceuticals Nutrition products’ portfolio Private Limited of H10 each, fully paid 24,06,000 96.24 24,06,000 96.24 th (CPink, CDense, Productiv and 10 October, 2019 82.86 Acquisition of trademark. Equity shares of Cipla Health Limited of H10 Folinine) each, fully paidiii 15,95,047 141.33 15,29,060 100.73 10th December, Acquisition of trademark for India Vysov 30.77 2019 Territory Total 113.63 270 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 271 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 5: Non-current investments (Contd.) Note 5: Non-current investments (Contd.) H in Crores vi. Pursuant to the Resolutions passed by the Board of Directors of the Company on 22nd May, 2019 and 7th August, 2019, the Company has further As at As at Particulars No. of units No. of units invested H2,093.48 crore and acquired 232,285,015 equity shares of Cipla (EU) Limited of GBP 1 each. 31st March, 2020 31st March, 2019 vii. On 26th March, 2020, the Company has cancelled 120,000 equity shares of Cipla Holding B.V. of EUR 100 each at par. Accordingly, the II. Investment in Preference sharesiii Company received back H92.21 crore. Series A 0.01 % Compulsory Convertible viii. Pursuant to Share Purchase, Subscription and Shareholder’s agreement dated 23rd May, 2019 ("SPSSA"), the Company acquired 26% stake on Preference shares of Cipla Health limited fully diluted basis in AMP Solar Power Systems Private Limited, representing 90,000 equity shares of H10 each and 89,100, 0.01% Compulsory Convertible debentures of AMP Solar Power Systems Private Limited of H1,000 each for a total consideration of H9.00 Crore. The Company has Preference shares of H50 each, fully paid 33,039 20.33 - - further plans to invest in 39,000 equity shares of H10 each and 38,610, 0.01% Compulsory Convertible debentures of AMPSolar Power Systems Series A1 0.01 % Compulsory Convertible Private Limited of H1,000 each for a total consideration of H3.90 Crore at second stage closing. Further, the Company also entered in a Power Purchase Agreement('PPA') with AMP Solar Power Systems Private Limited to procure 100% of the output of solar energy produced by the Preference shares of Cipla Health limited Company for 25 years as per the rates negotiated in the agreement. Preference shares of H50 each, fully paid 5,34,658 329.05 - - 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 (B) Investments in associateviii 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 due to the difference in agreement rate and existing government grid rates. I. Equity shares - carried at cost As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 “Investments in Equity shares of AMPSolar Power Systems associates and joint ventures”. Private Limited of H10 each, fully paid 90,000 0.01 - - II. Debentures - carried at amortised cost 0.01% Compulsory Convertible debentures of Note 6: Non-current financial assets - loans Note 7: Non-current financial assets - others AMPSolar Power Systems Private Limited of H in Crores H in Crores H1000 each, fully paid 89,100 0.55 - - As at As at As at As at (C) Other investment - carried at fair value st st Particulars 31 March, 31 March, Particulars 31st March, 31st March, through profit or loss (FVTPL) 2020 2019 2020 2019 Equity shares of The Saraswat Co-operative Bank Limited of H10 each, fully paid H10,000 (31st Unsecured, considered good, except otherwise stated (Carried at amortised cost, except otherwise stated) (Carried at amortised cost, except otherwise stated) March, 2019 H10,000) 1,000 0.00 1,000 0.00 Margin depositsi 0.52 0.48 Deposits with body (D) Investments in Government and trust Capital subsidy corporates and others securities - carried at amortised cost receivable - 4.29 Considered good 41.89 38.83 National savings certificates H41,000 Amount recoverable st Considered doubtful 0.86 0.85 (31 March, 2019 H41,000) 0.00 0.00 from supplier 6.49 - Less: Allowance for 6,355.32 3,803.61 7.01 4.77 bad and doubtful Aggregate amount of unquoted investments 6,355.32 3,803.61 i. Amount held as margin money under lien to tax authority and advances (0.86) (0.85) Aggregate amount of impairment in value of electricity department. Loan to subsidiary investment 959.32 927.06 (refer note 5, 41 and 44) - 169.08 Notes: 41.89 207.91 i On 19th November, 2019, the Company has incorporated a new wholly owned subsidiary, Cipla Pharmaceuticals Limited and subscribed its 2,00,00,000 equity shares of H10 each. ii. Pursuant to the Board resolution passed on 22nd May, 2019, the loan of H169.08 crore, interest accrued of H4.37 crore during the year and equity component of intercorporate deposits of H50.70 crore were converted to equity share capital of Meditab Specialities Limited for H224.15 crore divided into 9,46,179 shares of H1 each at a premium of H2,368 per share. iii. a) On 7th August, 2019, the Company has acquired non-controlling interest of 26.16% representing 5,34,658 Series A Compulsory Convertible Preference Shares of H50 each, 33,039 Series A1 Compulsory Convertible Preference Shares of H50 each and 1,000 equity shares of H10 each, on a fully diluted basis for a total cash consideration of H350 crore of its Subsidiary, Cipla Health Limited from Eight Road Investments Mauritius II Limited (Formerly knowns as FIL Capital Investments (Mauritius) II Limited) b) Pursuant to the Board resolution passed on 19th November 2019, the Company has invested of H40 crore divided into 64,987 equity shares of face value of H10 each at a premium of H6,144.42 per share. iv. 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 H32.36 crore during the year ended 31st March, 2020. v. On 12th December, 2019, the investment made in Cipla (Mauritius) Limited was liquidated. On liquidation, the Company received H1.27 crore against the total investment of H1.20 crore, accordingly a gain of H0.07 crore was accounted as gain from liquidation of investment in subsidiary. 272 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 273 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 8: Income taxes (Contd.) Note 8: Income taxes The major components of income tax expense for the year ended 31st March, 2020 and 31st March, 2019 are: There are unused capital losses amounting to H129.50 crore as at 31st March, 2020 (31st March, 2019 H104.59 crore) for which no deferred in Crores tax asset has been recognised as the Company believes that availability of taxable profit against which such temporary difference can be H utilised, is not probable. For the year ended For the year ended Particulars The Company have ongoing disputes which includes receives demands, notices and inquiries from income tax authorities in India. The disputes 31st March, 2020 31st March, 2019 relate to tax treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives or allowances and transfer pricing adjustments. A. Profit or loss section The Company have contingent liability of H49.97 crore (31st March, 2019: H60.86 crore), in respect of tax demands which are being contested Current income tax charge 545.96 576.43 by it based on the management evaluation and advice of tax consultants as the management believes that the ultimate tax determination is MAT credit utilisation / entitlement 227.06 83.64 uncertain due to various tax positions taken by adjudicating authorities in the past. Adjustments in respect of deferred tax of previous year 19.47 (22.60) 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 Deferred tax on account of temporary differences (146.35) (33.05) adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. 646.14 604.42 B. OCI section - tax related to items recognised in OCI during the year: Deferred tax: Income tax relating to re-measurements gain on defined benefit Movement in deferred tax assets and liabilities during the year ended 31st March, 2020: plans 7.05 (4.19) H in Crores Income tax relating to cash flow hedge 23.00 (17.06) As at Profit or Other As at 30.05 (21.25) Particulars 31st March, loss comprehensive Equity 31st March, C. Equity 2019 income 2020 MAT credit utilised for tax liability under section 115BBD - 40.40 Deferred tax assets/(liabilities) : - 40.40 Property, plant and equipment and intangible assets (494.77) 141.15 - - (353.62) Employee benefits expense 55.44 (10.59) 7.05 - 51.90 Reconciliation of tax expense and the profit before tax multiplied by India’s domestic tax rate for 31st March, 2020 Others 28.07 14.75 23.00 - 65.82 and 31st March, 2019: Allowance for credit loss 33.46 8.67 - - 42.13 Deferred revenue 23.62 (8.39) - - 15.23 H in Crores Provision for right of return/ For the year ended For the year ended discounts and others 84.28 (18.71) - - 65.57 Particulars 31st March, 2020 31st March, 2019 MAT credit entitlement/utilised 227.06 (227.06) - - - Deferred tax assets/(liabilities) (net) (42.84) (100.18) 30.05 - (112.97) Profit before tax 2,964.31 2,492.83 At India's applicable statutory income tax rate of 34.944% (31st March, 2019: 34.944%) 1,035.85 871.09 Movement in deferred tax assets and liabilities during the year ended 31st March, 2019: Effect for: H in Crores Prior year adjustments to deferred tax 19.47 (22.60) As at Profit or Other As at Weighted deductions and exemptions (238.10) (222.37) Particulars 31st March, loss comprehensive Equity 31st March, Non-deductible expenses for tax purpose 63.33 49.27 2018 income 2019 Others (1.25) 13.42 Deferred tax assets/(liabilities) : Tax impact on dividend income (Exempt) (197.61) (84.39) Property, plant and equipment and Effect of impairment of investment 11.30 - intangible assets (515.08) 20.31 - - (494.77) i Differential tax rate impact (46.85) - Employee benefits expense 50.95 8.68 (4.19) - 55.44 Income tax expense reported in the profit or loss 646.14 604.42 Others 14.54 30.59 (17.06) - 28.07 Effective income tax rate 21.80% 24.25% Allowance for credit loss 52.49 (19.03) - - 33.46 Deferred revenue 26.09 (2.47) - - 23.62 i. The Government of India, on 20th September, 2019 vide the Taxation Laws (Amendment) Ordinance, 2019, inserted a new Section 115 BAA in Provision for right of return/ 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 expects to avail lower tax rate only from a later financial year discounts and others 66.71 17.57 - - 84.28 (31st March, 2021) and therefore has applied the lower tax rate of 25.17% in measurement of deferred taxes only to the extent that such deferred MAT credit entitlement/utilised 351.10 (83.64) - (40.40) 227.06 tax assets/ liabilities are expected to be realised/ settled in the periods during which the Company expects to be subject to lower tax rate. Deferred tax assets/(liabilities) (net) 46.80 (27.99) (21.25) (40.40) (42.84) To the extent deferred tax assets/ liabilities was realised/ settled during the year ending 31st March, 2020, the normal tax rate of 34.994% has been applied. Consequently, deferred tax liabilities (net) reversed by the Company as at 31st March, 2020 is not significant. 274 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 275 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 8: Income taxes (Contd.) Note 10: Inventories (Contd.) Note 12: Trade receivables H in Crores D. Tax assets and Liabilities: H in Crores H in Crores As at As at As at As at As at As at Particulars 31st March, 31st March, Particulars Particulars 31st March, 31st March, 31st March, 2020 31st March, 2019 2020 2019 2020 2019 Income tax assets 353.74 272.45 (Carried at amortised Goods-in-transit Income tax liabilities (4.57) (51.59) cost, except otherwise included above stated) Raw materials and Unsecured, packing materials 45.26 79.52 considered goodi 3,560.27 3,168.73 Note 9: Other non-current assets Work-in-progress 32.37 27.32 Unsecured, Finished goods 51.62 46.05 H in Crores considered doubtful 163.81 92.20 Stock-in-trade 13.73 3.69 As at As at Less: Allowance for Particulars 142.98 156.58 31st March, 2020 31st March, 2019 expected credit loss (163.81) (92.20) 3,560.27 3,168.73 (Unsecured, considered good, except otherwise stated) The Company recorded inventory write down (net) of H307.65 crore (31st March, 2019: H315.19 crore). This is i. Includes amount due Capital advances included as part of cost of materials consumed and from related parties Secured, considered goodi 0.64 0.06 changes in inventories of finished goods, work-in-progress (refer note 41) 1,565.70 1,266.75 Unsecured, considered goodii 113.87 102.81 and stock-in-trade in profit or loss. o Trade receivables are amounts due from customers Deferred lease assets (Refer note 2.2) - 33.89 for goods sold or services performed in the Prepaid expenses 12.73 2.02 Note 11: Current investments ordinary course of business. Trade receivables are VAT receivable 22.69 26.00 H in Crores recognised initially at the amount of consideration that is unconditional unless they contain significant 149.93 164.78 As at As at financing components, when they are recognised at Particulars 31st March, 31st March, i. Secured against bank guarantees. fair value. The Company holds the trade receivables 2020 2019 ii. Includes amount paid to wholly owned subsidiary - Meditab with the objective to collect the contractual cash Specialities Limited (formerly known as Meditab Specialities Private Investment in mutual flows and therefore measures them subsequently at Limited) (refer note 41) 55.74 55.74 funds (quoted) 834.43 2,011.58 amortised cost using the effective interest method, (Carried at fair value less loss allowance. through profit or loss) o Trade receivables are interest and non-interest bearing Aggregate amount of and are generally due upto 180 days. Note 10: Inventories quoted investments 834.43 2,011.58 o For ageing analysis of trade receivables, refer note 45. H in Crores Aggregate market o There are no trade receivables which have significant As at As at value of quoted increase in credit risk and trade receivables which Particulars 31st March, 2020 31st March, 2019 investments 834.43 2,011.58 are credit impaired. (Lower of cost and net realisable value) Raw materials and packing materials 1,349.14 1,245.28 Work-in-progress 700.10 750.85 Finished goods 595.34 529.88 Stock-in-trade 330.07 301.70 Stores, spares and consumables 46.71 40.70 3,021.36 2,868.41 276 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 277 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 13: Cash and cash equivalents Note 15: Current financial assets - loans Note 17: Other current assets H in Crores (Contd.) H in Crores H in Crores As at As at As at As at st st As at As at Particulars Particulars 31 March, 31 March, 31st March, 2020 31st March, 2019 2020 2019 Particulars 31st March, 31st March, 2020 2019 Advances to suppliers 119.80 129.63 Balances with banks Prepaid expenses 53.94 57.04 In current accounts 82.55 63.85 Considered doubtful 2.25 2.25 Balances with statutory/revenue authorities like goods and service In fixed deposits Less: Allowance for bad tax (GST), excise, customs, service tax and value added tax, etc. 523.42 679.34 (original maturity less and doubtful loans (2.25) (2.25) Others (deferred lease assets (Refer note 2.2) and other advances) 1.45 2.69 than 3 months) 150.00 0.21 698.61 868.70 Remittance in transiti 28.41 - 0.94 0.94 Cash on hand 0.58 0.41 Loans to employees 3.55 4.10 261.54 64.47 Note 18: Equity share capital 4.49 5.04 i. Remittance in transit from Cipla Europe NV and H in Crores Medpro Pharmaceutica (Pty) Ltd. As at As at Particulars Numbers Numbers Note 16: Current financial assets - others 31st March, 2020 31st March, 2019 Note 14: Bank balance other than cash and H in Crores Authorised cash equivalents Equity shares of 2/- each 87,50,00,000 175.00 87,50,00,000 175.00 As at As at H H in Crores Particulars 31st March, 31st March, 175.00 175.00 As at As at 2020 2019 Issued Particulars 31st March, 31st March, Equity shares of H2/- each 80,62,35,329 161.25 80,57,01,266 161.14 (Carried at amortised 2020 2019 161.25 161.14 cost, except otherwise Subscribed and paid-up Bank deposits (original stated) Equity shares of H2/- each, fully paid-up 80,62,35,329 161.25 80,57,01,266 161.14 maturity between 3 Incentives/ benefits 161.25 161.14 months and 12 months) 250.08 100.45 receivable from Balance earmarked for Government 181.61 103.71 unclaimed dividendi 11.45 9.64 Deposit (refer note 39B) 175.08 175.08 Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period Derivatives not As at As at 261.53 110.09 designated as hedge Particulars 31st March, 2020 31st March, 2019 i. The above balances are restricted for specific use. There are no - carried at fair value amounts due and outstanding to be credited to the Investor Education (Refer note 45) - 19.82 Number of shares outstanding at the beginning of the period 80,57,01,266 80,51,19,164 and Protection Fund as at 31st March, 2020 and 31st March, 2019. Derivatives designated Add: Allotment of equity shares on exercise of employee stock options (ESOS) as hedge - carried at (Refer note 42) 5,34,063 5,82,102 Note 15: Current financial assets - loans fair value (forward Number of shares outstanding at the end of the period 80,62,35,329 80,57,01,266 contract) (Refer note 45) - 54.93 H in Crores Margin depositsi 3.66 3.47 As at As at Inter-company Details of shareholders holding more than 5 percent shares in the Company Particulars 31st March, 31st March, receivables As at 31st March, 2020 As at 31st March, 2019 2020 2019 (Refer note 41) 3.53 0.36 Particulars Number of shares % of holding Number of shares % of holding (Unsecured, considered Fixed deposit interest Dr. Y. K. Hamied 16,39,67,687 20.34% 16,39,67,687 20.35% good, except otherwise receivable 8.05 0.14 stated) Other receivables ICICI Prudential Mutual Fund 5,06,75,897 6.29% 2,75,05,977 3.41% (Carried at amortised Considered good 10.56 22.12 Ms. Sophie Ahmed 4,59,82,000 5.70% 4,59,82,000 5.71% cost, except otherwise Considered doubtful 0.46 0.46 stated) Less: Allowance for bad and doubtful Deposits with body advances (0.46) (0.46) corporate and others 382.49 379.63 Considered good 0.94 0.94 i. Amount held as margin money to government authority. 278 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 279 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 18: Equity share capital (Contd.) Note 19: Other equity (Contd.) Note 20: Other financial liabilities Note 21: Provisions (Contd.) H in Crores H in Crores Terms and rights attached to equity shares Nature and purpose of reserve As at As at As at As at The Company has only one class of equity shares having Capital reserve Particulars 31st March, 31st March, Particulars 31st March, 31st March, a par value of H2 per share. Each holder of equity share 2020 2019 2020 2019 The Company recognised profit or loss on sale, issue, is entitled to one vote per share. The Company declares purchase or cancellation of the Company's own (Carried at amortised Provision for litigation - and pays dividend in Indian Rupees. The dividend equity instruments to capital reserve. Capital reserve cost, except otherwise DPCO [Refer note 39B] proposed by the Board of Directors is subject to the may be used by the Company only for some specific stated) Balance at the approval of the shareholders in the ensuing Annual purpose. Security deposits 55.24 53.36 beginning of the year 98.49 93.94 General Meeting except in case of interim dividend. In Lease liabilities (Refer Provided during the the event of liquidation of the Company, the holders of Securities premium reserve note 2.2) 49.35 - year 7.00 8.08 equity shares will be entitled to receive remaining assets Securities premium reserve is used to record the premium of the Company, after distribution of all preferential on issue of shares. In case of equity-settled share 104.59 53.36 Utilised/ reversed/ amounts. The distribution will be in proportion to the based payment transactions, the difference between payout during the year (1.23) (3.53) number of equity shares held by the shareholder. fair value on grant date and nominal value of share is Balance at the end of accounted as securities premium. This reserve is utilised Note 21: Provisions the year 104.26 98.49 Aggregate number of bonus shares issued, in accordance with the provisions of the Act. H in Crores Provision for right of shares issued for consideration other than cash return/ discounts and General reserve As at As at and shares bought back during the period of five others The General reserve is used from time to time to transfer Particulars 31st March, 31st March, years immediately preceding the reporting date Balance at the profit from retained earnings for appropriation purpose. 2020 2019 beginning of the year 241.18 190.90 The Company has not issued any bonus shares, shares Employee stock options reserve Non-current Provided during the year 772.33 704.22 for consideration other than cash or bought back any Provision for employee Utilised/ reversed/ shares during five years immediately preceding the Employee stock options reserve is used to record the share based payments, expense under the various ESOS benefits (Refer note 40) 105.14 108.12 payout during the year (703.75) (653.94) reporting date. schemes as per SEBI regulations. The reserve is used for 105.14 108.12 Balance at the end of Equity shares reserved for issue under employee the settlement of ESOS. (Refer note 42) Current the year 309.76 241.18 Provision for stock options Retained earnings employee benefits For number of stock options against which equity shares Retained earnings are the profits that the Company has (Refer note 40) 127.48 88.88 Note 22: Other non-current liabilities to be issued by the Company upon vesting and exercise earned till date, less any transfers to general reserve, Provision for litigation H in Crores dividends, or other distributions paid to shareholders. of those stock options by the option holders as per the - DPCO [Refer note As at As at relevant schemes. (Refer note 42). Cash flow hedge reserve below and note 39B] 104.26 98.49 Particulars 31st March, 31st March, For the forward contracts designated as cash flow Provision for right of 2020 2019 hedges, the effective portion of the fair value of forward return/discounts and Note 19: Other equity Deferred government contracts are recognised in cash flow hedging reserve others (refer note H in Crores grants 2.70 2.94 under other equity. Upon de-recognition, amounts below) 309.76 241.18 Deferred revenue 57.07 60.52 As at As at accumulated in other comprehensive income are taken 541.50 428.55 st st Deferred lease income 0.94 1.04 Particulars 31 March, 31 March, to profit or loss at the same time as the related cash Note: Movement of provision for litigation -DPCO 2020 2019 flow. (Refer note 45) and provision for right of return/ discounts and 60.71 64.50 Capital reserve 0.08 0.08 others Securities premium reserve 1,602.03 1,574.59 General reserve 3,142.62 3,142.62 Employee stock options reserve 34.17 42.70 Retained earnings 12,479.72 10,828.56 Cash flow hedge reserve (16.91) 32.22 17,241.71 15,620.77 280 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 281 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 23: Financial liabilities - borrowings Note 24: Trade payables (Contd.) Note 26: Other current liabilities Note 27: Revenue from sale of products (Contd.) H in Crores o There are no micro and small enterprises, to whom H in Crores H in Crores the company owes dues, which are outstanding As at As at As at As at For the For the for more than 45 days as at 31st March, 2020 and Particulars 31st March, 31st March, Particulars 31st March, 31st March, year ended year ended no interest payment made during the year to any Particulars 2020 2019 2020 2019 31st March, 31st March, Micro and Small Enterprises. This information as 2020 2019 Loans repayable on required to be disclosed under the micro, small Advance from customers 19.58 6.30 demand from banks and medium enterprises development Act, 2006 Amount refundable to South Africa, Sub- (Unsecured loan) has been determined to the extent such parties are customers 10.86 109.28 Saharan Africa and Working capital demand identified on the basis of information available with Income received in advance 7.25 10.03 Cipla Global Access loan* 6.06 - the Company. Other payables: (SAGA) 995.01 1,281.12 6.06 - Statutory dues 93.69 50.68 Emerging Market (EM) 1,172.05 1,515.37 Deferred government Europe 727.74 527.88 * The working capital demand loan is availed from HSBC Note 25: Other financial liabilities - current grants 0.25 0.25 Active Pharmaceutical Bank repayable on demand at an interest rate of 7.95% Deferred revenue 9.00 7.07 Ingredient (API) 719.28 736.50 p.a. H in Crores Deferred lease income 0.51 0.30 Others 3.05 16.08 As at As at 141.14 183.91 12,220.22 11,968.44 Particulars 31st March, 31st March, Note 24: Trade payables 2020 2019 (ii) Reconciliation of revenue from sale of products H in Crores (Carried at amortised Note 27: Revenue from sale of products with the contracted price cost, except otherwise As at As at H in Crores H in Crores Particulars 31st March, 31st March, stated) For the For the 2020 2019 Unclaimed dividend* 11.45 9.64 For the For the Security deposits year ended year ended year ended year ended 3.25 1.33 Particulars Particulars (Carried at amortised st st st st Capital creditors 54.61 47.26 31 March, 31 March, 31 March, 31 March, cost, except otherwise Employee dues 73.21 84.61 2020 2019 2020 2019 stated) Derivatives not Sale of products (Refer Contracted price 13,116.41 12,638.27 Total outstanding dues designated as hedge note below) 12,220.22 11,968.44 Less: Trade discounts, of micro enterprises and - carried at fair value 12,220.22 11,968.44 sales and expiry return (896.19) (669.83) small enterprises 77.46 28.01 through profit or loss Sale of product 12,220.22 11,968.44 Total outstanding dues (Refer note 45) 17.88 - IndAS-115 disclosures of creditors other than Derivatives designated (i) Disaggregation of revenue (iii) Contract assets micro enterprises and as hedge - carried at small enterprisesi 1,534.66 1,453.34 fair value through OCI The Company’s revenue disaggregated by business unit The Company recognises an asset i.e., right to the 1,612.12 1,481.35 (Refer note 45) 38.03 - is as follows: returned saleable goods (included in inventories) i. Includes amount due Book overdraft 2.47 - H in Crores for the products expected to be returned in saleable to related parties Import advance licences 42.39 37.62 For the For the condition. The Company initially measures this asset (Refer note 41) 192.43 276.30 Accrued expenses 45.30 42.22 year ended year ended at the former carrying amount of the inventory, less Particulars Lease liabilities (Refer 31st March, 31st March, any expected costs to recover the goods, including o These amounts represent liabilities for goods and note 2.2) 25.31 - 2020 2019 any potential decreases in the value of returned services provided to the Company prior to the end 313.90 222.68 Sale of products goods. The Company updates the measurement of of financial year which are unpaid. The amounts are the asset recorded for any revision to its expected *There are no amounts due and outstanding to be credited to Investor India unsecured and are usually paid within 0-90 days of level of returns, as well as any additional decrease Education and Protection Fund. Branded and trade recognition based on the credit terms. Trade and in value of the returned products. generics 6,539.82 6,271.96 other payables are presented as current liabilities unless payment is not due within 12 months after Others 109.21 221.47 As on 31st March, 2020, the Company has H15.96 the reporting period. They are recognised initially Export sales crore (31st March, 2019 H13.24 crore) as contract at their fair value and subsequently measured North America (USA) 1,954.06 1,398.06 asset. at amortised cost using the effective interest method. 282 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 283 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 27: Revenue from sale of products (Contd.) Note 28: Other operating revenue (Contd.) Note 29: Other income (Contd.) Note 31: Purchases of stock-in-trade H in Crores H in Crores (iv) Contract liabilities H in Crores For the For the For the For the year ended year ended For the For the year ended year ended The Company records a contract liability when Particulars st st year ended year ended 31 March, 31 March, Particulars st st cash payments are received or due in advance of Particulars 31 March, 31 March, st st 2020 2019 its performance. 31 March, 31 March, 2020 2019 H in Crores 2020 2019 Litigation settlement Purchases of stock-in- As at As at Goods and service tax income - 47.96 Miscellaneous incomeii 17.13 18.13 trade 1,363.12 1,259.21 Particulars 31st March, 31st March, area based incentive 22.50 13.78 i 892.85 577.52 1,363.12 1,259.21 2020 2019 Miscellaneous income 34.15 34.44 438.93 405.57 Advance from customers 19.58 6.30 i. Government grant pertain to subsidy on property, plant and i. Income below 1% of revenue from operation are aggregated in equipment of manufacturing set up. There are no unfulfilled conditions Amount refundable to accordance with Schedule III to the Companies Act, 2013. or contingencies attached to these grant. customers 10.86 109.28 ii. Income below 1% of revenue from operation are aggregated in Note 32: Changes in inventories of finished Deferred revenue 66.07 67.59 accordance with Schedule III to the Companies Act, 2013. goods, work-in-progress and stock-in-trade Note 29: Other income Note: Dividend from following subsidiaries was received during the year. H in Crores in Crores Deferred revenue H H in Crores H in Crores For the For the For the For the For the For the year ended year ended For the For the year ended year ended Particulars Particulars year ended year ended 31st March, 31st March, year ended year ended st st Name of the Company Particulars 31 March, 31 March, 31st March, 31st March, 31st March, 31st March, 2020 2019 2020 2019 2020 2019 2020 2019 Opening stock Interest income: Foreign subsidiaries: Work-in-progress 750.85 729.73 Balance at the beginning Loan to subsidiaries - Cipla-Medpro South Finished goods 529.88 700.38 of the year 67.59 74.66 carried at amortised Africa (Proprietary) Revenue recognised cost (Refer note 41) 4.37 19.69 Stock-in-trade 301.70 289.02 Limited 476.73 189.59 during the year (9.71) (7.07) Deposit and others 56.54 39.94 1,582.43 1,719.13 Saba Investment Limited 15.05 41.57 Milestone payment Dividend income: Less: Closing stock (Refer Subsidiaries - carried at Cipla Holding BV 8.75 - received during the year 8.19 - note 10) amortised cost (Refer Indian subsidiaries: Balance at the end of Work-in-progress 700.10 750.85 note below and note 41) 565.51 241.50 Meditab SpeciaIities the year 66.07 67.59 i Finished goods 595.34 529.88 Government grants 0.96 6.95 Limited 28.30 - Net gain on foreign Stock-in-trade 330.07 301.70 (v) Information about major customers Jay Precision currency transaction 1,625.51 1,582.43 Pharmaceuticals Private (Increase)/Decrease (43.08) 136.70 No single external customer represents 10% or more and translation 119.39 20.38 Net gain on sale of Limited 18.29 10.34 of the Company’s total revenue for the year ended Goldencross Pharma st st investment - 31 March, 2020 and 31 March, 2019 respectively. Current investments - Limited 18.39 - Note 33: Employee benefits expense carried at FVTPL 114.02 96.39 565.51 241.50 H in Crores Note 28: Other operating revenue Non-current investments For the For the H in Crores - subsidiaries 0.07 11.02 Note 30: Cost of materials consumed year ended year ended Fair value gain on Particulars For the For the H in Crores 31st March, 31st March, financial instruments at year ended year ended For the For the 2020 2019 Particulars fair value through profit 31st March, 31st March, year ended year ended or loss (20.91) 19.11 Particulars Salaries and wages 1,689.00 1,633.63 2020 2019 31st March, 31st March, Net gain on disposal Contribution to 2020 2019 Rendering of services 2.74 6.48 of property, plant and provident and other Export incentives 249.96 155.27 equipment 2.86 - Semi finished goods funds (Refer note 40) 96.77 98.00 Technical know-how Sundry balances written consumed 978.34 1,025.89 Share based payments and licensing fees 16.72 41.02 back 2.41 26.60 Raw material consumed 917.91 1,023.78 expense (Refer note 42)i 18.56 22.01 Insurance claim 2.99 4.58 Scrap sales 29.55 31.90 Packing material Staff welfare expenses 106.75 86.20 Sale of marketing and Rent income 9.16 5.35 Corporate guarantee consumed 992.93 930.80 1,911.08 1,839.84 other product license 27.29 72.00 commission Cost of material - others 109.99 131.78 i. Share based payments expense charges includes net recovery of Royalty income 56.02 50.68 (Refer note 41) 18.35 19.92 2,999.17 3,112.25 H0.35 crore from subsidiaries. (31st March, 2019: H0.25 crore) (Refer note 41) 284 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 285 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 34: Finance costs Note 36: Other Expenses Note 37: Research and development (R&D) expenditure H in Crores H in Crores H in Crores H in Crores For the For the For the For the For the For the For the For the year ended year ended year ended year ended year ended year ended year ended year ended Particulars Particulars Particulars Particulars 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 2020 2019 2020 2019 2020 2019 2020 2019 Interest on DPCO 7.00 8.08 Manufacturing expenses 501.71 493.74 The amount of Total R&D expenditure 1,021.33 1,047.55 Stores and spares 120.33 100.49 expenditure as shown Amount eligible for Interest on Lease Repairs and in the respective heads weighted deduction liabilities 9.64 - maintenance: of account is as under: under Section 35(2AB) Interest on Working Buildings 27.16 30.38 R&D capital expenditure of the Income Tax Act, capital demand loan Plant and equipment 93.46 78.42 (gross) 1961 Insurance 28.58 16.20 and bank overdraft 0.05 - Building 4.13 7.97 R&D capital expenditure Rent (Refer note 2.2) 27.04 58.92 Interest others (including Rates and taxes 42.38 26.84 Assets other than (gross) 41.15 26.28 interest on taxes) 19.36 8.89 Power and fuel 253.95 264.93 building 41.15 26.28 R&D revenue Travelling and expenditure 881.61 902.01 36.05 16.97 45.28 34.25 conveyance 315.86 275.10 Less: Realisation on sale 922.76 928.29 Sales promotion expenses 321.49 363.66 of R&D assets Less: Realisation on sale Commission on sales 220.18 270.12 Note 35: Depreciation, impairment and Assets other than of R&D assets 0.05 0.05 Freight and forwarding 159.70 170.60 amortisation expense Allowance for credit loss building 0.05 0.05 922.71 928.24 H in Crores (net) (Refer note 45) 103.50 42.88 0.05 0.05 Revenue from For the For the Contractual services 178.38 158.93 Total R&D capital operations 12,659.15 12,374.01 year ended year ended Non-executive directors expenditure (net) 45.23 34.20 Total R&D expenditure/ Particulars 31st March, 31st March, remuneration (Refer R&D revenue revenue 8.07% 8.47% 2020 2019 note 41) 8.57 9.12 expenditure included Total eligible R&D Postage and telephone in the profit or expenditure/revenue 7.29% 7.50% Depreciation on property, expenses 19.29 30.37 loss (excluding plant and equipment Legal and professional depreciation) (Refer note 2.1) 476.22 504.46 fees 557.13 425.94 Materials consumed 182.06 228.30 Note 38: COVID-19 Payment to auditors: Impairment of tangible Employee benefits Audit fees 1.25 1.21 Due to COVID-19 situation, there have been several assets (Refer note 2.1) 14.96 - expense 206.24 208.10 Taxation matters 0.30 0.20 restrictions imposed by the Governments across Depreciation on right- For other services 0.38 0.36 Power and fuel 25.36 25.78 the globe on the travel, goods movement and of-use assets Reimbursement of Repairs and transportation considering public health and safety (Refer note 2.2) 38.75 - expenses 0.26 0.14 maintenance 17.86 21.99 measures, which had some impact on the Company’s Net loss on sale/ Impairment of capital Manufacturing expenses 24.84 22.10 supply chain during March, 2020. The Company is disposal of property, work-in-progress closely monitoring the impact of the pandemic on all plant and equipment - 2.93 Professional fees 104.08 113.98 (Refer note 2.3) - 5.45 aspects of its business, including how it will impact its Corporate social Research - clinical trials, customers, employees, vendors and business partners. Depreciation on responsibility expenditure samples and grants 246.44 203.10 The management has exercised due care, in concluding investment properties (CSR) (Refer note 46) 36.31 33.42 Printing and stationery 0.21 0.34 on significant accounting judgements and estimates, (Refer note 3) 2.75 1.49 Donationsi 17.14 11.99 Travelling expenses 13.38 18.32 Research - clinical trials, inter-alia, recoverability of receivables, assessment for Impairment on Other research and samples and grants 391.51 381.23 impairment of investments, intangible assets, inventory, development expenses 140.74 158.46 intangible assets Miscellaneous expensesii 295.71 275.89 based on the information available to date, both (Refer note 4) 4.03 2.23 3,721.57 3,524.01 Allocated internal and external, while preparing the Company’s manufacturing expenses st Amortisation of financial statements as of and for the year ended 31 st for R&D batches 14.89 12.88 intangible assets i. Includes H15.00 crore towards donation to Electoral fund (31 March, March, 2020. 2019: H9.00 crore). (Refer note 4) 63.07 56.09 Total R&D revenue ii. Expenses below 1% of revenue from operation are aggregated in expenditure 976.10 1,013.35 599.78 569.72 accordance with Schedule III to the Companies Act, 2013. 286 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 287 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 39: Contingent liabilities, commitments and other litigations (to the extent not provided for) Note 39: Contingent liabilities, commitments and other litigations (to the extent not provided for) A. Details of contingent liabilities and product, Elores, from Venus Remedies Limited (Contd.) commitments: (“VRL”) for the Indian market to further strengthen relating to components of salary structure that Supreme Court in its judgment. On the Union of India its presence in the branded Indian critical care need to be taken into account while computing filing transfer petitions, the Honourable Supreme H in Crores space and as a part of its agenda to contribute the contribution to provident fund under the Court ordered transfer of the said petitions to the As at As at to the fight against Anti-Microbial Resistance. The Employee Provdient Fund Act,1952 ("EPF"). In view of Honourable Bombay High Court to it for being st st Particulars 31 March, 31 March, deal includes the acquisition of intellectual property the interpretative aspects related to the Judgement heard with the appeal filed against the Honourable 2020 2019 rights such as trademarks, design and know-how including the effective date of application, the Allahabad High Court order. Subsequently, in its Company has been advised to await further order of 20th July, 2016 the Honourable Supreme Contingent liabilities related to the brand. The transaction is subject to developments in this matter. The Company will Court recalled its transfer order and remanded fulfilment of certain completion conditions and both Claims against continue to assess any further developments in this the petitions to Honourable Bombay High Court parties would be working together to complete this. the Company not matter for the implications on financial statements, if for hearing. While remanding the matter to acknowledged as debt 310.56 280.26 Total consideration committed for the transaction any. Honourable Bombay High Court, the Honourable Guarantees* 2,266.02 4,044.40 Supreme Court directed Cipla to deposit 50% of the is H65 crore and contingent considerations on Letters of credit 67.28 13.90 B. Details of other litigations:- overcharged amount with the NPPA as stated in its achievement of certain milestones which are based Income tax on account of order of 1st August, 2003 which at that point of time on achievement of the specific net sales from (i) The Government of India has served demand disallowance/additions 49.97 60.86 was H350.15 crore. Complying with the directions st st notices in March 1995 and May 1995 on the Elores brand ranging from 1 January, 2020 to 31 passed by the Honourable Supreme Court, Cipla Excise duty/service tax st Company in respect of six bulk drugs, claiming that December, 2024, payable on 31 March, 2024 as has deposited an amount of H175.08 crore which on account of valuation/ st an amount of H5.46 crore along with interest due first milestone payment and on 31 March, 2025 as has been received and acknowledged by NPPA. cenvat credit 129.71 137.07 thereon is payable into the DPEA under the Drugs second milestone payment. Furthermore, the Company has not received any Sales tax on account of (Prices Control) Order, 1979 on account of alleged *The Company has given guarantees in favour of various banks further notices in these cases post such transfer credit/classification 6.48 9.44 unintended benefit enjoyed by the Company. The for H4,440.40 Crore (31st March, 2019: H4,080.39 Crore) relating to of cases to Honourable Bombay High Court. Company has filed its replies to the notices and has 2,830.02 4,545.93 loan obtained by Cipla (EU) Limited and Invagen Pharmaceuticals Meanwhile, the Honourable Supreme Court of India contended that no amount is payable into the DPEA Commitments Inc. (wholly owned subsidiaries). Loan outstanding as at vide its Order and Judgment dated 21st October, under the Drugs (Prices Control) Order, 1979. (a) Estimated amount 31st March, 2020 is H2,084.39 Crore (31st March, 2019 H3,885.47 2016, allowed the Appeals filed by the Government of contracts Crore). (Refer note 41) (ii) The Company had received various notices of against the Judgment and Order of the Honourable unexecuted on Allahabad High Court regarding basis of fixation of Note: demand from the National Pharmaceutical Pricing capital account [also Authority (NPPA), Government of India, on account retail prices. The said order was specific to fixation of retail prices without adhering to the formula/ refer below note (c)] 291.78 256.06 i. Claims against the Company not acknowledged as of alleged overcharging in respect of certain drugs process laid down in DPCO, 1995. However, the debt include claim relating to pricing, commission, under the Drugs (Prices Control) Orders. The total (b) Until previous year, with respect to 0.001% Compulsory grounds relating to inclusion of certain drugs within etc. demand against the Company as stated in NPPA Convertible Preference Shares (the'CCPS') issued by public disclosure amounts to H2,655.13 crore. the span of price control continues to be sub-judice Cipla Health Limited ('CHL') , a subsidiary of the Cipla ii. It is not practicable for the Company to estimate with the Honourable Bombay High Court. Limited (the'Company'), to Eight Road Investments the timing of cash outflow, if any, in respect of our Out of the above, demand notices pertaining to a The Honourable Bombay High Court had, in Mauritius II Limited [Formerly known as FIL Capital pending resolution of the respective proceedings set of products being Norfloxacin, Ciprofloxacin, expectation of NPPA filing its counter-statement on Investments (Mauritius) II Limited] ('Investor') as it is determined only on receipt of judgements/ Salbutamol and Theophylline were challenged by status of each petitioner’s compliance with the 2003 aggregating to H128.97 crore, Investor had an option decisions pending with various forum/authorities. the Company (i) in the Honourable Bombay High and 2016 Honourable Supreme Court orders (on to sell the CCPS to CHL or the Company at the fair Court on the ground that bulk drugs contained in iii. The Company does not expect any reimbursements the said formulations are not amenable to price deposit 50% of amount demanded), re-scheduled value of such CCPS on exercise date of such option. in respect of the above contingent liabilities. the hearing for 5th June, 2019, but the same was not st control, as they cannot be included in the ambit of Such option was exercisable upto 1 April,2021, only listed on that date. iv. The Company’s pending litigations comprise of price control based on the parameters contained in the event Cipla Health Limited/ the Company fails in the Drug Policy, 1994 on which the DPCO, 1995 is proceedings pending with various direct tax, Further during the current quarter ended 31st to provide an exit opportunity to the Investor in the based and (ii) in the Honourable Allahabad High indirect tax and other authorities. The Company has March, 2020, the Company filed amendment form of qualified public offering, secondary sale or Court on process followed for fixation of pricing reviewed all its pending litigations and proceedings applications before the Honourable Bombay High acquisition, before then. norms. These Petitions were decided in favour and has adequately provided for where provisions Court to incorporate the effect of a ruling by the of the Company and the matters were carried in are required and disclosed as contingent liabilities Honourable Supreme Court of India to adjust trade During the year, the Company purchased CCPS appeal by the Union of India to the Honourable where applicable, in its financial statements. The margins of 16% from outstanding demands as not from Investor and thereby there is no outstanding Supreme Court of India. The Honourable Supreme st Company does not expect the outcome of these accrued to the manufacturers and to re-calculate commitment as at 31 March, 2020. Court in its judgment of 1st August, 2003 remanded proceedings to have a materially adverse effect on interest from date of non-payment of demand the said writ petitions to the Honourable Bombay its financial statements. within the time period stated in each demand. The (c) Deal with Venus Remedies Limited: High Court with directions that the Court will have said amendment also places certain additional v. There has been a judgement by the Honourable to consider the petitions afresh, having due regard During the year, the Company signed for an grounds on record. The Honourable Bombay High Supreme Court of India dated 28th February, 2019, to the observations made by the Honourable acquisition of a novel and patented anti-infective Court issued notice to Union of India and NPPA on 288 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 289 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 39: Contingent liabilities, commitments Note 40 : Employee benefits (Contd.) Note 40 : Employee benefits (Contd.) and other litigations (to the extent not b. Governance of the plan: e. Disclosures for defined benefit plans based on actuarial reports provided for) (Contd.) H in Crores The Company has setup an income tax approved the amendment applications and set 30th March, 31st March, 2020 31st March, 2019 irrevocable trust fund to finance the plan liability. 2020 for further hearing but the case was adjourned The trustees of the trust fund are responsible for Particulars Gratuity Gratuity due to the COVID-19 lockdown and the next date is the overall governance of the plan in accordance (funded plan) (funded plan) awaited. with the provisions of the trust deed and rules in i. Change in defined benefit obligation The Company has been legally advised that it has the best interests of the plan participants. They are Opening defined benefit obligation 133.11 134.35 tasked with periodic reviews of the solvency of the a substantially strong case on the merits of the Interest cost 10.37 10.52 fund and play a role in the long-term investment, matter, especially under the guidelines/principles Current service cost 22.09 27.15 of interpretation of the Drug Policy enunciated by risk management and funding strategy. Actuarial changes arising from changes in demographic assumptions 18.41 (4.21) the Honourable Supreme Court of India. Although, Further, since these funds are Income tax approved, Actuarial changes arising from changes in financial assumptions 7.64 5.41 the decision of Honourable Supreme Court dated the Company and the trustees have to ensure that 21st October, 2016 referred above was in favour of Actuarial changes arising from changes in experience assumptions (7.28) (12.29) they are at all times fully compliant with the relevant Union of India with respect to the appeals preferred Benefits paid (20.89) (27.82) provisions of the Income Tax Act and Rules. by the Government challenging the Honourable Liability at the end of the year 163.45 133.11 Allahabad High Court order, basis the facts and c. Investment strategy: ii. Change in fair value of assets legal advice on the matter sub-judice with the Opening fair value of plan assets 142.63 138.27 The Company’s investment strategy in respect of its Honourable Bombay High Court, no provision is Expected return on plan assets 11.11 10.83 funded plans is implemented within the framework considered necessary in respect of the notices of Return on plan assets, excluding interest income (3.58) 0.91 of the applicable statutory requirements. The plans demand received till date aggregating to H1,736.00 Contributions by employer 15.00 15.00 crore. It may be noted that NPPA in its public expose the Company to a number of actuarial risks Benefits paid (29.65) (22.38) disclosure has stated the total demand amount such as investment risk, interest rate risk, longevity against the Company in relation to the above said risk and inflation risk. The Company has developed Closing fair value of plan assets 135.51 142.63 molecules to be H2,272.32 crore (after adjusting policy guidelines for the allocation of assets to iii. Amount recognised in balance sheet deposit of H175.08 crore), however, the Company different classes with the objective of controlling Present value of obligations as at year end (163.45) (133.11) has not received any further notices beyond an risk and maintaining the right balance between risk Fair value of plan assets as at year end 135.51 142.63 aggregate amount of H1,736.00 crore. and long-term returns in order to limit the cost to Net asset/(liability) recognised (27.94) 9.52 the Company of the benefits provided. To achieve iv. Expenses recognised in profit or loss In addition, Company had made provision of H104.26 this, investments are well diversified, such that the Current service cost 22.09 27.15 crore as of 31st March, 2020 for products not part of failure of any single investment would not have a Interest on defined benefit obligation 10.37 10.52 the referenced writ proceedings. Few demands for material impact on the overall level of assets. these products aggregating H90.26 crore received Expected return on plan assets (11.11) (10.83) recently, were challenged before the Honourable d. Charge to the profit or loss: Total expense recognised in profit or loss 21.35 26.84 H in Crores Bombay High Court and the Honourable Delhi High v. Expenses recognised in other comprehensive income (OCI) Court and no coercion orders obtained. These writs For the For the Actuarial changes arising from changes in demographic year ended year ended are pending final hearing by the Courts for which Particulars assumptions 18.41 (4.21) 31st March, 31st March, the next date is awaited. Actuarial changes arising from changes in financial assumptions 7.64 5.41 2020 2019 Actuarial changes arising from changes in experience assumptions (7.28) (12.29) Note 40 : Employee benefits Defined Actuarial gain/(loss) return on plan assets, excluding interest income 3.58 (0.91) contribution plan Net (income)/expense for the period recognised in OCI 22.35 (12.00) a. Description of the plan: Employees vi. Actual return on plan assets pension scheme 30.95 23.97 Retirement benefit plans of the Company include Expected return on plan assets 11.11 10.83 Gratuity and Provident Fund. The Company Others - ESIS, Labour welfare Actuarial gain/(loss) on plan assets (3.58) 0.91 established the Cipla Limited Employees Gratuity fund, etc. 3.17 5.24 Actual return on plan assets 7.53 11.74 Fund (the “Gratuity Fund”) to fund the Gratuity vii. Asset information Plan. Liabilities in respect of the Gratuity Plan are 34.12 29.21 Insurer managed funds 100% 100% determined by an actuarial valuation, based upon Defined benefit plan which the Company makes contributions to the Gratuity 21.35 26.84 viii. Expected employer's contribution for the next year 45.00 12.59 Gratuity Fund. Provident fund 41.30 41.95 62.65 68.79 The actuarial calculations used to estimate commitments and expenses in respect of gratuity and compensated Provident Fund is managed through Cipla Limited Total contribution absences (Refer note 40(g)) are based on the following assumptions which if changed, would affect the Employees Provident Fund Trust (the “Provident to provident fund commitment's size, funding requirements and expense : Fund”) managed by the Company. and other fund 96.77 98.00 290 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 291 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 40: Employee benefits (Contd.) Note 40: Employee benefits (Contd.) For the year ended For the year ended Maturity analysis of the benefit payments: from the fund Principal actuarial assumptions used H in Crores 31st March, 2020 31st March, 2019 Projected benefits payable in future years from the date of As at As at Financial assumptions: reporting 31st March, 2020 31st March, 2019 Discounted rate (per annum) 6.84% 7.79% 1st following year 10.75 3.94 Expected rate of return on plan assets 6.84% 7.79% nd Expected rate of future salary increase (per annum) 2 following year 10.89 2.83 - For the next 2 years 5.00% 7.00% 3rd following year 12.35 4.50 - Thereafter starting from the 3rd year 5.00% 5.00% 4th following year 15.08 5.74 Demographic assumptions: 5th following year 16.07 9.65 Mortality rate Indian assured Indian assured Sum of years 6 to 10 60.63 43.62 lives Mortality lives Mortality Sum of years 11 and above 235.44 405.00 (2006-08) Ultimate (2006-08) Ultimate Retirement age 60 years 60 years f. The details of the Company's defined benefit plans in respect of the Company owned provident Attrition rate fund trust based on the actuarial reports - For Service 2 years and below 25.00% 25.00% H in Crores - For Service 3 years to 4 years 15.00% 15.00% 31st March, 2020 31st March, 2019 - For Service 5 years and above 5.00% 1.00% Particulars Provident fund Provident fund (funded plan) (funded plan) 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. i. Change in defined benefit obligation Opening defined benefit obligation 945.15 862.31 Sensitivity Analysis Interest cost 82.13 73.05 H in Crores Current service cost 41.30 41.95 For the Year ended For the Year ended Particulars Employee contribution 82.43 76.80 31st March, 2020 31st March, 2019 Liability transferred in 25.63 19.86 Discount rate Increase by 1% Decrease by 1% Increase by 1% Decrease by 1% Benefits paid (140.46) (128.11) Increase (decrease) in the Other experience adjustment 49.75 (0.71) defined benefit liability (13.45) 15.71 (15.97) 19.31 Liability at the end of the year 1,085.93 945.15 Salary growth rate Increase by 1% Decrease by 1% Increase by 1% Decrease by 1% ii. Change in fair value of assets Increase (decrease) in the Opening fair value of plan assets 962.45 875.33 defined benefit liability 15.84 (13.79) 19.62 (16.46) Expected return on plan assets 82.13 73.05 Attrition rate Increase by 1% Decrease by 1% Increase by 1% Decrease by 1% Actuarial gain 49.75 3.54 Increase (decrease) in the Contributions 123.73 118.75 defined benefit liability 2.14 (2.46) 5.48 (6.34) Transfer of plan assets 25.63 19.86 The sensitivity analysis above has been determined based on reasonable possible changes of the respective Benefits paid (140.46) (128.11) assumption occurring at the end of the reporting period while holding all other assumptions constant. Other experience adjustment (9.23) 0.03 Closing fair value of plan assets 1,094.00 962.45 The sensitivity analysis presented above may not be representative of the actual change in the projected benefit iii. Amount recognised in balance sheet obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the Present value of obligations as at year end (1,085.93) (945.15) assumptions may be correlated. Fair value of plan assets as at year end 1,094.00 962.45 Funded status (8.07) (17.30) Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation Net asset/(liability) recognised - - has been calculated using the projected unit credit method at the end of the reporting period, which is the same iv. Expenses recognised in profit or loss method as applied in calculating the projected benefit obligation as recognised in the balance sheet. Current service cost 41.30 41.95 There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years. Interest cost 82.13 73.05 Expected return on plan assets (82.13) (73.05) Total expense recognised in profit or loss 41.30 41.95 292 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 293 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 41: Related Party Disclosures Sr. Note 40: Employee benefits (Contd.) Name of the Company Information on related party transactions as required by No. f. The details of the Company’s defined benefit plans in respect of the Company owned provident fund trust Ind AS-24 - Related Party Disclosures are given below: based on the actuarial reports 28 Cipla Dibcare Proprietary Limited (in the process of liquidation) H in Crores A. Enterprise where control exists: 29 Cipla Life Sciences Proprietary Limited 31st March, 2020 31st March, 2019 Sr. 30 Cipla-Medpro Proprietary Limited Particulars Provident fund Provident fund Name of the Company No. 31 Cipla-Medpro Distribution Centre Proprietary (funded plan) (funded plan) Limited (a) Subsidiaries (held directly) v. Actual return on plan assets 32 Cipla Medpro Botswana Proprietary Limited 1 Cipla FZE (upto 31st March, 2018 and finally Expected return on plan assets 82.13 73.05 33 Cipla OLTP (Pty) Limited (formerly known as Cipla liquidated w.e.f. 11th february, 2019) Actuarial gain on plan assets 49.75 3.54 Nutrition Proprietary Limited) 2 Cipla (Mauritius) Limited (in the process of Actual return on plan assets 131.88 76.59 34 Medpro Pharmaceutica Proprietary Limited liquidation) vi. Asset information 35 Med Man Care Proprietary Limited (liquidated 3 Cipla-Medpro South Africa (Proprietary) Limited Investment in PSU bonds 475.27 423.54 w.e.f. 15th October, 2018) 4 Cipla Holding B.V. Investment in Government securities 502.73 423.75 36 Breathe Free Lanka (Private) Limited 5 Cipla Biotec Limited (formerly known as Cipla Bank special deposit 15.58 15.58 37 Medica Pharmaceutical Industries Company Biotec Private Limited) Investment in other securities 42.10 36.03 Limited 6 Cipla (EU) Limited Private sector bonds - 4.00 38 Cipla Pharma Lanka (Private) Limited (purchased 7 Cipla Health Limited (purchased non controlling Equity/insurer managed funds/mutual funds 52.67 55.72 non controlling interest of 40% on 30th January, interest of 26.16% on 7th August, 2019) Cash and cash equivalents 5.65 3.83 2020) 8 Goldencross Pharma Limited (formerly known as Total assets at the end of the year 1,094.00 962.45 39 Cipla Brasil Importadora E Distribuidora De Goldencross Pharma Private Limited) vii. Principal actuarial assumptions used Medicamentos Limiteda. 9 Jay Precision Pharmaceuticals Private Limited Discounted rate (p.a.) 6.84% 7.79% 40 Cipla Maroc SA 10 Meditab Specialities Limited (formerly known as Expected rate of return on plan assets (p.a.) 8.50% 8.65% 41 Cipla Middle East Pharmaceuticals FZ-LLC Meditab Specialities Private Limited) Expected rate of future salary increase (p.a.) 42 Quality Chemicals Limited 11 Saba Investment Limited - For the next 2 years 5.00% 7.00% 43 Cipla Philippines Inc. 12 Cipla Pharmaceuticals Limited (Incorporated on - Thereafter starting from the 3rd year 5.00% 5.00% 44 Cipla USA Inc. 19th November, 2019) viii. Experience adjustments 45 InvaGen Pharmaceuticals Inc. (b) Subsidiaries (held indirectly) Defined benefit obligation 1,085.93 945.15 46 Exelan Pharmaceuticals Inc. 13 Cipla (UK) Limited (in the process of liquidation) Plan assets (1,094.00) (962.45) 47 Anmaraté (Pty) Limited 14 Cipla Australia Pty. Ltd Deficit/(surplus) (8.07) (17.30) 48 Cipla Biotec South Africa (Pty) Limited 15 Medispray Laboratories Private Limited Experience adjustment on plan assets - gain 49.75 3.54 49 Cipla Algérie 16 Sitec Labs Limited (formerly known as Sitec Labs 50 Cipla Technologies LLC, USA Private Limited) g. Compensated absences note: 51 Cipla Gulf FZ-LLC (w.e.f. 10th October, 2018) 17 Meditab Holdings Limited 52 Mirren (Pty) Limited (w.e.f. 22nd October, 2018) The Company provides for accumulation of compensated absences by certain categories of its employees. 18 Tasfiye Halinde Cipla İlaç Ticaret Anonim Şirketi 53 Madison Pharmaceuticals Inc. (w.e.f 26th October, These employees can carry forward a portion of the unutilised compensated absences and utilise them in (formerly known as Cipla İlaç Ticaret Anonim 2018) future periods or receive cash in lieu thereof as per the Company’s policy. The Company records a liability for Şirketi) (Liquidated on 7th October, 2019) 54 Cipla Colombia SAS (incorporated on 25th April, compensated absences in the period in which the employee renders the services that increases this entitlement. 19 Cipla Kenya Limited 2019) The total liability recorded by the Company towards this obligation was H121.07 crore and H115.11 crore as at 31st 20 Cipla Malaysia Sdn. Bhd. 55 Cipla (China) Pharmaceutical Co. Ltd. March, 2020 and 31st March, 2019, respectively. 21 Cipla Europe NV (incorporated on 20th May, 2019) 22 Cipla Quality Chemical Industries Limited 56 Cipla (Jiangsu) Pharmaceutical Co., Ltd 23 Galilee Marketing Proprietary Limited (liquidated (incorporated on 8th August, 2019) w.e.f. 11th October, 2018) (c) Associates held directly 24 Inyanga Trading 386 Proprietary Limited (in the 57 AMPSolar Power Systems Private Limited (w.e.f. process of liquidation) 12th June, 2019) 25 Xeragen Laboratories Proprietary Limited (d) Associates held indirectly (liquidated w.e.f. 7th September, 2018) 58 Stempeutics Research Private Limited 26 Cipla-Medpro Holdings Proprietary Limited (in 59 Avenue Therapeutics, Inc. the process of liquidation) 60 Brandmed (Pty) Ltd (w.e.f. 24th April, 2019) 27 Cape to Cairo Exports Proprietary Limited (in the process of de-registration) 294 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 295 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 41: Related Party Disclosures (Contd.) H in Crores Note 41: Related Party Disclosures (Contd.) B. Key management personnel (KMP) For the For the H in Crores H in Crores year year For the For the For the For the 1 Ms. Samina Hamied - Executive Vice- Particulars ended ended year year year year Chairperson 31st March, 31st March, Particulars ended ended Particulars ended ended 2 Mr. Umang Vohra – Managing Director and 2020 2019 31st March, 31st March, 31st March, 31st March, Global Chief Executive Officer A. Equity component of 2020 2019 2020 2019 3 Mr. Kedar Upadhye - Global Chief Financial ICD converted to non- H. Loan repaid K. Outstanding Officer current investment Meditab Specialities receivables 4 Dr. Raghunathan Ananthanarayanan - Global Meditab Specialities Limited (Refer note 5) 173.45 - Cipla Gulf FZ LLC. - 0.01 Chief Operating Officer (from 8th August, 2018 Limited (Refer note 5) - 50.70 173.45 - Quality Chemicals and upto 31st December, 2019) - 50.70 I. Loans given/ Limited 12.07 10.31 B. Equity component unwinding of interest Breathe Free Lanka C. Non-executive Chairman and Non-executive of ICD converted Meditab Specialities (Private) Limited 75.88 68.42 Vice-Chairman on account of loan Limited 4.37 19.69 Cipla Quality Chemical conversion 4.37 19.69 Industries Limited 41.64 41.54 1 Dr. Y. K. Hamied, Chairman Meditab Specialities J. Outstanding payables Cipla Australia Pty. Ltd 28.69 18.60 2 Mr. M. K. Hamied, Vice Chairman Limited (Refer note 5) 50.70 - Goldencross Pharma Cipla USA Inc. 910.26 804.20 50.70 - D. Non-executive Directors Limited 42.47 75.62 Cipla-Medpro South C. Investment made - equity Saba Investment Africa Proprietary 1 Mr. Ashok Sinha Cipla (EU) Limited 2,093.48 206.84 Limited - 0.36 Limited 260.70 239.48 Cipla Health Limited 40.00 43.73 2 Mr. Adil Zainulbhai Sitec Labs Limited 23.41 25.74 Cipla Holding B.V. 0.03 0.01 Meditab Specialities Cipla Europe NV - 54.74 Cipla Health Limited 27.48 23.61 3 Ms. Punita Lal Limited (Refer note 5) 224.15 50.70 Cipla (UK) Limited - 0.53 Cipla Kenya Limited - 1.00 4 Ms. Naina Lal Kidwai Cipla Pharmaceuticals Medispray Cipla Middle East 5 Ms. Ireena Vittal (upto 31st March, 2019) Limited 20.00 - Laboratories Private Pharmaceuticals FZ- 2,377.63 301.27 6 Mr. Peter Lankau (upto 30th June, 2019) Limited 68.02 45.75 LLC 87.44 37.20 D. Investment made in InvaGen Cipla Maroc S.A. 2.99 12.77 7 Dr. Peter Mugyenyi associates - equity Pharmaceuticals Inc. - 1.15 Exelan 8 Mr. S. Radhakrishnan AMPSolar Power Cipla Malaysia Sdn. Pharmaceuticals Inc. 15.74 0.63 Systems Private Limited E. Entities over which Key management Bhd. 2.10 2.34 Cipla Technologies [Refer note 5 and 5 Cipla (EU) Limited - 39.89 LLC, USA 7.49 8.36 personnel are able to exercise significant (viii)] 0.09 - influence Jay Precision Medica 0.09 - Pharmaceuticals Pharmaceutical 1 Cipla Foundation E. Investment made in Private Limited 12.16 9.80 Industries Company associates - CCD 2 Chest Research Foundation (formerly known as Cipla Biotec Limited 4.10 2.08 Limited 0.63 0.97 AMPSolar Power Hamied Foundation upto 14th October, 2019) Meditab Specialities Cipla (EU) Limited 35.24 - Systems Private Limited Limited 9.60 18.30 Cipla Colombia SAS 21.65 - 3 Cipla Cancer and AIDS Foundation [Refer note 5 and 5 Cipla Gulf FZ LLC 0.89 - Cipla Europe NV 35.15 - (viii)] 8.91 - F. Trust over which entity has control/significant Cipla Kenya Limited 14.24 - InvaGen 8.91 - influence Cipla (China) Pharmaceuticals Inc. 6.14 - F. Sale/buy- back of Pharmaceutical Co. Ltd 5.19 - Saba Investment 1 Cipla Limited Employees Provident Fund investment - equity Cipla Life Sciences Limited 0.01 - Cipla (Mauritius) 2 Cipla Limited Employees Gratuity Fund (Pty) Ltd 0.02 - 1,569.23 1,267.11 Limited (Refer note 5) 1.27 105.91 Cipla Brasil 3 Cipla Employees Stock Option Trust L. Capital advance 1.27 105.91 Importadora E Meditab Specialities 4 Cipla Health Employees Stock Option Trust G. Share cancellation Distribuidora De Limited (Refer note 9) 55.74 55.74 Cipla Holding B.V. Medicamentos 55.74 55.74 (Refer note 5) 94.07 - Limiteda. 10.23 - 94.07 - 192.43 276.30 296 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 297 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 41: Related Party Disclosures (Contd.) Note 41: Related Party Disclosures (Contd.) H in Crores H in Crores H in Crores H in Crores For the For the For the For the For the For the For the For the year year year year year year year year Particulars ended ended Particulars ended ended Particulars ended ended Particulars ended ended 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 2020 2019 2020 2019 2020 2019 2020 2019 M. Loan to subsidiaries P. Purchase of goods Stempeutics Research Medpro Meditab Specialities Goldencross Pharma Private Limited 0.02 - Pharamaceutica (Pty) Limited (Refer note 6) - 169.08 Limited 102.71 97.49 0.30 0.34 Ltd 474.79 - - 169.08 Medispray T. Sale of goods Exelan N. Interest received Laboratories Private Goldencross Pharma Pharmaceuticals Inc. 48.40 - (Refer note 29) Limited 142.64 159.99 Limited 3.69 2.82 2,558.46 2,198.58 Meditab Specialities Meditab Specialities Meditab Specialities U. Sale of assets Limited 4.37 19.69 Limited 0.04 0.13 Limited 0.30 0.31 Goldencross Pharma Cipla (EU) Limited Jay Precision Medispray Limited - 0.00 (Guarantee Pharmaceuticals Laboratories Private Meditab Specialities commission) 6.80 8.01 Private Limited 96.84 102.69 Limited 20.86 29.77 Limited 0.01 0.02 InvaGen Cipla Quality Chemical Cipla Quality Chemical Medispray Pharmaceuticals Industries Limited 1.08 0.21 Industries Limited 24.44 46.35 Laboratories Private Inc. (Guarantee Cipla Health Limited 1.07 0.24 Cipla Health Limited 1.01 0.00 Limited 0.23 0.05 commission) 10.08 11.91 InvaGen Sitec Labs Limited 0.45 0.50 Cipla Biotec Limited 0.02 - Cipla Australia Pty. Pharmaceuticals Inc. 0.41 19.62 Cipla (EU) Limited 46.77 16.30 InvaGen Ltd (Guarantee Stempeutics Research Cipla Europe NV 110.95 60.45 Pharmaceuticals Inc. 0.17 - commission) 0.04 - Private Limited - 0.16 Cipla-Medpro South 0.43 0.07 21.29 39.61 Cipla Biotec Limited - 0.02 Africa Proprietary V. Purchase of assets O. Remuneration 344.79 380.55 Limited 17.27 645.58 Cipla Biotec Limited 0.64 0.48 (Including sitting fees)i Q. Processing charges Cipla Australia Pty. Ltd 10.99 16.49 Goldencross Pharma Dr. Y.K. Hamied 2.03 2.02 paid Cipla USA Inc. 1,516.03 1,166.76 Limited - 0.61 Mr. M.K. Hamied 2.08 2.07 Goldencross Pharma Quality Chemicals Stempeutics Research Ms. Samina Hamied 6.74 7.27 Limited 52.00 56.56 Limited 9.49 6.18 Private Limited - 3.00 Mr. Umang Vohra 15.05 17.06 Medispray InvaGen 0.64 4.09 Mr. S.Radhakrishnan 2.10 2.09 Laboratories Private Pharmaceuticals Inc. 2.37 0.92 W. Processing charges Mr. Kedar Upadhye 3.84 3.85 Limited 48.19 51.65 Cipla Kenya Limited 2.39 (5.93) received Dr. Raghunathan Meditab Specialities Cipla Maroc S.A. 15.41 13.01 Meditab Specialities Ananthanarayanan -1.02 8.85 Limited 36.19 38.15 Cipla Middle East Limited 0.83 0.38 Mr. Ashok Sinha 0.48 0.46 136.38 146.36 Pharmaceuticals FZ- Medispray Mr. Adil Zainulbhai 0.47 0.38 R. Testing and analysis LLC 112.04 87.34 Laboratories Private Ms. Punita Lal 0.40 0.41 charges paid Breathe Free Lanka Limited 1.91 4.96 Ms. Naina Lal Kidwai 0.45 0.43 Sitec Labs Limited 82.98 76.44 (Private) Limited 87.93 111.70 2.74 5.34 Ms. Ireena Vittal - 0.41 Stempeutics Research Jay Precision X. Contribution to Mr. Peter Lankau 0.10 0.44 Private Limited 2.06 1.79 Pharmaceuticals provident fund and Dr. Peter Mugyenyi 0.46 0.43 Cipla Biotec Limited 0.09 - Private Limited - 0.03 other fund 33.18 46.17 85.13 78.23 Cipla Colombia SAS 20.50 - Cipla Limited i. Expenses towards gratuity, compensated absences S. Freight charges paid Cipla Gulf FZ-LLC 32.20 - Employees Gratuity and premium paid for group health insurance has Goldencross Pharma Cipla Life Sciences Fund 15.00 15.00 not been considered in above information as a Limited 0.28 0.34 Proprietary Limited 0.18 - Cipla Limited separate actuarial valuation/premium paid are Meditab Specialities Employees Provident not available. Limited 0.00 - Fund 41.30 41.95 56.30 56.95 298 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 299 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 41: Related Party Disclosures (Contd.) Note 41: Related Party Disclosures (Contd.) H in Crores H in Crores H in Crores H in Crores For the For the For the For the For the For the For the For the year year year year year year year year Particulars ended ended Particulars ended ended Particulars ended ended Particulars ended ended 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 2020 2019 2020 2019 2020 2019 2020 2019 Y. Service charges paid InvaGen Cipla Quality Chemical Cipla-Medpro South Cipla Biotec Limited 13.90 12.27 Pharmaceuticals Inc. 1.64 3.75 Industries Limited 0.18 0.12 Africa Proprietary Cipla (EU) Limited 9.59 7.89 Goldencross Pharma Meditab Specialities Limited - 1.17 Cipla (UK) Limited 0.39 1.35 Limited 0.07 0.06 Limited 0.02 0.00 Cipla Quality Chemical Cipla Australia Pty. Ltd 14.38 13.34 Medispray InvaGen Industries Limited 0.37 0.34 Cipla Ilac Ticaret Laboratories Private Pharmaceuticals Inc. 8.83 10.25 Cipla USA Inc. 2.23 0.21 Anonim Sirketi - 0.78 Limited 0.18 0.20 Cipla Health Limited 15.24 0.36 Medispray Cipla USA Inc. 40.73 32.45 Cipla Quality Chemical Cipla Brasil Laboratories Private Cipla Malaysia Sdn. Industries Limited 0.19 0.36 Importadora e Limited 0.89 0.99 Bhd. 12.27 19.12 Cipla Australia Pty. Ltd 0.01 0.00 Distribuidora de Cipla Biotec Limited 0.01 0.01 Cipla Europe NV 23.59 9.54 Breathe Free Lanka Medicamentos Ltda. 10.23 1.98 Sitec Labs Limited 0.39 0.43 Cipla-Medpro South (Private) Limited 0.01 0.01 Cipla Kenya Limited 0.58 0.77 Cipla Europe NV 1.12 0.12 Africa Proprietary Cipla Kenya Limited 0.00 0.00 Cipla USA Inc. 10.01 20.34 InvaGen Limited - 1.71 Cipla Maroc S.A. 0.01 0.00 Stempeutics Research Pharmaceuticals Inc. 1.52 1.16 Quality Chemicals Exelan Private Limited 0.31 0.18 Breathe Free Lanka Limited 2.20 1.06 Pharmaceuticals Inc. 0.08 0.37 Cipla (UK) Limited 0.01 - (Private) Limited 0.23 0.12 Chest Research Meditab Specialities Cipla Colombia SAS 4.09 - Cipla Malaysia Sdn. Foundation - 2.22 Limited 0.09 0.08 Cipla Technologies LLC 0.06 - Bhd. 0.05 0.02 Cipla Health Ltd. 1.21 - Cipla Malaysia Sdn. Medispray Cipla Maroc S.A. 0.30 0.05 Cipla (China) Bhd. 0.00 0.00 Laboratories Private Cipla Holding B.V. 0.16 0.05 Pharmaceutical Co. Ltd 5.41 - Sitec Labs Limited 0.11 0.11 Limited 0.00 - Cipla Technologies Cipla Gulf FZ-LLC 14.99 - Medpro Medpro LLC, USA 1.63 1.89 Exelan Pharamaceutica (Pty) Pharamaceutica (Pty) Exelan Pharmaceuticals Inc. 13.14 - Ltd 0.45 - Ltd 0.95 - Pharmaceuticals Inc. 0.05 0.04 151.80 101.73 Cipla Gulf FZ-LLC 0.26 - Quality Chemicals Cipla Kenya Limited 0.08 0.04 Z. Service charges 30.50 29.51 Limited 0.02 - Medpro received AA. Donations given 50.75 34.51 Pharamaceutica (Pty) Cipla Biotec Limited 2.67 2.06 Cipla Foundation 35.11 28.80 AD. Reimbursement Ltd 2.13 - Cipla Brasil Cipla Health Limited 16.99 13.43 Chest Research received of operating/ Importadora E Saba Investment Foundation 2.00 - other expenses Distribuidora De Goldencross Pharma Limited - 0.23 37.11 28.80 Medicamentos Ltda. 0.00 - Limited 0.61 0.83 Cipla (EU) Limited 1.59 1.57 AB. Rent received Cipla Colombia SAS 0.01 - Cipla (UK) Limited 0.01 0.06 Dr. Y.K. Hamied Meditab Specialities 17.32 13.50 Cipla Europe NV 0.10 0.16 (H20,040/- in both the Limited 0.46 0.45 AE. Royalty received Cipla Holding B.V. 0.04 0.09 year) 0.00 0.00 Jay Precision Cipla Health Limited 4.00 2.96 Cipla-Medpro South Cipla Biotec Limited 1.33 1.33 Pharmaceuticals Cipla Quality Chemical Africa Proprietary 1.33 1.33 Private Limited 0.36 0.61 Industries Limited 7.44 15.83 Limited - 0.25 AC. Reimbursement of Cipla Health Limited 3.48 4.12 Cipla-Medpro South Cipla Technologies operating/other Cipla Gulf FZ-LLC 0.01 0.54 Africa Proprietary LLC, USA 5.62 6.46 expenses Cipla (EU) Limited 1.13 0.30 Limited 44.58 31.89 Cipla USA Inc. 0.38 0.26 Cipla Biotec Limited 0.09 0.02 Cipla Australia Pty. Ltd 0.10 0.00 56.02 50.68 Cipla Maroc S.A. 0.13 0.49 Cipla (UK) Limited 0.00 0.01 300 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 301 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 41: Related Party Disclosures (Contd.) Note 42: Employee stock option scheme H in Crores H in Crores Employee stock option scheme For the For the For the For the The Company has implemented "ESOS 2013 - A" as approved by the shareholders on 22nd August 2013. The plan covers year year year year all the employees of the Company and its subsidiaries and directors (excluding promoter directors) [collectively Particulars ended ended Particulars ended ended "eligible employees"]. The nomination and remuneration committee of the Board of Cipla Limited administers this st st st st 31 March, 31 March, 31 March, 31 March, ESOS plan and grants stock options to the eligible employees. Details of the options granted during the year under 2020 2019 2020 2019 the Scheme(s) are as given below: AF. Technical know-how Ms. Samina Hamied 2.30 2.30 No. of options Exercise price Vesting period Exercise period fees received Mr. Umang Vohra 4.00 5.50 Scheme details Grant date Cipla Health Limited 1.55 - Mr. S.Radhakrishnan 2.00 2.00 granted (J) per option 1.55 - Mr. Kedar Upadhye 0.90 0.91 ESOS 2013 - A 21-May-19 2,72,522 2.00 2 years 5 years from vesting AG. Royalty paid Mr. Ashok Sinha 0.40 0.40 date Cipla (EU) Limited 4.19 4.22 Mr. Adil Zainulbhai 0.36 0.32 ESOS 2013 - A 21-May-19 66,555 2.00 1 year 5 years from vesting 4.19 4.22 Ms. Punita Lal 0.35 0.35 date AH. Dividend received Ms. Naina Lal Kidwai 0.35 0.35 ESOS 2013 - A 05-Nov-19 1,50,118 2.00 50% options in 1 year On or before 31st Cipla-Medpro South Ms. Ireena Vittal - 0.36 and remaining 50% December of the Africa (Proprietary) Mr. Peter Lankau 0.10 0.40 to vest in 2 years respective calendar Limited 476.73 189.59 Dr. Peter Mugyenyi 0.41 0.40 year of vesting Saba Investment Dr. Raghunathan Limited 15.05 41.56 Ananthanarayanan - 1.78 The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at Jay Precision 15.17 19.07 the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one Pharmaceuticals AL. Contribution payable to gratuity/provident fund equity share of H2 each. Private Limited 18.29 10.35 Cipla Limited Goldencross Pharma Employees Provident Weighted average share price for options exercised during the year : Limited 18.39 - Fund 10.37 9.64 Particulars ESOS - 2013 - A Cipla Holding B.V. 8.75 - Cipla Limited Weighted average share price (H) 493.35 Meditab Specialities Employees gratuity Limited 28.30 - fund 27.94 - 565.51 241.50 38.31 9.64 Stock option activity under the scheme(s) for the year ended 31st March, 2020 is set out below: AI. Guarantee given on AM. Receivable from ESOS 2013 - A behalf of subsidiary gratuity fund Company Cipla Limited Weighted Range of exercise Weighted average average exercise price (J) per option remaining contractual Cipla (EU) Limited 833.72 1,562.90 Employees Gratuity Particulars No. of options Invagen Fund - 9.51 price (J) per life (years) option Pharmaceuticals Inc. 1,250.67 2,322.57 - 9.51 2,084.39 3,885.47 Outstanding at the AJ. Dividend paid Terms and conditions of transactions with related beginning of the year 10,55,791 2.00 2.00 4.57 Dr. Y.K. Hamied 114.78 50.02 parties: Granted during the year 4,89,195 2.00 2.00 - Mr. M.K. Hamied 24.20 10.37 All related party transactions entered during the year Forfeited/cancelled during Ms. Samina Hamied 12.53 5.37 were in ordinary course of the business and on arms the year 82,006 2.00 2.00 - Mr. Umang Vohra 0.16 0.04 length basis. Outstanding balances at the year end are Exercised during the year 5,37,973 2.00 2.00 - Mr. S.Radhakrishnan 0.11 0.01 unsecured and settlement occurs in cash. Outstanding at the end of Mr. Kedar Upadhye 0.03 - the year 9,25,007 2.00 2.00 5.13 151.81 65.81 Refer note 44 for terms and conditions for loans given Exercisable at the end of AK. Payable to KMP and Non executive directors to subsidiaries. the year 2,15,936 2.00 2.00 3.22 (Commission/remuneration) Dr. Y.K. Hamied 2.00 2.00 Mr. M.K. Hamied 2.00 2.00 302 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 303 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 42: Employee stock option scheme (Contd.) Note 44: Details of loans given, investment Note 45: Financial instruments (Contd.) The Black Scholes valuation model has been used for computing weighted average fair value considering the made and guarantee given (Contd.) The following methods and assumptions were used to following inputs: (b) Disclosure as per Section 186(4) of the estimate the fair values: Particulars ESOS 2013 - A Companies Act, 2013. The carrying amount of trade receivable, trade payable, H in Crores Expected dividend yield (%) 0.56% capital creditors, loans, cash and cash equivalents Expected volatility 24.71% For the For the and other bank balances as at 31st March, 2020 and Risk-free interest rate 6.64% Sr. Name of the year ended year ended 31st March, 2019 are considered to be the same as their st st Weighted average share price (H) 535.64 No. Company 31 March, 31 March, fair values, due to their short term nature. Difference Exercise price (H) 2.00 2020 2019 between carrying amounts and fair values of other Expected life of options granted in years 4.21 1 Meditab financial assets, other financial liabilities and short term Weighted average fair value of options (H) 521.64 Specialities borrowings subsequently measured at amortised cost is Limited (formerly not significant in each of the year presented. known as Meditab The effect of share-based payment transactions on the entity's profit for the period and earnings per share is Specialities Private Financial Instruments with fixed and variable interest presented below: Limited) (Refer rates are evaluated by the company based on Particulars 31st March, 2020 31st March, 2019 note 5(ii) and 41) 4.37 19.69 parameters such as interest rate and individual credit worthiness of the counterparty. Based on this evaluation, Profit after tax as reported (H in Crores) 2,318.17 1,888.41 Notes: allowances are taken to account for the expected losses Share based payment expense (H in Crores) 18.56 22.01 i. All the above loans have been given for business purposes, of these receivables. Earnings per share settlement of which was neither planned nor likely to occur in the next twelve months. Loan given is interest free. Basic (H) 28.99 23.72 ii. The loanees have not made any investment in the shares of the Fair value hierarchy Diluted (H) 28.95 23.68 Company. iii. Loans given to employees as per the Company’s policy are not The fair value hierarchy is based on inputs to valuation considered. techniques that are used to measure fair value that are either observable or unobservable and consists of Note 43: Segment information c) Refer note 5 for investments. following: In accordance with paragraph 3 of Indian Accounting Standard (Ind AS) 108 -Operating Segments, segment d) Corporate guarantees given by the Company Level 1 - category includes financial assets and liabilities, information has been given in the consolidated financial statements of the Company, and therefore, no separate in respect of loans as at 31st March, 2020. disclosure on segment information is given in these standalone financial statements. that are measured in whole or in significant part by reference to published quotes in an active market. H in Crores Note 44: Details of loans given, investment made and guarantee given As at 31st As at 31st Level 2 - category includes financial assets and Name of the Company March, March, liabilities measured using a valuation technique based (a) Disclosure as per Regulations 34(3) and 53(f) of Securities Exchange Board of India - Listing 2020 2019 on assumptions that are supported by prices from Obligations and Disclosure Requirements (LODR) Cipla (EU) Limited (refer observable current market transactions. These include H in Crores note 41) 833.72 1,562.90 assets and liabilities for which pricing is obtained via pricing services, but where prices have not been Maximum Maximum Invagen Sr. Name of the As at As at Nature balance during balance during Pharmaceuticals Inc. determined in an active market, financial assets No. Company 31st March, 2020 31st March, 2019 the year the year (refer note 41) 1,250.67 2,322.57 with fair values based on broker quotes and assets that are valued using the Company's own valuation 1 Meditab Specialities 2,084.39 3,885.47 models whereby the material assumptions are market Limited (formerly observable. The majority of Company’s over-the- known as Meditab counter derivatives and several other instruments not Specialities Private Note 45: Financial instruments traded in active markets fall within this category. Limited) (Refer note A. Fair value measurement 5(ii) and 41) Loan - 173.45 169.08 219.78 Level 3 - category includes financial assets and liabilities The fair value of financial assets and liabilities are measured using valuation techniques based on non included at the amount at which the instrument could market observable inputs. This means that fair values be exchanged in a current transaction between willing are determined in whole or in part using a valuation parties, other than in a forced or liquidation sale. 304 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 305 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 45: Financial instruments (Contd.) Note 45: Financial instruments (Contd.) model based on assumptions that are neither supported by prices from observable current market transactions in H in Crores the same instrument nor are they based on available market data. However, the fair value measurement objective Carrying Fair Value remains the same, that is, to estimate an exit price from the perspective of the Company. The main asset classes in Particulars value Level 1 Level 2 Level 3 this category are unlisted equity investments as well as unlisted funds. Investments - Saraswat Co-operative The carrying value and fair value of financial instruments by categories as on 31st March, 2020, were as follows: Bank Limited (refer note 5) 0.00 - - 0.00 H in Crores Financial assets at fair value through Carrying Fair Value other comprehensive income Particulars value Level 1 Level 2 Level 3 Derivatives designated as hedge (refer note 16) 54.93 - 54.93 - Financial assets: Financial assets at amortised cost Investment properties (refer note 3) 126.44 - - 159.21 B. Financial risk management objectives and Investments - National saving policies certificate (refer note 5) 0.00 - - 0.00 Investments in associate(refer note 5) 0.56 - - 0.56 The Company's activities expose it to a variety of changes in market rates and prices. The Company’s Financial assets at fair value through financial risks: market risk, credit risk and liquidity size and operations result in it being exposed to the profit or loss risk. The Company's primary focus is to foresee the following market risks that arise from its use of financial Investments in mutual funds (refer note 11) 834.43 834.43 - - unpredictability of financial markets and seek to minimise instruments: Investments - Saraswat Co-operative potential adverse effects on its financial performance. • currency risk; Bank Limited (refer note 5) 0.00 - - 0.00 • price risk; and Financial liabilities: The Company’s financial liabilities comprise of borrowings, trade payable and other liabilities to Financial liabilities at amortised cost • interest rate risk manage its operation and financial assets includes trade Lease liabilities (refer note 20 and 25) 74.66 - - 74.66 receivables, security deposits, loans and advances, etc. The above risks may affect the Company’s income and Financial liabilites at fair value arises from its operation. expenses, or the value of its financial instruments. The through profit or loss Company’s exposure to and management of these risks Derivatives not designated as hedge The Company has constituted a Risk Management are explained below. (refer note 25) 17.88 - 17.88 - Committee consisting of majority of directors and senior Financial liabilities at fair value managerial personnel. The Company has instituted (a) Currency risk: through other comprehensive income Business Risk Management framework to identify, The Company operates internationally and a major Derivatives designated as hedge evaluate business risks and opportunities. This framework portion of the business is transacted in several currencies (refer note 25) 38.03 - 38.03 - seeks to create transparency, minimise adverse impact and consequently the Company is exposed to foreign on the business objectives and enhance Company’s The carrying value and fair value of financial instruments by categories as on 31st March, 2019, were as follows: exchange risk to the extent that there is mismatch competitive advantage. The business risk framework between the currencies in which its sales and services defines the risk management approach across the H in Crores and purchases from overseas suppliers in various foreign enterprise at various levels including documentation currencies. The Company also holds derivative financial Carrying Fair Value and reporting. The framework has different risk models Particulars instruments such as foreign exchange forward and value Level 1 Level 2 Level 3 which help in identifying risk trend, exposure and currency option contracts to mitigate the risk of changes potential impact analysis at a Company level. Financial assets: in exchange rates on foreign currency exposures. The Financial assets at amortised cost The Audit Committee of the Board reviews the risk exchange rate between the Indian Rupee and foreign Investment properties (refer note 3) 61.85 - - 75.26 management framework at periodic intervals. currencies has changed substantially in recent years and Investments - National savings may fluctuate substantially in the future. Consequently, certificate (refer note 5) 0.00 - - 0.00 Market risk the results of the Company’s operations are affected as Financial assets at fair value through the Rupee appreciates/ depreciates against US dollar Market risk is the risk of loss of future earnings, fair profit or loss (USD), Euro (EUR), Great Britain Pound (GBP), South values or future cash flows that may result from adverse Derivatives not designated as hedge African Rand (ZAR) and Other currencies. (refer note 16) 19.82 - 19.82 - Investments in mutual funds (refer note 11) 2,011.58 2,011.58 - - 306 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 307 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 45: Financial instruments (Contd.) Note 45: Financial instruments (Contd.) Foreign exchange risk (iii) Sensitivity analysis (i) Foreign exchange derivatives and exposures outstanding at the year end A reasonably possible change in foreign exchange rates by 5% (31st March, 2019 - 2%) would have increased/ H in Crores (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables in Cross As at As at particular interest rates remain constant. Nature of Instrument Currency H in Crores currency 31st March, 2020 31st March, 2019 For the year For the year Forward contracts - Sold USD INR 2,178.37 2,054.00 Particulars ended ended Forward contracts - Sold ZAR INR 348.09 292.88 31st March, 2020 31st March, 2019 Foreign exchange currency options Movement in exchange rate contracts - Sold and bought USD INR 227.00 - USD - INR 5% 2% Unhedged foreign exchange exposures: Euro - INR 5% 2% Trade and other receivables 829.30 1,140.04 GBP - INR 5% 2% Cash and cash equivalents 1.77 4.21 ZAR - INR 5% 2% Trade and other payables (463.11) (539.71) Other currency 5% 2% Note: The Company uses foreign exchange forward and currency option contracts/derivatives for hedging purposes. Impact on profit/ loss USD - INR 12.41 10.50 Euro - INR 0.68 0.50 (ii) Foreign currency risk from financial instruments as of : GBP - INR 1.21 (0.95) H in Crores ZAR - INR 2.06 1.26 31st March, 2020 Other currency 2.04 0.79 Particulars Other USD EUR GBP ZAR Total Currency (b) Price risk Trade and other receivables 600.97 88.33 39.23 43.25 57.52 829.30 The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises st Cash and cash due to uncertainties about the future market values of these investments. At 31 March, 2020, the investments in st equivalents 0.85 - - - 0.92 1.77 debt mutual funds amounts to H834.43 crore (31 March, 2019: H2,011.58 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 Trade and other in debt mutual funds. A 1% increase in prices would have led to approximately an additional H8.34 crore gain in payables (353.67) (74.68) (15.12) (2.01) (17.63) (463.11) profit or loss (31st March, 2019: H20.11 crore gain). A 1% decrease in prices would have led to an equal but opposite Net assets / (liabilities) 248.15 13.65 24.11 41.24 40.81 367.96 effect. (c) Interest rate risk H in Crores 31st March, 2019 Company’s interest rate risk arises from borrowings and investment in short-term deposits. The Company adopts a Particulars Other policy of ensuring that maximum of its interest rate risk exposure is at a fixed rate. Considering the short-term nature, USD EUR GBP ZAR Total Currency there is no significant interest rate risk pertaining to short-term deposits. Trade and other The interest rate profile of the Company’s variable interest-bearing financial instruments (including sensitivity) as receivables 890.02 133.75 8.79 67.30 40.18 1,140.04 reported to the management of the Company is as follows: Cash and cash equivalents 0.84 - - - 3.37 4.21 The Company’s interest-bearing financial instruments is reported as below Trade and other H in Crores payables (366.05) (108.85) (56.43) (4.48) (3.90) (539.71) As at As at Particulars st st Net assets / (liabilities) 524.81 24.90 (47.64) 62.82 39.65 604.54 31 March, 2020 31 March, 2019 Variable rate instruments Borrowings (interest rate 7.95%) 6.06 - Sensitivity 1% rate increase 0.06 - 1% rate decrease (0.06) - 308 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 309 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 45: Financial instruments (Contd.) Note 45: Financial instruments (Contd.) Credit risk: The details of changes in allowance for credit losses during the year ended 31st March, 2020 and 31st March, 2019 for trade and other receivables are as follows: 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 H in Crores investment securities. The Company establishes an allowance for credit losses and impairment that represents its Movement of allowances of Loans Loans Other financial Trade Total estimate of expected losses in respect of trade and other receivables, cash and cash equivalents and investments. credit loss (current) (non-current) assets receivables st Trade and other receviables: As at 1 April, 2018 2.25 0.88 3.93 143.15 150.21 Provided during the year - - - 120.92 120.92 The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Reversals of provision - (0.03) (3.47) (168.20) (171.70) demographics of the customer, including the default risk of the industry and country in which the customer operates, Effect of changes in the foreign also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit exchange rates - - - (3.67) (3.67) limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in As at 31st March, 2019 2.25 0.85 0.46 92.20 95.76 the normal course of business. Provided during the year - 0.01 - 135.72 135.73 Cash and cash equivalents and investments: Reversals of provision - - - (70.15) (70.15) Effect of changes in the foreign Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and exchange rates - - - 6.04 6.04 financial institutions with high credit ratings assigned by international and domestic credit rating agencies. The As at 31st March, 2020 2.25 0.86 0.46 163.81 167.38 Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. Liquidity risk The Company does not expect any losses from non-performance by these counter-parties, and does not have any Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The significant concentration of exposures to specific industry sectors or specific country risks. 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 Details of financial assets – not due, past due and impaired: 31st March, 2020 and 31st March, 2019. Cash flow from operating activities provides the funds to service the financial None of the Company’s cash equivalents, including term deposits (i.e., certificates of deposit) with banks, were past liabilities on a day-to-day basis. The Company regularly monitors the rolling forecasts to ensure it has sufficient due or impaired as at 31st March, 2020. 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 The ageing analysis of the receivable (gross of provision) has been considered from the date the invoice falls due. 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 H in Crores sufficient liquidity to meet its liabilities. Neither past Past due but not impaired st Particulars due nor 0-180 180-365 Above 365 Total The table below provides details regarding the contractual maturities of significant financial liabilities as of 31 impaired days days days March, 2020: As at 31st March, 2020 2,688.88 748.53 129.35 157.32 3,724.08 H in Crores As at 31st March, 2019 1,913.24 1,112.33 138.60 96.76 3,260.93 Less than 1 Above 5 Particulars 1-2 years 2-5 years Total year years Expected credit loss: Non Derivative: In accordance with Ind AS 109, the Company uses the expected credit loss (“ECL”) model for measurement and Borrowings 6.06 - - - 6.06 recognition of impairment loss on its trade receivables or any contractual right to receive cash or another financial Trade payables 1,612.12 - - - 1,612.12 asset that result from transactions that are within the scope of Ind AS 115. For this purpose, the Company uses a Other financial liabilities 257.99 18.65 29.19 56.75 362.58 provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into Derivative: account external and internal credit risk factors and historical data of credit losses from various customers. Derivatives not designated as hedge - carried at fair value through profit or loss 17.88 - - - 17.88 Derivatives designated as hedge - carried at fair value through OCI 38.03 - - - 38.03 1,932.08 18.65 29.19 56.75 2,036.67 310 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 311 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 45: Financial instruments (Contd.) Note 45: Financial instruments (Contd.) st The table below provides details regarding the contractual maturities of significant financial liabilities as of 31 H in Crores March, 2019: Carrying amount Weighted H in Crores Maturity Hedge Type of hedge Nominal average strike Less than 1 Above 5 Assets Liabilities date ratio Particulars 1-2 years 2-5 years Total price/rate year years amount 31st March, 2019 Non Derivative: Cash flow hedge Trade payables 1,481.35 - - - 1,481.35 Foreign exchange risk Other financial liabilities 222.68 - 3.25 50.11 276.04 Foreign exchange forward April 2019 1,704.03 - 3.25 50.11 1,757.39 contracts (refer note 16) - March USD 1 = INR 72.79 (d) Impact of hedging activities 1,698.14 54.93 - 2020 1:1* ZAR 1 = INR 5.11 Fair value hedge The Company uses foreign exchange forward and currency option contracts to hedge against the foreign currency Foreign exchange risk risk of highly probable USD and ZAR sales. Such derivative financial instruments are governed by the Company’s Foreign exchange forward April 2019 policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent contracts (refer note 16) - March USD 1 = INR 71.45 with the Company’s risk management strategy. As the value of the derivative instrument generally changes in 710.65 19.82 - 2020 1:1* ZAR 1 = INR 5.01 response to the value of the hedged item, the economic relationship is established. * The foreign currency forward and currency option contracts are denominated in the same currency as the highly probable future sales, therefore hedge ratio of 1:1. a) Disclosure of effects of hedge accounting in the Company's balance sheet H in Crores b) Disclosure of effects of hedge accounting in the Company's profit or loss and other comprehensive income Carrying amount Weighted H in Crores Maturity Hedge Type of hedge and risks Nominal average strike Hedge Amount Amount Assets Liabilities date ratio amount price/rate Change in the ineffectiveness reclassified recognised in value of the recognised in from cash flow P&L 31st March, 2020 hedging instrument profit or loss hedging reserve Cash flow hedge Type of hedge recognised in other to profit or loss Foreign exchange risk comprehensive (Recognised as i) Foreign exchange April 2020 income component of forward contracts - March USD 1 = INR 73.42 revenue) (refer note 25) 1,753.26 - 31.07 2021 1:1* ZAR 1 = INR 4.82 31st March, 2020 ii) Foreign exchange April 2020 currency options contracts - March Foreign exchange risk sold (refer note 25) 227.00 - (0.53) 2021 1:1* USD 1 = INR 75.25 (i) Cash flow hedge (28.33) - (43.80) - iii) Foreign exchange April 2020 (ii) Fair value hedge - - - (37.70) currency options contracts - March bought (refer note 25) 227.00 - 7.49 2021 1:1* USD 1 = INR 71.80 H in Crores Fair value hedge Hedge Amount Amount Foreign exchange risk Change in the ineffectiveness reclassified recognised in (i) Foreign exchange April 2020 value of the recognised in from cash flow P&L forward contracts - March USD 1 = INR 73.51 hedging instrument profit or loss hedging reserve (refer note 25) 773.21 - 17.88 2021 1:1* ZAR 1 = INR 4.55 Type of hedge recognised in other to profit or loss comprehensive (Recognised as income component of revenue) 31st March, 2019 Foreign exchange risk (i) Cash flow hedge 54.42 - (5.61) - (ii) Fair value hedge - - - (12.83) 312 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 313 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the standalone financial statements Notes to the standalone financial statements Note 45: Financial instruments (Contd.) Note 47: Capital management Hedge effectiveness 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 A. Risk Management B. Dividend on equity share instruments. It is calculated by comparing changes in fair value of the hedged item, with the changes in fair value of H in Crores The Company’s objectives when managing capital the hedging instrument. Year ended Year ended are to safeguard their ability to continue as a going Particulars 31st March, 31st March, concern so that they can continue to provide returns for If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains 2020 2019 unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced shareholders and benefits for other stakeholders, and (a) Dividend on equity by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio maintain an optimal structure to reduce the cost of capital. shares paid during the aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for In order to maintain or adjust the capital structure, the year in profit or loss at the time of the hedge relationship rebalancing. Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new Final dividend for the c) Movement in cash flow hedging reserve and costs of hedging reserve shares or sell new assets to reduce debt. Consistent with year [FY 2018-19 H3.00 others in Industry, the Company monitors capital on the (FY 2017-18 H3.00) per H in Crores basis of the following gearing ratio (net debt divided by equity share of H2.00 As at As at each] 241.77 241.57 Cash flow hedging reserve total 'equity'). 31st March, 2020 31st March, 2019 Dividend distribution tax Net debt = Total borrowings less [Cash and cash Opening balance 32.22 0.47 on final dividend 34.23 40.40 equivalents + Bank balance other than cash and Add: Changes in fair value (28.33) 54.42 276.00 281.97 cash equivalents (excluding balance earmarked for Less: Amount reclassified to profit or loss (43.80) (5.61) Interim dividend unclaimed dividend) + Current investments] Less: Deferred tax relating to above 23.00 (17.06) (including one time special dividend) for the Closing balance (16.91) 32.22 Total ‘equity’ is as shown in the balance sheet. FY 2019-20 H4.00 per H in Crores equity share of H2.00 Note 46: Corporate social responsibility (CSR) expenditure As at As at each 322.49 - Particulars 31st March, 31st March, Dividend distribution tax The Company has incurred H36.31 crore (31st March, 2019: H33.42 crore) towards CSR activities, as per Section 135 of 2020 2019 on interim dividend 53.22 - the Companies Act, 2013 and Rules thereon. It is included in other expenses head in the profit or loss. Amount spent Total debt 6.06 - 375.71 - on construction/ aquisition of any assets is Nil during the year. Less: Cash and cash Total 651.71 281.97 (b) Proposed dividend Gross amount required to be spent by the Company during the year H36.24 crore (31st March, 2019: H32.14 crore). equivalent (including current investment on equity share not The above includes contribution of H35.11 crore (31st March, 2019: H28.80 crore) to Cipla Foundation which is a trust, and bank deposit recognised as liability - 291.40 with the main objective of working in the areas of social, economic and environmental issues. with original maturity During the previous year, the Board of Directors of the between 3 to 12 months) 1,346.05 2,176.50 Company at its meeting held on 22nd May, 2019 had Net debt (A) (1,339.99) (2,176.50) recommended a final dividend of H3.00 per equity share Total equity (B) 17,402.96 15,781.91 which was subject to approval at the ensuing Annual Net debt to equity ratio General Meeting of the Company and hence was not (A/B) (0.08) (0.14) recognised as a liability. 314 Creating Hope Since 85 Years Notes to the Standalone Financial Statements 315 Annual Report 2019-20 Notes to the standalone financial statements 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. Disclosure as required by Indian Accounting Standard (Ind AS)33 - Earnings per share: For the year ended For the year ended Particulars 31st March, 2020 31st March, 2019 Profit after tax as per profit or loss (H in Crores) 2,318.17 1,888.41 Basic weighted average number of equity shares outstanding 80,60,17,621 80,53,61,167 Basic earnings per share of par value H2/- per share 28.76 23.45 Add- Dilutive impact of employee stock options 10,58,934 14,68,822 Diluted weighted average number of equity shares outstanding 80,70,76,555 80,68,29,989 Diluted earnings per share of par value H2/- per share 28.72 23.41 Note 49: Reclassification note Note 51: Unforseeable losses The figures for the corresponding previous year have The Company has a process whereby periodically all been regrouped/reclassified wherever necessary, to long-term contracts (including derivative contracts) are make them comparable. 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 Note 50: Subsequent events material foreseeable losses. There are no subsequent events that occurred after the reporting date. Note 52: Authorisation of Financial statements The financial statements for the year ended 31st March, 2020 were approved by the Board of Directors on 15th May, 2020. As per our report of even date attached For and on behalf of the Board of Directors For Walker Chandiok & Co LLP Chartered Accountants Umang Vohra Samina Hamied Firm Reg. No.: 001076N/N500013 Managing Director and Executive Global Chief Executive Officer Vice-Chairperson DIN: 02296740 DIN: 00027923 Ashish Gupta Kedar Upadhye Rajendra Chopra Partner Global Chief Financial Officer Company Secretary Membership No.: 504662 New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 316 Creating Hope Since 85 Years Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report To the Members of Cipla Limited Basis for Opinion 3. We conducted our audit in accordance with the Key audit matter How our audit addressed the key audit matter Report on the Audit of the Consolidated Standards on Auditing specified under Section Financial Statements According to NPPA’s public disclosure, the total demand c) Inspected correspondence with the Group’s 143(10) of the Act. Our responsibilities under those against the Group aggregates to H2,655.13 crore as at external legal counsel in order to corroborate our Opinion standards are further described in the Auditor’s 31 March 2020, of which: understanding of these matters, accompanied by Responsibilities for the Audit of the Consolidated discussions with both internal and external legal a) H2,447.39 crore relates to matters pending at 1. We have audited the accompanying consolidated Financial Statements section of our report. We counsels. Tested the objectivity and competence of Honourable Bombay High Court, wherein the financial statements of Cipla Limited (‘the Holding are independent of the Group in accordance such management experts involved; Company’) and its subsidiaries (the Holding with the Code of Ethics issued by the Institute of Holding Company has deposited H175.08 crore Company and its subsidiaries together referred to as Chartered Accountants of India (‘ICAI’) together being 50% of the total demand of H350.15 crore as d) Obtained direct confirmation from the external ‘the Group’), and its associates, as listed in Annexure with the ethical requirements that are relevant to at 1 August 2003 under protest pursuant to direction legal counsel handling DPCO matters with respect I, which comprise the Consolidated Balance Sheet our audit of the financial statements under the of Honourable Supreme Court of India; and to the legal determination of the liability arising as at 31st March, 2020, the Consolidated Statement from such matters, conclusion of the matters in provisions of the Act and the rules thereunder, and b) H207.74 crore relates to other matters, wherein of Profit and Loss (including Other Comprehensive accordance with the requirements of Ind AS 37 and we have fulfilled our other ethical responsibilities in based on facts and legal advice, the Group has Income), the Consolidated Cash Flow Statement disclosures to be made in the financial statements. accordance with these requirements and the Code recorded a charge of H7.00 crore (including interest) and the Consolidated Statement of Changes in Evaluated the response received from the external of Ethics. We believe that the audit evidence we during the year ended 31st March, 2020 and carries Equity for the year then ended, and a summary have obtained and the audit evidence obtained by legal counsel to ensure that the conclusions reached of the significant accounting policies and other a total provision of H104.26 crore (including interest) the other auditors in terms of their reports referred st our supported by sufficient legal rationale; explanatory information. as at 31 March, 2020. to in paragraph 15 of the Other Matter section e) Assessed the appropriateness of methods used, The amounts involved are material and the application 2. In our opinion and to the best of our information below, is sufficient and appropriate to provide a and the reliability of underlying data for the of accounting principles as given under Ind AS 37, and according to the explanations given to us and basis for our opinion. calculations made for quantifying the amounts Provisions, Contingent Liabilities and Contingent Assets based on the consideration of the reports of the involved. Tested the arithmetical accuracy of such (‘Ind AS 37’), in order to determine the amounts to be other auditors on separate financial statements and Key Audit Matters calculations; and on the other financial information of the subsidiaries recognised as liability or to be disclosed as a contingent liability, is inherently subjective and needs careful f) Evaluated the Group’s disclosures for adequate and associates, the aforesaid consolidated 4. Key audit matters are those matters that, in evaluation and significant judgement to be applied by disclosure regarding the significant litigations of financial statements give the information required our professional judgment and based on the the management. the Group. by the Companies Act, 2013 (‘Act’) in the manner so consideration of the reports of the other auditors required and give a true and fair view in conformity on separate financial statements and on the Considering the materiality and the inherent subjectivity Based on the audit procedures performed, the with the accounting principles generally accepted other financial information of the subsidiaries and which involves significant management judgment in judgements made by the management were reasonable in India including Indian Accounting Standards associates, were of most significance in our audit of predicting the outcome of the matter, DPCO matters and disclosures made in respect of these matters were (‘Ind AS’) specified under Section 133 of the Act, the consolidated financial statements of the current have been considered to be a key audit matter for the appropriate in the context of the consolidated financial of the consolidated state of affairs of the Group period. These matters were addressed in the current period audit. statements taken as a whole. and its associates as at 31st March, 2020 and their context of our audit of the consolidated financial Impairment of goodwill, intangible assets and Our audit included, but was not limited to, the following consolidated profit (including other comprehensive statements as a whole, and in forming our opinion income), its consolidated cash flows and the intangible assets under development: procedures: thereon, and we do not provide a separate opinion consolidated changes in equity for the year ended As at 31st March, 2020, the Group has goodwill on these matters. a) Obtained an understanding of the management’s on that date. balance of H2,934.00 crore relating to multiple Cash process for identification of impairment indicators Generating Units (‘CGUs’). Further, the Group is carrying for goodwill, intangibles and intangibles under product-related capitalised intangibles and intangibles 5. We have determined the matters described below to be the key audit matters to be communicated in our report. development and process for identification of under development aggregating to H1,496.54 crore CGUs and impairment testing of such assets; Key audit matter How our audit addressed the key audit matter and H403.53 crore, respectively. These balances are subject to a test of impairment by the management b) Tested the design and operating effectiveness Drug (Prices Control) Orders Act (‘DPCO’) matters: Our audit of DPCO matters included, but was not in accordance with Ind AS 36 “Impairment of Assets”. of internal controls over such identification and limited to, the following procedures: The Group has recorded an impairment charge on The Holding Company and many of its Indian impairment measurement of identified assets; intangible assets of 52.95 crore during the year ended subsidiaries are regulated by National Pharmaceutical a) Obtained an understanding of the management’s H 31st March, 2020. Refer note 4 and 5 to the Consolidated c) Evaluated management’s identification of CGUs; Pricing Authority, Government of India (NPPA). There process for updating the status of the matters, Financial Statements. are number of legal and regulatory cases, of which assessment of accounting treatment in accordance d) Obtained the impairment assessment workings the most significant is a matter under Drugs (Prices with Ind AS 37, and for measurement of amounts The carrying values of goodwill, intangible assets and prepared by the management and its experts; Control) Orders Act (DPCO) as disclosed in Note 45B involved; intangible assets under development will be recovered to the consolidated financial statements, relating to through future cash flows and there is a risk that the overcharging of certain drugs under DPCO. b) Evaluated the design and tested the operating assets will be impaired if these cash flows do not meet effectiveness of key controls around above process; the group’s expectations. 318 Creating Hope Since 85 Years Independent Auditor’s Report 319 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report Key audit matter How our audit addressed the key audit matter Key audit matter How our audit addressed the key audit matter In addition to significance of the amounts, management's e) Involved auditor’s experts to assess the Revenue from operations: (Refer note 1 and 30 to the Our audit included, but was not limited to, the following assessment process is complex as it involves significant appropriateness of the valuation methodologies consolidated financial statements) procedures: judgement in determining the assumptions to be used used by the management to determine the to estimate the recoverable amounts involved in recoverable values; The Group recognises revenue from the sales of a) Obtained an understanding of the management’s forecasting cash flows for each of the CGUs, intangible pharmaceutical products to resellers or distributors, process for revenue recognition (from sale assets and those under development, principally f) Reconciled the cash flows to the business plans out-licensing arrangements and service fee. The Group to customers, out-licensing arrangements relating to budgeted revenue, operating margins, short- approved by the Board of Directors of the recognises revenue from product sales when control and service fee), judgments in estimation and term and long-term growth rates and the discount rates companies which constitute identified CGUs; of the product transfers, generally upon shipment or accounting treatment of discount schemes, returns, used. delivery to a customer. The Group records product chargebacks, rebates, failure to supply penalties g) Evaluated and challenged management’s sales net of estimated incentives/discounts, returns, and Medicaid compliance requirements; Considering the materiality of amounts involved assumptions such as implied growth rates during chargeback, rebates and other related charges. The together with the inherent subjectivity related to explicit periods, terminal growth rates and discount actual point in time when revenue is recognised varies b) Evaluated the design and tested the operating principal assumptions, which are dependent on current rates for their appropriateness based on our depending on the specific terms and conditions of the effectiveness of the Group’s internal controls, and future economic factors and trading conditions understanding of the business of the respective sales contracts entered with customers. including general IT controls, key IT application varying for different economic and geographical CGUs, past results and external factors such controls implemented by the management, over territories, assessment of carrying values of goodwill, as industry trends and forecasts, including the Further, the Group has a large number of customers recognition of revenue and measurement of various intangibles and intangible assets under development is possible impact of COVID-19 pandemic on such operating in various geographies and sales contracts discount schemes, returns, chargebacks, rebates, considered to be complex and determined to be a key assumptions; with customers have a variety of different terms relating failure to supply penalties and Medicaid; audit matter in our current period audit. to the recognition of revenue, the entitlement to sales h) Obtained and evaluated sensitivity analysis rebates, the right to return and price adjustments. Sales c) Evaluated the terms of the licensing arrangements performed by the management on key assumptions arrangements in certain jurisdictions lead to material to determine satisfaction of performance of implied growth rates during explicit periods, deductions to gross sales in arriving at revenue such as obligations under the contracts for appropriate terminal growth rates and discount rates; the Group’s sales to customers in the United States of revenue recognition and tested allocation of America (‘US’) which fall under certain commercial and consideration between performance obligations to i) Tested the mathematical accuracy of the governmental reimbursement schemes and mandated verify deferral of revenue in respect of unsatisfied management computations; contracts of which the most significant ones are performance obligations; chargebacks, rebates, failure to supply penalties and j) Performed independent sensitivity analysis of d) Performed substantive testing by selecting Medicaid Drug Rebate Program (‘Medicaid’). aforesaid key assumptions to assess the effect of samples of revenue transactions pertaining to reasonably possible variations on the estimated The Group also has development and commercialisation sale of products during the year, and verified recoverable amounts for respective CGUs to arrangements relating to research and development the underlying supporting documents including evaluate sufficiency of headroom between of new products in the pharmaceutical sector. This contracts, agreements, sales invoices and dispatch/ recoverable values and carrying amounts; and includes in-licensing and out-licensing arrangements shipping documents; and other types of complex agreements. k) Evaluated the adequacy of disclosures given e) Performed cut-off testing procedures by testing in the consolidated financial statements with We identified the recognition of revenue from samples of revenue transactions recorded during respect to goodwill, intangibles and intangible operations as a key audit matter because: the year in specific periods before and after year assets under development, including disclosure of end to conclude there has not been overstatement/ significant assumptions, judgements and sensitivity a) Accrual towards rebates, discounts, returns, understatement of revenue recorded for the year; analysis performed, in accordance with applicable chargebacks and allowances is complex and requires accounting standards. significant judgments and estimates in relation to f) Obtained management workings for amounts complex contractual agreements/commercial terms recognised towards discount schemes, returns, Based on the audit procedures performed, we across various geographies. Any change in these chargebacks, rebates, failure to supply penalties determined that the management’s assessment that estimates can have a significant financial impact. These and Medicaid during the year and as at year the carrying values of goodwill, intangible assets and estimates are particularly complex in US healthcare end. On a sample basis, tested the underlying intangible assets under development do not require environment which involves multi-layered product calculations for amounts recorded as accruals and any further impairment is appropriate in the context of discounting due to competitive pricing pressure apart provisions towards the aforementioned obligations the consolidated financial statements taken as a whole. from regulatory requirements such as Medicaid; as per the terms of related schemes, contracts and regulations, and traced the underlying data to source documents; 320 Creating Hope Since 85 Years Independent Auditor’s Report 321 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report Key audit matter How our audit addressed the key audit matter Key audit matter How our audit addressed the key audit matter b) The nature of development and commercialisation g) Evaluated historical accuracy of the Group’s Inventory existence: Our audit of existence of inventory included, but was not arrangements are often inherently complex estimates of year-end accruals pertaining to limited to, the following procedures: st and unusual, requiring significant management aforesaid arrangements made in the previous As at 31 March, 2020, the Group held inventories judgment to be applied in respect of revenue years to identify any management bias; of H4,377.60 crore as disclosed in Note 12 to the a) Obtained an understanding of the management’s recognition; consolidated financial statements. Inventories mainly process for inventory counts, including the changes h) Tested all the manual sales-related adjustments consist of raw and packing material, work-in-progress, required thereto as a result of COVID-19 related c) The Group considers revenue as key benchmark made to revenue comprising of variable stock-in-trade, finished goods and stores, spares and restrictions, and evaluated the design and tested for evaluating performances and hence, there is consideration under Ind AS 115 to ensure the consumables. Due to inherent nature of the business the operating effectiveness of key controls with risk of revenue being overstated due to pressure to appropriateness of revenue recognition during the and its widespread reach globally, inventories are kept respect to physical verification of inventory; achieve targets, earning expectations or incentive year; and at a number of locations which include plants, loan schemes linked to performance for a reporting b) Inspected the instructions given by supervisory i) Evaluated the adequacy of disclosures in the licensing facilities, depots, cold storages and third- period; and teams to the management count teams; Consolidated financial statements. party warehouses. As per the Group’s annual inventory d) Considering the widespread impact of the outbreak verification plan, management has performed physical Based on audit procedures performed, we determined c) Reviewed the managements process for ensuring due to COVID-19, point of transfer of goods control verification of the inventory at all locations, with the that the revenue recognition and measurement is that there was no movement of stock during the (transit days) and probability of collection from help of third party experts where required, under the appropriate in the context of the consolidated financial physical verification of inventory. customers was required to be re-assessed in certain supervision of finance team, over the period from statements taken as a whole. geographies. January 2020 to mid-March 2020. d) Appointed independent auditor’s experts for Accounting for new intangible acquisitions: Our audit included, but was not limited to, the following observing inventory counts at certain locations; Due to outbreak of the COVID-19, there has been procedures: In the current financial year, the Group completed the a lockdown enforced in various geographies near e) Provided suitable instructions and supervision to significant acquisitions of intangibles amounting to a) Obtained an understanding of the management year end and several restrictions were imposed by the component auditors to observe inventories. H326.30 crore. Refer note 5 to the consolidated financial process for recognition of intangibles arising from the respective governments across the globe on statements.: various acquisition agreements; travel and movement considering public health and f) Observed live video feeds of inventory counts safety measures which resulted into complexities for for certain locations subsequent to year-end and Management has determined that all the transactions b) Evaluated the design and tested the operating us to observe the physical verification of inventory gathered video evidence of warehouses, inventory as disclosed in aforesaid note meet the criteria for effectiveness of the Group’s internal controls over conducted by the management. This was resolved by counts, and other safeguarding procedures, and recognition as intangible assets under Ind AS 38, the accounting of intangibles; applying alternate audit techniques with the help of performed roll-back procedures; Intangible Assets. c) For all significant contracts: audio/video devices and use of other auditors, etc., as g) Performed roll-forward procedures on inventory The identification, recognition and measurement a. evaluated the acquisition agreements for these further described in our audit procedures. counts performed on locations before the lockdown of identifiable assets in these transactions required transactions and assessed the appropriateness had commenced; significant management estimates and judgements in of management’s judgment that these As a result of the above-mentioned complexities and transactions have resulted in acquisition of an due to the size, number of locations and geographical determining: h) Recounted a sample of inventory items at each asset or a group of assets that do not constitute spread of the inventories as at year end, we determined location to confirm management count; a) Whether the transactions were acquisitions of a business; the existence of inventory to be a key audit matter for businesses or assets which had a significant effect b. evaluated the fulfilment of recognition criteria the current period audit. i) Obtained direct confirmations from the third-party on the accounting treatment of the transactions; under Ind AS 38 including the probability of warehouses and loan licensing units with respect to b) Projections of future sales of products, probability expected future economic benefits embodied the existence of the inventories; and of getting the regulatory approvals, the potential in the asset flowing to the Group; j) Ensured that the differences noted in management’s impact of competitors’ products and the delivery d) Challenged management on their assessment of physical verification of inventory from book records of anticipated synergies to assess future economic the products getting regulatory approvals in case were adequately adjusted in books of account. benefits, for recognition of such assets. of acquisitions where the product is in development We determined the accounting for these new intangibles stage; and Based on the audit procedures performed, the acquired during the year to be a key audit matter to e) Evaluated appropriateness of the disclosures made management assertion on existence of inventories the current period audit due to the significance of the in the financial statements with respect to above determined to be appropriate in the context of the amounts involved as well as significant management mentioned intangibles acquired during the year. consolidated financial statements taken as a whole. judgement that was required in the classification of Based on audit procedures performed, we determined the transactions as acquisitions of businesses or assets that the intangibles acquired during the year have been and also the identification and measurement of the appropriately recognised and measured in the context of identifiable intangibles. the consolidated financial statements taken as a whole. 322 Creating Hope Since 85 Years Independent Auditor’s Report 323 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report Information other than the Consolidated necessary for the preparation of consolidated assurance is a high level of assurance, but is not a its associates to continue as a going concern. Financial Statements and Auditor’s Report Ind AS financial statements. Further, in terms of guarantee that an audit conducted in accordance If we conclude that a material uncertainty thereon the provisions of the Act, the respective Board of with Standards on Auditing will always detect a exists, we are required to draw attention in Directors /management of the companies included material misstatement when it exists. Misstatements our auditor’s report to the related disclosures 6. The Holding Company’s Board of Directors are in the Group, and its associates companies covered can arise from fraud or error and are considered in the consolidated financial statements or, if responsible for the other information. The other under the Act are responsible for maintenance of material if, individually or in the aggregate, they such disclosures are inadequate, to modify information comprises the information included adequate accounting records in accordance with could reasonably be expected to influence the our opinion. Our conclusions are based on in the Annual Report, but does not include the the provisions of the Act for safeguarding the economic decisions of users taken on the basis of the audit evidence obtained up to the date of consolidated financial statements and our auditor’s assets and for preventing and detecting frauds and these consolidated financial statements. our auditor’s report. However, future events report thereon. other irregularities; selection and application of or conditions may cause the Group and its appropriate accounting policies; making judgments 11. As part of an audit in accordance with Standards associates to cease to continue as a going Our opinion on the consolidated financial and estimates that are reasonable and prudent; on Auditing, we exercise professional judgment concern. statements does not cover the other information and design, implementation and maintenance of and maintain professional skepticism throughout and we do not express any form of assurance adequate internal financial controls, that were the audit. We also: o Evaluate the overall presentation, structure conclusion thereon. operating effectively for ensuring the accuracy and and content of the consolidated financial o Identify and assess the risks of material completeness of the accounting records, relevant statements, including the disclosures, and In connection with our audit of the consolidated misstatement of the financial statements, to the preparation and presentation of the financial whether the consolidated financial statements financial statements, our responsibility is to read whether due to fraud or error, design and statements that give a true and fair view and are represent the underlying transactions the other information and, in doing so, consider perform audit procedures responsive to those free from material misstatement, whether due to and events in a manner that achieves fair whether the other information is materially risks, and obtain audit evidence that is sufficient fraud or error. These financial statements have presentation. inconsistent with the consolidated financial and appropriate to provide a basis for our been used for the purpose of preparation of the statements or our knowledge obtained in the audit opinion. The risk of not detecting a material o Obtain sufficient appropriate audit evidence consolidated financial statements by the Directors or otherwise appears to be materially misstated. misstatement resulting from fraud is higher regarding the financial information of the of the Holding Company, as aforesaid. If, based on the work we have performed, we than for one resulting from error, as fraud may entities within the Group and its associates, to conclude that there is a material misstatement of 8. In preparing the consolidated financial statements, involve collusion, forgery, intentional omissions, express an opinion on the financial statements. this other information, we are required to report the respective Board of Directors of the companies misrepresentations, or the override of internal We are responsible for the direction, that fact. We have nothing to report in this regard. included in the Group and of its associates are control. supervision and performance of the audit of responsible for assessing the ability of those financial statements of such entities included o Obtain an understanding of internal controls companies or associates, as the case may be, in the financial statements, of which we are the Responsibilities of Management and relevant to the audit in order to design audit to continue as a going concern, disclosing, as independent auditors. For the other entities procedures that are appropriate in the Those Charged with Governance for the applicable, matters related to going concern included in the financial statements, which circumstances. Under Section 143(3)(i) of the Consolidated Financial Statements and using the going concern basis of accounting have been audited by the other auditors, Act, we are also responsible for expressing unless the Board of Directors either intends to such other auditors remain responsible for the 7. The accompanying consolidated financial our opinion on whether the Holding Company, liquidate those companies or associates or to cease direction, supervision and performance of the statements have been approved by the Holding its subsidiary companies and its associate operations, or has no realistic alternative but to do audits carried out by them. We remain solely Company’s Board of Directors. The Holding companies, which are covered under the Act so. responsible for our audit opinion. Company’s Board of Directors is responsible for has adequate internal financial controls system the matters stated in Section 134(5) of the Act with 9. Board of Directors are also responsible for in place and the operating effectiveness of 12. We communicate with those charged with respect to the preparation of these consolidated overseeing the financial reporting process of such controls. governance regarding, among other matters, financial statements that give a true and fair view the companies included in the Group and of its the planned scope and timing of the audit and o Evaluate the appropriateness of accounting of the consolidated state of affairs (consolidated associates. significant audit findings, including any significant financial position), consolidated profit or loss policies used and the reasonableness of deficiencies in internal control that we identify (consolidated financial performance including other accounting estimates and related disclosures during our audit. comprehensive income), consolidated changes in Auditor’s Responsibilities for the Audit of the made by the management. 13. We also provide those charged with governance equity and consolidated cash flows of the Group Consolidated Financial Statements o Conclude on the appropriateness of with a statement that we have complied with relevant including its associates in accordance with the management’s use of the going concern basis ethical requirements regarding independence, and accounting principles generally accepted in India, 10. Our objectives are to obtain reasonable assurance of accounting and, based on the audit evidence to communicate with them all relationships and including the Ind AS specified under Section 133 of about whether the financial statements as a whole obtained, whether a material uncertainty exists other matters that may reasonably be thought to the Act. The Holding Company’s Board of Directors are free from material misstatement, whether related to events or conditions that may cast bear on our independence, and where applicable, is also responsible for ensuring accuracy of due to fraud or error, and to issue an auditor’s significant doubt on the ability of the Group and related safeguards. records including financial information considered report that includes our opinion. Reasonable 324 Creating Hope Since 85 Years Independent Auditor’s Report 325 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Independent Auditor’s Report 14. From the matters communicated with those applicable in their respective countries. The Report on Other Legal and Regulatory d) In our opinion, the aforesaid consolidated charged with governance, we determine those Holding Company’s management has converted Requirements financial statements comply with Ind AS matters that were of most significance in the audit the financial statements of such subsidiaries specified under Section 133 of the Act; of the consolidated financial statements of the located outside India from accounting principles 17. As required by Section 197(16) of the Act, based on current period and are therefore the key audit generally accepted in their respective countries to our audit and on the consideration of the reports e) On the basis of the written representations matters. We describe these matters in our auditor’s accounting principles generally accepted in India. of the other auditors, referred to in paragraph received from the directors of the Holding report unless law or regulation precludes public We have audited these conversion adjustments 15, on separate financial statements of the Company and taken on record by the Board disclosure about the matter or when, in extremely made by the Holding Company’s management. Our subsidiaries, we report that the Holding Company, of Directors of the Holding Company and rare circumstances, we determine that a matter opinion on the consolidated financial statements in 2 subsidiary companies covered under the Act paid the reports of the statutory auditors of its should not be communicated in our report because so far as it relates to the balances and affairs of remuneration to their respective directors during the subsidiary companies covered under the Act, the adverse consequences of doing so would such subsidiaries and an associate located outside year in accordance with the provisions of and limits none of the directors of the Group companies reasonably be expected to outweigh the public India is based on the report of other auditors laid down under Section 197 read with Schedule covered under the Act, are disqualified as on 31 interest benefits of such communication. and the conversion adjustments prepared by the V to the Act. Further, we report that 5 subsidiary March 2020 from being appointed as a director management of the Holding Company and audited companies covered under the Act, no managerial in terms of Section 164(2) of the Act. Further, as by us. remuneration is payable for the year ended 31 stated in paragraph 16, financial statements Other Matter March 2020. Also, we report that the provisions of an associate company covered under the Our opinion above on the consolidated financial Act is unaudited and have been furnished to 15. We did not audit the financial statements of 47 of section 197 read with Schedule V to the Act are statements, and our report on other legal and us by the management, and as certified by subsidiaries, whose financial statements reflects not applicable to 2 associate companies covered regulatory requirements below, are not modified in the management, none of the directors of the total assets of H2,542.22 crore and net assets of under the Act, since none of such companies is a respect of the above matters with respect to our associate company covered under the Act, are H162.17 crore as at 31st March, 2020, total revenues public company as defined under section 2(71) of reliance on the work done by and the reports of the disqualified as on 31st March, 2020 from being of H3,359.65 crore and net cash outflows amounting the Act. other auditors. appointed as a director in terms of Section to H(60.41) crore for the year ended on that 18. As required by Section 143 (3) of the Act, based on 164(2) of the Act. date, as considered in the consolidated financial 16. The consolidated financial statements also include our audit and on the consideration of the reports of statements. The consolidated financial statements the Group’s share of net loss (including other the other auditors on separate financial statements f) With respect to the adequacy of the internal also include the Group’s share of net loss (including comprehensive income) of H(45.06) crore for the and other financial information of the subsidiaries financial controls over financial reporting of other comprehensive income) of H(2.40) crore for year ended 31 March 2020, as considered in the and associates, we report, to the extent applicable, the Holding Company, its subsidiary companies the year ended 31st March, 2020, as considered in consolidated financial statements, in respect of that: and associate companies covered under the consolidated financial statements, in respect 2 associates whose financial information has not the Act, and the operating effectiveness of of an associate, whose financial statement has not been audited by us. These financial information are a) We have sought and obtained all the such controls, refer to our separate report in been audited by us. These financial statements have unaudited and have been furnished to us by the information and explanations which to the best ‘Annexure II’; been audited by other auditors whose report has management and our opinion on the consolidated of our knowledge and belief were necessary been furnished to us by the management and our financial statements, in so far as it relates to the for the purpose of our audit of the aforesaid g) With respect to the other matters to be included opinion on the consolidated financial statements, in amounts and disclosures included in respect of the consolidated financial statements; in the Auditor’s Report in accordance with rule so far as it relates to the amounts and disclosures aforesaid associates, and our report in terms of 11 of the Companies (Audit and Auditors) Rules, included in respect of these subsidiaries and sub-section (3) of Section 143 of the Act in so far b) In our opinion, proper books of account as 2014 (as amended), in our opinion and to the associates, and our report in terms of sub-Section as it relates to the aforesaid associates, are based required by law relating to preparation of the best of our information and according to the (3) of Section 143 of the Act, in so far as it relates to solely on such unaudited financial information. In aforesaid consolidated financial statements explanations given to us and based on the the aforesaid subsidiaries and associates, is based our opinion and according to the information and have been kept so far as it appears from our consideration of the report of the other auditors solely on the reports of the other auditors. explanations given to us by the management, this examination of those books and the reports of on separate financial statements as also the financial information are not material to the Group. the other auditors; other financial information of the subsidiaries Further, of these subsidiaries and an associate, and associates: 44 subsidiaries and an associate are located Our opinion above on the consolidated financial c) The consolidated financial statements dealt outside India whose financial statements and statements, and our report on other legal and with by this report are in agreement with the i. The consolidated financial statements other financial information have been prepared regulatory requirements below, are not modified relevant books of account maintained for the disclose the impact of pending litigations in accordance with accounting principles in respect of the above matter with respect to our purpose of preparation of the consolidated on the consolidated financial position of generally accepted in their respective countries reliance on the financial information certified by financial statements; the Group and its associates as detailed and which have been audited by other auditors the management. under generally accepted auditing standards 326 Creating Hope Since 85 Years Independent Auditor’s Report 327 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Independent Auditor’s Report Annexure I in Note 45 to the consolidated financial bank notes were applicable for the period List of entities included in the consolidated financial statement. statements; from 8 November 2016 to 30th December, 2016, which are not relevant to these I) Subsidiaries: ii. Provision has been made in these consolidated financial statements. Hence, consolidated financial statements, as reporting under this clause is not applicable. 1. Goldencross Pharma Limited, India (formerly 21. Cipla Brasil lmportadora E Distribuidora De required under the applicable law or Ind known as Goldencross Pharma Private Limited) Medicamentos Ltda., Brazil AS, for material foreseeable losses, on long-term contracts including derivative 2. Meditab Specialities Limited, India (formerly 22. Galilee Marketing Proprietary Limited, South th contracts, as detailed in note 53 to the known as Meditab Specialities Private Limited) Africa (liquidated on 11 October, 2018) For Walker Chandiok & Co LLP consolidated financial statements; Chartered Accountants 3. Cipla BioTec Limited, India (formerly known as 23. lnyanga Trading 386 Proprietary Limited, South iii. There has been no delay in transferring Firm’s Registration No.: 001076N/N500013 Cipla BioTec Private Limited) Africa (under liquidation) amounts, required to be transferred, to the 4. Jay Precision Pharmaceuticals Private Limited, 24. Xeragen Laboratories Proprietary Limited, Investor Education and Protection Fund Ashish Gupta India South Africa (liquidated on 7th September, 2018) by the Holding Company, its subsidiary Partner companies and associates company 5. Cipla Health Limited, India 25. Cipla Medpro Holdings Proprietary Limited, Membership No.: 504662 covered under the Act during the year South Africa (under liquidation) UDIN: 20504662AAAABN5571 ended 31st March, 2020; and 6. Medispray Laboratories Private Limited, India 26. Cape to Cairo Exports Proprietary Limited, iv. The disclosure requirements relating to Place: New Delhi 7. Sitec Labs Limited, India (formerly known as South Africa (under deregistration) holdings as well as dealings in specified Date: 15st May, 2020 Sitec Labs Private Limited) 27. Cipla Dibcare Proprietary Limited, South Africa 8. Cipla Medpro South Africa (Proprietary) (under liquidation) Limited, South Africa 28. Cipla Life Sciences Proprietary Limited, South 9. Cipla Holding B.V., Netherlands Africa 10. Cipla (EU) Limited, United Kingdom 29. Cipla-Medpro Proprietary Limited, South Africa 11. Saba Investment Limited, United Arab Emirates 30. Cipla-Medpro Distribution Centre Proprietary Limited, South Africa 12. Cipla (UK) Limited, United Kingdom, (under liquidation) 31. Cipla Medpro Botswana Proprietary Limited, South Africa 13. Cipla Australia Pty. Limited, Australia 32. Cipla Algérie, Algeria 14. Meditab Holdings Limited, Mauritius 33. Cipla Biotec South Africa (Pty) Limited, South 15. Tasfİye Halİnde Cİpla İlac Tİcaret Anonİm Africa SİrketİTurkey (formerly known as Cipla llac th Ticaret Anonim Sirketi) (liquidated w.e.f 7 34. Cipla OLTP (Pty) Limited, South Africa (formerly October, 2019) known as Cipla Nutrition Proprietary Limited) 16. Cipla USA, Inc., United States of America 35. Medpro Pharmaceutica Proprietary Limited, South Africa 17. Kenya Limited, Kenya 36. Med Man Care Proprietary Limited, South 18. Cipla Malaysia Sdn. Bhd., Malaysia Africa (liquidated on 15th October, 2018) 19. Cipla Europe NV, Belgium 37. Breathe Free Lanka (Private) Limited, Sri Lanka 20. Cipla Quality Chemical Industries Limited, 38. Medica Pharmaceutical Industries Company Uganda Limited, Yemen 328 Creating Hope Since 85 Years Independent Auditor’s Report 329 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure I Annexure II 39. Cipla (Mauritius) Limited, Mauritius (under 53. Cipla (Colombia) SAS, Colombia (incorporated Independent Auditor’s Report on the internal financial statements of the Holding Company, its liquidation) on 25th April, 2019) financial controls with reference to financial subsidiary companies and its associate companies, as aforesaid, based on our audit. We conducted our 40. Cipla FZE, United Arab Emirates (liquidated on statements under Clause (i) of sub-section 54. Cipla (China) Pharmaceutical Co., Ltd.,China audit in accordance with the Standards on Auditing 11th February, 2019) th (incorporated on 20 May, 2019) 3 of Section 143 of the Companies Act, 2013 issued by the ICAI prescribed under Section 143(10) (‘the Act’) of the Act, to the extent applicable to an audit of 41. Cipla Pharma Lanka (Private) Limited, Sri Lanka 55. Cipla Health Employees Stock Option Trust, 1. In conjunction with our audit of the consolidated internal financial controls with reference to financial 42. Cipla Maroc SA, Morocco India financial statements of Cipla Limited (‘the Holding statements, and the Guidance Note issued by the 43. Cipla Middle East Pharmaceuticals FZ-LLC, 56. Cipla Employee Stock Option Trust, India Company’) and its subsidiaries (the Holding ICAI. Those Standards and the Guidance Note United Arab Emirates Company and its subsidiaries together referred require that we comply with ethical requirements 57. Cipla (Jiangsu) Pharmaceutical Co., Ltd. to as ‘the Group’), and its associates as at and for and plan and perform the audit to obtain (incorporated on 8th August, 2019) 44. Quality Chemicals Limited, Uganda the year ended 31st March, 2020, we have audited reasonable assurance about whether adequate internal financial controls with reference to financial 45. Cipla Philippines, Inc., Philippines 58. Cipla Pharmaceuticals Limited, India the internal financial controls with reference to statements were established and maintained and if (incorporated on 19th November, 2019) financial statements of the Holding Company, its 46. lnvaGen Pharmaceuticals, Inc., United States of subsidiary companies and its associate companies, such controls operated effectively in all material America II) Associates: which are covered under the Act, as at that date. respects. 4. Our audit involves performing procedures to obtain 47. Exelan Pharmaceuticals, Inc., United States of 1. Stempeutics Research Private Limited, India audit evidence about the adequacy of the internal America (w.e.f. 8th November, 2019 stake is changed from Responsibilities of Management and Those Charged with Governance for Internal financial controls with reference to financial 48. Anmaraté (Pty) Limited, South Africa 43.64% to 40.78%) Financial Controls statements and their operating effectiveness. Our audit of internal financial controls with reference 49. Cipla Technologies LLC, United States of 2. Avenue Therapeutics, Inc. United States of th 2. The respective Board of Directors of the Holding to financial statements includes obtaining an America America (acquired 33.3% stake on 8 February, 2019) Company, its subsidiary companies and its understanding of such internal financial controls, 50. Cipla Gulf FZ–LLC, United Arab Emirates associate companies which are companies assessing the risk that a material weakness (incorporated on 10 October 2018) 3. Brandmed (Pty) Limited, South Africa (acquired covered under the Act, are responsible for exists, and testing and evaluating the design and 30% stake on 24th April, 2019) establishing and maintaining internal financial operating effectiveness of internal control based 51. Mirren (Pty) Ltd, South Africa (acquired on 22nd controls based on internal control financial on the assessed risk. The procedures selected October, 2018) 4. AMPSolar Power Systems Private Limited reporting criteria established by the Company depend on the auditor’s judgement, including the (acquired 26% stake on 12th June, 2019)- (Share 52. Madison Pharmaceuticals Inc. United States of considering the essential components of internal assessment of the risks of material misstatement of of loss/profit not required to be considered) America (incorporated on 26th October, 2018) control stated in the guidance note on audit of the financial statements, whether due to fraud or Internal Financial Control over Financial Reporting error. (“the Guidance Note”) issued by the Institute of Chartered Accountants of India (ICAI). These 5. We believe that the audit evidence we have responsibilities include the design, implementation obtained and the audit evidence obtained by the and maintenance of adequate internal financial other auditors in terms of their reports referred to in controls that were operating effectively for the Other Matter paragraph below, is sufficient and ensuring the orderly and efficient conduct of the appropriate to provide a basis for our audit opinion Company’s business, including adherence to the on the internal financial controls with reference to Company’s policies, the safeguarding of its assets, financial statements of the Holding Company, its the prevention and detection of frauds and errors, subsidiary companies and its associate companies the accuracy and completeness of the accounting as aforesaid. records, and the timely preparation of reliable financial information, as required under the Act. Meaning of Internal Financial Controls with Reference to Financial Statements Auditor’s Responsibility for the Audit of the Internal Financial Controls with Reference to 6. A company's internal financial controls with Financial Statements reference to financial statements is a process designed to provide reasonable assurance 3. Our responsibility is to express an opinion on regarding the reliability of financial reporting and the internal financial controls with reference to the preparation of financial statements for external 330 Creating Hope Since 85 Years Independent Auditor’s Report 331 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Annexure II Annexure II purposes in accordance with generally accepted and its associate companies, which are companies reference to financial statements of this associate respect of the aforesaid company. Our opinion is accounting principles. A company's internal covered under the Act, have in all material company, which is a company covered under not modified in respect of the above matter with financial controls with reference to financial respects, adequate internal financial controls with the Act, is unaudited and our opinion under respect to our reliance on the internal financial statements include those policies and procedures reference to financial statements and such controls Section 143(3)(i) of the Act in so far as it relates controls with reference to financial statements that (1) pertain to the maintenance of records that, were operating effectively as at 31 March 2020, to the aforesaid associate company, which are report certified by the management. in reasonable detail, accurately and fairly reflect based on internal control over financial reporting companies covered under the Act, is solely based the transactions and dispositions of the assets of the criteria established by the Company considering on the corresponding internal financial controls For Walker Chandiok & Co LLP company; (2) provide reasonable assurance that the essential components of internal control stated with reference to financial statements reports Chartered Accountants transactions are recorded as necessary to permit in the Guidance Note on audit of Internal Financial certified by the management of such company. Firm’s Registration No.: 001076N/N500013 preparation of financial statements in accordance Control over Financial Reporting issued by the ICAI. In our opinion and according to the information with generally accepted accounting principles, and and explanations given to us by the management, that receipts and expenditures of the company are these financial statements are not material to the Ashish Gupta Other Matter being made only in accordance with authorisations Group. Our report on adequacy and operating Partner of management and directors of the company; 9. We did not audit the internal financial controls effectiveness of the internal financial controls with Membership No.: 504662 and (3) provide reasonable assurance regarding with reference to financial statements in so far reference to financial statements of the Group and UDIN: 20504662AAAABN5571 prevention or timely detection of unauthorised as it relates to 1 subsidiary company, which is its associate companies covered under the Act acquisition, use, or disposition of the company's company covered under the Act, whose financial does not include the internal financial controls with Place: New Delhi th assets that could have a material effect on the statement reflect total assets of H90.46 crore and reference to financial statements assessment in Date: 15 May, 2020 financial statements. net assets of H79.42 crore as at 31st March, 2020, total revenues of H0.46 crore and net cash outflows Inherent Limitations of Internal Financial amounting to H16.52 crore for the year ended Controls with Reference to Financial on that date, as considered in the consolidated financial statements. The internal financial controls Statements with reference to financial statements in so far as 7. Because of the inherent limitations of internal it relates to such subsidiary company have been financial controls with reference to financial audited by other auditors whose reports have been statements, including the possibility of collusion furnished to us by the management and our report or improper management override of controls, on the adequacy and operating effectiveness of material misstatements due to error or fraud may the internal financial controls with reference to occur and not be detected. Also, projections of any financial statements for the Holding Company, its evaluation of the internal financial controls with subsidiary companies and its associate companies, reference to financial statements to future periods as aforesaid, under Section 143(3)(i) of the Act in are subject to the risk that the internal financial so far as it relates to such subsidiary company is controls with reference to financial statements based solely on the reports of the auditors of such may become inadequate because of changes in company. Our opinion is not modified in respect of conditions, or that the degree of compliance with this matter with respect to our reliance on the work the policies or procedures may deteriorate. done by and on the reports of the other auditors. 10. We did not audit the internal financial controls with Opinion reference to financial statements in so far as it relates to 1 associate company, which is company covered 8. In our opinion and based on the consideration of under the Act, in respect of which, the Group’s share the reports of the other auditors on internal financial of net loss (including other comprehensive income) controls with reference to financial statements of the of H6.95 crore for the year ended 31st March, 2020 subsidiary companies and associate companies, has been considered in the consolidated financial the Holding Company, its subsidiary companies statements. The internal financial controls with 332 Creating Hope Since 85 Years Independent Auditor’s Report 333 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Consolidated Balance Sheet Consolidated Statement of Profit and Loss as at 31st March, 2020 for the year ended 31st March, 2020 H in Crores H in Crores Particulars Notes As at As at Particulars Notes For the year ended For the year ended 31st March, 2020 31st March, 2019 31st March, 2020 31st March, 2019 Assets (1) Income (1) Non-current assets (a) Property, plant and equipment 2.1 4,805.32 5,114.35 (a) Revenue from operations (b) Right-of-use assets 2.2 322.73 - (i) Revenue from sale of products 30 16,694.85 15,970.97 (c) Capital work-in-progress 2.1 421.00 331.05 (ii) Other operating revenue 31 437.14 391.44 (d) Investment properties 3 124.30 61.85 (e) Goodwill 4 2,934.00 2,869.14 17,131.99 16,362.41 (f) Intangible assets 5 1,496.54 1,563.02 (b) Other income 32 344.20 476.57 (g) Intangible assets under development 5 403.53 345.13 (h) Investment in associates 6 234.97 234.49 Total income 17,476.19 16,838.98 (i) Financial assets (2) Expenditure (i) Investments 7 219.53 193.86 (ii) Loans 8 52.39 49.42 (a) Cost of materials consumed 33 4,376.81 4,285.04 (iii) Other financial assets 9 42.04 93.21 (b) Purchases of stock-in-trade 34 1,859.37 1,452.41 (j) Income tax assets (net) 10 468.62 345.59 (c) Changes in inventories of finished goods, work-in-progress and (k) Deferred tax assets (net) 10 239.77 201.41 (l) Other non-current assets 11 191.64 134.17 stock-in-trade 35 (244.76) 47.04 Total non-current assets 11,956.38 11,536.69 (d) Employee benefits expense 36 3,027.01 2,856.53 (2) Current assets (a) Inventories 12 4,377.60 3,964.83 (e) Finance costs 37 197.36 168.43 (b) Financial assets (f) Depreciation, impairment and amortisation expense 38 1,174.65 1,326.31 (i) Investments 13 1,016.52 2,125.79 (g) Other expenses 39 4,907.57 4,624.08 (ii) Trade receivables 14 3,891.31 4,150.72 (iii) Cash and cash equivalents 15 742.38 508.36 Total expenditure 15,298.01 14,759.84 (iv) Bank balances other than cash and cash equivalents 16 261.53 110.45 (3) Profit before tax 2,178.18 2,079.14 (v) Loans 17 5.60 6.28 (vi) Other financial assets 18 522.28 497.87 (4) Tax expense (net) (c) Other current assets 19 886.62 1,060.33 (a) Current tax 10 682.87 747.70 Total current assets 11,703.84 12,424.63 (b) Deferred tax 10 (51.67) (178.17) (3) Assets classified as held-for-sale 2.1 2.34 2.00 Total assets 23,662.56 23,963.32 (5) Profit after tax before share of profit/(loss) from associates 1,546.98 1,509.61 Equity and liabilities (6) Share of profit/(loss) from associates 44 (47.46) (17.17) (1) Equity (a) Equity share capital 20 161.25 161.14 (7) Profit for the year 1,499.52 1,492.44 (b) Other equity 21 15,601.75 14,851.14 (8) Other comprehensive income/(loss) 40 Equity attributable to owner 15,763.00 15,012.28 (a) (i) Items that will not be reclassified to profit or loss (14.90) 42.51 (c) Non-controlling interest 22 294.28 331.97 Total equity 16,057.28 15,344.25 (ii) Income tax relating to these items 5.48 (7.60) (2) Share application money pending allotment * 0.00 - (3) Liabilities Non-current liabilities (b) (i) Items that will be reclassified to profit or loss (149.88) (312.63) (a) Financial liabilities (ii) Income tax relating to these items 29.90 (12.22) (i) Borrowings 23 2,369.28 3,830.07 (ii) Other financial liabilities 24 276.90 387.45 Other comprehensive income/(loss) for the year (129.40) (289.94) (b) Provisions 25 133.27 121.41 (9) Total comprehensive income for the year 1,370.12 1,202.50 (c) Deferred tax liabilities (net) 10 365.21 425.32 (d) Other non-current liabilities 26 67.48 83.31 (10) Profit for the year attributable to Total non-current liabilities 3,212.14 4,847.56 (a) Owners 1,546.52 1,527.70 Current liabilities (b) Non-controlling interest (47.00) (35.26) (a) Financial liabilities (i) Borrowings 23 447.15 486.16 (11) Total comprehensive income attributable to (ii) Trade payables 27 (a) Owners 1,385.23 1,220.23 -Total outstanding dues of micro enterprises and small enterprises 81.19 28.69 -Total outstanding dues of creditors other than micro enterprises (b) Non-controlling interest (15.11) (17.73) and small enterprises 2,200.62 1,919.30 (12) Earnings per equity share of face value of K 2 each 41 (iii) Other financial liabilities 28 530.36 398.43 Basic (in H) 19.19 18.97 (b) Other current liabilities 29 176.29 143.43 (c) Provisions 25 948.19 736.76 Diluted (in H) 19.16 18.93 (d) Income tax liabilities (net) 10 9.34 58.74 The accompanying notes form an integral part of these consolidated financial Total current liabilities 4,393.14 3,771.51 statements. 1-58 Total liabilities 7,605.28 8,619.07 Total equity and liabilities 23,662.56 23,963.32 *Represents H7,820 As per our report of even date attached For and on behalf of the Board of Directors The accompanying notes form an integral part of these consolidated financial statements. 1-58 For Walker Chandiok & Co LLP As per our report of even date attached For and on behalf of the Board of Directors Chartered Accountants Umang Vohra Samina Hamied For Walker Chandiok & Co LLP Firm Reg. No.: 001076N/N500013 Managing Director and Executive Chartered Accountants Umang Vohra Samina Hamied Global Chief Executive Officer Vice-Chairperson Firm Reg. No.: 001076N/N500013 Managing Director and Executive DIN: 02296740 DIN: 00027923 Global Chief Executive Officer Vice-Chairperson DIN: 02296740 DIN: 00027923 Ashish Gupta Kedar Upadhye Rajendra Chopra Partner Global Chief Financial Officer Company Secretary Ashish Gupta Kedar Upadhye Rajendra Chopra Membership No.: 504662 Partner Global Chief Financial Officer Company Secretary th th Membership No.: 504662 New Delhi, 15 May, 2020 Mumbai, 15 May, 2020 New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 334 Creating Hope Since 85 Years Consolidated Balance Sheet and Consolidated Statement of Profit and Loss 335 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows for the year ended 31st March, 2020 for the year ended 31st March, 2020 (a) Equity share capital (refer note 20) H in Crores H in Crores For the year ended For the year ended As at As at Particulars Particulars 31st March, 2020 31st March, 2019 31st March, 2020 31st March, 2019 Cash flow from operating activities Balance at the beginning of the year 161.14 161.02 Profit before tax 2,178.18 2,079.14 Changes in equity share capital during the year on exercise of employee stock Adjustments for : options (ESOSs) 0.11 0.12 Depreciation, impairment and amortisation expense 1,174.65 1,326.31 Balance at the end of the year 161.25 161.14 Interest expense 197.36 168.43 (b) Other equity (refer note 21) Unrealised foreign exchange (gain)/loss (net) (31.90) 11.77 H in Crores Share based payment expense 23.45 24.11 Attributable to the owners of the Company Allowances for credit loss (net) 180.27 76.56 Reserves and surplus Other reserve Interest income on income tax refund (9.28) (22.09) Non- Gross Equity Other Interest income (58.39) (37.77) Particulars Employee Foreign controlling Total Securities obligation to instrument equity Capital General stock Retained currency Hedge interest premium non-controlling through other Dividend income (0.06) (34.44) reserve reserve options earnings translation reserve reserve interest under comprehensive reserve reserve Sundry balances written back (2.41) (26.92) put option income Net gain on sale of current investment carried at fair value through Balance as at 31st profit or loss (125.92) (100.98) March, 2018 24.01 1,542.15 3,141.73 66.26 - 8,998.78 208.98 20.85 65.41 14,068.17 352.44 14,420.61 Profit for the year - - - - - 1,527.70 - - - 1,527.70 (35.26) 1,492.44 Net gain on sale of non-current investments - (84.05) Other comprehensive Loss on liquidation of subsidiaries (net) 4.66 - income/ (loss) (net of tax) - - - - - 8.92 (347.36) 25.92 5.05 (307.47) 17.53 (289.94) Net fair value (gain)/loss on financial instruments at fair value Payment of dividend (including tax on through profit or loss 25.18 (22.74) dividend) (refer note Net gain on sale/disposal of property, plant and equipment (2.62) (3.30) 43C) - - - - - (284.09) - - - (284.09) (55.97) (340.06) Recognition of put Rent income (9.46) (6.12) option liability during Operating profit before working capital changes 3,543.71 3,347.90 the year - - - - (334.09) - - - - (334.09) - (334.09) Exercise of employee Adjustments for working capital: stock options - 32.44 - (32.44) ------(Increase)/decrease in inventories (331.55) 103.84 Share based payments expense - - 0.89 23.22 - - - - - 24.11 - 24.11 Decrease/(increase) in trade and other receivables 217.26 (1,014.87) Non-controlling Increase /(decrease) in trade payables and other liabilities 487.28 (152.51) interest (refer note 22 C) 156.81 ------156.81 53.23 210.04 Cash generated from operations 3,916.70 2,284.37 Balance as at 31st Income taxes paid (including tax deducted at source) (848.25) (593.23) March, 2019 180.82 1,574.59 3,142.62 57.04 (334.09) 10,251.31 (138.38) 46.77 70.46 14,851.14 331.97 15,183.11 Profit for the year - - - - - 1,546.52 - - - 1,546.52 (47.00) 1,499.52 Net cash flows generated from operating activities (a) 3,068.45 1,691.14 Other comprehensive Cash flow from investing activities income/ (loss) (net of tax) - - - - - (15.75) (53.30) 6.29 (98.53) (161.29) 31.89 (129.40) Purchase of property, plant and equipment {Note (ii)} (572.77) (360.08) Payment of dividend Purchase of intangible assets (including intangible asset under (including tax on dividend) (refer note development) (427.24) (167.07) 43C) - - - - - (664.20) - - - (664.20) (32.78) (696.98) Proceeds from sale of property, plant and equipment {Note (ii)} 14.32 23.37 Exercise of employee stock options - 27.44 - (27.44) ------Proceeds from liquidation of investments in subsidiaries 1.27 - Share based Consideration paid on acquisition of subsidiaries (net of cash payments expense - - - 23.45 - - - - - 23.45 - 23.45 Non-controlling acquired on acquisition) - (179.13) interest (refer note 22C) (327.96) - - - 334.09 - - - - 6.13 10.20 16.33 Investment in associates (33.32) (242.04) Balance as at 31st Proceeds from sale of non-current investments - 84.05 March, 2020 (147.14) 1,602.03 3,142.62 53.05 - 11,117.88 (191.68) 53.06 (28.07) 15,601.75 294.28 15,896.03 Purchase of non-current investments - (10.50) The accompanying notes form an integral part of these consolidated financial statements (Note 1-58). Sale/(purchase) of current investments (net) 1,210.01 (899.88) As per our report of even date attached For and on behalf of the Board of Directors Change in other bank balance and cash not available for immediate use (147.84) 4.27 For Walker Chandiok & Co LLP Interest received 50.09 37.77 Chartered Accountants Umang Vohra Samina Hamied Dividend received 0.06 34.44 Firm Reg. No.: 001076N/N500013 Managing Director and Executive Rent received 9.46 6.12 Global Chief Executive Officer Vice-Chairperson DIN: 02296740 DIN: 00027923 Net cash flow generated from/(used in) investing activities (b) 104.04 (1,668.68) Ashish Gupta Kedar Upadhye Rajendra Chopra Partner Global Chief Financial Officer Company Secretary Membership No.: 504662 New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 336 Creating Hope Since 85 Years Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows 337 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements for the year ended 31st March, 2020 H in Crores Group Information o Derivative financial instruments and For the year ended For the year ended contingent consideration is measured at Particulars 31st March, 2020 31st March, 2019 Cipla Limited (Corporate identity number: fair value; L24239MH1935PLC002380) ("Cipla" or “the Company”) Cash flow from financing activities Proceeds from issue of equity shares (ESOSs) 0.11 0.12 having registered office at Cipla house, Peninsula o Assets-held-for-sale – measured at fair Transaction with non-controlling interest (net) (383.02) 154.07 Business Park, Ganpatrao Kadam Marg, Lower Parel, value less cost to sell; Settlement of Put option liability 21.83 - Mumbai - 400013, is a public company incorporated Proceeds/(repayment) from current borrowings (net) 51.92 (2.25) Defined benefit plans – plan assets and domiciled in India. The Company is in the business o Payment of lease liabilities (75.83) - measured at fair value; Proceeds from non-current borrowings 211.63 48.00 of manufacturing, developing, and marketing wide Repayment of non-current borrowings (1,947.74) (106.00) range of branded and generic formulations and Active o Lease liability and Right of use of assets – Interest paid (163.52) (158.57) Pharmaceutical Ingredients (APIs). The Group has its Dividend paid (564.26) (241.57) measured at fair value; Tax paid on dividend (99.94) (42.52) wide network of manufacturing, trading and other Net cash flow used in financing activities (c) (2,948.82) (348.72) incidental operations in India and International markets. o Share-based payments – measured at fair Net increase/(decrease) in cash and cash equivalents (a+b+c) 223.67 (326.25) Equity Shares of the Company are listed on Bombay value ; and Cash and cash equivalents at the beginning of the year 508.36 853.46 Exchange difference on translation of foreign currency cash and Stock Exchange Limited and National Stock Exchange o Investment in associates are accounted for cash equivalents 10.35 (18.85) of India Limited. Global Depository Receipts are listed Cash and cash equivalents at the end of the year (refer Note 15) 742.38 508.36 on Luxembourg Stock Exchange. using equity method. Note: (iii) Consistency of accounting policy (i) The above statement of cash flow has been prepared under the "indirect method" as set out in Indian Accounting Standard (Ind AS-7)- The consolidated financial statements comprise Statement of Cash Flows. financial statements of Cipla Limited (‘the Company’) The accounting policies are applied (ii) Purchase and sale of property, plant and equipment represents additions and deletions to property, plant and equipment and investment and its subsidiaries (the Company and its subsidiaries consistently to all the periods presented in the property adjusted for movement of capital work in progress, capital advances and capital creditors for property, plant and equipment and together referred to as ‘the Group’), and its associates. investment property during the year. financial statements, except where a newly (Refer “Annexure A” to Note 1 for the list of subsidiaries issued accounting standard is initially adopted Reconciliation of borrowings H in Crores and associates). or a revision to an existing standard requires a For the year ended For the year ended Particulars change in the accounting policy hitherto in use. 31st March, 2020 31st March, 2019 Note 1: Significant accounting policies and Opening balance key accounting estimates and judgements (iv) New and amended standards adopted by the Non-current borrowings 3,830.07 3,662.11 Group Current borrowings 486.16 435.87 1.1 Basis of preparation Current maturity of non-current borrowings - 0.07 The Group has applied the following standards (i) Compliance with Indian Accounting Standards 4,316.23 4,098.05 and amendments for the first time for their annual (Ind AS) Movement of borrowings reporting period commencing 1st April, 2019: Proceeds from non-current borrowings 211.63 48.00 Repayment of non-current borrowings (1,947.74) (106.00) The consolidated financial statements of the o Ind AS 116, Leases Proceed/(repayments) of current borrowings (net) 51.92 (2.25) Group as at and for the year ended 31st March, Foreign exchange movement 200.81 244.05 2020 have been prepared and presented in Other non-cash items (16.42) 34.38 o Amendment to Ind AS 109, Financial accordance with Indian Accounting Standards (1,499.80) 218.18 Instruments, Prepayment Features with Closing balance (“Ind-AS”) notified under Section 133 of the Negative Compensation Non-current borrowings 2,369.28 3,830.07 Companies Act, 2013 (“the Act”) [Companies Current borrowings 447.15 486.16 (Indian Accounting Standards) Rules, 2015], as o Amendment to Ind AS 12, Income Taxes, 2,816.43 4,316.23 amended from time to time and other relevant Appendix C, Uncertainty over Income Tax The accompanying notes form an integral part of these consolidated financial statements (note 1-58). provisions of the Act and accounting principles Treatments and Dividend distribution tax As per our report of even date attached For and on behalf of the Board of Directors generally accepted in India. o Amendment to Ind AS 28, Investments in For Walker Chandiok & Co LLP (ii) Basis of measurement Associates and Joint Ventures Chartered Accountants Umang Vohra Samina Hamied Firm Reg. No.: 001076N/N500013 Managing Director and Executive The consolidated financial statements have o Amendment to Ind AS 19, Employee Benefits Global Chief Executive Officer Vice-Chairperson been prepared on a historical cost basis and plan amendment, curtailment or settlement. DIN: 02296740 DIN: 00027923 on accrual basis, except for the following: These amendments did not have any impact Ashish Gupta Kedar Upadhye Rajendra Chopra o Financial assets and liabilities are measured on the amounts recognised in prior periods Partner Global Chief Financial Officer Company Secretary at fair value or at amortised cost depending and are not expected to significantly affect the Membership No.: 504662 on classification; current or future periods. New Delhi, 15th May, 2020 Mumbai, 15th May, 2020 338 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 339 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements (v) Functional currency and rounding of c) it is due to be settled within twelve months after non-controlling interests and any consideration measured at fair value at the date that control amounts the reporting date; or paid or received is recognised within equity. is lost. Subsequently, it is accounted for as an equity-accounted investee or as a FVTOCI or The consolidated financial statements are d) the Group does not have an unconditional right o The profit and other comprehensive income FVTPL financial asset, depending on the level of presented in Indian Rupee (H) which is also the to defer settlement of the liability for at least attritubutable to non-controlling interest influence retained. functional currency of the parent Company. All twelve months after the reporting date. Terms of subsidiaries are shown separately in the amounts disclosed in the consolidated financial of a liability that could, at the option of the consolidated profit or loss and consolidated 1.3 Use of estimates and judgements statements and notes have been rounded off counterparty, result in its settlement by the issue of statement of changes in equity. to the nearest crore or decimal thereof as per equity instruments do not affect its classification. The preparation of consolidated financial the requirement of Schedule III, unless otherwise o An associate is an entity over which the investor statements requires management of the Group to stated. Amount less than H50,000/- is presented Current assets and liabilities include the current has significant influence. Significant influence is make judgements, estimates and assumptions that as H0.00 crore. Items included in the consolidated portion of current assets and liabilities, respectively. the power to participate in the financial and affect the reported assets and liabilities, revenue financial statements of each of the Group’s All other assets and liabilities are classified as operating policy decisions of the investee but and expenses and disclosures relating to contingent entities are measured using the currency of the non-current. Deferred tax assets and liabilities are is not control or joint control of those policies. liabilities. Management believes that the estimates primary economic environment in which the always disclosed as non-current. Investments in associates are accounted for used in the preparation of the consolidated financial entity operates (‘the functional currency’) unless using the equity method unless otherwise statements are prudent and reasonable. Estimates Principles of consolidation use of different currency is appropriate. stated. and underlying assumptions are reviewed by management at each reporting date. Actual results The consolidated financial statements relate to o Under the equity method, on initial recognition 1.2 Current and non-current classification could differ from these estimates. Any revision of Cipla Limited, its subsidiaries and associates. the investment in an associate is recognised at these estimates is recognised prospectively in the All assets and liabilities have been classified as cost. The carrying amount of the investment Subsidiaries are all entities over which the Company current and future periods. current and non-current as per the Group’s normal in associates is increased or decreased to exercises control. The Company exercises control if operating cycle and other criteria set out in the recognise the Group’s share of the profit or and only if it has the following: Following are the critical judgements and estimates: Schedule III of the Act and Ind AS 1, Presentation of loss after the date of acquisition, unless the Financial Statements. o power over the entity; share purchase agreement specify otherwise. 1.3.1 Judgements When necessary, adjustments are made to Assets: o exposure, or rights, to variable returns from its bring the accounting policies in line with those (i) Leases involvement with the entity; and of the Group. Unrealised gains and losses An asset is classified as current when it satisfies any Ind AS 116 requires lessees to determine the on transactions between the Group and its of the following criteria: o the ability to use its power over the entity to lease term as the non-cancellable period of associates are eliminated to the extent of affect the amount of its returns. a lease adjusted with any option to extend the Group’s interest in those entities. Where a) it is expected to be realised in, or is intended or terminate the lease, if the use of such unrealised losses are eliminated, the underlying for sale or consumption in, the Group’s normal The consolidated financial statements have been option is reasonably certain. The Group asset is also tested for impairment. operating cycle; prepared on the following basis: makes an assessment on the expected lease term on a lease-by-lease basis and thereby b) it is held primarily for the purpose of being o The consolidated financial statements of the o The financial statements of the subsidiaries and assesses whether it is reasonably certain traded; Group have been combined on a line-by-line associates used for the purpose of consolidation that any options to extend or terminate the basis by adding together the book values are drawn up to the same reporting date as c) it is expected to be realised within twelve contract will be exercised. In evaluating the of like items of assets, liabilities, income and that of the Group. months after the reporting date; or lease term, the Group considers factors such expenses, after fully eliminating intra-group o The consolidated financial statements have as any significant leasehold improvements balances and intra-group transactions and d) it is cash or a cash equivalent unless it is been prepared using uniform accounting undertaken over the lease term, costs resulting unrealised profits. Unrealised losses restricted from being exchanged or used to policies for like transactions and other events resulting from intra-group transactions are relating to the termination of the lease and settle a liability for at least twelve months after in similar circumstances and are presented to eliminated unless cost cannot be recovered. the importance of the underlying asset to the reporting date. the extent possible, in the same manner, as the Group’s operations taking into account Company’s separate financial statements. Liabilities: o The Group treats transactions with the location of the underlying asset and non-controlling interests that do not result in the availability of suitable alternatives. The o Upon loss of control, the Company derecognises A liability is classified as current when it satisfies a loss of control as transactions with equity lease term in future periods is reassessed the assets and liabilities of the subsidiary, any of the following criteria: owners of the Group. A change in ownership to ensure that the lease term reflects the any non-controlling interests and the other interest results in an adjustment between current economic circumstances. components of equity related to the subsidiary. a) it is expected to be settled in the Group’s normal the carrying amounts of the controlling and Any surplus or deficit arising on the loss of operating cycle; non-controlling interests to reflect their relative (ii) Income taxes control is recognised in the consolidated profit interests in the subsidiary. Any difference b) it is held primarily for the purpose of being or loss. If the Company retains any interest in The major tax jurisdictions for the Group are between the amount of the adjustment to traded; the previous subsidiary, then such interest is India, US and South Africa, though the Group 340 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 341 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements companies also file tax returns in other (iv) Provisions and contingent liabilities values of Group's assets are determined (iv) Shelf stock adjustments foreign jurisdictions. Significant judgments by the management at the time the asset are involved in determining the provision The Group exercises judgement in is acquired and reviewed periodically, Shelf stock adjustments are credits issued to for income taxes including judgment on determining if a particular matter is including at each financial year end. The customers to reflect decreases in the selling whether tax positions are probable of possible, probable or remote. The Group lives are based on historical experience price of products sold by the Company, also exercises judgement in measuring and are accrued when the prices of certain being sustained in tax assessments. A tax with similar assets as well as anticipation of and recognising provisions and the products decline as a result of increased assessment can involve complex issues, future events, which may impact their life, which can only be resolved over extended exposures to contingent liabilities related competition upon the expiration of limited such as changes in technology. time periods. The recognition of taxes that to pending litigation or other outstanding competition or exclusivity periods. These are subject to certain legal or economic claims subject to negotiated settlement, (ii) Sales returns credits are customary in the pharmaceutical limits or uncertainties is assessed individually mediation, government regulation, as well industry, and are intended to reduce the by management based on the specific facts as other contingent liabilities. Judgement is The Group accounts for sales returns customer inventory cost to better reflect the and circumstances. necessary in assessing the likelihood that a by recording an allowance for sales current market prices. The determination to pending claim will succeed, or a liability will returns concurrent with the recognition of grant a shelf stock adjustment to a customer In assessing the realisability of deferred arise, and to quantify the possible range revenue at the time of a product sale. This is based on the terms of the applicable tax assets, management considers whether of the financial settlement. Because of allowance is based on the Group's estimate contract, which may or may not specifically some portion or all of the deferred tax the inherent uncertainty in this evaluation of expected sales returns. The Group limit the age of the stock on which a credit assets will not be realised. The ultimate process, actual outcome may be different deals in various products and operates in realisation of deferred tax assets is would be offered. from the originally concluded position. various markets. Accordingly, the estimate dependent upon the generation of future (v) Expected credit loss taxable income during the periods in of sales returns is determined primarily (v) Business Combinations by the Group’s historical experience in which the temporary differences become The Group applies Expected Credit Loss the markets in which the Group operates. deductible. Management considers the The Company uses the acquisition method (“ECL”) model for measurement and With respect to established products, the scheduled reversals of deferred income tax of accounting to account for business recognition of loss allowance on the Group considers its historical experience liabilities, projected future taxable income combinations. The acquisition date is following: and tax planning strategies in making this the date on which control is transferred of sales returns, levels of inventory in the assessment. Based on the level of historical to the acquirer. Judgement is applied distribution channel, estimated shelf life, • Trade receivables and lease receivables taxable income and projections for future in determining the acquisition date, product discontinuances, price changes of • Financial assets measured at amortised taxable income over the periods in which the determining whether control is transferred competitive products, and the introduction cost (other than trade receivables and deferred income tax assets are deductible, from one party to another and whether of competitive new products, to the extent management believes that the Group will lease receivables) acquisition constitute a business or asset each of these factors impact the Group’s realise the benefits of those deductible acquisition. Control exists when the business and markets. differences. The amount of the deferred • Financial assets measured at fair value Company is exposed to, or has rights to income tax assets considered realisable, (iii) Provision for chargeback, rebates and through other comprehensive income variable returns from its involvement with however, could be reduced in the near term discounts (“FVTOCI”) the entity and has the ability to affect if estimates of future taxable income during those returns through power over the the carry forward period are reduced. Provisions for chargeback, rebates, In accordance with Ind AS 109, the Group entity. In assessing control, potential voting discounts, other deductions and medicaid applies ECL model for measurement and (iii) Research and development costs rights are considered only if the rights are payments are estimated and provided for in recognition of impairment loss on the trade substantive. the year of sales and recorded as reduction receivables or any contractual right to Management monitors progress of internal receive cash or another financial asset that research and development projects by using 1.3.2 Estimates of revenue. A chargeback claim is a claim result from transactions that are within the a project management system. Significant made by the wholesaler for the difference scope of Ind AS 115. judgement is required in distinguishing (i) Useful lives of property, plant and between the price at which the product is research from the development phase. equipment and intangible assets initially invoiced to the wholesaler and the For this purpose, the Group follows Development costs are recognised as an net price at which it is agreed to be procured Property, plant and equipment and ‘simplified approach’ for recognition of asset when all the criteria are met, whereas from the Company. Provisions for such intangibles assets represent a significant impairment loss allowance on the trade research costs are expensed as incurred. chargebacks are accrued and estimated proportion of the asset base of the receivable balances. The application of based on historical average chargeback Group. The charge in respect of periodic simplified approach does not require the Management also monitors whether the rate actually claimed over a period of time, recognition requirements for development depreciation is derived after determining Group to track changes in credit risk. Rather, current contract prices with wholesalers/ costs continue to be met. This is necessary an estimate of an asset’s expected useful it recognises impairment loss allowance other customers and estimated inventory due to inherent uncertainty in the economic life and the expected residual value at the based on lifetime ECLs at each reporting holding by the wholesaler. success of any product development. end of its life. The useful lives and residual date, right from its initial recognition. 342 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 343 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements As a practical expedient, the Group determine the recoverable amount, equipment and borrowing costs that are directly (ii) Depreciation uses a provision matrix to determine management estimates expected future attributable to the acquisition, construction impairment loss allowance on portfolio cash flows from each asset or cash- or production of a qualifying property, Depreciation on property, plant and equipment of its trade receivables. The provision generating unit and determines a suitable plant and equipment. Subsequent to initial (other than freehold land) is provided based on matrix is based on its historically observed interest rate in order to calculate the recognition, property, plant and equipment useful life of the assets as prescribed in Schedule default rates over the expected life of present value of those cash flows. In the other than freehold land are measured at II of the Act. Depreciation on property, plant the trade receivables and is adjusted for process of measuring expected future cash cost less accumulated depreciation and any and equipment, which are added/disposed forward-looking estimates. At every flows, management makes assumptions accumulated impairment losses. Freehold off during the year, is provided on pro-rata reporting date, the historical observed about future operating results. These land has an unlimited useful life and therefore basis with reference to the month of addition/ default rates are updated and changes assumptions relate to future events and is not depreciated. The carrying values of deletion, in the consolidated profit or loss. in the forward-looking estimates are circumstances. The actual results may vary, property, plant and equipment are reviewed For certain class of assets, based on the analysed. and may cause significant adjustments to for impairment when events or changes in technical evaluation and assessment, the Group the Group’s assets. circumstances indicate that the carrying value believes that the useful lives adopted by it best In case of other assets, the Group may not be recoverable. (Refer note 1.8 for represent the period over which an asset is determines if there has been a significant In most cases, determining the applicable more details). The Group had applied for the expected to be available for use. Accordingly, increase in credit risk of the financial discount rate involves estimating the one time transition exemption of considering for these assets, the useful lives estimated by asset since initial recognition. If the credit appropriate adjustment to market risk the carrying cost on the transition date i.e., the Group are different from those prescribed risk of such assets has not increased and the appropriate adjustment to asset- 1st April, 2015 as the deemed cost under Ind in the Schedule II. significantly, an amount equal to twelve specific risk factors. AS and regarded thereafter as historical cost. months ECL is measured and recognised as When parts of an item of property, plant and (viii) Fair value of financial instruments The residual values, useful lives and methods of equipment have different useful lives, they loss allowance. However, if credit risk has depreciation of property, plant and equipment are accounted for as separate items (major increased significantly, an amount equal to Management uses valuation techniques are reviewed at each financial year end and, lifetime ECL is measured and recognised as components) of property, plant and equipment. in measuring the fair value of financial if expectations differ from previous estimates, loss allowance. instruments where active market quotes are The cost of an item of property, plant and the change(s) are accounted for as a change in not available. Details of the assumptions equipment is recognised as an asset if, and only an accounting estimate in accordance with Ind (vi) Accounting for defined benefit plans used are given in the notes regarding if, it is probable that future economic benefits AS 8, Accounting Policies, Changes in financial assets and liabilities. In applying In accounting for post-retirement benefits, associated with the item will flow to the Group Accounting Estimates and Errors. the valuation techniques, management several statistical and other factors that and the cost of the item can be measured reliably. makes maximum use of market inputs and The estimated useful lives are as follows: attempt to anticipate future events are used Items such as spare parts, stand-by equipment uses estimates and assumptions that are, as to calculate plan expenses and liabilities. and servicing equipment that meet the definition far as possible, consistent with observable Property, plant and Useful Life These factors include expected return on of property, plant and equipment are capitalised data that market participants would use in equipment plan assets, discount rate assumptions and at cost and depreciated over their useful life. pricing the instrument. Where applicable rate of future compensation increases. Costs in the nature of repairs and maintenance Buildings – Factory and 25 to 60 years data is not observable, management uses To estimate these factors, actuarial are recognised in the consolidated profit or loss Administrative Buildings its best estimate about the assumptions consultants also use estimates such as as and when incurred. The present value of the Buildings – Ancillary 3 to 10 years that market participants would make. These withdrawal, turnover, and mortality rates expected cost for the decommissioning of an structures estimates may vary from the actual prices asset after its use is included in the cost of the which require significant judgment. The that would be achieved in an arm’s length Plant and equipments 2 to 25 years actuarial assumptions used by the Group respective asset if the recognition criteria for the transaction at the reporting date. Furniture and fixtures 3 to 10 years may differ materially from actual results in provision is met. future periods due to changing market and 1.4 Property, plant and equipment Vehicles 4 to 8 years Advances paid towards the acquisition of economic conditions, regulatory events, property, plant and equipment outstanding (iii) De-recognition judicial rulings, higher or lower withdrawal (i) Recognition and measurement at each reporting date is disclosed as capital rates, or longer or shorter participant life An item of property, plant and equipment, All items of property, plant and equipment, advance under non-current assets. spans. including freehold land, are initially recorded is de-recognised upon disposal or when no Capital work-in-progress included in future economic benefits are expected from (vii) Impairment at cost. Cost of property, plant and equipment comprises purchase price, non-refundable non-current assets comprises of direct costs, its use or disposal. Any gain or loss arising on An impairment loss is recognised for taxes, levies and any directly attributable cost related incidental expenses and attributable de-recognition of the asset (calculated as the the amount by which an asset’s or of bringing the asset to its working condition interest. Capital work-in-progress are not difference between the net disposal proceeds cash-generating unit’s carrying amount for the intended use. The cost includes the cost depreciated as these assets are not yet and the carrying amount of the asset) is exceeds its recoverable amount. To of replacing part of the property, plant and available for use. included in the consolidated profit or loss. 344 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 345 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements 1.5 Intangible assets not be recoverable. Subsequent expenditure 1.6 Assets classified as held-for-sale 1.8 Impairment of non-financial assets on an in-process research or development (i) Recognition and measurement project acquired separately or in a business Assets are classified as held-for-sale if their carrying The Group assesses, at each reporting date, combination and recognised as an intangible amount will be recovered principally through a sale whether there is an indication that an asset may be Intangible assets such as marketing intangibles, asset is: transaction rather than through continuing use impaired. If any indication exists, or when annual trademarks, technical know-how, brands and a sale is considered highly probable. They are impairment testing for an asset is required, the and computer software, product related o Recognised as an expense when incurred, measured at the lower of their carrying amount Group estimates the asset’s recoverable amount. intangibles, distribution network, non-compete if it is research expenditure; and fair value less costs to sell. An asset’s recoverable amount is the higher of rights, government contracts acquired an asset’s or cash-generating unit’s (CGU) fair separately are measured on initial recognition o Capitalised if the cost can be reliably An impairment loss is recognised for any initial or value less costs of disposal and its value-in-use. at cost. Further, payments to third parties for measured, the product or process is subsequent write-down of the asset to fair value Recoverable amount is determined for an individual in-licensed products, generally take the form technically and commercially feasible less costs to sell. A gain is recognised for any asset, unless the asset does not generate cash of up-front and milestones payments which and the Group has sufficient resources to subsequent increases in fair value less costs to sell inflows that are largely independent of those from are capitalised following a cost accumulation complete the development and to use and of an asset, but not in excess of any cumulative other assets or Group of assets. When the carrying approach to variable payments (milestones) sell the asset. impairment loss previously recognised. A gain amount of an asset or CGU exceeds its recoverable for the acquisition of intangible assets when or loss not previously recognised by the date of amount, the asset is considered impaired and receipt of economic benefits out of the (iv) Expenditure on regulatory approval the sale of the asset is recognised at the date of is written down to its recoverable amount. separately purchased transaction is considered de-recognition. Non-financial assets other than goodwill that Expenditure for obtaining regulatory approvals to be probable. Following initial recognition, suffered an impairment are reviewed for possible and registration of products for overseas Assets are not depreciated or amortised while they intangible assets are carried at cost less reversal of the impairment at the end of each markets is charged to the consolidated profit are classified as held-for-sale. Interest and other accumulated amortisation and accumulated reporting period. impairment loss, if any. Subsequent expenditures or loss. expenses attributable to the liabilities of a disposal are capitalised only when they increase the group classified as held-for-sale continue to be The goodwill acquired in a business combination is, (v) Amortisation future economic benefits embodied in the recognised. for the purpose of impairment testing, allocated to specific asset to which they relate. The Group amortises intangible assets with a cash-generating units that are expected to benefit Assets classified as held-for-sale are presented finite useful life using the straight-line method from the synergies of the combination. (ii) Goodwill separately from the other assets in the Balance over the following useful lives: sheet. The liabilities of a disposal group classified Goodwill that forms part of the carrying amount Goodwill represents the excess of consideration as held-for-sale are presented separately from of an investment in an associate is not recognised Intangible assets Useful Lives transferred, together with the amount of other liabilities in the Consolidated Balance sheet. separately, and therefore is not tested for non-controlling interest in the acquiree, over Marketing intangibles 2 to 25 years impairment separately. Instead, the entire amount the fair value of the identifiable net assets Trademarks 2 to 15 years 1.7 Investment properties of the investment in an associate is tested for acquired. Goodwill is measured at cost less impairment as a single asset when there is objective Technical Know-how 2 to 15 years Property that is held for long-term rental yields or accumulated impairment losses. In respect evidence that the investment in an associate may Brands 2 to 15 years for capital appreciation or both, and that is not of equity accounted investees, the carrying be impaired. occupied by the Group, is classified as investment amount of goodwill is included in the carrying Computer software 2 to 6 years amount of the investment, and any impairment property. Investment property is measured initially An impairment loss in respect of equity accounted loss on such an investment is not allocated to The amortisation period and the amortisation at its cost, including related transaction costs and investee is measured by comparing the recoverable any asset, including goodwill, that forms part method for intangible assets with a finite useful borrowing costs where applicable. Subsequent amount of investment with its carrying amount. An of the carrying value of the equity accounted life are reviewed at each reporting date. expenditure is capitalised to the asset’s carrying impairment loss is recognised in the profit or loss, investee. amount only when it is probable that future economic and reversed if there has been a favorable change (vi) De-recognition of intangible assets benefits associated with the expenditure will flow to in the estimates used to determine the recoverable (iii) In-Process Research and Development the Group and the cost of the item can be measured amount. Intangible assets are de-recognised either on assets (“IPR&D”) or Intangible assets under reliably. All other repairs and maintenance costs are development their disposal or where no future economic expensed when incurred. When part of an investment Impairment losses, including impairment on benefits are expected from their use. Losses property is replaced, the carrying amount of the inventories, are recognised in the consolidated Acquired research and development arising on such de-recognition are recorded replaced part is de-recognised. profit or loss. intangible assets that are under development in the consolidated profit or loss, and are are recognised as In-Process Research and measured as the difference between the net Investment properties are depreciated using the 1.9 Borrowing costs Development assets (“IPR&D”) or Intangible disposal proceeds, if any, and the carrying straight-line method over their estimated useful lives. Borrowing costs consists of interest, ancillary costs assets under development. IPR&D assets are amount of respective intangible assets as on and other costs in connection with the borrowing not amortised, but evaluated for potential the date of de-recognition. Investment properties generally have a useful life impairment on an annual basis or when there of 5-60 years. The useful life has been determined of funds and exchange differences arising from are indications that the carrying value may based on technical evaluation performed by the foreign currency borrowings to the extent they are management’s expert. regarded as an adjustment to interest costs. 346 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 347 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Borrowing costs attributable to acquisition and/or 1.11 Inventories rate below the current applicable market rate, the upon the corresponding sales by customer to construction of qualifying assets are capitalised as effect of this favourable interest is regarded as a a third party. The Group records product sales a part of the cost of such assets, up to the date Raw materials and packing materials are valued government grant. net of estimated incentives/discounts, returns, such assets are ready for their intended use. Other at lower of cost and net realisable value after chargeback, rebates and other related charges. providing for obsolescence, if any. However, these The loan or assistance is initially recognised and borrowing costs are charged to the consolidated These are generally accounted for as variable items are considered to be realisable at cost if the measured at fair value and the government grant is profit or loss. consideration estimated in the same period finished products, in which they will be used, are measured as the difference between initial carrying the related sales occur. The methodology and expected to be sold at or above cost. value of the loan and the proceeds received. The 1.10 Foreign currency translation assumptions used to estimate rebates and loan is subsequently measured at amortised cost. returns are monitored and adjusted regularly Foreign currency transactions and balances Stores, spares and consumables, work-in-progress, stock-in-trade and finished goods are valued at Export entitlement from Government authority are in the light of contractual and legal obligations, Foreign exchange gains and losses resulting from lower of cost and net realisable value. recognised in the consolidated profit or loss as other historical trends, past experience and projected the settlement of such transactions and from the operating revenue when the right to receive credit as market conditions. The revenue for such variable Cost includes expenditures incurred in acquiring translation of monetary items denominated in per the terms of the scheme is established in respect consideration is included in the Company’s the inventories, production or conversion costs foreign currency at prevailing reporting date, of the exports made by the Group and where there estimate of the transaction price only if it is highly and other costs incurred in bringing them to their exchange rates are recognised in the consolidated is no significant uncertainity regarding the ultimate probable that a significant reversal of revenue existing location and condition. In the case of profit or loss. Non-monetary items are measured at collection of the relevant export proceeds. will not occur once any uncertainty is resolved. In finished goods and work-in-progress, cost includes historical cost (translated using the exchange rates making this assessment the Company considers an appropriate share of overheads based on at the transaction date), except for non-monetary 1.13 Revenue recognition its historical record of performance on similar normal operating capacity. Cost of inventories is items measured at fair value which are translated contracts. determined on a weighted moving average basis. A contract with a customer exists only when the using the exchange rates at the date when fair parties to the contract have approved it and are (ii) Sales by clearing and forwarding agents value was determined. Stores and spares are inventories that do not committed to perform their respective obligations, qualify to be recognised as property, plant and Revenue from sales of generic products in Group Companies the Group can identify each party’s rights equipment and consists of packing materials, regarding the distinct goods or services to be India is recognised upon delivery of products engineering spares (such as machinery spare The financial statements of foreign operations (none transferred (“performance obligations”), the Group to distributors by clearing and forwarding parts) and consumables (such as lubricants, cotton of which has the currency of a hyperinflationary can determine the transaction price for the goods agents of the Company. Control in respect of waste and oils), which are used in operating economy) that have a functional currency different or services to be transferred, the contract has ownership of generic products are transferred machines or consumed as indirect materials in the from the presentation currency are translated as commercial substance and it is probable that the by the Company when the goods are delivered manufacturing process. follows: Group will collect the consideration to which it will to distributors from clearing and forwarding The factors that the Group considers in determining be entitled in exchange for the goods or services agents. Clearing and forwarding agents are o Assets and liabilities are translated at the the provision for slow moving, obsolete and other that will be transferred to the customer. generally compensated on a commission basis closing rate prevailing on the reporting date; non-saleable inventory include estimated shelf life, as a percentage of sales made by them. Revenues are recorded in the amount of planned product discontinuances, price changes, o Goodwill and fair value adjustments arising consideration to which the Group expects to be (iii) Out licensing arrangements ageing of inventory and introduction of competitive on the acquisition of a foreign operation are entitled in exchange for performance obligations new products, to the extent each of these factors treated as assets and liabilities of the foreign upon transfer of control to the customer and is Revenues include amounts derived from product impact the Group’s business and markets. The operation and translated at the closing rate; measured at the fair value of the consideration out-licensing agreements. The Group enters into Group considers all these factors and adjusts the received or receivable, net of estimated incentives, collaborations and out-licensing arrangement o Income and expenses are translated at inventory provision to reflect its actual experience returns, chargeback, rebates, sales tax and of the Group’s products to other parties. average exchange rates (unless this is not a on a periodic basis. applicable trade discounts, allowances, Goods reasonable approximation of the cumulative Licensing arrangements performance and Services Tax (GST) and amounts collected on effect of the rates prevailing on the transaction 1.12 Government grants obligations generally include intellectual behalf of third parties. dates, in which case income and expenses are property (“IP”) rights, certain R&D and contract Government grants are recognised where there translated at the dates of the transactions); and manufacturing services. The Group accounts is reasonable assurance that the grant will be (i) Sale of products for IP rights and services separately if they are o All resulting exchange differences are received and all attached conditions will be The majority of customer contracts that recognised in other comprehensive income. complied with. When the grant relates to an asset, distinct — i.e., if they are separately identifiable the Group enters into consist of a single it is recognised as income in equal amounts over from other items in the arrangement and if the On disposal of a foreign operation, the related performance obligation for the delivery of the expected useful life of the related asset and customer can benefit from them on their own or cumulative translation differences recognised in pharmaceutical products. The Group recognises presented within other income. with other resources that are readily available equity are re-classified to consolidated profit or loss revenue from product sales when control of the to the customer. The consideration is allocated and are recognised as part of the gain or loss on When loans or similar assistance are provided by the product transfers, generally upon shipment or between IP rights and services based on their disposal. government or related institutions, with an interest delivery, to the customer, or in certain cases, relative stand-alone selling prices. 348 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 349 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Revenue from IP rights is recognised at the 1.14 Employee Benefits (iii) Defined benefit plan the estimated future cash outflows by point in time when control of the distinct license reference to market yields at the end of is transferred to the customer, the Group has a (i) Short term employee benefits a) Employee's provident fund the reporting period on government bonds present right to payment and risks and rewards that have terms approximating to the terms Short-term employee benefits are expensed In accordance with The Employees' of ownership are transferred to the customer. of the related obligation. as the related service is provided. A liability is Provident Fund and Miscellaneous Provision Act, 1952, all eligible employees Revenue from sales-based milestones and recognised for the amount expected to be paid The net interest cost is calculated by of the Company are entitled to receive royalties promised in exchange for a license of if the Group has a present legal or constructive applying the discount rate to the net benefits under the provident fund plan in IP is recognised only when, or as, the later of obligation to pay this amount as a result of balance of the defined benefit obligation past service provided by the employee and the which both the employee and employer subsequent sale or the performance obligation and the fair value of plan assets. This cost to which some or all of the sales-based royalty obligation can be estimated reliably. (at a determined rate) contribute monthly is included in employee benefit expense in has been allocated, is satisfied. The Group to “Cipla Limited Employee’s Provident the consolidated profit or loss. estimates variable consideration in the form of (ii) Defined contribution plans Fund Trust”, a Trust set up by the Company sales-based milestones by using the expected to manage the investments and distribute Post-retirement contribution plans such as Changes in the present value of the defined value or most likely amount method, depending the amounts to employees at the time of Employees' Pension scheme, Labour Welfare benefit obligation resulting from plan upon which the Group expects to better predict separation from the Group or retirement, Fund, Employee State Insurance Corporation amendments or curtailments are recognised whichever is earlier. This plan is a defined the amount of consideration to which it will be immediately in the consolidated profit or (ESIC) are charged to the consolidated profit or obligation plan as the Company is entitled. loss as past service cost. loss for the year when the contributions to the obligated to provide its members a rate of respective funds accrue. The Group does not (iv) Service fee return which should, at a minimum, meet the (iv) Other benefit plan have any obligation other than the contribution interest rate declared by the Government Revenue from services rendered, is recognised made. - administered provident fund. A part of Liability in respect of compensated absences in the consolidated profit or loss as the the Company’s contribution is transferred becoming due or expected to be availed within underlying services are performed. Upfront In respect of Indian subsidiaries, eligible to the Government - administered pension one year from the reporting date is recognised non-refundable payments received under these employees receive benefits from a provident fund. The contributions made by the on the basis of undiscounted value of estimated arrangements are deferred and recognised fund, which is a defined contribution plan. Both Company and the shortfall of interest, if amount required to be paid or estimated as revenue over the expected period over the eligible employee and respective companies any, are recognised as an expense in the value of benefit expected to be availed by the which the related services are expected to be make monthly contributions to this provident consolidated profit or loss under "Employee employees. Liability in respect of compensated performed. fund plan equal to a specified percentage of the benefits expense". absences becoming due or expected to be covered employee’s salary. Amounts collected (v) Interest income availed more than one year after the reporting under provident fund plan are deposited in a b) Gratuity obligations date is estimated on the basis of an actuarial Interest income from a financial asset is Government administered provident fund. Indian Post-retirement benefit plans such as valuation performed by an independent recognised when it is probable that the subsidiaries have no further obligation to plan gratuity for eligible employees of the actuary using the projected unit credit method economic benefits will flow to the Group beyond its monthly contributions. Company and its Indian subsidiaries is at the year-end. Actuarial gains/losses are and the amount of income can be measured In respect of USA subsidiaries, there is a 401(k) determined on the basis of actuarial immediately taken to the consolidated profit or reliably. Interest income is accrued on a time plan that provides defined contribution retirement valuation made by an independent actuary loss and are not deferred. basis, by reference to the principal outstanding benefits for all the employees. Participants may as at the reporting date. Re-measurement, and at the effective interest rate applicable, contribute a portion of their compensation to the (v) Termination benefits which is the rate that discounts estimated future comprising actuarial gains and losses, the plan, subject to the limitations under the Internal cash receipts through the expected life of the effect of the changes to the asset ceiling Termination benefits are recognised in the Revenue Code. The Company’s contributions (if applicable) and the return on plan assets financial asset to that asset’s net carrying consolidated profit or loss when: to the plan are at the discretion of the Board. amount on initial recognition. (excluding net interest), is recognised in Obligations for contributions to 401(k) plan are other comprehensive income in the period o The Group has a present obligation as a (vi) Dividends recognised as an employee benefits expense in in which they occur. Re-measurement result of past event; profit or loss as incurred. recognised in other comprehensive income Dividend income from investments is recognised is included in retained earnings and o A reliable estimate can be made of the when the right to receive payment has been For other foreign subsidiaries, contributions will not be reclassified to the consolidated amount of the obligation; and established, provided that it is probable that to defined contribution plans are charged to profit or loss. the economic benefits will flow to the Group the consolidated profit or loss as and when the o It is probable that an outflow of resources and the amount of income can be measured services are received from the employees. The present value of the defined benefit embodying economic benefits will be reliably. obligation is determined by discounting required to settle the obligation. 350 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 351 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements 1.15 Share-based payments does not impact the expense recorded in any (ii) Deferred tax: o When the Group is able to control the timing period. of the reversal of the temporary difference; a) Equity settled share-based payment Deferred tax is recognised using the Balance and transactions Market conditions are taken into account sheet approach on temporary differences when estimating the fair value of the equity arising between the tax bases of assets and o It is probable that the temporary difference The Group operates equity-settled share- instruments granted. liabilities and their carrying amounts. will not reverse in the foreseeable future. based remuneration plans for its employees. Upon exercise of share options, the proceeds Deferred tax assets are recognised to the Dividend distribution tax arising out of All services received in exchange for the grant received, net of any directly attributable extent that it is probable that taxable profit payment of dividends to shareholders under of any share-based payment are measured transaction costs, are allocated to share capital will be available against which the deductible the Indian Income tax regulations and tax on at their fair values on the grant date and is up to the nominal (or par) value of the shares temporary differences, and the carry forward dividend received from foreign subsidiary is not recognised as an employee expense, in the issued with any excess being recorded as share of unused tax credits and unused tax losses considered as tax expense for the Group and profit or loss with a corresponding increase premium. can be utilised, except when the deferred tax all such taxes are recognised in the statement in equity, over the period that the employees asset relating to the deductible temporary of changes in equity as part of the associated become unconditionally entitled to the options. b) Cash settled share-based payment difference arises from the initial recognition dividend payment and receipt. The increase in equity recognised in connection transactions of an asset or liability in a transaction that is with share-based payment transaction is Deferred tax assets and liabilities are offset not a business combination and, at the time of presented as a separate component in equity For cash settled share based payments a when there is a legally enforceable right to the transaction, affects neither the accounting under “Employee stock options reserve”. The liability is recognised for the services acquired, offset current tax assets and liabilities. profit nor taxable profit or loss. amount recognised as an expense is adjusted measured initially at the fair value of the liability. 1.17 Leases to reflect the actual number of stock options At the end of each reporting period until the The carrying amount of deferred tax assets is that vest. liability is settled and at the date of settlement reviewed at each reporting date and reduced The determination of whether an arrangement is the fair value is re-measured with any changes to the extent that it is no longer probable that Grant date is the date when the Group and (or contains) a lease is based on the substance of in fair value is recognised in the consolidated sufficient taxable profit will be available to employees have shared an understanding of the arrangement at the inception of the lease. The profit or loss. allow all or part of the deferred tax asset to terms and conditions on the arrangement. arrangement is, or contains, a lease if fulfillment 1.16 Taxes be utilised. Unrecognised deferred tax assets of the arrangement is dependent on the use of Where employees are rewarded using share- are re-assessed at each reporting date and a specific asset or assets and the arrangement based payments, the fair value of employees’ Income tax expense comprises of current tax are recognised to the extent that it has become conveys a right to use the asset or assets, even if that services is determined indirectly by reference to expense and deferred tax expense/benefit. probable that future taxable profits will allow right is not explicitly specified in an arrangement. the fair value of the equity instruments granted. Current and deferred taxes are recognised in the the deferred tax asset to be recovered. This fair value is appraised at the grant date consolidated profit or loss, except when they relate (i) Group as a lessee Deferred tax assets and liabilities are measured and excludes the impact of non-market vesting to items that are recognised in other comprehensive using substantively enacted tax rates expected The Group’s lease asset classes primarily conditions (for example profitability and income or directly in equity, in which case, the to apply to taxable income in the years in which consist of leases for land, buildings, vehicle sales growth). All share-based remuneration current and deferred tax are also recognised in the temporary differences are expected to be and computers. The Group assesses whether is ultimately recognised as an expense in the other comprehensive income or directly in equity. consolidated profit or loss. If vesting periods or recovered or settled. a contract contains a lease, at inception of a other vesting conditions apply, the expense is (i) Current income tax: contract. A contract is, or contains, a lease if Minimum Alternate Tax (MAT) credit is allocated over the vesting period, based on the the contract conveys the right to control the Current tax is the amount of tax payable on recognised as an asset only when and to the best available estimate of the number of share use of an identified asset for a period of time in extent it is resonably certain that the Group will options expected to vest. the taxable income for the year as determined exchange for consideration. To assess whether in accordance with the provisions of the pay normal income tax during the specified a contract conveys the right to control the Non-market vesting conditions are included applicable income tax law of the respective period. Such asset is reviewed at each reporting use of an identified asset, the Group assesses in assumptions about the number of options jurisdiction. The current tax is calculated date and the carrying amount of the MAT credit whether: (i) the contract involves the use of an that are expected to become exercisable. using tax rates that have been enacted or asset is written down to the extent there is no identified asset (ii) the Group has substantially Estimates are subsequently revised if there substantively enacted, at the reporting date longer a convincing evidence to the effect that all of the economic benefits from use of the is any indication that the number of share and any adjustment to tax payable in respect the Group will pay normal income tax during asset through the period of the lease and (iii) options expected to vest differs from previous of previous years. Current tax assets and tax the specified period. the Group has the right to direct the use of the estimates. Any adjustment to cumulative share- liabilities are offset where the entity has a asset. based compensation resulting from a revision is legally enforceable right to offset and intends The Group recognises deferred tax liability for recognised in the current period. The number of either to settle on a net basis, or to realise the all taxable temporary differences associated At the date of commencent of the lease, the vested options ultimately exercised by holder asset and settle the liability simultaneously. with investments in subsidiaries and associates, Group recognises right-of-use asset (“ROU”) except to the extent that both of the following and corresponding lease liability for all lease conditions are satisfied: arrangement in which it is a lessee, except for 352 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 353 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements leases with a term of twelve months or less and lease payments have been classified as to lnd AS 116, the Group recognised lease 1.19 Provisions (short term leases) and low value leases. For financing cash flows. liabilities and corresponding equivalent ROU these short-term and low value leases, the assets.The Group has elected not to apply the Provisions are recognised when the Group has a Group recognises the lease payments as an (ii) Group as a lessor requirements of lnd AS 116 to short-term leases present legal or constructive obligation as a result operating expense on a straight-line basis over and certain leases for which the underlying of past events, it is probable that an outflow of Leases for which the Group is a lessor is classified the term of the lease. asset is of low value. resources will be required to settle the obligation as a finance or operating lease. Whenever the and the amount can be reliably estimated. Certain lease arrangements includes the terms of the lease transfer substantially all the In the statement of profit or loss for the current Provisions are not recognised for future operating options to extend or terminate the lease risks and rewards of ownership to the lessee, period, operating lease expenses which were losses. before the end of the lease term. ROU assets the contract is classified as a finance lease. All recognised as other expenses in previous Where there are a number of similar obligations, and lease liabilities includes these options other leases are classified as operating leases. periods is now recognised as depreciation the likelihood that an outflow will be required in when it is reasonably certain that they will be expense for the right-of-use asset and finance When the Group is an intermediate lessor, it settlement is determined by considering the class exercised. The right-of-use assets are initially cost for imputed interest on lease liability. The accounts for its interests in the head lease of obligations as a whole. A provision is recognised recognised at cost, which comprises the initial adoption of this standard did not have any and the sublease separately. The sublease is even if the likelihood of an outflow with respect amount of the lease liability adjusted for significant impact on the profit for the period classified as a finance or operating lease by to any one item included in the same class of any lease payments made at or prior to the and earnings per share. reference to the right of-use asset arising from obligations may be small. commencement date of the lease plus any the head lease. For operating leases, rental initial direct costs less any lease incentives. The following is the summary of practical income is recognised on a straight-line basis Provisions are measured at the present value of They are subsequently measured at cost less expedients elected on initial application over the term of the relevant lease. management’s best estimate of the expenditure accumulated depreciation and impairment required to settle the present obligation at the end o Applied a single discount rate to a portfolio losses. (iii) Arrangements in the nature of lease of the reporting period. The discount rate used to of leases of similar assets in similar determine the present value is a pre-tax rate that Right-of-use assets are depreciated from the economic environment with a similar end The Group enters into agreements, comprising reflects current market assessments of the time commencement date on a straight-line basis date. a transaction or series of related transactions value of money and the risks specific to the liability. over the shorter of the lease term and useful life that does not take the legal form of a lease o Applied the exemption not to recognise The increase in the provision due to the passage of of the underlying asset. Right of use assets are but conveys the right to use the asset in return right-of-use assets and liabilities for leases time is recognised as interest expense. evaluated for recoverability whenever events for a payment or series of payments. In case with less than 12 months of lease term on or changes in circumstances indicate that their of such arrangements, the Group applies the 1.20 Contingencies the date of initial application. carrying amounts may not be recoverable. requirements of Ind AS 116 – Leases to the lease Disclosure of contingent liabilities is made when For the purpose of impairment testing, the element of the arrangement. For the purpose o Excluded the initial direct costs from the there is a possible obligation or a present obligation recoverable amount (i.e, the higher of the fair of applying the requirements under Ind measurement of the right-of-use asset at that may, but probably will not, require an outflow value less cost to sell and the value-in-use) is AS 116 – Leases, payments and other the date of initial application. of resources. Where there is possible obligation or a determined on an individual asset basis unless consideration required by the arrangement are present obligation in respect of which the likelihood the asset does not generate cash flows that separated at the inception of the arrangement o Applied the practical expedient to grand of outflow of resources is remote, no provision or are largely independent of those from other father the assessment of which transactions into those for lease and those for other disclosure is made. assets. In such cases, the recoverable amount is elements. are leases. Accordingly,Ind AS 116 is applied determined for the Cash Generating Unit (CGU) only to contracts that were previously Contingent assets are not recognised in the to which the asset belongs. (iv) Transition to Ind AS 116 identified as leases under Ind AS 17. consolidated financial statements. However, contingent assets are assessed continually and The lease liability is initially measured at Effective 1st April, 2019, the Group has adopted lnd Comparatives as at and for the year ended if it is virtually certain that an inflow of economic amortised cost at the present value of the AS 116 "Leases" using the modified retrospective st 31 March, 2019 have not been retrospectively benefits will arise, the asset and related income future lease payments. The lease payments are method. The Group has applied the standard to adjusted and therefore will continue to be are recognised in the period in which the change discounted using the interest rate implicit in the its leases with the cumulative impact recognised reported under the accounting policies st occurs. lease or, if not readily determinable, using the on the date of initial application (1 April, 2019). included as part of our Annual Report for year incremental borrowing rates in the country of Accordingly, previous period information has ended 31st March, 2019. 1.21 Fair value measurement domicile of these leases. Lease liabilities are not been restated. remeasured with a corresponding adjustment 1.18 Cash and cash equivalents The Group measures financial instruments at fair st value at each reporting date. to the related right of use asset if the Group On 1 April, 2019, the Group has recognised a lease liability measured at the present Cash and cash equivalents comprise cash on hand changes its assessment if whether it will exercise Financial instruments an extension or a termination option. value of the remaining lease payments, and and cash at bank including fixed deposit with right-of-use (ROU) asset at an amount equal original maturity period of three months or less and A financial instrument is any contract that gives rise Lease liability and ROU asset have been to lease liability (adjusted for any related short term highly liquid investments with an original to a financial asset of one entity and a financial separately presented in the Balance Sheet prepayments). Accordingly, on transition maturity of three months or less. liability or equity instrument of another entity. 354 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 355 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements (i) Financial assets o Derivatives and equity instruments at that case, the Group also recognises an (b) Initial recognition and measurement fair value through profit or loss (FVTPL). associated liability. The transferred asset (a) Classification and the associated liability are measured All financial liabilities are recognised o Equity instruments measured at fair on a basis that reflects the rights and initially at fair value and, in the case of The Group classifies its financial assets in value through other comprehensive obligations that the Group has retained. loans and borrowings and payables, net of the following measurement categories: income (FVTOCI). directly attributable transaction costs. Continuing involvement that takes the form o Those to be measured subsequently (d) Equity investments The Group’s financial liabilities include of a guarantee over the transferred asset at fair value (either through other trade and other payables, loans and is measured at the lower of the original comprehensive income, or through All equity investments in scope of Ind AS 109 borrowings including bank overdrafts, carrying amount of the asset and the profit or loss), and are measured at fair value. Equity instruments financial guarantee contracts and maximum amount of consideration that the which are held for trading are classified as derivative financial instruments. o Those to be measured at amortised FVTPL. For all other equity instruments, the Group could be required to repay. cost. The classification depends on the Group decides to classify the same either as (c) Subsequent measurement (f) Impairment of financial assets entity’s business model for managing at FVTOCI or FVTPL. The Group makes such The measurement of financial liabilities the financial assets and the contractual election on an instrument-by-instrument In accordance with Ind AS 109, the Group depends on their classification, as terms of the cash flows. basis. The classification is made on initial applies the expected credit loss (ECL) described below: recognition and is irrevocable. model for measurement and recognition For assets measured at fair value, gains of impairment loss on trade receivables and losses will either be recorded in profit If the Group decides to classify an equity Financial liabilities at fair value through profit or any contractual right to receive cash or or loss or other comprehensive income. For instrument as at FVTOCI, then all fair value or loss include financial liabilities held for another financial asset. For this purpose, the trading and financial liabilities designated investments in equity instruments that are changes on the instrument, excluding Group follows a ‘simplified approach’ for upon initial recognition as at fair value not held for trading, this will depend on dividends, are recognised in the OCI. There recognition of impairment loss allowance through the profit or loss. Financial liabilities whether the Group has made an irrevocable is no recycling of the amounts from OCI to on the trade receivable balances. The are classified as held for trading if they are election at the time of initial recognition consolidated profit or loss, even on sale of application of this simplified approach does incurred for the purpose of repurchasing in to account for the equity investment at investment. However, the Group may transfer not require the Group to track changes in the near term. This category also includes FVTOCI. the cumulative gain or loss within equity. credit risk. Rather, it recognises impairment derivative financial instruments entered into (b) Initial recognition and measurement Equity instruments included within the loss allowance based on lifetime ECLs at by the Group that are not designated as FVTPL category are measured at fair each reporting date, right from its initial hedging instruments in hedge relationships Purchases or sales of financial assets value with all changes recognised in the recognition. As a practical expedient, the as defined by Ind AS 109. Separated that require delivery of assets within a consolidated profit or loss. Transaction cost Group uses a provision matrix to determine embedded derivatives are also classified as time frame established by regulation or of financial assets at FVTPL are expensed impairment loss allowance on portfolio of held for trading unless they are designated convention in the market place (regular in the consolidated profit or loss. its trade receivables. The provision matrix as effective hedging instruments. way trades) are recognised on the trade is based on its historically observed default Gains or losses on liabilities held for trading date, i.e., the date that the Group commits (e) De-recognition rates over the expected life of the trade are recognised in the the consolidated to purchase or sell the asset. All financial receivables and is adjusted for forward- The Group derecognises a financial asset profit or loss. assets are recognised initially at fair value only when the contractual rights to the cash looking estimates. At every reporting date, plus, in the case of financial assets not flows from the asset expires or it transfers the historical observed default rates are Financial liabilities designated upon initial recorded at fair value through profit or the financial asset and substantially all the updated and changes in the forward- recognition at fair value through profit or loss, transaction costs that are attributable risks and rewards of ownership of the asset. looking estimates are analysed. loss are designated as such at the initial to the acquisition of the financial asset. date of recognition, and only if the criteria (ii) Financial liabilities When the Group has transferred its rights in Ind AS 109 are satisfied. For liabilities (c) Subsequent measurement to receive cash flows from an asset or has (a) Classification designated as FVTPL, fair value gains/ entered into a pass-through arrangement, For the purposes of subsequent losses attributable to changes in own credit it evaluates if and to what extent it has Financial liabilities are classified, at initial measurement, financial assets are classified risk are recognised in OCI. These gains/ retained the risks and rewards of ownership. recognition, as financial liabilities at fair in below categories: losses are not subsequently transferred to When it has neither transferred nor retained value through profit or loss, loans and the profit or loss. However, the Group may o Debt instruments at amortised cost. substantially all of the risks and rewards of borrowings, payables, or as derivatives transfer the cumulative gain or loss within the asset, nor transferred control of the designated as hedging instruments in an equity. All other changes in fair value of o Debt instruments measured at fair asset, the Group continues to recognise effective hedge, as appropriate. such liability are recognised in consolidated value through other comprehensive the transferred asset to the extent of income (FVTOCI). the Group’s continuing involvement. In 356 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 357 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements profit or loss. The Group has not designated (iv) Cash flow hedge o the amount determined in accordance with In the event that the option expires any financial liability as fair value through the expected credit loss model as per Ind unexercised, the liability is derecognised with a profit and loss. The Group classifies its foreign exchange AS 109; and corresponding adjustment to equity. forward and currency option contracts (d) Loans and borrowings and interest rate swaps that hedge foreign o the amount initially recognised less, 1.22 Business combinations currency risk associated with highly probable where appropriate, cumulative amount of After initial recognition, interest-bearing The Group uses the acquisition method of forecasted as cash flow hedges and measures income recognised in accordance with the loans and borrowings are subsequently accounting to account for business combinations. them at fair value. The effective portion of principles of Ind AS 115. measured at amortised cost using the The acquisition date is the date on which control is changes in the fair value of derivatives that are effective interest rate (EIR) method. The fair value of financial guarantees is transferred to the acquirer. Judgement is applied in designated and qualify as cash flow hedges Gains and losses are recognised in the determined based on the present value of determining the acquisition date and determining is recognised in other comprehensive income consolidated profit or loss when the the difference in cash flows between the whether control is transferred from one party and accumulated under hedging reserve. The liabilities are de-recognised as well as contractual payments required under the to another. Control exists when the Group is gain or loss relating to the ineffective portion through the EIR amortisation process. debt instrument and the payments that would exposed to, or has rights to variable returns from is recognised immediately in the profit or loss, be required without the guarantee, or the its involvement with the entity and has the ability Amortised cost is calculated by taking and is included in the ‘Other income/ expenses’ estimated amount that would be payable to to affect those returns through power over the into account any discount or premium line item. Amounts previously recognised in a third party for assuming the obligations. entity. In assessing control, potential voting rights on acquisition and fees or costs that other comprehensive income and accumulated Where guarantees in relation to loans or other are considered only if the rights are substantive. are an integral part of the EIR. The EIR in equity relating to effective portion (as payables of associates are provided for no The Group measures goodwill as of the applicable amortisation is included as finance costs in described above) are reclassified to the compensation, the fair values are accounted acquisition date at the fair value of the consideration the consolidated profit or loss. consolidated profit or loss in the periods when for as contributions and recognised as part of transferred, including the recognised amount of This category generally applies to interest- the hedged item affects consolidated profit or the cost of the investment. any non-controlling interest in the acquiree, less the bearing loans and borrowings. loss, in the same line as the recognised hedged net recognised amount of the identifiable assets item. When the hedging instrument expires (vii) Put option acquired and liabilities assumed. (e) De-recognition or is sold or terminated or when a hedge no longer meets the criteria for hedge accounting, The potential cash payments related to put When the fair value of the net identifiable assets A financial liability is de-recognised any cumulative deferred gain/loss at that time options issued by the Group over the equity acquired and liabilities assumed exceeds the when the obligation under the liability is remains in equity until the forecast transaction of subsidiary companies are accounted for consideration transferred, a bargain purchase gain is discharged or cancelled or expires. When as financial liabilities when such options may occurs. When the forecast transaction is no recognised immediately in the OCI and accumulates an existing financial liability is replaced only be settled by exchange of a fixed amount longer expected to occur, the cumulative gain/ the same in equity as capital reserve where there by another from the same lender on of cash or another financial asset for a fixed loss that was reported in equity are immediately exists clear evidence of the underlying reasons for substantially different terms, or the terms number of shares in the subsidiary. classifying the business combination as a bargain reclassified to consolidated profit or loss. of an existing liability are substantially purchase else the gain is directly recognised in modified, such an exchange or modification In the absence of specific guidance under Ind (v) Offsetting financial instruments equity as capital reserve. Consideration transferred is treated as the de-recognition of the AS 32 on accounting of such put option (NCI includes the fair values of the assets transferred, original liability and the recognition Put Option), initially, the Group recognises the Financial assets and liabilities are offset and liabilities incurred by the Group to the previous of a new liability. The difference in the amount that may become payable under the the net amount is reported in the balance sheet owners of the acquiree, and equity interests respective carrying amounts is recognised option on exercise at fair value as financial where there is a legally enforceable right to issued by the Group. Consideration transferred in the consolidated profit or loss. liability. Subsequently, the Group recognises offset the recognised amounts and there is an also includes the fair value of any contingent the change in fair value of the option, with intention to settle on a net basis or realise the consideration. Consideration transferred does not (iii) Derivative financial instruments a corresponding charge directly to equity. asset and settle the liability simultaneously. The include amounts related to the settlement of pre- The Group recognises the cost of writing put The Group uses derivative financial legally enforceable right must not be contingent existing relationships and employee service related options, determined as the excess of the fair instruments, such as foreign exchange forward on future events and must be enforceable in the payments. Any goodwill that arises on account of value of the options over any consideration and currency option contracts, interest rate normal course of business and in the event of such business combination is tested annually for received, as a finance cost. swaps, to hedge its foreign currency risks and default, insolvency or bankruptcy of the Group impairment. interest rate risks, respectively. Such derivative or the counterparty. Put option liabilities have been valued based financial instruments are initially recognised Any contingent consideration is measured at fair on either: at fair value on the date on which derivative (vi) Financial guarantee contracts value at the date of acquisition. If an obligation to pay contract is entered into and are subsequently o Discounted cash flow valuation models; or contingent consideration that meets the definition of re-measured at fair value. Derivatives are Financial guarantee contracts are recognised a financial instrument is classified as equity, then it carried as financial assets when the fair value as a financial liability at the time the guarantee o Observable market transactions (e.g. is not re-measured and the settlement is accounted is positive and as financial liabilities when the is issued. The liability is initially measured at fair funding rounds and non-controlling interest for within equity. Otherwise, other contingent fair value is negative. value and subsequently at the higher of: buy-outs). consideration is re-measured at fair value at each 358 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 359 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements reporting date and subsequent changes in the fair Transaction costs that the Group incurs in Annexure ‘A’ to Note 1: Significant accounting policies and key accounting estimates and judgements value of the contingent consideration are recorded connection with a business combination, such as % Ownership Interest in the consolidated profit or loss. Country of With effect finder’s fees, legal fees, due diligence fees and other Sr. Name of the Company Incorporation As at As at from A contingent liability of the acquiree is assumed professional and consulting fees, are expensed as 31st March, 2020 31st March, 2019 in a business combination only if such a liability incurred. a. Subsidiaries (held directly) represents a present obligation and arises from 1 Goldencross Pharma Limited (formerly a past event, and its fair value can be measured known as Goldencross Pharma Private 1.23 Recent accounting pronouncements reliably. Limited) India 100% 100% 14/05/2010 2 Meditab Specialities Limited (formerly On an acquisition-by-acquisition basis, the Ministry of Corporate Affairs (“MCA”) notifies new known as Meditab Specialities Private Group recognises any non-controlling interest standards or amendments to the existing standards. Limited) India 100% 100% 01/10/2010 in the acquiree either at fair value or at the non- 3 Cipla (Mauritius) Limited # Mauritius 100% 100% 27/01/2011 controlling interest’s proportionate share of the There is no such notification which would have been 4 Cipla Medpro South Africa (Proprietary) acquiree’s identifiable net assets. applicable from 1st April, 2020. Limited South Africa 100% 100% 15/07/2013 5 Cipla Holding B.V Netherlands 100% 100% 28/08/2013 6 Cipla Biotec Limited (formerly known as Cipla Biotec Private Limited) India 100% 100% 24/07/2014 7 Cipla (EU) Limited United Kingdom 100% 100% 27/01/2011 8 Saba Investment Limited United Arab Emirates 51% 51% 02/10/2014 9 Jay Precision Pharmaceuticals Private Limited India 60% 60% 26/02/2015 10 Cipla Health Limited 1 India 100% 73.84% 27/08/2015 11 Cipla Pharmaceuticals Limited 2 India 100% - 19/11/2019 b. Subsidiaries (held indirectly) 12 Cipla (UK) Limited # United Kingdom 100% 100% 27/01/2011 13 Cipla Australia Pty Ltd Australia 100% 100% 04/03/2011 14 Medispray Laboratories Private Limited India 100% 100% 01/10/2010 15 Sitec Labs Limited (formerly known as Sitec Labs Private Limited) India 100% 100% 01/10/2010 16 Meditab Holdings Limited Mauritius 100% 100% 01/10/2010 17 Tasfiye Halinde Cipla İlaç Ticaret Anonim Şirketi (formerly known as Cipla İlaç Ticaret Anonim Şirketi) ## Turkey - 100% 20/02/2012 18 Cipla USA Inc. USA 100% 100% 12/09/2012 19 Cipla Kenya Limited Kenya 100% 100% 08/10/2012 20 Cipla Malaysia Sdn. Bhd. Malaysia 100% 100% 20/03/2013 21 Cipla Europe NV Belgium 100% 100% 30/09/2013 22 Cipla Quality Chemical Industries Limited Uganda 51.18% 51.18% 20/11/2013 23 Inyanga Trading 386 Proprietary Limited # South Africa 100% 100% 15/07/2013 24 Cipla Medpro Holdings Proprietary Limited # South Africa 100% 100% 15/07/2013 25 Cape to Cairo Exports Proprietary Limited * South Africa 100% 100% 15/07/2013 26 Cipla Dibcare Proprietary Limited # South Africa 100% 100% 15/07/2013 27 Cipla Life Sciences Proprietary Limited South Africa 100% 100% 15/07/2013 28 Cipla-Medpro Proprietary Limited South Africa 100% 100% 15/07/2013 29 Cipla-Medpro Distribution Centre Proprietary Limited South Africa 100% 100% 15/07/2013 30 Cipla Medpro Botswana Proprietary Limited Botswana 100% 100% 15/07/2013 31 Cipla OLTP (Pty) Limited (formerly known as Cipla Nutrition Proprietary Limited) South Africa 100% 100% 15/07/2013 32 Medpro Pharmaceutica Proprietary Limited South Africa 100% 100% 15/07/2013 33 Breathe Free Lanka Private Limited Sri Lanka 100% 100% 16/06/2014 360 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 361 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Annexure ‘A’ to Note 1: Significant accounting policies and key accounting estimates and judgements Note 2.1 : (a) Property, plant and equipment (Contd.) H in Crores Leasehold Furniture Freehold Leasehold Buildings Plant and Office % Ownership Interest Particulars building and Vehicles Total Country of With effect land land and flats equipments equipments Sr. Name of the Company improvements fixtures Incorporation As at As at from 31st March, 2020 31st March, 2019 Gross block Balance as at 1st April, 2018 72.82 34.42 245.99 2,304.28 4,168.29 137.79 92.84 9.88 7,066.31 34 Medica Pharmaceutical Industries Business combinations (refer note 56) 6.56 - - - 29.44 7.22 0.85 1.11 45.18 Company Limited Yemen 50.49% 50.49% 02/10/2014 Additions for the year 0.25 0.15 6.39 52.17 444.31 9.43 7.79 0.88 521.37 35 Cipla Pharma Lanka Private Limited 3 Sri Lanka 100% 60% 17/11/2014 Transfer to investment property (refer 36 Cipla Brasil Importadora e Distribuidora note 3) - - - (64.69) (0.78) (0.92) (1.06) - (67.45) de Medicamentos Ltda. Brazil 100% 100% 11/05/2015 Assets classified as held for sale (refer below note iii) - - - - (23.27) - - - (23.27) 37 Cipla Maroc SA Morocco 60% 60% 08/05/2015 Deletions and adjustments during the year - - - (0.12) (45.01) (2.35) (0.83) (1.07) (49.38) 38 Cipla Middle East Pharmaceuticals FZ- United Arab Foreign currency translations adjustments 0.41 0.29 (8.08) 11.29 11.96 (1.47) (1.22) (0.01) 13.17 LLC Emirates 51% 51% 31/05/2015 Balance as at 31st March, 2019 80.04 34.86 244.30 2,302.93 4,584.94 149.70 98.37 10.79 7,505.93 39 Quality Chemicals Limited Uganda 51% 51% 06/08/2015 Transition impact of Ind AS 116 (refer note 40 Cipla Philippines Inc. Philippines 100% 100% 06/01/2016 2.2) - (34.86) ------(34.86) 41 InvaGen Pharmaceuticals Inc. USA 100% 100% 17/02/2016 Additions for the year 1.24 - 2.21 60.81 353.57 8.63 8.01 0.83 435.30 42 Exelan Pharmaceuticals Inc. USA 100% 100% 17/02/2016 Transfer to investment property (refer 43 Cipla Algérie Algeria 40% 40% 06/06/2016 note 3) - - - (68.56) (1.01) (1.00) (1.15) - (71.72) 44 Cipla Biotec South Africa (Pty) Ltd South Africa 100% 100% 10/06/2016 Deletions and adjustments during the year (4.36) - (0.22) 3.75 (34.25) (0.90) (1.05) (0.34) (37.37) 45 Anmaraté Proprietary Limited South Africa 100% 100% 12/04/2017 Foreign currency translations adjustments (0.09) - 2.47 18.75 12.65 (0.70) (1.14) (0.01) 31.93 Balance as at 31st March, 2020 76.83 - 248.76 2,317.68 4,915.90 155.73 103.04 11.27 7,829.21 46 Cipla Technologies LLC USA 100% 100% 13/11/2017 Depreciation and impairment 47 Cipla Gulf FZ-LLC UAE 100% 100% 10/10/2018 Accumulated balance as at 1st April, 2018 - 0.97 91.32 210.13 1,359.09 45.53 42.60 1.32 1,750.96 48 Mirren Proprietary Limited South Africa 100% 100% 22/10/2018 Business combinations (refer note 56) - - - - 17.38 6.76 0.44 1.01 25.59 49 Madison Pharmaceuticals Inc. USA 100% 100% 26/10/2018 Depreciation charge for the year - 0.32 14.55 76.86 537.91 17.70 16.76 2.21 666.31 4 50 Cipla Colombia SAS Colombia 100% - 25/04/2019 Impairment charge for the year - - - - 1.48 - - - 1.48 5 51 Cipla (China) Pharmaceutical Co. Ltd China 100% - 20/05/2019 Transfer to investment property (refer 52 Cipla (Jiangsu) Pharmaceutical Co. Ltd 6 China 80% - 08/08/2019 note 3) - - - (3.19) (0.24) (0.28) (0.72) - (4.43) 53 Cipla FZE 10 United Arab Assets classified as held for sale (refer Emirates - - 04/10/2006 below note iii) - - - - (21.27) - - - (21.27) Deletions and adjustments during the year - - - (0.11) (20.27) (2.04) (0.70) (0.75) (23.87) 54 Galilee Marketing Proprietary Limited 11 South Africa - - 15/07/2013 Foreign currency translations adjustments - 0.01 (4.05) 1.24 0.35 (0.47) (0.25) (0.02) (3.19) 55 Xeragen Laboratories Proprietary Accumulated balance as at 31st March, 12 Limited South Africa - - 15/07/2013 2019 - 1.30 101.82 284.93 1,874.43 67.20 58.13 3.77 2,391.58 56 Med Man Care Proprietary Limited 13 South Africa - - 15/07/2013 Transition impact of Ind AS 116 (refer note c. Associates (held directly) 2.2) - (1.30) ------(1.30) 57 AMPSolar Power Systems Private Limited 7 India 26% - 12/06/2019 Depreciation charge for the year - - 15.26 75.60 511.72 15.69 15.21 2.22 635.70 d. Associates (held indirectly) Impairment charge for the year - - - 0.07 21.60 - 0.01 - 21.68 58 Stempeutics Research Private Limited 8 India 40.78% 48.99% 01/10/2010 Transfer to investment property (refer note 3) - - - (4.51) (0.61) (0.44) (1.07) - (6.63) 59 Avenue Therapeutics, Inc. USA 33.30% 33.30% 08/02/2019 Deletions and adjustments during the year - - - (0.03) (26.77) (0.70) (0.99) (0.28) (28.77) 9 60 Brandmed (Pty) Limited South Africa 30% - 24/04/2019 Foreign currency translations adjustments - - (0.51) 4.01 9.77 (0.89) (0.70) (0.05) 11.63 e. Other consolidating entities Accumulated balance as at 31st March, 61 Cipla Employee Stock Option Trust India 100% 100% 09/10/2015 2020 - - 116.57 360.07 2,390.14 80.86 70.59 5.66 3,023.89 62 Cipla Health Employee Stock Option Net block Trust India 100% 100% 14/03/2016 As at 31st March, 2020 76.83 - 132.19 1,957.61 2,525.76 74.87 32.45 5.61 4,805.32 As at 31st March, 2019 80.04 33.56 142.48 2,018.00 2,710.51 82.50 40.24 7.02 5,114.35 # In the process of liquidation 6. Incorporated on 8th August, 2019 i. The gross value of buildings and flats includes the cost of shares in co-operative housing societies. ## Liquidated on 7th October, 2019 7. Acquired stake from 12th June, 2019 (Share of loss/ * In the process of deregistration profit not required to be considered) ii. The above additions to property, plant and equipments during the year includes H46.01 crore (31st March, 2019 H34.58 crore) used for research and development. 1. Purchased non controlling interest of 26.16% on 8. Stake changed to 40.78% from 43.64% on 8th 7th August, 2019 November, 2019 iii. Power plant at Goa amounting to H18.74 crore impaired in earlier years has been classified as assets held-for-sale, with reversal of 2. Incorporated on 19th November, 2019 9. Acquired stake from 24th April, 2019 corresponding impairment provision. Plant and equipment classified as held-for-sale during the reporting period is measured at the lower of its carrying value and fair market value less cost to sell at the time of classification. Fair market value for such assets is valued 10. Liquidated on 11th February, 2019. 3. Purchased non controlling interest of 40% on at H2.34 crore as at 31st March, 2020 (31st March, 2019 H2.00 crore). 30th January, 2020 11. Liquidated on 11th October, 2018. st 4. Incorporated on 25th April, 2019 12. Liquidated on 7th September, 2018. iv. The impairement charge for the year H21.68 crore (31 March, 2019 H1.48 crore), includes impairment charge on certain assets that has been assessed as non-usable by the management and has been recorded at scrap value less cost to sell. 5. Incorporated on 20th May, 2019 13. Liquidated on 15th October, 2018. 362 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 363 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements (b) Details of capital work-in-progress Note 2.2: Lease Accounting (Contd.) The following is the movement in the net investment in H in Crores sublease of Right-of-use assets during the year ended The following is the movement in lease liabilities for the st As at As at 31 March, 2020: Particulars year ended 31st March, 2020 31st March, 2020 31st March, 2019 H in Crores H in Crores Opening balance 331.05 512.35 For the For the Additions during the year 464.53 310.52 year ended year ended Particulars st Deletions during the year (0.03) (1.72) Particulars 31 March, 31st March, Capitalised during the year (377.82) (479.83) 2020 2020 Impairment during the year* (0.07) (12.18) Balance as of 1st April, 2019 - Balance as of 1st April, 2019 327.89 Foreign currency translation adjustments 3.34 1.91 Addition 1.75 Additions during the year 33.41 Closing balance 421.00 331.05 Lease receipts (0.68) Deletions / Modifications during the year (9.68) * The impairment loss relates to certain capital work-in-progress that has been assessed as non-usable by the management and has been recorded Prepaid rent on 31st March, 2020 (3.32) Translation difference 0.12 at the scrap value less cost to sell. Finance cost accrued during the Balance as of 31st March, 2020 1.19 period 24.76 Payment of lease liabilities (100.59) Note 2.2: Lease Accounting The table below provides details regarding the Where Group is lessee - Translation difference 0.30 contractual maturities of net investment in sublease st Balance as of 31 March, 2020 272.77 of Right-of-use assets as of 31st March, 2020 on an Following are the changes in the carrying value of right of use assets for the year ended 31st March, 2020: undiscounted basis: H in Crores The table below provides details regarding the H in Crores Category of ROU asset contractual maturities of lease liabilities as of As at Particulars Buildings st Land Computers Vehicles Total 31 March, 2020 on an undiscounted basis: st and Flats Particulars 31 March, H in Crores 2020 st Balance recognised as at 1 April, 2019 7.00 299.84 19.73 1.32 327.89 As at Less than one year 1.19 Transfer from Property, plant and equipment on Particulars 31st March, Total 1.19 implementation of Ind AS 116 33.56 - - - 33.56 2020 Transfer from Deferred lease, Operating lease accrual Less than one year 102.28 Where Group is lessor - and prepaid rent on implementation of Ind AS 116 40.28 (12.81) 3.58 - 31.05 One to five years 179.99 The Group has given certain premises under operating Additions during the year 3.60 22.28 11.67 - 37.55 More than five years 59.88 lease or leave and license agreement. The Group retains Deletions / Modifications during the year - (11.33) - - (11.33) Total 342.15 Depreciation charge for the year (2.08) (79.22) (16.01) (0.20) (97.51) substantially all risks and benefits of ownership of the The aggregate depreciation on ROU assets has been leased asset and hence classified as operating lease. Translation difference - 1.45 - 0.07 1.52 included under depreciation and amortisation expense Lease income on such operating lease is recognised in Balance as of 31st March , 2020 82.36 220.21 18.97 1.19 322.73 in the Consolidated Statement of Profit or Loss. profit or loss under ‘Rent’ in Note 32 - Other income. The difference between the lease obligation recorded as of 31st March, 2019 under Ind AS 17 disclosed under Note 49 st Range of of the 2019 Annual Report and the value of the lease liability as of 1 April, 2019 is primarily on account of inclusion of Note 3: Investment properties extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance Right-of- use asset remaining H in Crores with Ind AS 116 and discounting the lease liabilities to the present value under Ind AS 116. term Land 3 to 94 years As at As at The weighted average incremental borrowing rate applied to lease liabilities is in the range of 4% to 12%. st st Buildings and Flats 1 to 7 years Particulars 31 March, 31 March, 2020 2019 The following is the break-up of current and non-current lease liabilities as of 31st March , 2020 Computers 1 to 3 years Vehicle 3 to 5 years H in Crores Gross Block Opening balance 67.78 1.11 As at Rental expense recorded for short-term leases was Particulars Transfer from property, 31st March, 2020 H68.44 crore for the year ended 31st March, 2020 plant and equipment Current lease liabilities 89.69 The aggregate depreciation on Right-of-use assets has (refer note 2.1) 71.72 67.45 Non-current lease liabilities 183.08 been included under depreciation and amortisation Disposals during the Total 272.77 expense in the Consolidated Statement of Profit and period - (0.78) Loss. Closing balance 139.50 67.78 364 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 365 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 3: Investment properties (Contd.) Note 4: Goodwill (Contd.) Note 4: Goodwill (Contd.) H in Crores For impairment testing, goodwill is allocated to the d) Discount rates CGUs which represents the lowest level within the group As at As at at which goodwill is monitored for internal management Management estimates discount rates that reflect current market assessments of the risks specific to the CGU, Particulars 31st March, 31st March, purposes. The Group’s goodwill on consolidation is taking into consideration the time value of money and individual risks of the underlying assets that have not been 2020 2019 tested for impairment annually or more frequently if incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Accumulated there are indications that goodwill might be impaired. Group and its operating segments and is derived from its weighted average cost of capital (WACC) ranging from depreciation During the year, the testing did not result in any 11% to 31 %. Opening balance 5.93 0.08 impairment in the carrying amount of goodwill. The Group believe that any reasonably possible change in the key assumptions on which a recoverable amount Transfer from property, Goodwill acquired in business combination, was is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the plant and equipment 6.63 4.43 allocated to the following cash generating units cash-generating units. Depreciation for the (CGUs) that are expected to benefit from that business year (refer note 38) 2.64 1.49 combination : Note 5: Intangible assets Disposals during the H in Crores period - (0.07) H in Crores Technical Licences Closing balance 15.20 5.93 As at As at Marketing Particulars Software know- Trademarks and Brands Total Net block 124.30 61.85 Particulars 31st March, 31st March, intangibles how patents Fair value 139.37 75.26 2020 2019 Gross block United States of America 1,830.82 1,673.30 st Rental income recognised in profit or loss for investment Balance as at 1 April, 2018 198.22 2,561.05 8.15 387.47 19.87 29.43 3,204.19 South Africa 840.86 947.64 Business combinations (refer properties aggregates to H7.45 crore (31 st March, 2019 Yemen 131.66 120.33 note 56) - - - 124.11 - - 124.11 H3.77 crore). India 75.46 75.46 Additions for the year 10.58 99.80 - 25.66 0.38 - 136.42 Estimation of fair value Uganda 52.41 49.12 Deletions and adjustments for the year (0.06) - - (4.72) - - (4.78) Others 2.79 3.29 The fair valuation of the assets is based on the perception Foreign currency translations Total 2,934.00 2,869.14 about the macro and micro economics factors presently adjustments (0.68) (11.38) 0.21 (33.12) (1.46) 1.73 (44.70) st govering the construction industry, location of property, The recoverable amount of each CGUs are determined Balance as at 31 March, 2019 208.06 2,649.47 8.36 499.40 18.79 31.16 3,415.24 Additions for the year (refer existing market conditions, degree of development of based on value in use calculated using, estimated note below) 26.05 224.09 - 118.08 - - 368.22 infrastructure in the area, demand supply conditions, discounted cash flows. Deletions and adjustments for internal amenities, common amenities, etc. Key assumptions upon which the Group has based its the year (4.56) (0.01) - (0.46) (0.29) - (5.32) Foreign currency translations This value is based on valuation conducted by an determinations of value-in-use includes: external valuation specialist. The fair value measurement adjustments 0.34 92.66 0.35 (45.88) (0.76) 2.83 49.54 st is categorised in level 3 fair value hierarchy. a) The Group prepares its cash flow forecasts for 5 Balance as at 31 March, 2020 229.89 2,966.21 8.71 571.14 17.74 33.99 3,827.68 Amortisation and impairment years based on the most recent financial budgets Balance as at 1st April, 2018 91.38 1,107.57 3.24 161.22 15.31 6.42 1,385.14 approved by Board of Directors. Amortisation charge for the Note 4: Goodwill b) A terminal value is arrived at by extrapolating the year 40.64 354.19 1.71 29.27 1.36 2.18 429.35 in Crores Impairment charge for the H last forecasted year cashflows to perpetuity, using year* - - 1.81 6.31 - 0.42 8.54 For the For the a constant long-term growth rate ranging from 0% Deletions and adjustments for year ended year ended to 4%. Particulars the year (0.03) - - - - - (0.03) 31st March, 31st March, Foreign currency translations 2020 2019 c) Growth rates adjustments (0.51) 35.25 0.05 (4.62) (1.31) 0.36 29.22 st Opening balance 2,869.14 2,814.74 The growth rates are based on industry growth Balance as at 31 March, 2019 131.48 1,497.01 6.81 192.18 15.36 9.38 1,852.22 Recognised on forecasts. Management determines the budgeted Amortisation charge for the year 43.55 272.30 1.26 44.46 0.40 2.13 364.10 acquisition of subsidiaries growth rates based on past performance and its Impairment charge for the year* - 21.17 - 2.88 - - 24.05 (refer note 56) - 79.22 expectations of market development. The weighted Deletions and adjustments for Foreign currency average growth rates used were consistent with translation adjustments 64.86 (24.82) the year (4.52) - - (0.37) - - (4.89) industry reports ranging from 0% to 34%. Closing balance 2,934.00 2,869.14 366 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 367 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 5: Intangible assets (Contd.) Note 5: Intangible assets (Contd.) H in Crores sheet date is based on discounted cash flow method. Contingent consideration is arrived basis weighted average Technical Licences probability approach of achieving various financial and non-financial performance targets. Basis the future Marketing Particulars Software know- Trademarks and Brands Total projections and the performance of the products, the contingent consideration is subject to revision on a yearly intangibles how patents basis. Foreign currency translation adjustments (0.08) 118.76 0.29 (23.48) (0.74) 0.91 95.66 Note 6: Investment in associates Balance as at 31st March, 2020 170.43 1,909.24 8.36 215.67 15.02 12.42 2,331.14 H in Crores Net block As at As at st Particulars As at 31 March, 2020 59.46 1,056.97 0.35 355.47 2.72 21.57 1,496.54 31st March, 2020 31st March, 2019 As at 31st March, 2019 76.58 1,152.46 1.55 307.22 3.43 21.78 1,563.02 Investments in unquoted equity instruments (refer note 44) * The carrying amount of certain Marketing intangibles, technical know-how, trademarks and brands has been 375 (31st March, 2019 - Nil) equity shares of Brandmed (Pty) Limited of reduced to its recoverable amount by recognition of an impairment loss in the profit or loss. ZAR 1 each, fully paid 25.38 - 2,05,02,525 (31st March, 2019 2,05,02,525) equity shares of Stempeutics Intangible assets under development Research Private Limited of H10 each, fully paid - 6.95 H in Crores 90,000 (31st March, 2019 - Nil) equity shares of AMPSolar Power As at As at Systems Private Limited of H10 each, fully paid* 0.01 - Particulars st st 31 March, 2020 31 March, 2019 Investments in quoted equity instruments (refer note 44) Opening balance 345.13 468.98 58,33,333 (31st March, 2019 58,33,333) equity shares of Avenue Additions during the year [refer note below] 352.83 99.39 Therapeutics, Inc. of $0.001 each, fully paid 209.03 227.54 Capitalised during the year (292.21) (45.03) Investments in debentures -carried at amortised cost (refer note 44) Impairment charge during the year (28.90) (206.96) 89,100 (31st March, 2019 - Nil) 0.01% Compulsory Convertible debentures Foreign currency translations adjustments 26.68 28.75 of AMPSolar Power Systems Private Limited of H1000 each, fully paid 0.55 - Closing balance 403.53 345.13 234.97 234.49 *Carried at cost. Refer note 44. Acquisition of intangibles: During the year, the Group completed the following significant acquisitions of intangible assets and intangible assets Note 7: Non-current financial assets - other investments in Crores under development amounting to H326.30 crore in form of marketing intangibles and trademarks. The Group has H recorded the acquired assets as Intangible assets under Ind AS 38 “Intangible Assets” on the assessment that fair As at As at Particulars value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets 31st March, 2020 31st March, 2019 which is controlled by the Group and future economic benefits are probable. Investments in equity instruments (unquoted)* Investments at fair value through OCI Date of J in Product Group Entity Type of deal 16.50% (31st March, 2019 - 16.50%) Equity interest in Shanghai Desano agreement Crores Pharmaceuticals Co., Ltd. 202.36 183.36 Nutrition products’ portfolio 10.96% (31st March, 2019 - 11.71%) Equity interest in Wellthy Therapeutics (CPink, CDense, Productiv and 10th October, Private Limited 17.17 10.50 Folinine) Cipla Limited 2019 82.86 Acquisition of trademark Investment carried at fair value through Profit or loss th Vysov 12 December, Acquisition of trademark for India 1,000 (31st March, 2019 - 1,000) Equity shares of The Saraswat Cipla Limited 2019 30.77 Territory co-operative bank Ltd of H10 each, fully paid H10,000 (31st March, 2019 - Plazomicin Acquisition of worldwide marketing H10,000) 0.00 0.00 Cipla USA Inc. 20th June, 2019 59.92 rights (excluding China) Investment in government securities carried at amortised cost Pulmazole (PUR1900), an Cipla National saving certificates H41,000 (31st March, 2019 - H41,000) 0.00 0.00 inhaled iSPERSE™ Technologies 219.53 193.86 Inc. 15th April, 2019 152.75 Co-development Total 326.30 Aggregate amount of unquoted investments 219.53 193.86 *Refer Note 42 for information on fair value of investments. Contingent consideration (On achievement of sale target as per agreement) Note: On 8th March, 2019, Goldencross Pharma Private Limited, a wholly owned subsidiary of the Company acquired As at 31st March, 2020, the fair value of the contingent consideration was assessed as H Nil in respect of above 11.71% stake for a consideration of H10.50 crore in Wellthy Therapeutics Private Limited (“Wellthy”) pursuant to the acquisitions as the sales targets are not probable and estimable. Determination of the fair value as at balance Amended and Restated Share Subscription and Shareholders Agreement dated 18th February, 2019. 368 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 369 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 8: Non-current financial assets - loans Note 10 : Income taxes (Contd.) H in Crores Reconciliation of tax expense and the profit multiplied by tax rate applicable to respective tax jurisdiction for As at As at Particulars 31st March, 2020 and 31st March, 2019: 31st March, 2020 31st March, 2019 H in Crores (Unsecured, considered good, except otherwise stated) For the year ended For the year ended Particulars (Carried at amortised cost, except otherwise stated) 31st March, 2020 31st March, 2019 Deposits with body corporates and others Profit before tax 2,178.18 2,079.14 Considered good 52.35 49.38 Considered doubtful 0.86 0.85 At Income tax rates applicable to respective tax jurisdiction 801.34 758.39 Less: Allowance for bad and doubtful advances (0.86) (0.85) Effect for: Other loans and advances 0.04 0.04 Prior year adjustments to deferred tax 32.39 (31.62) 52.39 49.42 Weighted deductions and exemptions (239.46) (256.18) Non-deductible expenses for tax purposes 77.50 72.28 Note 9: Non-current financial assets - others Deferred tax not recognised (net) 16.14 7.08 H in Crores Differential tax impact (37.82) 4.02 Others (18.89) 15.57 As at As at Particulars Income tax expense reported in the profit or loss 631.20 569.53 31st March, 2020 31st March, 2019 Effective income tax rate 28.98% 27.39% (Carried at amortised cost, except otherwise stated) Margin deposits* 5.29 8.45 There are unused tax losses (including capital losses and MAT Credit) for which no deferred tax asset has been recognised as the Group believes that availability of taxable profit against which such temporary difference can be Capital subsidy receivable 30.26 34.54 utilised, is not probable. Derivatives designated as hedges carried at fair value** Interest rate swap - 50.22 H in Crores Amount recoverable from supplier 6.49 - As at As at Particulars 42.04 93.21 31st March, 2020 31st March, 2019 *Amount held as margin money under lien to tax authority and electricity department. Unabsorbed depreciation and Business Loss 575.09 512.53 **Refer Note 42 for information about Fair value measurement and effects of hedge accounting in Group's Financial Statement. Capital Loss 129.50 104.59 MAT credit not recognised 31.51 30.60 Note 10 : Income taxes The major components of income tax expense for the years ended 31st March, 2020 and 31st March, 2019 are: Uncertain tax position : H in Crores The Group is subject to income taxes in India and numerous foreign jurisdictions including US and South Africa as other major jurisdictions. The Group have ongoing disputes which includes demands, notices and inquiries For the year ended For the year ended Particulars from income tax authorities in India and in some of the jurisdictions where they operate. The disputes relate to tax 31st March, 2020 31st March, 2019 treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives or allowances and (A) Profit or loss section transfer pricing adjustments. Current income tax charge 682.87 747.70 The Group have contingent liability of H51.67 crore (31st March, 2019: H72.26 crore), in respect of tax demands which MAT credit utilisation / entitlement 229.49 80.94 are being contested by it based on the management evaluation and advice of tax consultants as the management Adjustment in respect of deferred tax of previous year 32.39 (31.62) believes that the ultimate tax determination is uncertain due to various tax positions taken by adjudicating authorities Deferred tax on account of temporary differences (313.55) (227.49) in the past. 631.20 569.53 (B) Other comprehensive income section The Group has made provisions for taxes basis its best judgement, considering past resolutions to disputed matters Income tax relating to re-measurements gain/(loss) on defined benefit plans 7.60 (4.72) by adjudicating authorities, prior year assessments and advice from external experts, if required. The Group believes Income tax relating to changes in fair value of FVTOCI equity instrument (2.12) (2.88) that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, Income tax relating to cash flow hedge 29.90 (12.22) including interpretations of tax law and prior experience. 35.38 (19.82) Deferred tax on undistributed earnings: (C) Equity section Deferred income tax liabilities on undistributed earnings of the Group subsidiaries have not been provided as such MAT credit utilised for tax liability under section 115BBD - 40.40 earnings are deemed to be reinvested in the business and the Group is able to control the timing of the reversals of - 40.40 temporary differences associated with these investments. Accordingly, temporary difference on which deferred tax liability has not been recognised amounts to H1,544.74 crore (31st March, 2019 : H1,400.52 crore). 370 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 371 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 10 : Income taxes (Contd.) Note 10 : Income taxes (Contd.) Deferred tax: The Government of India, on 20th September, 2019 vide the Taxation Laws (Amendment) Ordinance, 2019, inserted a new Section 115 BAA in the Income Tax Act, 1961, which provides an option to the Indian companies for paying tax at reduced Movement in deferred tax assets and liabilities during the year ended 31st March, 2020: H in Crores rates (lower tax rate) as per the provisions/ conditions defined in the said section. Based on its evaluation, certain Indian components of the Group have opted for New tax regime in FY 2019-20 and restated the opening deferred tax as per As at Profit or Other Business Equity Foreign As at New Tax Regime and certain Indian components expects to avail lower tax rate only from a later financial year (31st Particulars 31st March, loss comprehensive combination currency 31st March, March, 2021) and therefore has applied the lower tax rate of 25.17% in measurement of deferred taxes only to the extent 2019 income translation 2020 that such deferred tax assets/ liabilities are expected to be realised/ settled in the periods during which the Group Property, plant and equipment expects to be subject to lower tax rate. To the extent deferred tax assets/liabilities were utilised/settled during the year and intangible assets (934.82) 228.81 - - - 4.01 (702.00) ended 31st March, 2020, the applicable normal tax rate as applicable to Indian entities has been applied. Consequently, Employee benefits expense 82.56 (8.28) 7.60 - - 0.17 82.05 deferred tax liabilities (net) reversed by the Group at 31st March, 2020 is not significant. Others* 106.26 48.07 27.78 - - 0.98 183.09 Allowance for credit loss 43.31 32.82 - - - (1.06) 75.07 Tax assets and liabilities - Deferred revenue 23.62 (8.39) - - - 0.00 15.23 H in Crores Provision for right of return, As at As at Particulars discounts and others 155.85 (22.48) - - - 7.05 140.42 31st March, 2020 31st March, 2019 Tax loss carried forward (refer note below) 64.11 10.61 - - - 0.26 74.98 Income tax assets (net) 468.62 345.59 Mat credit entitlement/utilised 235.20 (229.49) - - - 0.01 5.72 Income tax liabilities (net) 9.34 58.74 Deferred tax assets/ (liabilities) (net) (223.91) 51.67 35.38 - - 11.42 (125.44) Deferred tax assets 201.41 - - - - - 239.77 Deferred tax liabilities (425.32) - - - - - (365.21) Note 11: Other non-current assets Note 12: Inventories Total (223.91) - - - - - (125.44) H in Crores H in Crores *Others includes inventory reserves, provision for DPCO, Hedge reserve etc. As at As at As at As at Particulars 31st March, 31st March, Particulars 31st March, 31st March, Movement in deferred tax assets and liabilities during the year ended 31st March, 2019: 2020 2019 2020 2019 H in Crores (Unsecured, considered good, except otherwise stated) (Lower of cost or net realisable value) As at Profit or Other Business Equity Foreign As at Raw materials and st st Particulars 31 March, loss comprehensive combination currency 31 March, Capital advances packing materials 1,827.29 1,666.40 2018 income translation 2019 Secured, considered Work-in-progress 822.87 858.71 Property, plant and equipment good* 0.64 0.12 Finished goods 1,066.11 941.37 and intangible assets (1,063.12) 156.69 - (37.25) - 8.86 (934.82) Unsecured, Stock-in-trade 605.28 449.42 Employee benefits expense 74.67 10.97 (4.72) - - 1.64 82.56 considered good 148.94 60.44 Stores, spares and Others* 78.45 46.28 (15.10) 0.08 - (3.45) 106.26 consumables 56.05 48.93 Deferred lease assets Allowance for credit loss 53.44 (12.10) - - - 1.97 43.31 4,377.60 3,964.83 Deferred revenue 26.09 (2.47) - - - - 23.62 (refer note 2.2) - 38.54 Provision for right of return, Prepaid expenses 12.91 2.13 H in Crores discounts and others 111.69 41.80 - - - 2.36 155.85 VAT receivable 29.15 32.94 As at As at Tax loss carried forward (refer 191.64 134.17 Particulars 31st March, 31st March, note below) 46.58 17.94 - - - (0.41) 64.11 * Secured against bank guarantees 2020 2019 Mat credit entitlement/utilised 356.54 (80.94) - - (40.40) - 235.20 Deferred tax assets/ Goods-in-transit included above (liabilities) (net) (315.66) 178.17 (19.82) (37.17) (40.40) 10.97 (223.91) Raw materials and Deferred tax assets 187.65 201.41 packing materials 64.82 126.66 Deferred tax liabilities (503.31) (425.32) Work-in-progress 32.37 27.32 Total (315.66) (223.91) Finished goods 108.13 124.38 *Others includes inventory reserves, provision for DPCO, Hedge reserve etc. Stock-in-trade 23.16 3.69 Stores, spares and Note: Based on approved plans and budgets, the Cipla Health Limited (CHL) one of the subsidiary of the Group consumables - 0.85 has estimated that future taxable income will be sufficient to absorb carried forward unabsorbed depreciation and 228.48 282.90 business losses, which management believes is probable and accordingly, CHL has recognised deferred tax assets on aforesaid losses aggregating to H69.23 crore as at 31st March, 2020 (31st March, 2019 : H59.26 crore). 372 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 373 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 12: Inventories (Contd.) Note 14: Trade receivables (Contd.) Note 16: Bank balance other than cash and Note 18: Financial assets: others - current o Trade receivable are interest and non-interest bearing cash equivalents H in Crores The Group recorded inventory write down (net) of H382.76 and are generally due upto 180 days. H in Crores crore (31st March, 2019 : H364.49 crore). This is included As at As at as part of cost of materials consumed and changes o For ageing analysis of trade receivables, refer note 42. As at As at Particulars 31st March, 31st March, st st in inventories of finished goods, work-in-progress and Particulars 31 March, 31 March, 2020 2019 stock-in-trade in profit or loss. o There are no trade receivable which have significant 2020 2019 increase in credit risk and trade receivables which are (Carried at amortised cost, except otherwise stated) As indicated in Note 23, a notorial bond over Group inventory credit impaired. Bank deposits (original Incentives/ benefits of H329.92 crore (31st March, 2019 H Nil) (net of stock reserve) maturity between 3 receivable from have been held as security for long-term and short-term o The Group entered into an arrangement with a bank months and 12 months) 250.08 100.81 Government 184.16 107.72 borrowings of Cipla Medpro South Africa (Pty) Limited. for sale of trade receivables. Under the arrangement, Balances earmarked for Deposits (refer note 45 B) 175.08 175.08 the Group sold to the Bank certain of its trade unclaimed dividend* 11.45 9.64 receivables on a non-recourse basis. The receivables Derivatives designated Note 13: Current investments sold were mutually agreed with the Bank after 261.53 110.45 as hedges carried at fair value* - 54.93 H in Crores considering the credit worthiness of the customers * The above balances are restricted for specific use. There are no and also other contractual terms with the customer Derivatives not As at As at amounts due and outstanding to be credited to the Investor Education including any gross to net adjustments due to rebates, and Protection Fund as at 31st March, 2020 and 31st March, 2019. designated as hedges st st Particulars 31 March, 31 March, discounts etc. from the contracted amounts, such carried at fair value* 2020 2019 that the receivables sold are generally lower than the Forward contracts 14.38 22.29 net amount receivables from trade receivables. The Note 17: Current financial assets - loans Investment in mutual Margin deposits# 3.66 3.75 Group has transferred substantially all the risks and H in Crores funds (quoted) rewards of ownership of such receivables sold to the Other receivables (Carried at fair value Bank and accordingly, the same are de-recognised in As at As at Considered good 145.00 134.10 through profit or loss) 1,016.52 2,125.79 the statement of financial position. As on 31st March, Particulars 31st March, 31st March, Considered doubtful 0.46 0.46 2020, the amount of trade receivables de-recognised Less: Allowance for Aggregate amount of 2020 2019 pursuant to the aforesaid arrangement is H445.82 bad and doubtful quoted investments 1,016.52 2,125.79 st crore (31 March, 2019 H103.80 crore). (Unsecured, considered advances (0.46) (0.46) Aggregate market value good except otherwise 522.28 497.87 of quoted investments 1,016.52 2,125.79 o As indicated in notes 23, trade receivables of H420.12 stated) crore (31st March, 2019: H399.42 crore) have been (Carried at amortised *Refer Note 42 for information about Fair value measurement and ceded to the bank as security for long-term and short- effects of hedge accounting in Group's Financial Statement. cost, except otherwise term borrowings of Cipla Medpro South Africa (Pty) # Amount held as margin money to Government authority. Note 14: Trade receivables Limited. stated) H in Crores Deposits with body As at As at corporates and others Note 19: Other current assets st st Note 15: Cash and cash equivalents Particulars 31 March, 31 March, Considered good 1.92 2.05 H in Crores 2020 2019 H in Crores Considered doubtful 2.25 2.25 As at As at As at As at (Carried at amortised cost, except otherwise stated) Less: Allowance for Particulars 31st March, 31st March, Particulars 31st March, 31st March, Considered good, bad and doubtful 2020 2019 2020 2019 Unsecured 3,891.31 4,150.72 advances (2.25) (2.25) Advance to suppliers 191.77 210.19 Considered doubtful, Balances with banks 1.92 2.05 Unsecured 288.56 127.60 In current accounts 511.46 480.26 Loans to employees 3.68 4.23 Prepaid expenses 89.51 87.09 Less: Allowance for In deposit accounts 5.60 6.28 Balances with statutory/ expected credit loss (288.56) (127.60) (original maturity less revenue authorities like 3,891.31 4,150.72 than 3 months) 189.32 27.35 goods and service tax Remittance in transit* 40.64 - o Trade receivables are amounts due from customers for (GST), excise, customs, Cash on hand 0.96 0.75 goods sold or services performed in the ordinary course service tax and value 742.38 508.36 of business. Trade receivables are recognised initially added tax, etc. 598.71 755.65 * Remittance in transit from Group entities. at the amount of consideration that is unconditional Others (deferred unless they contain significant financing components, lease assets and other when they are recognised at fair value. The Group holds advances) (refer note 2.2) 6.63 7.40 the trade receivables with the objective to collect the contractual cash flows and therefore measures them 886.62 1,060.33 subsequently at amortised cost using the effective interest method, less loss allowance. 374 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 375 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 20: Equity share capital Note 21: Other equity H in Crores Employee stock options reserve H in Crores As at As at As at As at Employee stock options reserve is used to record the Particulars Numbers Numbers Particulars 31st March, 31st March, 31st March, 2020 31st March, 2019 share based payments, expense under the various ESOS 2020 2019 schemes as per SEBI regulations. The reserve is used for Authorised Capital reserve (147.14) 180.82 the settlement of ESOS. (refer note 47) Equity shares of H2/- each 87,50,00,000 175.00 87,50,00,000 175.00 Securities premium 175.00 175.00 Gross obligation to non-controlling interest under put reserve 1,602.03 1,574.59 Issued option General reserve 3,142.62 3,142.62 Equity shares of H2/- each 80,62,35,329 161.25 80,57,01,266 161.14 Employee stock options 161.25 161.14 The amount that may become payable under the option Subscribed and paid-up reserve 53.05 57.04 on exercise is initially recognised at fair value within other financial liabilities with a corresponding charge directly Equity shares of H2/- each, fully paid up 80,62,35,329 161.25 80,57,01,266 161.14 Gross obligation to to equity. The charge to equity is recognised separately 161.25 161.14 non-controlling interest under put option (refer as gross obligation to non-controlling interest under put option in other equity. (refer note 22) Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period note 22) - (334.09) Retained earnings 11,117.88 10,251.31 Retained earnings Foreign currency As at As at Particulars translation reserve (191.68) (138.38) Retained earnings are the profits that the Group has 31st March, 2020 31st March, 2019 Equity instrument earned till date, less any transfers to general reserve, Number of shares outstanding at the beginning of the period 80,57,01,266 80,51,19,164 through other dividends, or other distributions paid to shareholders. Add: Allotment of equity shares on exercise of employee stock options (ESOS) comprehensive income 53.06 46.77 Foreign currency translation reserve (refer note 47) 5,34,063 5,82,102 Hedge reserve (28.07) 70.46 Number of shares outstanding at the end of the period 80,62,35,329 80,57,01,266 Total 15,601.75 14,851.14 Foreign currency translation reserve represents the unrealised gains and losses on account of translation Nature and purpose of reserves:- Details of Shareholders holding more than 5 percent shares in the Company of reporting currency for foreign subsidiaries into the Company's presentation currency. Capital reserve As at 31st March, 2020 As at 31st March, 2019 Fair value through other comprehensive income Particulars Capital reserve represents gain arising from business Number of shares % of Holding Number of shares % of Holding combination and loss/(gain) on account of acquisition/ This reserve represents the cumulative gains and losses Dr Y K Hamied 16,39,67,687 20.34% 16,39,67,687 20.35% divestment of non-controlling interest and profit or arising on the revaluation of equity instrument measured ICICI Prudential Mutual Fund & loss on sale, issue, purchase or cancellation of the at fair value through other comprehensive income. Sub-accounts 5,06,75,897 6.29% 2,75,05,977 3.41% Company's own equity instrument. (refer note 22) The Company transfers amounts from this reserve to Ms Sophie Ahmed 4,59,82,000 5.70% 4,59,82,000 5.71% retained earnings when the relevant equity instruments Securities premium reserve are derecognised/disposed off. Terms and rights attached to equity shares Securities premium reserve is used to record the premium Hedge reserve on issue of shares. In case of equity-settled share The Company has only one class of equity shares having a par value of H2 per share. Each holder of equity share is based payment transactions, the difference between The hedging reserve represents the cumulative effective entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed fair value on grant date and nominal value of share is portion of gain or loss arising on changes in fair value of by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting accounted as securities premium. This reserve is utilised designated portion of hedging instruments (i.e., forward except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be in accordance with the provisions of the Act. contracts and interest rate swap). Upon de-recognisition, entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution amount accumulated in other comprehensive income will be in proportion to the number of equity shares held by the shareholder. General reserve are taken to profit or loss at the same time as the related cash flow. Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares The general reserve is used from time to time to transfer bought back during the period of five years immediately preceding the reporting date. profit from retained earning for appropriation purpose. 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 to note 47 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. 376 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 377 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 22: Non-controlling interest Note 22: Non-controlling interest (Contd.) Summarised profit or loss for the year ended 31st March, 2020 Financial information of subsidiaries that have material Jay Precision non-controlling interests is provided below: Pharmaceuticals Private H in Crores A. Proportion of equity interest held by non-controlling Limited 47.68 52.95 Name of the subsidiary interest: Cipla Maroc SA 34.56 5.47 Cipla Quality Saba Jay Precision Cipla Quality Cipla Health Quality Chemicals Limited 6.71 6.29 Particulars Chemical Investment Pharmaceuticals Maroc SA Chemicals Limited As at As at Cipla Health Limited Industries Limited Private Limited Limited (refer note st st Name of the subsidiary 31 March, 31 March, [refer note 22 (C )] - 25.88 Limited 22C ) 2020 2019 Others* 0.01 (0.45) Revenue from Cipla Quality Chemical Total 294.28 331.97 operations 370.95 0.81 99.86 94.32 31.79 49.78 Industries Limited 48.82% 48.82% Profit for the year (42.64) 5.43 24.62 (2.41) (0.03) (15.52) * Insignificant amount Saba Investment Limited Other comprehensive (Group) 49.00% 49.00% H in Crores income - - 0.12 - - (0.02) Jay Precision For the For the Total comprehensive Pharmaceuticals Private year ended year ended income (42.64) 5.43 24.74 (2.41) (0.03) (15.54) Particulars Limited 40.00% 40.00% 31st March, 31st March, Dividends paid to non- Cipla Maroc SA 40.00% 40.00% 2020 2019 controlling interests - (15.22) (14.70) (2.87) - - Quality Chemicals Limited 49.00% 49.00% Profit/(loss) allocated st Cipla Health Limited - 26.16% Summarised profit or loss for the year ended 31 March, 2019 to material non- H in Crores controlling interest: Name of the subsidiary Cipla Quality Chemical B. Information regarding non-controlling interest: Industries Limited (23.35) (16.23) Cipla Quality Saba Jay Precision Cipla Quality Cipla Health H in Crores Particulars Saba Investment Limited Chemical Investment Pharmaceuticals Maroc SA Chemicals Limited As at As at (Group) (28.25) (20.25) Industries Limited Private Limited Limited st st Particulars 31 March, 31 March, Jay Precision Limited 2020 2019 Pharmaceuticals Private Revenue from Accumulated balances Limited 9.38 11.50 operations 365.78 3.41 106.08 66.75 34.54 147.83 of material non- Cipla Maroc SA (1.40) (0.57) Profit for the year 13.10 8.66 30.35 (1.25) 1.10 (40.98) controlling interest: Quality Chemicals Other comprehensive Cipla Quality Chemical Limited (0.01) 0.22 income - - (0.01) - - 0.30 Industries Limited 143.22 158.06 Cipla Health Limited (4.06) (10.81) Total comprehensive Saba Investment Limited Others 0.69 0.88 income 13.10 8.66 30.34 (1.25) 1.10 (40.68) (Group) 62.10 83.77 Total (47.00) (35.26) Dividends paid to non- controlling interests (7.40) (40.26) (8.31) - - - Summarised balance sheet as at 31st March, 2020 H in Crores Name of the subsidiary Cipla Quality Saba Jay Precision Cipla Quality Cipla Health Particulars Chemical Investment Pharmaceuticals Maroc SA Chemicals Limited Industries Limited Private Limited Limited (refer note Limited 22C ) Non-current assets 171.91 100.39 102.42 68.61 10.14 - Non-current liabilities 5.71 - 4.47 - 0.87 - Net non-current assets 166.20 100.39 97.95 68.61 9.27 - Current assets 322.52 163.58 25.67 55.62 27.21 - Current liabilities 202.63 1.90 3.73 32.27 22.75 - Net current assets 119.89 161.68 21.94 23.35 4.46 - Total equity 286.09 262.07 119.89 91.96 13.73 - 378 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 379 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 22: Non-controlling interest (Contd.) Note 22: Non-controlling interest (Contd.) Summarised balance sheet as at 31st March, 2019 C. Transactions with non-controlling interest: The effect on the equity attributable to the owners H in Crores of the Group during the year is summarised as a) Cipla Health Limited follows: Name of the subsidiary Cipla Quality Saba Jay Precision Cipla Quality Cipla Health th Particulars Chemical Investment Pharmaceuticals Maroc SA Chemicals Limited On 7 August, 2019, Cipla Limited (the Holding Particulars J in Crores Industries Limited Private Limited Limited Company) has acquired non-controlling interest of Consideration paid to Non- Limited 26.16% representing 534,658 Series A Compulsory Convertible Preference Shares of 50 each, 33,039 Controlling interest 0.02 Non-current assets 123.67 91.74 101.09 83.43 9.88 65.58 H Series A1 Compulsory Convertible Preference Shares Carrying amount of stake Non-current liabilities 8.27 - 5.18 51.69 1.22 1.45 of H50 each and 1,000 equity shares of H10 each, on acquired (0.25) Net non-current assets 115.40 91.74 95.91 31.74 8.66 64.13 a fully diluted basis for a total cash consideration Net adjustment to capital reserve (0.23) Current assets 413.29 171.20 37.63 50.69 22.69 113.34 of H350 crore of its subsidiary, Cipla Health Limited. Current liabilities 218.90 1.08 1.65 68.75 18.53 65.81 Accordingly, the related put option liability of H355.90 c) Cipla Quality Chemical Industries Limited (QCIL) Net current assets 194.39 170.12 35.98 (18.06) 4.16 47.53 crore (including H21.81 crore for non-controlling Total equity 309.79 261.86 131.89 13.68 12.82 111.66 interest) has been adjusted against the capital During the previous year, on 17th September, 2018, reserve. the Group has sold 40,58,04,411 shares (11.12% of Summarised cash flow information as at 31st March, 2020 Group’s shareholding) in Cipla Quality Chemical H in Crores As per Ind AS 110, in case of acquisiton of additional Industries Limited (QCIL), a subsidiary of the Group Name of the subsidiary interest, where there is no change in control of in the Initial Public Offer (IPO) on the Uganda Cipla Quality Saba Jay Precision Cipla Quality Cipla Health the subsidiary, gain or loss are accounted as an Securities Exchange for a total consideration Particulars Chemical Investment Pharmaceuticals Maroc SA Chemicals Limited equity transaction. Hence the Group accounted of H193.79 crore. The Group continues to hold Industries Limited Private Limited Limited (refer note the differential gain/loss on transaction with non- 51.18% interest in QCIL, thereby retaining the Limited 22C) controlling interest to capital reserve and other control. equity as follows - Operating activities 44.37 5.85 32.60 17.69 0.26 - As per Ind AS 110, in case of dilution, where there Investing activities (28.45) (12.05) (12.38) (0.51) - - Particulars J in Crores is no change in control of the subsidiary, gain or loss are accounted as equity transaction. Hence Financing activities (0.25) 2.98 (36.74) (2.67) - - Consideration paid to Non- the Group accounted increase in non-controlling Net increase/ Controlling interest 350.00 (decrease) in cash and interest of H36.98 crore (carrying amount of 11.12% Carrying amount of stake cash equivalents 15.67 (3.22) (16.52) 14.51 0.26 - stake) and differential consideration as capital acquired (21.81) reserve amounting to H156.81 crore. Net adjustment to capital reserve 328.19 Summarised cash flow information as at 31st March, 2019 Settlement of put option liability (334.09) The effect on the equity attributable to the owners H in Crores st Net adjustment to other equity (5.90) of the Group during the previous year ended 31 Name of the subsidiary March 2019 is summarised as follows: Cipla Quality Saba Jay Precision Cipla Quality Cipla Health b) Cipla Pharma Lanka (Private) Limited Particulars Chemical Investment Pharmaceuticals Maroc SA Chemicals Limited Particulars J in Crores Industries Limited Private Limited Limited The Company's wholly-owned subsidiary Cipla (EU) Consideration received from Non- Limited Limited, holding 60% stake in Cipla Pharma Lanka Controlling interest 193.79 (Private) Limited has acquired the remaining 40% Operating activities (92.25) 7.78 23.06 (3.28) 1.84 (63.80) Carrying amount of stake diluted/ stake in Cipla Pharma Lanka from non-controlling Investing activities (2.35) (8.42) (3.73) (59.99) - 1.95 sold (36.98) interest (NCI) shareholders. Post-acquisition, Cipla Financing activities (20.74) 1.10 (20.79) 63.40 - 59.99 Net adjustment to capital reserve 156.81 Pharma Lanka became a wholly owned subsidiary Net increase/ of the Group. (decrease) in cash and cash equivalents (115.34) 0.46 (1.46) 0.13 1.84 (1.86) 380 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 381 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 23: Financial liabilities: borrowings Note 23: Financial liabilities: borrowings (Contd.) Note 24: Other financial liabilities - non-current Note 25: Provisions in Crores H in Crores H in Crores H * Term loan from banks (Secured) As at As at As at As at As at As at st Term loan of H304.74 crore ( 31 March, 2019 : H47.70 crore) is st st st st st st Particulars 31 March, 31 March, Particulars 31 March, 31 March, Particulars 31 March, 31 March, obtained by Cipla Medpro South Africa (Pty) Ltd. This loan 2020 2019 2020 2019 2020 2019 bears interest at rates linked to the Johannesburg Interbank (a) Non -current (refer Average Rate ("JIBAR rate"). The loan is repayable in full in (Carried at amortised cost, except otherwise stated) Non-current th note 42) 2 instalments of ZAR 300 million and ZAR 420 million on 07 Security deposits 55.23 53.36 Provision for employee st (Carried at amortised February, 2023 and 31 March, 2023 respectively. This loan Deferred consideration 15.00 - benefits (refer note 46) 133.27 121.41 is secured by way of guarantees by Medpro Pharmaceutica Lease liabilities (refer cost, except otherwise 133.27 121.41 Proprietary Limited and trade receivables, insurance proceeds note 2.2) 183.08 - stated) and claims of Cipla Medpro South Africa Proprietary Limited Put option liability - Fair Current Secured loans: and Medpro Pharmaceutica Proprietary Limited. value through profit Provision for Term loan from banks* 304.74 47.70 ** Term loan from banks (Unsecured) or loss {refer note (a) employee benefits Unsecured loans: below} 23.59 - (refer note 46) 219.25 173.03 Term loan from banks** 2,064.54 3,782.37 Includes loans of H2,064.54 crore (31st March, 2019 H3,782.37 Put option liability {refer Provision for litigation 2,369.28 3,830.07 crore) taken by the Company’s wholly owned subsidiaries note (b) below} - 334.09 - DPCO (refer note (b) Current (refer note 42) in connection with acquisition of two US based companies, 276.90 387.45 below and note 45(b)) 104.26 98.49 (Carried at amortised Invagen Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc. These loans carry interest at LIBOR + 0.96% p.a. and (a) Cipla (Jiangsu) Pharmaceutical Co. Limited cost, except otherwise Provision for right of guarantee given by Cipla Limited to the bankers for repayment Cipla (Jiangsu) Pharmaceutical Co. Limited (‘Cipla Jiangsu’) is a stated) return/discounts and of principal and interest thereon. These loans are repayable less than wholly owned subsidiary of the Company. The investment others (refer note Secured loans: th in full in 2 equal instalments of H1,032.27 crore each on 18 July, agreement between Cipla (EU) Limited, Cipla Jiangsu and Non- below) 624.68 465.24 Loans repayable on 2021 and 18th July, 2022 respectively. Controlling Interest (‘NCI’) shareholders of Cipla Jiangsu sets out demand that the NCI shareholders of Cipla Jiangsu shall be entitiled to an 948.19 736.76 # Loan repayble on demand (Secured) Loan from bank# 118.51 119.25 exit option after expiry of lock-in-period at a price as defined in Unsecured loans: Loan repayable on Demand of H118.51 crore ( 31st March, 2019: investment agreement. A liability is recognised for such put option Loans repayable on H119.25 crore) is obtained by Cipla Medpro South Africa (Pty) issued by the Group over the equity of Cipla Jiangsu at the gross Movement of provisions for litigation - DPCO and demand Ltd. This loan bears interest at rates linked to the JIBAR rate. amount payable aggregating H23.59 crore (including H0.93 crore provision for right of return/discounts and others: The loan is repayable on demand. This loan is secured by way for interest accrued). Such amount is recognised under 'other Bank overdraft$ 93.25 98.67 of guarantees by Medpro Pharmaceutica Proprietary Limited financial liabilities'. The fair value of such put option is determined H in Crores Working capital line and trade receivables, insurances proceeds and claims of using the fair value model methodology enunciated in the As at As at of credit## 233.06 234.44 Cipla Medpro South Africa Proprietary Limited and Medpro investment agreement. Particulars 31st March, 31st March, Other loans### 2.33 33.80 Pharmaceutica Proprietary Limited. 2020 2019 447.15 486.16 (b) Cipla Health Limited (‘CHL’) $ Bank overdraft Cipla Health Limited (‘CHL’) was a less than wholly owned Provision for litigation - DPCO (refer note 45(b)) Bank overdraft pertains to overdraft facility obtained by Cipla subsidiary of the Company. The investment agreement Balance at the Quality Chemical Industries Limited from Absa Bank Uganda between the Company, CHL and non-controlling interest (‘NCI’) beginning of the year 98.49 93.94 Limited at an interest rate of 4% above 3 months LIBOR. shareholders of CHL sets out that the NCI shareholders of CHL Provided during the were entitled to an exit option in the event of a qualified initial year 7.00 8.08 ## Working capital line of credit public offering or offer for sale of the interest by the investor to Utilised/reversed/ a bonafide investor. If the Company and CHL failed to provide payout during the year (1.23) (3.53) As at As at Bank Entity Interest Rate such an exit to the NCI shareholders, NCI shareholders was Balance at the end of 31st March, 2020 31st March, 2019 having the right to sell their interests to the Company or CHL at the year 104.26 98.49 HSBC Bank USA Cipla USA. Inc. 2.80% to 3.94% p.a. (31st fair value of such interest. A liability was recognised in previous Provision for right of return/discounts and others year for such put option issued by the Group over the equity of N.A. March, 2019-2.91% to Balance at the CHL at the gross amount payable aggregating H359.97 crore 3.72% p.a.) 227.00 30.43 beginning of the year 465.24 340.44 (including H25.88 crore for non-controlling interest). Such amount st Provided during the Bank of America Cipla USA. Inc. (31 March, 2019-3.23% was recognised under 'other financial liabilities' as at 31st March, year 1,119.49 965.77 N.A. to 3.59% p.a) - 204.01 2019. The fair value of such put option was determined using Utilised/reversed/ HSBC Cipla Limited 7.95% p.a. 6.06 - the fair value model methodology enunciated in the investment payout during the year (981.52) (847.93) Total 233.06 234.44 agreement. On 7th August, 2019, the Company has acquired non- controlling interest of 26.16% on a fully diluted basis for a total Foreign currency ### Other loans cash consideration of H350 crore. Accordingly, the related put translation 21.47 6.96 option liability has been adjusted against the capital reserve Balance at the end of Other borrowing consist of loan obtained by Cipla Maroc SA of H2.22 crore (31st March 2019 - H33.81 crore) which is repayable on (refer note 22C). the year 624.68 465.24 demand carries interest rate of 5.01% p.a (31st March 2019 - 4% p.a). 382 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 383 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 26: Other non-current liabilities Note 28: Other financial liabilities - current Note 30: Revenue from sale of products Note 30: Revenue from sale of products H in Crores H in Crores H in Crores (Contd.) As at As at For the For the As at As at (iii) Contract assets Particulars 31st March, 31st March, year ended year ended Particulars 31st March, 31st March, Particulars st st The Group recognises an asset i.e., right to the 2020 2019 2020 2019 31 March, 31 March, 2020 2019 returned saleable goods (included in inventories) Deferred government (Carried at amortised cost, except otherwise stated) for the products expected to be returned in saleable grant 8.91 9.99 Sale of products (refer Unclaimed dividend* 11.45 9.64 condition. The Group initially measures this asset at note below) 16,694.85 15,970.97 Deferred revenue 57.07 61.60 the former carrying amount of the inventory, less Security deposits 3.38 1.50 16,694.85 15,970.97 Deferred lease income Capital creditors 61.34 50.27 any expected costs to recover the goods, including (refer note 2.2) 1.50 11.72 any potential decreases in the value of returned Employee dues 100.00 112.21 Ind AS 115- Disclosures goods. The Group updates the measurement of 67.48 83.31 Derivative designated the asset recorded for any revision to its expected as hedge - carried at (i) Disaggregation of revenue level of returns, as well as any additional decrease fair value (refer note 42) Note 27: Trade payables The Group’s revenue disaggregated by business unit is in value of the returned products. Forward contracts 31.07 - H in Crores as follows: As on 31st March, 2020, the Group has 17.41 crore Options 6.96 - H in Crores H As at As at (31st March, 2019 H14.29 crore) as contract asset. Interest rate swap 16.75 - For the For the Particulars 31st March, 31st March, year ended year ended (iv) Contract liabilities from contracts with customers 2020 2019 Derivative not Particulars 31st March, 31st March, designated as hedge The Group records a contract liability when cash (Carried at amortised cost, except otherwise stated) 2020 2019 - carried at fair value payments are received or due in advance of its Total outstanding dues (refer note 42) 17.88 - Sale of products performance. of micro enterprises and Import advance licences 42.39 37.62 (1) India - Trade and Contract liabilities small enterprises 81.19 28.69 Deferred consideration 22.23 21.84 Branded Generics 6,539.82 6,272.09 Total outstanding dues (2) North America (USA) Lease liabilities (refer 3,715.36 3,293.69 For the For the of creditors other than note 2.2) 89.69 - (3) South Africa, Sub- year ended year ended micro enterprises and Particulars Accrued expenses 127.22 165.35 Saharan Africa and 31st March, 31st March, small enterprises 2,200.62 1,919.30 Cipla Global Access 530.36 398.43 2020 2019 2,281.81 1,947.99 (SAGA) 3,050.76 3,169.34 Advance from customers 22.92 6.58 * There is no amount due and outstanding to be credited to Investor (4) Emerging Markets (EM) 1,395.76 1,658.42 Education and Protection Fund. Amount refundable to (5) Europe 760.49 675.28 o These amounts represent liabilities for goods and customers 10.86 37.51 (6) Active services provided to the Group prior to the end of Deferred revenue 66.07 68.67 Pharmaceutical financial year which are unpaid. The amounts are Note 29: Other current liabilities Ingredient (API) 727.03 684.94 Deferred revenue unsecured and are usually paid within 0-90 days of H in Crores (7) CHL and Others 505.63 217.22 recognition based on the credit terms. Trade and For the For the As at As at 16,694.85 15,970.97 other payables are presented as current liabilities Particulars 31st March, 31st March, year ended year ended Particulars st st unless payment is not due within 12 months after 2020 2019 31 March, 31 March, the reporting period. They are recognised initially (ii) Reconciliation of revenue from sale of products 2020 2019 Advance from at their fair value and subsequently measured at with the contracted price Balance at the customers 22.92 6.58 amortised cost using the effective interest method. beginning of the year 68.67 74.66 Amount refundable to H in Crores Revenue recognised customers 10.86 37.51 As at As at o There are no micro and small enterprises, to whom during the year (10.79) (7.07) Particulars 31st March, 31st March, the Group owes dues, which are outstanding for Income received in Milestone payment st 2020 2019 more than 45 days as at 31 March, 2020, and advance 7.25 10.03 received during the year 8.19 1.08 no interest payment made during the year to any Other payables: Contracted price 26,694.09 23,518.68 Balance at the end of micro and small enterprises. This information as Statutory dues 125.14 79.46 Less: trade discounts, the year 66.07 68.67 required to be disclosed under the Micro, Small Deferred government chargeback, sales and (v) Information about major customer and Medium Enterprises Development Act, 2006, grant 0.75 0.79 expiry return, Medicaid No single external customer represents 10% or more has been determined to the extent such parties are Deferred revenue 9.00 7.07 etc. (9,999.24) (7,547.71) of the Group’s total revenue for the years ended identified on the basis of information available with Others 0.37 1.99 Sale of products 16,694.85 15,970.97 31st March, 2020 and 2019, respectively. the Group. 176.29 143.43 384 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 385 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 31: Other operating revenue Note 32: Other income (Contd.) Note 35: Changes in inventories of finished Note 38: Depreciation, impairment and H in Crores H in Crores goods, work-in-progress and stock-in-trade amortisation expense H in Crores For the For the For the For the (Contd.) year ended year ended For the For the Particulars year ended year ended H in Crores st st Particulars 31 March, 31 March, 31st March, 31st March, year ended year ended For the For the Particulars st st 2020 2019 2020 2019 31 March, 31 March, year ended year ended Rendering of services Particulars 2020 2019 8.73 45.37 Rent income 9.46 6.12 31st March, 31st March, Export incentives 252.32 159.60 Litigation settlement 2020 2019 Depreciation on Technical know-how income - 47.96 property, plant and and licensing fees 16.72 41.01 Finished goods 941.37 1,094.82 equipment (refer note Miscellaneous income # 19.89 28.63 Stock-in-trade 449.42 413.99 Scrap sales 31.00 33.17 2.1) 635.70 666.31 344.20 476.57 2,249.50 2,296.54 Sale of marketing and Impairment of property, Less: Closing Stock (refer product license 77.11 86.23 $ Government grants pertain to subsidy of property, plant and plant and equipment Goods and service tax note 12) equipment of manufacturing set up. There are no unfulfilled conditions (refer note 2.1) 21.68 1.48 area based incentive 22.53 14.07 or contingencies attached to these grants. Work-in-progress 822.87 858.71 Impairment of capital Miscellaneous income* 28.73 11.99 Finished goods 670.39 941.37 # Income below 1% of revenue from operation are aggregated in work-in-progess (refer 437.14 391.44 accordance with Schedule III to the Companies Act, 2013. Stock-in-trade 1,001.00 449.42 note 2.1) 0.07 12.18 * Income below 1% of revenue from operation are aggregated in 2,494.26 2,249.50 accordance with Schedule III to the Companies Act, 2013. (Increase)/decrease (244.76) 47.04 Depreciation on ROU Note 33: Cost of materials consumed assets (refer note 2.2) 97.51 - Note 32: Other income H in Crores Note 36: Employee benefits expense Depreciation on H in Crores For the For the H in Crores investment properties (refer note 3) 2.64 1.49 For the For the year ended year ended For the For the Particulars st st Amortisation of year ended year ended 31 March, 31 March, year ended year ended Particulars Particulars intangible assets (refer 31st March, 31st March, 2020 2019 31st March, 31st March, note 5) 364.10 429.35 2020 2019 Cost of materials 2020 2019 Impairment of intangibles Interest income consumed 4,376.81 4,285.04 Salaries and wages 2,700.66 2,560.51 and intangible assets 4,376.81 4,285.04 Contribution to provident Bank deposit 36.59 16.53 under development (refer and other funds (refer Others 31.08 43.33 note 5)* 52.95 215.50 note 46) 137.00 130.01 Dividend income 0.06 34.44 Note 34: Purchases of stock-in-trade 1,174.65 1,326.31 Government grants$ 2.07 8.06 Share based payments H in Crores expense (refer note 47) 23.45 24.11 Net gain on foreign *Due to the uncertain regulatory developments and Staff welfare expenses 165.90 141.90 currency transaction and For the For the litigations for certain intangible assets and intangible year ended year ended 3,027.01 2,856.53 translation 103.71 42.42 Particulars assets under development on the existing and IP R&D 31st March, 31st March, Net gain on sale of portfolio relating to US generics business, the Group 2020 2019 Note 37: Finance costs investment - recorded an impairment charge of H42.49 crore H in Crores st -Current investments Purchases of stock-in- (31 March, 2019 : H206.96 crore) and other impairments st carried at FVTPL 125.92 100.98 trade 1,859.37 1,452.41 For the For the amounting to H10.46 crore (31 March, 2019 : H8.44 crore). year ended year ended -Non-current 1,859.37 1,452.41 Particulars 31st March, 31st March, investments 0.07 84.05 2020 2019 Note 39: Other expenses Net gain on disposal Note 35: Changes in inventories of finished H in Crores Interest expense on of property, plant and goods, work-in-progress and stock-in-trade equipments (refer note 2.1) 2.62 3.30 long-term and short- For the For the H in Crores year ended year ended Fair value gain on term borrowings 149.67 153.27 Particulars 31st March, 31st March, financial instruments at For the For the Interest on Lease Liabilities 2020 2019 fair value through profit year ended year ended (refer note 2.2) 24.76 - Particulars or loss (25.18) 22.74 31st March, 31st March, Interest on discounting Manufacturing expenses 476.80 447.68 of trade receivables 7.80 2.42 Sundry balances written 2020 2019 Stores and spares 141.16 128.83 Interest on DPCO 7.00 8.08 back 2.41 26.92 Opening Stock Other borrowing cost 8.13 4.66 Insurance claim 35.50 11.09 Work-in-progress 858.71 787.73 197.36 168.43 386 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 387 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 39: Other expenses (Contd.) Note 39: Other expenses (Contd.) Note 40 : Other comprehensive income (Contd.) H in Crores H in Crores H in Crores For the For the For the For the For the year ended For the year ended Particulars year ended year ended year ended year ended 31st March, 2020 31st March, 2019 Particulars st st Particulars st st 31 March, 31 March, 31 March, 31 March, B. (1) Items that will be reclassified to profit or loss 2020 2019 2020 2019 (i) Exchange difference on translation of foreign operations (21.45) (329.90) Repairs and maintenance: Legal and professional fees 701.79 501.15 (ii) Cash flow hedge and interest rate swap (refer note 42) (128.43) 17.27 Buildings 37.82 39.68 Payment to auditors: (149.88) (312.63) Plant and equipment 118.80 104.35 Audit fees 1.79 1.69 (2) Income tax relating to Items that will be reclassified to profit or loss Insurance 47.59 36.33 Taxation matters 0.34 0.22 (i) Income tax relating to cash flow hedge and interest rate swap 29.90 (12.22) Rent (refer note 2.2) 68.44 141.32 For other services 0.39 0.37 29.90 (12.22) Rates and taxes 59.51 38.07 Reimbursement of (119.98) (324.85) Power and fuel 327.43 335.11 expenses 0.26 0.14 (129.40) (289.94) Travelling and Corporate social conveyance 369.86 328.82 responsibility (CSR) expenditure (refer no 49) 38.70 36.08 Note 41: Earnings per share (EPS) Sales promotion Donations * 17.19 12.03 expenses 773.92 743.37 Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity Commission on sales 234.49 293.89 Research - clinical trials, shareholders by the weighted average number of equity shares outstanding during the year. samples and grants 354.52 356.86 Freight and forwarding 243.63 244.03 Miscellaneous expenses # 430.78 501.57 For the purpose of calculating diluted earnings per share, the net profit attributable to equity shareholders and the Allowance for credit loss weighted average number of shares outstanding are adjusted for the effect of all dilutive potential equity shares 4,907.57 4,624.08 (net) (refer note 42) 180.27 76.56 which includes all stock options granted to employees. The number of equity shares is the aggregate of the weighted Contractual services 242.93 207.54 *Includes H15.00 crore towards donation to Electoral fund (previous average number of equity shares and the weighted average number of equity shares which are to be issued in the Non-executive directors year H9.00 crore). conversion of all dilutive potential equity shares into equity shares. remuneration (refer note # Expense below 1% of revenue from operation are aggregated in 48) 9.40 9.56 accordance with Schedule III to the Companies Act, 2013. Revenue expenditure aggregating to H1,118.54 (31st March, 2019: Disclosure as required by Indian Accounting Standard (Ind AS) 33 - Earnings per share: Postage and telephone H1,147.82) on research and development activities to the in-house expenses 29.76 38.83 research of new products has been charged through natural heads of accounts. For the year ended For the year ended Particulars 31st March, 2020 31st March, 2019 Profit after tax as per profit or loss (H in Crore) 1,546.52 1,527.70 Note 40 : Other comprehensive income Basic weighted average number of equity shares outstanding 80,60,17,621 80,53,61,167 in Crores H Basic earnings per share of par value H2/- per share 19.19 18.97 For the year ended For the year ended Add: Dilutive impact of employee stock options 10,58,934 14,68,822 Particulars 31st March, 2020 31st March, 2019 Diluted weighted average number of equity shares outstanding 80,70,76,555 80,68,29,989 A. (1) Items that will not be reclassified to profit or loss Diluted earnings per share of par value H2/- per share 19.16 18.93 (i) Re-measurements of post-employment benefit obligation (refer note 46 (e)) (23.31) 13.71 Note 42: Financial Instrument The following methods and assumptions were (ii) Changes in fair value of FVTOCI equity instruments 8.41 28.80 used to estimate the fair values: (14.90) 42.51 A. Fair value measurement (2) Income tax relating to items that will not be reclassified to profit The carrying amount of trade receivable, trade payable, or loss The fair value of financial assets and liabilities are capital creditors, loans, cash and cash equivalents and included at the amount at which the instrument could other bank balances as at 31st March, 2020 and 31st (i) Income tax relating to re-measurements of post-employment be exchanged in a current transaction between willing March, 2019 are considered to be the same as their benefit obligation 7.60 (4.72) parties, other than in a forced or liquidation sale. fair values, due to their short term nature. Difference (ii) Income tax relating to changes in fair value of FVTOCI equity between carrying amounts and fair values of other instruments (2.12) (2.88) 5.48 (7.60) (9.42) 34.91 388 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 389 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 42: Financial Instrument (Contd.) Note 42: Financial Instrument (Contd.) financial assets, other financial liabilities and short term from observable current market transactions. These H in Crores borrowings subsequently measured at amortised cost is include assets and liabilities for which pricing is Carrying Fair value Particulars not significant in each of the year presented. obtained via pricing services, but where prices have value Level 1 Level 2 Level 3 not been determined in an active market, financial Financial instruments with fixed and variable interest assets with fair values based on broker quotes Financial liabilities at fair value through Profit and rates are evaluated by the Group based on parameters and assets that are valued using the Group's own Loss: such as interest rate and individual credit worthiness of valuation models whereby the material assumptions Put option liability (refer note 24) 23.59 - - 23.59 the counterparty. Based on this evaluation, allowances are market observable. The majority of Group’s Derivative not designated as hedge (refer note 28) 17.88 - 17.88 - are taken to account for the expected losses of these over-the-counter derivatives and several other Financial liabilities at fair value through other receivables. instruments not traded in active markets fall within comprehensive income this category. Interest rate swap used for hedging (refer note 28) 16.75 - 16.75 - Fair value hierarchy Derivative designated as hedge (refer note 28) 38.03 - 38.03 - Level 3 - category includes financial assets and The fair value hierarchy is based on inputs to valuation liabilities measured using valuation techniques techniques that are used to measure fair value that The carrying value and fair value of financial instruments by categories as of 31st March, 2019 were as follows: based on non market observable inputs. This are either observable or unobservable and consists of means that fair values are determined in whole H in Crores following: or in part using a valuation model based on Carrying Fair value Particulars Level 1 - category includes financial assets assumptions that are neither supported by prices value Level 1 Level 2 Level 3 and liabilities, that are measured in whole or in from observable current market transactions in the Financial assets: significant part by reference to published quotes in same instrument nor are they based on available Financial assets at amortised cost an active market. market data. However, the fair value measurement Investment properties (refer note 3) 61.85 - - 75.26 objective remains the same, that is, to estimate an Level 2 - category includes financial assets and exit price from the perspective of the Group. The Investment (refer note 7) 0.00 - - 0.00 liabilities measured using a valuation technique main asset classes in this category are unlisted Financial assets at fair value through profit or loss based on assumptions that are supported by prices equity investments as well as unlisted funds. Investments in mutual funds (refer note 13) 2,125.79 2,125.79 - - Investment (refer note 7) 0.00 - - 0.00 Other forward contracts (refer note 18) 22.29 - 22.29 - st The carrying value and fair value of financial instruments by categories as of 31 March, 2020 were as follows: Financial assets at fair value through other H in Crores comprehensive income Carrying Fair value Investments in equity instrument (refer note 7) 193.86 - - 193.86 Particulars Interest rate swap used for hedging (refer note 9) 50.22 - 50.22 - value Level 1 Level 2 Level 3 Derivatives designated as hedges (refer note 18) 54.93 - 54.93 - Financial assets: Financial liabilities: Financial assets at amortised cost Financial liabilities at amortised cost Investment properties (refer note 3) 124.30 - - 139.37 Borrowings (refer note 23) 4,316.23 - - 4,316.23 Investment in associates (refer note 6) 0.56 - - 0.56 Investment (refer note 7) 0.00 - - 0.00 Financial assets at fair value through profit or Loss B. Financial risk management objectives and The Group has constituted a Risk Management Investments in mutual funds (refer note 13) 1,016.52 1,016.52 - - policies Committee consisting of majority of directors and senior Investment (refer note 7) 0.00 - - 0.00 managerial personnel. The Group has a robust Business The Group activities expose it to a variety of financial Other forward contracts (refer note 18) 14.38 - 14.38 - Risk Management framework to identify, evaluate risks: market risk, credit risk and liquidity risk. The Group Financial assets at fair value through other business risks and opportunities. This framework seeks primary focus is to foresee the unpredictability of comprehensive income to create transparency, minimise adverse impact on the financial markets and seek to minimise potential adverse business objectives and enhance Group’s competitive Investments in equity instrument (refer note 7) 219.53 - - 219.53 effects on its financial performance. Financial liabilities: advantage. The business risk framework defines the Financial liabilities at amortised cost The Group financial liabilities comprise of borrowings, risk management approach across the enterprise at Lease liabilities (refer note 24 and 28) 272.77 - - 272.77 trade payable and other liabilities to manage various levels including documentation and reporting. Borrowings (refer note 23) 2,816.43 - - 2,816.43 its operation and financial assets includes trade The framework has different risk models which help in receivables, security deposit, loan and advances etc., identifying risks trend, exposure and potential impact arises from its operation. analysis at a Group level. 390 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 391 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 42: Financial Instrument (Contd.) Note 42: Financial Instrument (Contd.) The Audit Committee of the Board reviews the risk (a) Currency risk: (ii) Foreign currency risk from financial instruments as of: management framework at periodic intervals. H in Crores The Group operates internationally and a major portion st Market risk of the business is transacted in several currencies and As at 31 March, 2020 Particulars US Other consequently the Group is exposed to foreign exchange Euro GBP ZAR Total Market risk is the risk of loss of future earnings, fair risk to the extent that there is mismatch between the Dollars Currency values or future cash flows that may result from adverse currencies in which its sales and services and purchases Trade and other receivables 771.79 93.49 75.72 43.25 67.73 1,051.98 changes in market rates and prices. The Group’s from overseas suppliers in various foreign currencies. Cash and cash equivalents 35.15 0.81 1.74 - 12.77 50.47 size and operations result in it being exposed to the The Group also holds derivative financial instruments Trade and other payables (448.95) (74.98) (18.87) (2.01) (21.28) (566.09) following market risks that arise from its use of financial such as foreign exchange forward and currency option Borrowings (93.69) - - - - (93.69) instruments: contracts to mitigate the risk of changes in exchange Net assets / (liabilities) 264.30 19.32 58.59 41.24 59.22 442.67 rates on foreign currency exposures. The exchange rate • currency risk; between the Indian Rupee and foreign currencies has H in Crores • price risk; and changed substantially in recent years and may fluctuate As at 31st March, 2019 • interest rate risk substantially in the future. Consequently, the results Particulars US Other of the Group’s operations are affected as the Rupee Euro GBP ZAR Total The above risks may affect the Group’s income and appreciates/depreciates against US dollar (USD), Euro dollars Currency expenses, or the value of its financial instruments. The (EUR), Great Britain Pound (GBP), South African Rand Trade and other receivables 1,243.26 139.78 38.11 67.30 47.95 1,536.40 Group’s exposure to and management of these risks are (ZAR) and other currencies. Cash and cash equivalents 4.68 1.34 13.39 - 3.37 22.78 explained below. Trade and other payables (531.63) (254.51) (93.30) (5.37) (11.36) (896.17) Borrowings (97.37) - - - - (97.37) Net assets / (liabilities) 618.94 (113.39) (41.80) 61.93 39.96 565.64 Foreign exchange risk (iii) Sensitivity analysis (b) Price risk (i) Foreign exchange derivatives and exposures outstanding at the year end H in Crores A reasonably possible change in foreign exchange The Group is mainly exposed to the price risk due to its rates by 5% (31st March, 2019 : 2%) would have investment in debt mutual funds. The price risk arises Cross As at As at Nature of instrument Currency increased/ (decreased) equity and profit or loss by due to uncertainties about the future market values of currency 31st March, 2020 31st March, 2019 the amounts shown below. This analysis assumes these investments. At 31st March, 2020, the investments Forward contracts - Sold USD INR 2,178.37 2,054.00 that all other variables in particular interest rates in debt mutual funds amounts to H1,016.52 crore Option contracts - Sold and Bought USD INR 227.00 - remain constant. (31st March, 2019: H2,125.79 crore). These are exposed Forward contracts - Sold ZAR INR 348.09 292.88 to price risk. The Group has laid policies and guidelines in Crores Forward contracts - Bought USD ZAR 127.34 93.55 H which it adheres to in order to minimise price risk arising For the For the from investments in debt mutual funds. A 1% increase in Forward contracts - Bought EUR ZAR 15.45 3.55 year ended year ended prices would have led to approximately an additional Unhedged foreign exchange exposures: Particulars 31st March, 31st March, H10.16 crore gain in profit or loss (31st March, 2019: - Trade and other receivables 1,051.98 1,536.40 2020 2019 H21.25 crore gain). A 1% decrease in prices would have - Cash and cash equivalents 50.47 22.78 Movement in exchange rate led to an equal but opposite effect. - Trade and other payables (566.09) (896.17) USD - INR 5% 2% (c) Interest rate risk - Borrowings (93.69) (97.37) Euro - INR 5% 2% Note: The Group uses foreign exchange forward and currency option contracts for hedging purposes. GBP - INR 5% 2% Interest rate risk can be either fair value interest rate ZAR - INR 5% 2% risk or cash flow interest rate risk. Fair value interest Other currency 5% 2% rate risk is the risk of changes in fair values of fixed Impact on profit/ loss interest bearing investments because of fluctuations USD - INR 13.22 12.38 in the interest rates, in cases where the borrowings Euro - INR 0.97 (2.27) are measured at fair value through profit or loss. GBP - INR 2.93 (0.84) Cash flow interest rate risk is the risk that the future ZAR - INR 2.06 1.24 cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest Other currency 2.96 0.80 rates. 392 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 393 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 42: Financial Instrument (Contd.) Note 42: Financial Instrument (Contd.) Cash and cash equivalents and investments: The Group interest rate risk mainly arises from long term borrowings with variable rates, which expose the group and investment securities. The Group establishes Credit risk on cash and cash equivalents is limited as to cash flow interest rate risk. Group policy is to maintain most of its borrowings at fixed rate using interest rate an allowance for credit losses and impairment that the Group generally invest in deposits with banks and swaps to achieve this when necessary. During 31st March, 2020 and 31st March, 2019, the Group borrowings at represents its estimate of expected losses in respect of financial institutions with high credit ratings assigned variable rate were mainly denominated in USD and ZAR. trade and other receivables, cash and cash equivalents by international and domestic credit rating agencies. and investments. The Group limits its exposure to credit risk by generally Exposure to interest rate risk investing in liquid securities and only with counterparties Group’s interest rate risk arises from borrowings. The Group adopts a policy of ensuring that maximum of its interest Trade and other receivables that have a good credit rating. rate risk exposure is at a fixed rate by hedging interest rate swaps . The borrowings profile of the Group’s interest- The Group’s exposure to credit risk is influenced mainly The Group does not expect any losses from non- bearing financial instruments as reported to the management of the Group is as follows: performance by these counter-parties, and does not by the individual characteristics of each customer. The have any significant concentration of exposures to H in Crores demographics of the customer, including the default specific industry sectors or specific country risks. As at As at risk of the industry and country in which the customer Particulars 31st March, 2020 31st March, 2019 operates, also has an influence on credit risk assessment. Details of financial assets – not due, past due and Variable rate instruments Credit risk is managed through credit approvals, impaired Financial liabilities 2,816.43 4,316.23 establishing credit limits and continuously monitoring None of the Group’s cash equivalents, including term the creditworthiness of customers to which the Group deposits (i.e., certificates of deposit) with banks, were grants credit terms in the normal course of business. past due or impaired as at 31st March, 2020. H in Crores As at 31st March, 2020 As at 31st March, 2019 Weighted Weighted Balance %of total Particulars %of total average Balance average loans The ageing analysis of the receivable (gross of provision) has been considered from the date the invoice falls due: loans interest cost interest cost H in Crores Borrowings 3.24% 2,816.43 100% 3.21% 4,316.23 100% Neither past due Past due but not impaired Total Particulars Interest rate swap nor impaired 0-180 180-365 Above 365 (notional principal st amount) 2.30% 2,080.79 2.30% 1,901.76 - As on 31 March, 2020 2,573.42 1,087.30 212.93 306.22 4,179.87 st Net exposure to cash As on 31 March, 2019 2,727.13 1,196.69 183.77 170.73 4,278.32 flow interest rate risk 735.64 - 2,414.47 - Expected credit loss: Cash flow sensitivity analysis for variable-rate The risk estimates provided assume a parallel shift of In accordance with Ind AS 109, the Group 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 50 basis points interest rate across all yield curves. This instruments asset that result from transactions that are within the scope of Ind AS 115. For this purpose, the Group uses a provision calculation also assumes that the change occurs at the matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account A reasonably possible change of 50 basis points balance sheet date and has been calculated based on external and internal credit risk factors and historical data of credit losses from various customers. in interest rates at the reporting date would have risk exposures outstanding as at that date. The period The details of changes in allowance for credit losses during the year ended 31st March, 2020 and 31st March, 2019 end balances are not necessarily representative of the increased (decreased) equity and profit or loss by the for trade and other receivables are as follows: average debt outstanding during the period. amounts shown below. This analysis assumes that all H in Crores Loans Loans Other financial Trade Total other variables, in particular foreign currency exchange The Group does not account for any fixed-rate financial Particulars (current) (non-current) assets receivables rates, remain constant. assets or financial liabilities at fair value through profit or loss, and the Group does not designate derivatives As at 1st April, 2018 2.25 0.88 3.93 158.99 166.05 H in Crores as hedging instruments under a fair value hedge Provided during the year - - - 150.74 150.74 For the For the accounting model. Therefore, a change in interest rates Reversals of provision - (0.03) (3.47) (176.62) (180.12) year ended year ended Business combination - - - (1.56) (1.56) Particulars at the reporting date would not affect profit or loss. 31st March, 31st March, Effects of changes in foreign 2020 2019 Credit risk exchange rate - - - (3.95) (3.95) As at 31st March, 2019 2.25 0.85 0.46 127.60 131.16 Impact on profit/ loss Credit risk is the risk of financial loss to the Group if a Provided during the year - 0.01 - 212.40 212.41 Increase (3.68) (12.07) customer or counterparty to a financial instrument Reversals of provision - - - (70.06) (70.06) fails to meet its contractual obligations, and arises Effects of changes in foreign Decrease 3.68 12.07 principally from the Group’s receivables from customers exchange rate - - - 18.62 18.62 As at 31st March, 2020 2.25 0.86 0.46 288.56 292.13 394 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 395 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 42: Financial Instrument (Contd.) Note 42: Financial Instrument (Contd.) Liquidity risk the hedged item, the economic relationship is established. Further, the Group has taken Interest rate swap to hedge its term loan from banks which are at variable interest rates. Liquidity risk is the risk that the Group will face in meeting its obligations associated with its financial liabilities. The Group’s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due a) Disclosure of effects of hedge accounting in Group's balance sheet without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. H in Crores The Group maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31st Carrying amount Weighted March, 2020 and 31st March, 2019. Cash flow from operating activities provides the funds to service the financial Maturity Hedge Type of hedge and risks Nominal average strike liabilities on a day-to-day basis. The Group regularly monitors the rolling forecasts to ensure it has sufficient cash Assets Liabilities date ratio amount price/rate 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 31st March, 2020 equivalents (to the extent required) and any excess is invested in interest bearing term deposits and other highly Cash flow hedge marketable debt investments with appropriate maturities to optimise the cash returns on investments while ensuring Foreign exchange risk sufficient liquidity to meet its liabilities. Foreign exchange forward April 2020 - USD 1 = H73.42 contracts (refer note 28) 1,753.26 - 38.56 March 2021 1:1 ZAR 1 = H4.82 The table below provides details regarding the contractual maturities of significant financial liabilities as of Foreign exchange forward April 2020 - USD 1 = ZAR 16.49 st 31 March, 2020: contracts (refer note 18) 142.79 14.38 - March 2021 1:1* EUR 1 = ZAR 16.88 in Crores H Foreign exchange currency option April 2020 - USD 1 = H75.25 Less than 1-2 years 2-5 years Above 5 Total Particulars contracts - Sold (refer note 28) 227.00 - (0.53) March 2021 1:1 1 year years Foreign exchange option April 2020 - USD 1 = H71.80 Non derivative: contracts - Bought (refer note 28) 227.00 - 7.49 March 2021 1:1 Borrowings Interest rate risk Current borrowings 447.15 - - - 447.15 Interest rate swap (refer note 28) April 2020 - 2.30% Non-Current borrowings - 1,032.27 1,337.01 - 2,369.28 2,080.79 - 16.75 March 2022 1:1 Fair value hedge Trade payables 2,281.81 - - - 2,281.81 Foreign exchange risk Other financial liabilities 530.36 64.05 98.27 114.58 807.26 Foreign exchange forward April 2020 - USD 1 = H73.51 Derivative: contracts (refer note 28) 773.21 - 17.88 March 2021 1:1* ZAR 1 = H4.55 Derivative not designated as hedge 17.88 - - - 17.88 Derivative designated as hedge 38.03 - - - 38.03 3,315.23 1,096.32 1,435.28 114.58 5,961.41 H in Crores Carrying amount Weighted Maturity Hedge The table below provides details regarding the contractual maturities of significant financial liabilities as of Type of hedge and risks Nominal average strike st Assets Liabilities date ratio 31 March, 2019: amount price/rate H in Crores 31st March 2019 Less than 2-5 years Above 5 Total Particulars 1-2 years Cash flow hedge 1 year years Foreign exchange risk Non derivative: Foreign exchange forward 1,698.14 54.93 - April 2019 - 1:1* USD 1 = H72.79 Borrowings contracts (refer note 18) March 2020 ZAR 1 = H5.11 Current borrowings 486.16 - - - 486.16 Interest rate risk Non-Current borrowings - 756.47 3,073.60 - 3,830.07 Interest rate swap (refer note 9) 1,901.76 50.22 - April 2020 - 1:1 2.30% Trade payables 1,947.99 - - - 1,947.99 March 2022 Other financial liabilities 398.43 - 3.25 384.20 785.88 Fair value hedge 2,832.58 756.47 3,076.85 384.20 7,050.10 Foreign exchange risk Foreign exchange forward 94.63 2.47 - April 2019 - 1:1* USD 1 = ZAR 14.24 Impact of hedging contracts (refer note 18) March 2020 EUR 1 = ZAR 16.08 Foreign exchange forward 710.65 19.82 - April 2019 - 1:1* USD 1 = H71.45 The Group uses foreign exchange forward/options contracts to hedge against the foreign currency risk of highly contracts (refer note 18) March 2020 ZAR 1 = H5.01 probable USD/ZAR sales. Such derivative financial instruments are governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Group’s * The foreign currency forward contracts are denominated in the same currency as the highly probable future sales, therefore hedge ratio of 1:1 risk management strategy. As the value of the derivative instrument generally changes in response to the value of 396 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 397 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 42: Financial Instrument (Contd.) Note 43: Capital Management Note 43: Capital Management (Contd.) b) Disclosure of effects of hedge accounting in Group's profit or loss and other comprehensive income (A) Risk Management (c) the ratio of EBITDA to Gross interest and finance H in Crores charges shall not be less than 3.50:1. The Group objectives when managing capital are Change in the value of Hedge Amount reclassified to safeguard their ability to continue as a going The Group has complied with these covenants throughout the hedging instrument ineffectiveness from cash flow concern so that they can continue to provide returns Type of hedge the reporting periods. recognised in other recognised in hedging reserve to for shareholders and benefits for other stakeholders, comprehensive income profit or loss Profit and loss and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the capital (C) Dividend on equity share 31st March, 2020 structure, the group may adjust the amounts of dividends H in Crores Cash flow hedge paid to shareholders, return capital to shareholders, i) Foreign exchange risk contracts For the For the (17.27) - (40.60) issue new shares or sell new assets to reduce debt. (refer note 40) Consistent with others in Industry, the Group monitors year ended year ended Particulars ii) interest rate swap (refer note 40) (70.56) - - capital on the basis of the following gearing ratio : (net 31st March, 31st March, 31st March, 2019 debt divided by total 'equity'). 2020 2019 Cash flow hedge Net debt = Total borrowings less (Cash and cash (a) Dividend on equity shares paid during the year i) Foreign exchange risk contracts 48.81 - (5.61) equivalents + Bank balance other than cash and Final dividend for the (refer note 40) cash equivalents (excluding balance earmarked for year ii) interest rate risk (refer note 40) (31.54) - - unclaimed dividend) + Current investments). [FY 2018-19 H3.00 (FY 2017-18 H3.00) per Total 'equity' as shown in the the balance sheet, including equity share of H2.00 Hedge effectiveness is determined at the inception of hedge relationship, and through periodic prospective non-controlling interest. effectiveness assessment to ensure that an economic relationships exists between the hedged item and hedging H in Crores each) 241.77 241.57 instruments. It is calculated by comparing changes in fair value of the hedged item, with the changes in fair value of Dividend distribution tax As at As at the hedging instrument. on final dividend 34.23 40.40 Particulars 31st March, 31st March, 276.00 281.97 2020 2019 If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains Interim Dividend unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced Total debt 2,816.43 4,316.23 (including one time by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio Less: Cash and cash special dividend) for aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for equivalent including the FY 19-20 H4.00 per in profit or loss at the time of the hedge relationship rebalancing. mutual fund and bank equity share of H2.00 deposit with original each 322.49 - c) Movement in cash flow hedge reserve and cost of hedge reserve maturity between 3 to 12 Dividend distribution tax months. 2,008.98 2,734.96 on interim dividend 53.22 - H in Crores Net debt (A) 807.44 1,581.27 375.71 - st st As at 31 March, 2020 As at 31 March, 2019 Total equity (B) 16,057.28 15,344.25 Dividend distribution Foreign Interest Total Foreign Interest Total Net debt to equity ratio tax on dividend exchange rate hedge exchange rate hedge (A/B) 0.05 0.10 paid by Indian Derivative Instruments forward/ swap reserve forward swap reserve subsidiaries 12.49 2.12 currency contracts (B) Loan covenants 664.20 284.09 option Under the terms of the major borrowing facilities, the (b) Proposed dividend contracts group is required to comply with the following financial on equity share not Cash flow hedging reserve covenants: recognised as liability - 291.40 Opening balance 32.22 38.24 70.46 0.47 64.94 65.41 (a) the ratio of Total debt to EBITDA on the last day of During the previous year, the Board of Directors of the nd Add: Changes in fair value (17.27) (70.56) (87.83) 54.42 (31.54) 22.88 each relevant period shall not exceed 3.50:1 Company at its meeting held on 22 May, 2019 had Less: Amount reclassified to profit or loss (40.60) - (40.60) (5.61) - (5.61) recommended a final dividend of H3.00 per equity share (b) the ratio of Total debt to tangible net worth on the which was subject to approval at the ensuing Annual Less: Deferred tax relating to above (net) 19.00 10.90 29.90 (17.06) 4.84 (12.22) last day of each relevant period shall not exceed General Meeting of the Company and hence was not Closing balance (6.65) (21.42) (28.07) 32.22 38.24 70.46 2:1; and recognised as a liability. 398 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 399 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 44: Investment in an Associate Note 44: Investment in an Associates (Contd.) Note 44: Investment in an Associates (Contd.) Note 44: Investment in an Associates (Contd.) th A) Stempeutics Research Private Limited Investment in Associate as per Ind AS 28 - Investments in of H1,000 each for a total consideration of H9.00 Crore. 24 April, 2019. The investment is accounted as Associates and Joint Ventures. The Company has further plans to invest in 39,000 Investment in Associate as per Ind AS 28 - Investments The Group has a 40.78% (Previous year - 48.99%) interest equity shares of H10 each and 38,610, 0.01% Compulsory in Associates and Joint Ventures. The Company has in Stempeutics Research Private Limited. Following table The Group has reported the investments based on initial Convertible debentures of AMPSolar Power Systems reported the investments based on initial determination shows the summarised financial information. determination of the net fair values of investee’s assets and Private Limited of H1,000 each for a total consideration of the net fair values of investee's assets and liabilities. H in Crores liabilities. of H3.90 Crore on second stage closing. Further, the Brandmed is a connected healthcare firm which As at As at Company also entered in a Power Purchase Agreement Following table shows the summarised financial develops software to seamlessly integrate a combination Particulars 31st March, 31st March, ('PPA') with AMPSolar Power Systems Private Limited to information. of connected solutions across the health continuum 2020 2019 H in Crores procure 100% of the output of solar energy produced for next 25 years as per the rates negotiated in agreement. for patients, healthcare professionals, practices and Current assets 23.17 8.50 As at As at As per the SPSSA, in the event of termination of the institutions, and aims to deliver personalised patient Non-current assets 41.82 36.03 Particulars 31st March, 31st March, contracts or completion of the PPA term, the Company care. Brandmed’ s principal place of business is South Current liabilities (4.68) (5.14) 2020 2019 will receive nominal value of its investment without any Africa and has a financial year end consistent with the Non-current liabilities (1.15) (36.29) Current assets 40.82 205.60 share of profit/ loss in the associate. Accordingly, the Group. Equity 59.16 3.10 Intangible assets under investment amount has been amortised to give the effect Group ownership 40.78% 48.99% Following table shows the summarised financial development 534.99 542.81 of expected fixed return on such investment due to the Equity proportion of the information. Current liabilities (6.98) (65.09) difference in agreement rate and existing government H in Crores Group ownership 24.13 1.52 grid rates. As the Company has significant influence, Equity 568.83 683.32 As at Capital reserve (24.13) - the investment has been accounted as investment in Group ownership 33.30% 33.30% Particulars 31st March, Goodwill - 5.43 associate as per Ind AS 28 “Investments in associates and Equity proportion of the 2020 Carrying amount of the joint ventures”. However, the equity pick up will not be Group ownership 189.42 227.54 investment - 6.95 considered in consolidated financial statements. Current assets 5.44 Translation adjustment Non-current assets 9.38 in Crores arising out of translation Following table shows the summarised financial H Current liabilities (0.29) of foreign currency information. Year ended Year ended balances 19.61 - H in Crores Non-current liabilities (0.24) Particulars 31st March, 31st March, Carrying amout of the As at Equity 14.29 2020 2019 investment 209.03 227.54 Particulars 31st March, Group ownership 30.00% Revenue from sale of 2020 Equity proportion of the Group products 5.58 3.24 H in Crores Current assets 17.49 ownership 4.29 Profit/(loss) for the year (18.51) (5.45) Goodwill Brandmed 24.93 Total Comprehensive Year ended Year ended Non-current assets 116.65 Income for the year (18.51) (5.45) Particulars 31st March, 31st March, Current liabilities (17.74) Translation adjustment arising out of translation of foreign currency Group’s share of profit/ 2020 2019 Non-current liabilities (82.00) balances (3.84) (loss) for the year# (7.55) (2.67) Revenue from sale of Equity 34.40 Carrying amount of the investment 25.38 # During the year, the group’s share of losses of the products - - Group ownership 26.00% Company (an associate) exceeds its interest in the Profit/(loss) for the year (114.45) (43.53) Equity proportion of the Group Total comprehensive Company and the hence the Group has discontinued ownership (restricted to investment H in Crores income for the year (114.45) (43.53) recognizing its share of further losses. amount as per above note) 9.00 Year ended Group’s share of profit/ Carrying amout of the investment 0.56 Particulars 31st March, (loss) for the year (38.11) (14.50) 2020 B) Avenue Therapeutics, Inc. D) Brandmed (Pty) Limited Revenue from sale of products 1.08 During the previous year, Invagen Pharmaceuticals Inc. C) AMPSolar Power Systems Private Limited Profit/(loss) for the year (8.00) (“Invagen”) a step down subsidiary of the Group have On 24th April, 2019, Cipla Medpro South Africa Pursuant to Share Purchase, Subscription and Total comprehensive income for the completed the first stage closing and acquired 33.30% rd Proprietary Limited ("Medpro"), a step down subsidiary Shareholder’s agreement ("SPSSA") dated 23 May, 2019, year (8.00) stake for H242.04 crore ($35 million) of Avenue Therapeutics, of the company acquired 30% of the shares (375 the Cipla Limited, Holding Company has acquired 26% Inc., a Delaware corporation (“Avenue”) on a fully diluted shares of no par value) of Brandmed Proprietary Group’s share of profit/(loss) for the stake on fully diluted basis in AMPSolar Power Systems basis. Invagen also has an option to acquire the remaining Limited ("Brandmed") for H31.61 Cr (ZAR 65 mn) as well year (2.40) Private Limited, representing 90,000 equity shares of issued and outstanding capital stock of Avenue for $180 as certain milestone payments over a period of three H10 each and 89,100, 0.01% Compulsory Convertible million, subject to the satisfaction or waiver of the conditions years subject to meeting agreed profit targets effective debentures of AMPSolar Power Systems Private Limited set forth therein. The investment in Avenue is accounted as 400 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 401 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 45: Contingent liabilities, commitments Note 45: Contingent liabilities, commitments Note 45: Contingent liabilities, commitments order of 1st August, 2003 which at that point of time and other litigations (to the extent not and other litigations (to the extent not and other litigations (to the extent not was H350.15 crore. Complying with the directions provided for) provided for) (Contd.) provided for) (Contd.) passed by the Honourable Supreme Court, Cipla has deposited an amount of H175.08 crore which A. Details of contingent liabilities and Note : thereon is payable into the DPEA under the Drugs has been received and acknowledged by NPPA. commitments (Prices Control) Order, 1979 on account of alleged Furthermore, the Company has not received any (i) Claims against the company not acknowledged as H in Crores unintended benefit enjoyed by the Company. The further notices in these cases post such transfer debt include claims related to pricing, commission, Company has filed its replies to the notices and of cases to Honourable Bombay High Court. As at As at etc. has contended that no amount is payable into the Meanwhile, the Honourable Supreme Court of India Particulars 31st March, 31st March, DPEA under the Drugs (Prices Control) Order, 1979. vide its Order and Judgment dated 21st October, 2020 2019 (ii) It is not practicable for the Group to estimate the 2016, allowed the Appeals filed by the Government timing of cash outflows, if any, in respect of our Contingent liabilities (ii) The Company had received various notices of against the Judgment and Order of the Honourable pending resolution of the respective proceedings Claims against demand from the National Pharmaceutical Pricing Allahabad High Court regarding basis of fixation of the Group not as it is determined only on receipt of judgements/ Authority (NPPA), Government of India, on account retail prices. The said order was specific to fixation acknowledged as debt 321.04 421.55 decisions pending with various authorities. of alleged overcharging in respect of certain drugs of retail prices without adhering to the formula/ Financial guarantees 183.80 161.99 under the Drugs (Prices Control) Orders. The total process laid down in DPCO, 1995. However, the (iii) The Group does not expect any reimbursements in Letters of credit 67.28 13.90 demand against the Company as stated in NPPA grounds relating to inclusion of certain drugs within respect of the above contingent liabilities. Income tax on account public disclosure amounts to H2,655.13 crore the span of price control continues to be sub-judice of disallowances/ (iv) The Group’s pending litigations comprise of Out of the above, demand notices pertaining to a with the Honourable Bombay High Court. additions 51.67 72.26 proceedings pending with various direct tax, set of products being Norfloxacin, Ciprofloxacin, Excise duty/service tax The Honourable Bombay High Court had, in indirect tax and other authorities. The Company has Salbutamol and Theophylline were challenged by on account of valuation/ expectation of NPPA filing its counter-statement on the Company (i) in the Honourable Bombay High cenvat credit 129.71 137.59 reviewed all its pending litigations and proceedings status of each petitioner’s compliance with the 2003 Court on the ground that bulk drugs contained in Sales tax on account of and has adequately provided for where provisions and 2016 Honourable Supreme Court orders (on the said formulations are not amenable to price credit/classification 7.72 9.55 are required and disclosed as contingent liabilities deposit 50% of amount demanded), re-scheduled control, as they cannot be included in the ambit of th 761.22 816.84 where applicable, in its financial statements. The the hearing for 5 June, 2019, but the same was price control based on the parameters contained Group does not expect the outcome of these not listed on that date. Further during the current Commitments in the Drug Policy, 1994 on which the DPCO, 1995 is proceedings to have a materially adverse effect on quarter, the Company filed amendment applications Estimated amount of based and (ii) in the Honourable Allahabad High contracts unexecuted its financial statements. before the Honourable Bombay High Court to Court on process followed for fixation of pricing incorporate the effect of a ruling by the Honourable on capital account* 620.97 320.50 norms. These Petitions were decided in favour (v) There has been a judgement by the Honourable Supreme Court of India to adjust trade margins of of the Company and the matters were carried in *Deal with Venues Remedies Limited: Supreme Court of India dated 28th February, 2019, 16% from outstanding demands as not accrued to appeal by the Union of India to the Honourable During the year, the Cipla Limited, Holding Company relating to components of salary structure that the manufacturers and to re-calculate interest from Supreme Court of India. The Honourable Supreme signed for an acquisition of a novel and patented need to be taken into account while computing the date of non-payment of demand within the time Court in its judgment of 1st August, 2003 remanded anti-infective product, Elores, from Venus Remedies period stated in each demand. The said amendment contribution to provident fund under the Employee the said writ petitions to the Honourable Bombay Limited (“VRL”) for the Indian market to further also places certain additional grounds on record. Provident Fund Act, 1952 ("EPF"). In view of the High Court with directions that the Court will have strengthen its presence in the branded Indian critical The Honourable Bombay High Court issued notice interpretative aspects related to the Judgement to consider the petitions afresh, having due regard care space and as a part of its agenda to contribute to Union of India and NPPA on the amendment including the effective date of application, the Group to the observations made by the Honourable to the fight against Anti-Microbial Resistance. The deal applications and set 30th March, 2020 for further has been advised to await further developments Supreme Court in its judgment. On the Union of India includes the acquisition of intellectual property rights hearing but the case was adjourned due to the in this matter. The Group will continue to assess filing transfer petitions, the Honourable Supreme such as trademarks, design and know-how related to COVID - 19 lockdown and the next date is awaited. the brand. The transaction is subject to fulfilment of any further developments in this matter for the Court ordered transfer of the said petitions to the certain completion conditions and both parties would implications on financial statements, if any. Honourable Bombay High Court to it for being The Company has been legally advised that it has be working together to complete this. heard with the appeal filed against the Honourable a substantially strong case on the merits of the Allahabad High Court order. Subsequently, in its matter, especially under the guidelines/principles Total consideration committed for the transaction is H65 B. Details of other litigations order of 20th July, 2016 the Honourable Supreme of interpretation of the Drug Policy enunciated by crore and contingent considerations on achievement of Court recalled its transfer order and remanded the Honourable Supreme Court of India. Although, certain milestones which are based on achievement of (i) The Government of India has served demand the petitions to Honourable Bombay High Court the decision of Honourable Supreme Court dated the specific net sales from Elores brand ranging from notices in March 1995 and May 1995 on the for hearing. While remanding the matter to 21st October, 2016 referred above was in favour of 1st January, 2020 to 31st December, 2024, payable on Company in respect of six bulk drugs, claiming that Honourable Bombay High Court, the Honourable Union of India with respect to the appeals preferred an amount of 5.46 crore along with interest due 31st March, 2024 as first milestone payment and on 31st H Supreme Court directed Cipla to deposit 50% of the by the Government challenging the Honourable March, 2025 as second milestone payment. overcharged amount with the NPPA as stated in its Allahabad High Court order, basis the facts and 402 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 403 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 45: Contingent liabilities, commitments of the same land to be utilised for purpose other Note 46: Employee Benefits Note 46: Employee Benefits (Contd.) and other litigations (to the extent not than SEZ. The Subsidiary Company filed a Special Employee benefit expense of the Group includes provided for) (Contd.) Leave Petition before the Hon’ble Supreme Court Disclosure in respect of defined benefit plan: and in which parties were directed to maintain various short term employee expenses, defined benefits legal advice on the matter sub-judice with the status quo. Also by order dated 18th October, 2013 expenses, expenses toward defined contribution on a. Description of the plan: Honourable Bombay High Court, no provision is the Hon’ble Supreme Court has granted the Special plans and other long-term employee benefits. Total considered necessary in respect of the notices of Retirement benefit plans of the Group include Leave to Appeal to the Subsidiary Company and employee benefits,including share based payments, demand received till date aggregating to H1,736.00 st Gratuity for the holding company and Indian the interim orders continue till the Appeal is finally incurred during the year ended 31 March, 2020 and crore. It may be noted that NPPA in its public st subsidiaries and Provident Fund for the holding heard. Vide a GO dated 30th July, 2018, issued by 31 March, 2019 amounted to H3,027.01 crore and disclosure has stated the total demand amount 2,856.53 crore respectively. Disclosure in respect of company. Liabilities in respect of the Gratuity Plan the Goa Government, it was resolved that the lands H against the Company in relation to the above said contribution to provident and other funds is as follows- are determined by an actuarial valuation, based which were alotted to 7 SEZ land owners (including molecules to be H2,272.32 crore (after adjusting upon which the Holding Company and Indian the Subsidiary Company) would be taken back and deposit of H175.08 crore), however, the Company subsidiaries makes contributions to the Gratuity their monies refunded. In pursuance of the said GO, has not received any further notices beyond an Disclosure in respect of contributions to provident Fund. Provident Fund is managed by the holding the Hon'ble Supreme Court vide its order dated aggregate amount of H1,736.00 crore. and other funds as follows: 31st July, 2018 disposed the Appeals of 6 SEZ owners company through trust Employees Provident Fund H in Crores (the “Provident Fund”). In addition, Company had made provision of H104.26 and the Subsidiary Company is the sole continuing st nd For the For the crore as of 31 March, 2020 for products not part of litigant. Further, vide order dated 22 October b. Governance of the plan: the referenced writ proceedings. Few demands for 2018, the Hon'ble Supreme court has ordered that, year ended year ended Particulars st st these products aggregating H90.26 crore received the Appeal filed by the Subsidiary Company shall 31 March, 31 March, The Holding Company has setup an income tax recently, were challenged before the Honourable be listed for hearing in due course. 2020 2019 approved irrevocable trust fund to finance the Bombay High Court and the Honourable Delhi High Defined plan liability. The trustees of the trust fund are The Subsidiary Company has been legally advised Court and no coercion orders obtained. These writs contribution plans responsible for the overall governance of the that it has good case both on facts and on law are pending final hearing by the Courts for which the Employees’ plan in accordance with the provisions of the succeeding in its appeal. The Subsidiary Company next date is awaited. pension scheme 33.15 26.50 trust deed and rules in the best interests of the is therefore of the view that no provision is required Provident fund 18.09 15.73 plan participants. They are tasked with periodic (iii) In March 2006, the Meditab Specialities Limited, to be made on the amount incurred towards cost of Contribution for reviews of the solvency of the fund and play a role (‘the Subsidiary Company’) acquired on lease, land and on the development of SEZ amounting to 401(k) fund* 16.26 9.94 in the long-term investment, risk management and land admeasuring 1,232,000 sq.m in Kerim H10.48 crore as at 31st March, 2020. Industrial Estate at But Khamb, Taluka Ponda, Goa Others - ESIS, funding strategy. from Goa Industrial Development Corporation (iv) During the previous year, the Group has launched labour welfare Further, since these funds are Income tax approved, (GIDC) for setting up and development of Special gSensipar (Cinacalcet hydrochloride) at risk (“LAR”) fund, etc. 4.42 6.23 the Company and the trustees have to ensure that Economic Zone (SEZ) for pharmaceutical products. as second US generic of Sensipar® in the US market. 71.92 58.40 Thereafter, the Subsidiary Company entered into Following Cipla’s LAR of its gSenispar product, Defined benefit they are at all times fully compliant with the relevant sub-lease of this land with a SEZ occupier with an the District Court denied Amgen’s motion for a plan provisions of the Income Tax Act and Rules. undertaking to provide infrastructural facilities. Preliminary Injunction (PI) on 2nd May, 2019. Amgen Gratuity (refer c. Investment strategy: Following public agitation, the State Government then appealed from the District Court decision to table 1 below) 23.78 29.66 of Goa brought about changes in policy regarding the Third Circuit, and the Third Circuit affirmed the Provident fund The holding company and Indian subsidiaries (refer table 2 SEZ in the State of Goa which had the effect of the District Courts decision and denied Amgen’s motion investment strategy in respect of its funded plans is below) 41.30 41.95 Subsidiary Company not pursuing its development for a Preliminary Injunction. Cipla and Amgen implemented within the framework of the applicable 65.08 71.61 activity and GIDC on instructions of the State continue to litigate the claims and the counter- statutory requirements. The plans expose these Government of Goa issued show cause for revoking Total contribution claims. The trial date is set for October 2021. Cipla companies to a number of actuarial risks such as allotment of land. The Subsidiary Company’s writ to provident fund continues to market its Cinacalcet Hydrochloride investment risk, interest rate risk, longevity risk and petition on the challenge to the show cause was and other fund 137.00 130.01 Product. On considering the various factors such as inflation risk. The companies has developed policy disposed by the Hon’ble Bombay High Court stating district court opinion, terms of proposed settlement *The Group maitain a 401(k) plan, pursuant to which employees guidelines for the allocation of assets to different that the State Government of Goa was competent may make contributions which are not to exceed statutory limits. with Amgen and assessment of internal legal team, classes with the objective of controlling risk and to alter the SEZ policy. It was also held that the Employer matching contribution are equal to 100% of employee the management is of the view that there are remote contribution. maintaining the right balance between risk and Subsidiary Company may apply for re-allotment chances to pay damages following the LAR. long-term returns in order to limit the cost to these companies 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. 404 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 405 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 46: Employee Benefits (Contd.) H in Crores Note 46: Employee Benefits (Contd.) d. Table 1 : Disclosures for defined benefit plans 2020 2019 H in Crores Gratuity Gratuity based on actuarial reports: Particulars 2020 2019 For the For the (Funded (Funded Gratuity Gratuity Principal actuarial year ended year ended H in Crores Plan) Plan) Particulars (Funded (Funded assumptions used 31st March, 31st March, 2020 2019 iii. Amount Plan) Plan) 2020 2019 Gratuity Gratuity recognised in Particulars Actuarial (Funded (Funded balance sheet Discounted rate 6.82% to 7.54% to Plan) Plan) changes arising (per annum) 6.87% 7.83% Present value of from changes i. Change in obligations as at Expected rate of in experience defined benefit year end (179.52) (147.46) return on plan 6.82% to 7.54% to assumptions (9.05) (13.83) obligation Fair value of assets 6.87% 7.79% Actuarial gain/ Opening plan assets as at (loss) return on Expected rate defined benefit year end 145.48 153.07 plan assets, of future salary obligation 147.46 147.84 Net asset/ excluding increase Interest cost 11.49 11.58 (liability) interest income 4.34 (1.42) Current service recognised (34.04) 5.61 - For the next 2 Net (income)/ cost 24.22 29.57 iv. Expenses years 5% to 7% 7.00% Actuarial expense for recognised in - Thereafter changes arising the period profit or loss starting from the from changes recognised in OCI 23.31 (13.71) Current service 3rd year 5.00% 5.00% in demographic vi. Actual return on cost 24.22 29.57 assumptions 18.41 (4.47) plan assets Demographic Interest on Actuarial Expected return assumptions: defined benefit changes arising on plan assets 11.93 11.49 obligation 11.49 11.58 Mortality rate Indian Indian from changes Actuarial gain/ Expected return assured assured in financial (loss) on plan on plan assets lives lives assumptions 9.61 6.01 assets (4.34) 1.42 (Interest income Mortality Mortality Actuarial Actual return on only) (11.93) (11.49) (2006-08) (2006-08) changes arising plan assets 7.59 12.91 Total expense Ultimate Ultimate from changes vii. Asset recognised in Retirement age in experience information 60 years 60 years profit or loss 23.78 29.66 assumptions (9.05) (13.83) Insurer managed Attrition rate v. Expenses Benefits paid (22.62) (29.24) funds 100% 100% - For Service 2 recognised Liability at the viii. Expected years and below 25.00% 25.00% end of the year 179.52 147.46 in other employer's - For Service 3 ii. Change in fair comprehensive contribution for years to 4 years 15.00% 15.00% value of assets income the next year 48.58 15.06 - For Service 5 Opening fair Actuarial years and above 1% to 5 % 1% to 5 % value of plan changes arising The actuarial calculations used to estimate assets 153.07 148.21 from changes commitments and expenses in respect of gratuity The estimates of future salary increases, considered Expected return in demographic and compensated absences (Refer note 46(f)) in actuarial valuation, take account of inflation, on plan assets 11.93 11.49 assumptions 18.41 (4.47) are based on the following assumptions which seniority, promotion and other relevant factors, Return on plan Actuarial if changed, would affect the commitment's size, such as supply and demand in employment market. assets excluding changes arising funding requirements and expense: interest income (4.34) 1.42 from changes The sensitivity analysis below have been Contributions by in financial determined based on reasonably possible changes employer 16.03 15.50 assumptions 9.61 6.01 of the respective assumptions occuring at the end Benefits paid (31.21) (23.55) of the reporting period, while holding all other Closing fair assumptions constant. value of plan assets 145.48 153.07 406 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 407 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 46: Employee Benefits (Contd.) one another as some of the assumptions may be Note 46: Employee Benefits (Contd.) correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined H in Crores For the For the benefit obligation has been calculated using the 2020 Provident 2019 Provident year ended year ended projected unit credit method at the end of the Particulars Particulars Fund (Funded Plan) Fund (Funded Plan) 31st March, 31st March, reporting period, which is the same as that applied Contributions by employer 123.73 118.75 2020 2019 in calculating the defined benefit obligation liability Transfer of plan assets 25.63 19.86 recognised in the Balance Sheet. Discount rate (1% Benefits paid (140.46) (128.11) movement increase) (15.59) (17.80) There was no change in the methods and Other experience adjustment (9.23) 0.03 Discount rate (1% assumptions used in preparing the sensitivity Closing fair value of plan assets 1,094.00 962.45 movement decrease) 18.05 21.32 analysis from prior years. iii. Amount recognised in balance sheet Future salary Present value of obligations as at year end (1,085.93) (945.15) growth (1% Maturity analysis of the benefit payments: from Fair value of plan assets as at year end 1,094.00 962.45 movement increase) 18.54 22.41 the fund Funded status (8.07) (17.30) Future salary growth (1% movement H in Crores Net asset/(liability) recognised - - iv. Expenses recognised in profit or loss decrease) (15.72) (18.43) Projected benefits As at As at Current service cost 41.30 41.95 Attrition rate (1% payable in future 31st March, 31st March, Interest cost 82.13 73.05 movement increase) 2.55 6.08 years from the 2020 2019 Expected return on plan assets (82.13) (73.05) Attrition rate (1% date of reporting movement decrease) (2.90) (6.99) Total expense recognised in profit or loss 41.30 41.95 1st following year 11.14 4.84 v. Actual return on plan assets The sensitivity analysis above has been determined 2nd following year 11.32 3.13 Expected return on plan assets 82.13 73.05 based on reasonable possible changes of the Actuarial gain on plan assets 49.75 3.54 respective assumption occurring at the end of the 3rd following year 12.77 5.01 Actual return on plan assets 131.88 76.59 reporting period while holding all other assumptions th 4 following year 15.41 6.17 vi Asset information constant. 5th following year 16.46 9.98 Investment in PSU bonds 475.27 423.54 The sensitivity analysis presented above may not Sum of years 6 to 10 64.04 46.56 Investment in government securities 502.73 423.75 be representative of the actual change in the Bank special deposit 15.58 15.58 Sum of years 11 and defined benefit obligation as it is unlikely that the Investment in other securities 42.10 36.03 above 235.44 405.00 change in assumptions would occur in isolation of Private sector bonds - 4.00 Equity/insurer managed funds/mutual funds 52.67 55.72 e. Table 2 : The details of the Group's defined benefit plans in respect of the owned provident fund trust for the Cash and cash equivalents 5.65 3.83 Holding Company based on acturial report - Total assets at the end of the year 1,094.00 962.45 H in Crores vii. Principal actuarial assumptions used 2020 Provident 2019 Provident Particulars Discounted rate (per annum) 6.84% 7.79% Fund (Funded Plan) Fund (Funded Plan) Expected rate of return on plan assets (per annum) 8.50% 8.65% i. Change in defined benefit obligation Expected rate of future salary increase (per annum) Opening defined benefit obligation 945.15 862.31 - For the next 2 years 5.00 % 7.00 % Interest cost 82.13 73.05 - Thereafter starting from the 3rd year 5.00% 5.00% Current service cost 41.30 41.95 viii. Experience adjustments Employee contribution 82.43 76.80 Defined benefit obligation 1085.93 945.15 Liability transferred in 25.63 19.86 Plan assets (1,094.00) (962.45) Benefits paid (140.46) (128.11) Deficit/(surplus) (8.07) (17.30) Other experience adjustment 49.75 (0.71) Experience adjustment on plan assets gain 49.75 3.54 Liability at the end of the year 1,085.93 945.15 ii. Change in fair value of assets Opening fair value of plan assets 962.45 875.33 Expected return on plan assets 82.13 73.05 Actuarial gain 49.75 3.54 408 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 409 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 46: Employee Benefits (Contd.) Note 47: Employee stock option scheme (Contd.) Weighted average share price for options exercised during the year: f. Compensated absences note: Particulars ESOS - 2013 - A The Group 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 Weighted average share price (H) 493.35 periods or receive cash in lieu thereof as per the Group’s policy. The Group records a liability for compensated Stock option activity under the scheme(s) for the year ended 31st March, 2020 is set out below: absences in the period in which the employee renders the services that increases this entitlement. The total ESOS 2013 - A liability recorded by the Group towards this obligation was H161.29 crore and H142.24 crore as at 31st March, 2020 and 31st March, 2019, respectively. No. of options Weighted average Range of exercise Weighted average Particulars exercise price (H) price (H) per option remaining contractual g. Cash settled share based payment: per option life (years) Certain employees of the Group are eligible for share-based payment awards that are settled in cash. These Outstanding at the awards entitle the employees to a cash payment, on the exercise date, subject to vesting upon satisfaction beginning of the year 10,55,791 2.00 2.00 4.57 of certain service conditions which range from one to four years. The amount of cash payment is determined Granted during the year 4,89,195 2.00 2.00 - based on the price of the Company’s share price at the time of vesting. As of 31st March, 2020, there was Forfeited/cancelled H1.96 crore of total unrecognised compensation cost related to unvested awards. This cost is expected to be during the year 82,006 2.00 2.00 - recognised over a weighted-average period of 1 years. Exercised during the year 5,37,973 2.00 2.00 - Outstanding at the end This scheme does not involve dealing in or subscribing to or purchasing securities of the Company, directly or of the year 9,25,007 2.00 2.00 5.13 indirectly. Exercisable at the end of the year 2,15,936 2.00 2.00 3.22 Note 47: Employee stock option scheme The Black Scholes valuation model has been used for computing weighted average fair value considering the 1. Parent Company following inputs: Particulars ESOS 2013 - A Cipla Limited Expected Dividend yield (%) 0.56% Employee stock option scheme Expected volatility 24.71% Risk-free interest rate 6.64% nd The Company has implemented "ESOS 2013 - A" as approved by the Shareholders on 22 August, 2013. The plan Weighted average share price (H) 535.64 covers all the employees of the Company and its subsidiaries and directors (excluding promoter directors) [collectively Exercise price (H) 2.00 "eligible employees"]. The nomination and remuneration committee of the Board of Cipla Limited administers these Expected life of options granted in years 4.21 ESOP plans and grants stock options to the eligible employees. Details of the options granted during the year under Weighted average fair value of Options (H) 521.64 the Scheme(s) are as given below: No. of options Exercise price Vesting period Exercise period Scheme details Grant date The effect of share-based payment transactions on the entity's profit for the period and earnings per share is granted (H) per option presented below: ESOS 2013 - A 21-May-19 2,72,522 2.00 2 years 5 years from vesting date Particulars 31st March, 2020 31st March, 2019 ESOS 2013 - A 21-May-19 66,555 2.00 1 year 5 years from vesting date ESOS 2013 - A 05-Nov-19 1,50,118 2.00 50% options On or before Profit after tax as reported (H in Crore) 2,318.17 1,888.41 in 1 year and 31st December of the Share based payment expense (H in Crore)* 18.92 22.62 remaining 50% respective calendar year Earnings per share adjusted to vest in 2 years of vesting Basic (H) 28.99 23.72 The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at Diluted (H) 28.95 23.68 the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one * includes H0.36 crore( previous year H0.61 crore) pertaining to Jay Precision Pharmaceuticals Private limited. equity share of H2 each. 410 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 411 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 47: Employee Stock Option Scheme (Contd.) Note 48: Related party disclosures F. Trust over which entity has control/significant 2. Subsidiary Company Information on related party transactions as required influence by Ind AS-24 - 'Related Party Disclosures' for the year Cipla Health Limited Cipla Limited Employees Provident Fund ended 31st March, 2020 Share based employee remuneration Cipla Limited Employees Gratuity Fund The Subsidiary Company has implemented "ESOS 2016", as approved by the Shareholders on 22nd March, 2016. A. Associates Details of the Options granted during the year under the Scheme(s) are as given below: Disclosure in respect of related parties Stempeutics Research Private Limited Scheme No. of options Exercise price Avenue Therapeutics, Inc. During the year, the following transactions were carried out Grant date Vesting period Exercise period with the related parties in the ordinary course of business: details granted (J) per option Brandmed (Pty) Ltd (w.e.f. 24th April, 2019) H in Crores ESOS 2016 20-May-19 2,483 10.00 1 to 4 years At time of liquidity event AMPSolar Power Systems Private Limited (w.e.f. For the For the ESOS 2016 27-May-19 10,588 10.00 1 to 4 years At time of liquidity event 12th June, 2019) year ended year ended ESOS 2016 03-Oct-19 920 10.00 1 to 4 years At time of liquidity event Particulars 31st March, 31st March, ESOS 2016 07-Jan-20 4,003 10.00 1 to 4 years At time of liquidity event B. Key management personnel 2020 2019 ESOS 2016 03-Mar-20 9,335 10.00 1 to 4 years At time of liquidity event Ms. Samina Hamied - Executive Vice- A. Investment in equity shares of Associates st st Chairperson The carrying amount of the liability relating to the stock options at 31 March, 2020 was H18.88 crore (31 March, 2019 Avenue H14.35 crore) Mr. Umang Vohra – Managing Director and Global Therapeutics, Inc. - 242.04 The expense recognised for employee services received during the year is shown in the following table: Chief Executive Officer Brandmed (Pty) Ltd. 31.61 - H in Crores Mr. Kedar Upadhye - Global Chief Financial AMPSolar Power For the year ended For the year ended Officer Systems Private Particulars Limited 0.09 - 31st March, 2020 31st March, 2019 Dr. Raghunathan Ananthanarayanan - President 31.70 242.04 and Global Chief Operating Officer (upto 31st Expense arising from equity-settled share-based payment transactions 4.53 1.49 B. Investment in Compulsory Convertible December, 2019) Debentures of Associates The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at C. Non-executive Chairman and Non-executive AMPSolar Power the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one Vice Chairman Systems Private equity share of H10 each. Limited 8.91 - Dr. Y. K. Hamied, Chairman 8.91 - The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share C. Remuneration (including sitting fees)* Mr. M. K. Hamied, Vice Chairman options during the year: Dr. Y. K. Hamied 2.03 2.02 As at 31st March, 2020 As at 31st March, 2019 Mr. M. K. Hamied 2.08 2.07 Particulars D. Non executive Directors Number WAEP Number WAEP Ms. Samina Hamied 6.74 7.27 Mr. Ashok Sinha Mr. Umang Vohra 15.05 17.06 Outstanding at the beginning of the year 66,746 10.00 79,399 10.00 Mr. S. Radhakrishnan 2.10 2.09 Mr. Adil Zainulbhai Granted during the year 27,329 10.00 10,850 10.00 Mr. Kedar Upadhye 3.84 3.85 Forfeited/Cancelled during the year 4,301 10.00 23,503 10.00 Ms. Punita Lal Dr. Raghunathan Outstanding at the end of the year 89,774 10.00 66,746 10.00 Ms. Naina Lal Kidwai Ananthanarayanan (0.47) 8.85 Exercisable at the end of the year - 10.00 - 10.00 Mr. Peter Lankau (upto 30th June, 2019) Mr. Ashok Sinha 0.48 0.46 Mr. Adil Zainulbhai 0.47 0.38 The following table lists the inputs to the models used for the years ended 31st March, 2020 and 31st March, 2019, Dr. Peter Mugyenyi Ms. Punita Lal 0.40 0.41 respectively. Mr. S Radhakrishnan Ms. Naina Lal Kidwai 0.45 0.43 As at As at Ms. Ireena Vittal (upto 31st March, 2019) Ms. Ireena Vittal - 0.41 Particulars 31st March, 2020 31st March, 2019 Mr. Peter Lankau 0.17 0.73 E. Entities over which key management Dr. Peter Mugyenyi 0.66 0.43 Dividend yield(%) 0% 0% personnel are able to exercise significant 34.00 46.46 Expected Volatality(%) 25.13% 25.13% influence Risk free investment rate(%) 7.08% 8.13% * Expenses towards gratuity, compensated absences and premium paid for group health insurance has not Exercise price at date of grant 10 10 Cipla Foundation been considered in above information as a separate Share price at date of grant H6,155.00 H4,063.84 Chest Research Foundation (Formerly known as actuarial valuation/premium paid are not available. Vesting Period 1 to 4 years 1 to 4 years Hamied Foundation upto 14th October, 2019) Exercise Period At the time of At the time of liquidity event liquidity event Cipla Cancer and AIDS Foundation Model Used Black Scholes Black Scholes 412 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 413 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 48: Related party disclosures (Contd.) Note 49: Corporate social responsibility end, the Group did not have any long-term contracts (CSR) expenditure (including derivative contracts) for which there were H in Crores H in Crores any material foreseeable losses. Long-term derivative For the For the For the For the The Group has incurred H38.70 crore (31st March, 2019: contract related to interest rate swaps are accounted, year ended year ended year ended year ended H36.08 crore) towards CSR activities, as per Section as required under the applicable law or Ind AS. Particulars st st Particulars st st 31 March, 31 March, 31 March, 31 March, 135 of the Companies Act, 2013, and Rules thereon. It 2020 2019 2020 2019 is included in other expenses head in the profit or loss. Note 54: Functional currency D. Contribution to L. Service charges paid Amount spent on construction/ acquisition of any assets provident fund and Chest Research is Nil during the year. Gross amount required to be spent Until 31st March, 2018, the functional currency of Cipla st other fund Foundation - 2.22 by the Group during the year H38.63 crore (31 March, (EU) Limited, one of the subsidiary in the United Cipla Limited - 2.22 2019: H34.55 crore). Kingdom, was determined to be Great Britain Pound M. Payable to KMP and Non executive directors Employees Gratuity (GBP). The subsidiary’s operating, investing and Fund 15.00 15.00 (Commission and remuneration) The above includes contribution of H37.50 crore financing activities have a greater reliance on the United Cipla Limited Dr. Y.K. Hamied 2.00 2.00 (previous year H28.80 crore ) to Cipla Foundation which States dollars (USD) due to change in the underlying Employees Mr. M.K. Hamied 2.00 2.00 is a trust , with the main objective of working in the areas economic environment. Accordingly, effective 1st April, Provident Fund 41.30 41.95 Ms. Samina Hamied 2.30 2.30 of social, economic and environmental issues. 56.30 56.95 Mr. Umang Vohra 4.00 5.50 2018, the functional currency of the subsidiary was E. Purchase of goods Mr. S. Radhakrishnan 2.00 2.00 Note 50: Reclassification note changed to USD. This change in the functional currency Stempeutics Mr. Kedar Upadhye 0.90 0.91 has been applied prospectively from date of change Research Private Mr. Ashok Sinha 0.40 0.40 The figures for the corresponding previous year have in accordance with Ind AS 21, The Effect of Changes in Mr. Adil Zainulbhai 0.36 0.32 Limited - 0.16 been regrouped / reclassified wherever necessary, to Foreign Exchange Rate. Further, owing to this change, Ms. Punita Lal 0.35 0.35 - 0.16 make them comparable. the designation of underlying investment, being in Ms. Naina Lal Kidwai 0.35 0.35 F. Donations given USD, in the US subsidiary of Cipla (EU) Limited as net Ms. Ireena Vittal - 0.36 Cipla foundation 37.50 28.80 Mr. Peter Lankau 0.10 0.40 Note 51: Subsequent events investment hedge was not required. Chest Research Dr. Peter Mugyenyi 0.41 0.40 Foundation 2.00 - There are no subsequent events that occurred after the Dr. Raghunathan 39.50 28.80 reporting date. Note 55: Segment Information Ananthanarayanan - 1.78 G. Rent Received Dr. Y.K. Hamied 15.17 19.07 Operating segments are reported in a manner N. Dividend Paid Note 52: COVID-19 (H20,040/- in both consistent with the internal reporting provided to the Dr. Y.K. Hamied 114.78 50.02 the years) 0.00 0.00 Due to COVID-19 situation, there have been several Chief Operating Decision Maker (“CODM”). The CODM Mr. M.K. Hamied 24.20 10.37 0.00 0.00 restrictions imposed by the Governments across the is the Chief Executive Officer of the Group, who assesses Ms. Samina Hamied 12.53 5.37 H. Testing and analysis charges paid globe on the travel, goods movement and transportation the financial performance and position of the Group Mr. Umang Vohra 0.16 0.04 Stempeutics Mr. S. Radhakrishnan 0.11 0.01 considering public health and safety measures, which and makes strategic decisions. The Group’s reportable Research Private Mr. Kedar Upadhye 0.03 - had some impact on the Group’s supply chain during segments are as follows: Limited 2.06 1.79 151.81 65.81 March, 2020. The Group is closely monitoring the impact 2.06 1.79 O. Contribution payable to provident/gratuity fund of the pandemic on all aspects of its business,including 1 Pharmaceuticals - This segment develops, I. Freight charges paid Cipla Limited how it will impact its customers, employees, vendors and manufactures, sells and distributes generic or Stempeutics Employee Provident business partners. The management has exercised due branded generic medicines as well as Active Research Private fund 10.37 9.64 care, in concluding on significant accounting judgements Pharmaceutical Ingredients (“API”). Limited 0.02 - Cipla Limited and estimates, interalia, recoverability of receivables, 0.02 - Employee Gratuity assessment for impairment of goodwill, investments, 2 New ventures - This includes the operations of the J. Purchase of assets fund 27.94 - intangible assets, inventory, based on the information Company, a consumer healthcare, Biosimilars and Stempeutics 38.31 9.64 available to date, both internal and external, while speciality business. Research Private P. Advances receivable from gratuity trust preparing the Group’s financial statements as of and for Limited - 3.00 Cipla Limited the year ended 31st March, 2020. The CODM reviews revenue and gross profit as the - 3.00 Employee Gratuity performance indicator, and does not review the total K. Reimbursement of operating/other expenses Fund - 9.51 assets and liabilities for each reportable segment. Stempeutics - 9.51 Note 53: Unforeseeable losses Research Private The measurement of each segment’s revenues, expenses Limited 0.31 0.18 The Group has a process whereby periodically all long- and assets is consistent with the accounting policies that 0.31 0.18 term contracts (including derivative contracts) are are used in preparation of the Group’s consolidated assessed for material foreseeable losses. At the year financial statements. 414 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 415 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 55: Segment Information (Contd.) Note 56: Acquisition of Mirren Proprietary Recognised amounts of identifiable net assets H in Crores H in Crores H in Crores Limited For the For the For the For the Particulars year ended year ended year ended year ended Acquisition of Mirren Proprietary Limited Property, plant and equipment 19.59 Particulars Particulars st st st st Intangible assets 124.11 31 March, 31 March, 31 March, 31 March, Cipla Medpro South Africa Proprietary Limited acquired 2020 2019 2020 2019 100% stake (1500 shares of ZAR 1 each) of Mirren Inventories 15.64 nd Trade and other receivables 17.22 Segment wise revenue Segment results: Proprietary Limited ("Mirren") effective 22 October, Cash and cash equivalents 21.63 and results Profit / (loss) before tax 2018. Mirren is a pharmaceutical company incorporated in South Africa specialising in the manufacture, Total assets 198.18 Segment revenues: and interest from each production and distribution of over the counter products. Trade and other payables 13.92 a) Pharmaceuticals 16,958.67 16,231.21 segment a) Pharmaceuticals 2,574.17 2,254.24 The primary reason for the acquisition was to grow Current tax payable 1.66 b) New Ventures 219.17 160.45 b) New Ventures (198.63) (6.67) product portfolio and strengthen market position in our Deferred tax liability 37.17 Total 17,177.84 16,391.66 Total 2,375.54 2,247.57 over the counter therapeutic area. The acquisition and Provisions 2.05 Less : Inter segment Less: the underline accounting under Ind AS 103 "Business Total liabilities 54.80 revenue 45.85 29.25 Finance cost 197.36 168.43 Combination" was completed by the Group in the year Net identifiable assets aquired 143.38 st Total Income from Total profit / (loss) ended 31 March, 2019. H in Crores Operations 17,131.99 16,362.41 before tax 2,178.18 2,079.14 Mirren Proprietary Limited Particulars H in Crores Purchase consideration 222.60 Particulars Segment assets and liabilities Less: Net identifiable assets aquired 143.38 Amount settled in cash 200.76 Goodwill 79.22 As some of the assets and liabilities are deployed interchangeably across segments, it is not practically possible Deferred consideration (refer note to allocate those assets and liabilities to each segment. Hence, the details of assets and liabilities have not been below) 21.84 H in Crores disclosed in the above table. Purchase consideration 222.60 Particulars The management also evaluates the Group’s revenue performance based on geographical segments. The Group’s Deferred consideration for acquisition of Mirren Cash paid 200.76 geographical segments are as follows: Proprietary Limited amounting to H21.84 crore Less: cash and cash equivalent balances acquired 21.63 1 India (R 45 million) is still due to be paid to sellers and will only Consideration transferred (net) 179.13 2 United States of America be paid upon finalisation of an unresolved matter. The 3 South Africa Group management expects that this amount will be 4 Rest of the world settled within a year. Deferred consideration is interest The geographical segments derives their revenues from the sale of pharmaceuticals products (generics, speciality) free and unsecured. and milestone payments. The management reviews revenue as the performance indicator, and does not review the total assets and liabilities for each reportable segment. Note 57: Additional information as required, pursuant to Para 2 under Schedule III of the Analysis of Revenue (including other operating revenue) (by customer's location) Companies Act, 2013 of the enterprises consolidated as Subsidiaries/Associates H in Crores H in Crores Net Assets (Total Assets Owners share in profit Owners share in other Owners share in total Year India United States of America South Africa Rest of the world Total less Total Liabilities) or loss comprehensive income comprehensive income As % of Amount As % of Amount As % of Amount As % of Amount 2020 6,740.56 3,873.82 2,206.42 4,311.19 17,131.99 Name of the entity consolidated consolidated consolidated consolidated 2019 6,419.76 3,420.94 2,161.19 4,360.52 16,362.41 net assets profit or loss other total comprehensive comprehensive income income Analysis of non current assets (excluding investment in associates, income tax and deferred tax assets Parent Company and financial assets (by assets location) Cipla Limited 110.40% 17,402.96 149.90% 2,318.17 39.95% (64.43) 162.70% 2,253.74 H in Crores Subsidiaries Year India United States of America South Africa Rest of the world Total Indian Goldencross Pharma Limited 2020 5,116.62 3,090.03 1,755.15 737.25 10,699.05 (formerly known as Goldencross 2019 5,136.97 2,754.68 1,942.15 584.91 10,418.71 Pharma Private Limited) 1.91% 300.50 0.90% 13.91 (3.01%) 4.85 1.35% 18.76 Meditab Specialities Limited (formerly known as Meditab Specialities Private Limited) 2.35% 371.16 1.55% 24.03 0.33% (0.53) 1.70% 23.50 416 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 417 Corporate Statutory Financial Annual Report 2019-20 Overview 001-120 Reports 121-230 Statements 231-423 Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Note 57: Additional information as required, pursuant to Para 2 under Schedule III of the Note 57: Additional information as required, pursuant to Para 2 under Schedule III of the Companies Act, 2013 of the enterprises consolidated as Subsidiaries/Associates (Contd.) Companies Act, 2013 of the enterprises consolidated as Subsidiaries/Associates (Contd.) H in Crores H in Crores Net Assets (Total Assets Owners share in profit Owners share in other Owners share in total Net Assets (Total Assets Owners share in profit Owners share in other Owners share in total less Total Liabilities) or loss comprehensive income comprehensive income less Total Liabilities) or loss comprehensive income comprehensive income As % of Amount As % of Amount As % of Amount As % of Amount As % of Amount As % of Amount As % of Amount As % of Amount Name of the entity consolidated consolidated consolidated consolidated Name of the entity consolidated consolidated consolidated consolidated net assets profit or loss other total net assets profit or loss other total comprehensive comprehensive comprehensive comprehensive income income income income Jay Precision Pharmaceuticals Cipla Gulf FZ-LLC 0.10% 16.34 (0.28%) (4.38) 0.00% - (0.32%) (4.38) Private Limited 0.76% 119.89 1.59% 24.62 (0.07%) 0.12 1.79% 24.74 Cipla Pharma Lanka (Pvt) Ltd 0.01% 0.98 0.14% 2.10 0.00% - 0.15% 2.10 Medispray Laboratories Private Cipla Brasil Importadora e Limited 1.84% 289.39 2.69% 41.65 0.25% (0.41) 2.98% 41.24 Distribuidora de Medicamentos Sitec Labs Limited (formerly Ltda. 0.10% 15.72 0.02% 0.25 0.00% - 0.02% 0.25 known as Sitec Labs Private Cipla Maroc SA 0.58% 91.96 (0.16%) (2.41) 0.00% - (0.17%) (2.41) Limited) 0.55% 87.11 0.56% 8.62 (0.17%) 0.27 0.64% 8.89 Invagen Pharmaceuticals Inc. 14.23% 2,243.19 (9.76%) (150.89) 21.71% (35.01) (13.42%) (185.90) Cipla Biotec Limited (formerly Cipla Middle East known as Cipla Biotec Private Pharmaceuticals FZ-LLC 0.05% 8.20 (0.38%) (5.83) 0.00% - (0.42%) (5.83) Limited) 0.58% 91.94 (0.33%) (5.17) (0.06%) 0.10 (0.37%) (5.07) Cipla Philippines Inc. 0.00% 0.78 (0.02%) (0.27) 0.00% - (0.02%) (0.27) Cipla Health Limited 0.61% 95.84 (3.90%) (60.25) 0.06% (0.09) (4.36%) (60.34) Cipla Algérie 0.00% 0.01 0.00% (0.00) 0.00% - 0.00% (0.00) Cipla Pharmaceuticals Limited 0.13% 19.76 (0.02%) (0.24) 0.00% - (0.02%) (0.24) Cipla Biotec South Africa (Pty) Ltd 0.00% 0.00 0.00% - 0.00% - 0.00% - Foreign Cipla Colombia SAS 0.01% 0.93 (0.41%) (6.31) 0.00% - (0.46%) (6.31) Cipla (Mauritius) Limited 0.00% - 0.00% (0.01) 0.00% - 0.00% (0.01) Cipla (Jiangsu) Pharmaceutical Cipla Medpro South Africa Co., Ltd 0.90% 141.61 0.00% 0.02 0.00% - 0.00% 0.02 Proprietary Limited (1.05%) (166.13) 7.72% 119.43 0.00% - 8.62% 119.43 Cipla (China) Pharmaceutical Cipla Holding BV 0.54% 84.35 0.67% 10.34 0.00% - 0.75% 10.34 Co., Ltd 0.05% 7.70 0.02% 0.34 0.00% - 0.02% 0.34 Cipla (EU) Limited 17.63% 2,779.79 (6.86%) (106.04) 15.28% (24.65) (9.43%) (130.69) Exelan Pharmaceuticals Inc. 0.28% 44.15 1.50% 23.25 0.00% - 1.68% 23.25 Saba Investment Limited 1.66% 262.08 0.35% 5.43 0.00% - 0.39% 5.43 Cipla Technologies LLC 1.32% 207.56 (3.12%) (48.31) 0.00% - (3.49%) (48.31) Cipla (UK) Limited 0.00% - 0.00% (0.02) 0.00% - 0.00% (0.02) Madison Pharmaceuticals Inc. 0.00% 0.00 0.00% - 0.00% - 0.00% - Cipla Australia Pty Ltd (0.01%) (1.16) (0.39%) (5.99) 0.00% - (0.43%) (5.99) Cipla Health Employees Stock Meditab Holdings Limited 2.84% 447.49 (0.01%) (0.19) (0.97%) 1.56 0.10% 1.37 Option Trust 0.00% 0.00 0.00% 0.00 0.00% - 0.00% 0.00 Tasfiye Halinde Cipla İlaç Ticaret Cipla Employee Stock Option Anonim Şirketi (formerly known as Trust 0.00% 0.00 0.00% 0.00 0.00% - 0.00% 0.00 Cipla İlaç Ticaret Anonim Şirketi) 0.00% - 0.00% 0.01 0.00% - 0.00% 0.01 Subtotal 26,143.67 2,288.96 (118.22) 2,170.74 Cipla USA Inc. 1.32% 207.99 4.60% 71.15 0.00% - 5.14% 71.15 Inter-company Elimination and Cipla Kenya Limited 0.01% 1.66 0.02% 0.26 0.00% - 0.02% 0.26 Consolidation Adjustments (65.48%) (10,321.36) (47.98%) (741.98) 6.93% (11.18) (54.37%) (753.16) Cipla Malaysia Sdn. Bhd. 0.02% 3.22 0.02% 0.34 0.00% - 0.02% 0.34 Non-controlling Interest in Cipla Europe NV 0.40% 63.03 0.13% 2.04 0.00% - 0.15% 2.04 Subsidiaries (1.87%) (294.28) 3.04% 47.00 19.77% (31.89) 1.09% 15.11 Cipla Quality Chemical Industries Share of Profit/(loss) in Limited 1.80% 284.50 (2.86%) (44.22) 0.00% - (3.19%) (44.22) Associates 1.49% 234.97 (3.07%) (47.46) 0.00% - (3.43%) (47.46) Quality Chemicals Limited 0.09% 13.72 0.00% (0.03) 0.00% - 0.00% (0.03) Grand Total 15,763.00 1,546.52 (161.29) 1,385.23 Inyanga Trading 386 Proprietary Note : Net assets and share in profit or loss for the parent company, subsidiairies, associates and other consolidating entities are as per the Limited 0.00% 0.00 0.00% 0.01 0.00% - 0.00% 0.01 Cipla Medpro Holdings standalone financial statements of the respective entities. Proprietary Limited 0.00% (0.13) (0.01%) (0.15) 0.00% - (0.01%) (0.15) Cape to Cairo Exports Note 58: Authorisation of financial statements Proprietary Limited 0.00% (0.00) 0.00% - 0.00% - 0.00% - Cipla Dibcare Proprietary Limited 0.00% 0.17 0.00% - 0.00% - 0.00% - The Consolidated financial statements for the year ended 31st March, 2020 were approved by the Board of Directors on Cipla Life Sciences Proprietary th Limited 0.71% 111.44 0.04% 0.55 0.00% - 0.04% 0.55 15 May, 2020. Cipla-Medpro Proprietary As per our report of even date attached For and on behalf of the Board of Directors Limited 2.09% 328.89 2.25% 34.81 0.00% - 2.51% 34.81 Cipla-Medpro Distribution Centre For Walker Chandiok & Co LLP Proprietary Limited (0.01%) (1.36) (0.03%) (0.44) 0.00% - (0.03%) (0.44) Chartered Accountants Umang Vohra Samina Hamied Cipla Medpro Botswana Firm Reg. No.: 001076N/N500013 Managing Director and Executive Proprietary Limited 0.00% - 0.00% - 0.00% - 0.00% - Cipla OLTP (Pty) Limited (formerly Global Chief Executive Officer Vice-Chairperson known as Cipla Nutrition DIN: 02296740 DIN: 00027923 Proprietary Limited) (0.14%) (21.34) 0.00% 0.02 0.00% - 0.00% 0.02 Medpro Pharmaceutica Proprietary Limited 0.83% 130.20 4.68% 72.39 0.00% - 5.23% 72.39 Ashish Gupta Kedar Upadhye Rajendra Chopra Mirren Proprietary Limited 0.27% 42.28 0.17% 2.55 0.00% - 0.18% 2.55 Partner Global Chief Financial Officer Company Secretary Anmaraté Proprietary Limited 0.00% 0.23 (0.01%) (0.09) 0.00% - (0.01%) (0.09) Membership No.: 504662 Breathe Free Lanka (Pvt) Ltd 0.03% 5.48 0.02% 0.24 0.00% - 0.02% 0.24 th th Medica Pharmaceutical Industries New Delhi, 15 May, 2020 Mumbai, 15 May, 2020 Company Limited 0.06% 9.59 (3.00%) (46.33) 0.00% - (3.34%) (46.33) 418 Creating Hope Since 85 Years Notes to the Consolidated Financial Statements 419 420 Salient Features of Financial Statements of Subsidiaries and Associates Statement pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of the Companies (Accounts) Rules, 2014 in form AOC-1 related to Creating Hope Since 85 Years85 Since Hope Creating Subsidiaries and Associate Companies Part (A) : Information on Subsidiaries H in Crores Exchange Investment Reserves Profit Provision Profit % of Sr. Name of the Subsidiary Reporting rate as on Share Total Total other than Proposed Country of and Turnover * before for after Share No. Company currency 31st March Capital Assets Liabilities Investment Dividend Incorporation Surplus Taxation* Taxation* Taxation* Holding 2020 in subsidiary 1 Jay Precision Pharmaceuticals Private Limited INR 1.0000 4.01 115.88 128.09 8.20 - 99.86 32.34 7.72 24.62 - 60% India 2 Meditab Specialities Limited (formerly known as Meditab Specialities Private Limited) INR 1.0000 0.71 370.45 451.74 80.58 4.81 38.93 25.86 1.83 24.03 - 100% India 3 Medispray Laboratories Private Limited INR 1.0000 0.05 289.34 338.68 49.29 53.94 253.71 56.38 14.72 41.65 - 100% India 4 Goldencross Pharma Limited (formerly known as Goldencross Pharma Private Limited) INR 1.0000 0.05 300.45 318.47 17.97 62.17 154.99 19.73 5.82 13.91 - 100% India 5 Sitec Labs Limited (formerly known as Sitec Labs Private Limited) INR 1.0000 0.02 87.10 108.78 21.67 - 88.36 11.80 3.18 8.62 - 100% India 6 Cipla Health Limited** INR 1.0000 4.43 91.41 203.74 107.90 32.96 203.02 (69.08) (8.83) (60.25) - 100% India 7 Cipla Biotec Limited (formerly known as Cipla Biotec Private Limited) INR 1.0000 258.71 (166.77) 104.60 12.66 25.46 14.10 (5.23) (0.06) (5.17) - 100% India 8 Cipla Pharmaceuticals Limited INR 1.0000 20.00 (0.24) 19.79 0.03 2.77 - (0.24) - (0.24) - 100% India 9 Cipla Medpro South Africa (Pty) Ltd ZAR 4.2325 0.19 (166.32) 646.32 812.45 - 939.47 151.57 32.14 119.43 - 100% South Africa 10 Cipla Biotec South Africa (Pty) Limited ZAR 4.2325 0.00 (0.00) 0.00 0.00 ------100% South Africa 11 Cipla Quality Chemical Industries Limited USH 0.0199 90.84 193.65 494.45 209.95 - 370.95 (69.14) (24.92) (44.22) - 51.18% Uganda 12 Cipla (Mauritius) Limited USD 75.6650 ------(0.01) - (0.01) - 100% Mauritius 13 Meditab Holdings Limited USD 75.6650 337.62 109.87 447.53 0.04 - - (0.19) - (0.19) - 100% Mauritius 14 CIPLA Algérie DZD 0.6032 0.06 (0.05) 0.08 0.08 - - (0.00) 0.00 (0.00) - 40% Algeria 15 Cipla Europe NV EUR 82.7700 58.77 4.14 251.76 188.74 - 161.58 4.12 2.08 2.04 - 100% Belgium Annual Annual Report 2019-20 16 Cipla Holding B.V. EUR 82.7700 83.07 1.28 88.72 4.37 - 14.52 10.75 0.41 10.34 - 100% Netherlands 17 Saba Investment Limited USD 75.6650 258.56 3.52 389.72 127.64 - 0.81 5.43 - 5.43 - 51% UAE 18 Medica Pharmaceutical Industries Company Limited USD 75.6650 1.76 7.83 193.28 183.69 - - (46.33) (0.00) (46.33) - 50.49% Yemen 19 Cipla Middle East Pharmaceuticals FZ-LLC USD 75.6650 0.31 7.89 275.49 267.29 - 148.38 (5.83) - (5.83) - 51% UAE 20 Cipla Gulf FZ – LLC USD 75.6650 0.10 16.24 19.54 3.20 - 53.16 (4.38) - (4.38) - 100% UAE 21 Quality Chemicals Limited USH 0.0199 0.12 13.60 37.37 23.64 - 31.79 0.23 0.26 (0.03) - 51% Uganda Salient Features of Financial Statements of Subsidiaries and Associates Overview Corporate Statement pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of the Companies (Accounts) Rules, 2014 in form AOC-1 related to Subsidiaries and Associate Companies Part (A) : Information on Subsidiaries H in Crores Exchange Investment Reserves Profit Provision Profit % of Sr. Name of the Subsidiary Reporting rate as on Share Total Total other than Proposed Country of 001-120 and Turnover * before for after Share No. Company currency 31st March Capital Assets Liabilities Investment Dividend Incorporation Surplus Taxation* Taxation* Taxation* Holding 2020 in subsidiary 22 Tasfiye Halinde Cipla İlaç Ticaret Anonim Şirketi (formerly known as Cipla İlaç Ticaret Anonim Şirketi) TRY 11.3839 ------0.01 - 0.01 - 100% Turkey 23 Cipla Malaysia Sdn. Bhd. MYR 17.5150 1.01 2.21 3.91 0.68 - 12.23 0.45 0.11 0.34 - 100% Malaysia 24 Breathe Free Lanka (Private) Limited LKR 0.3975 5.17 0.31 81.00 75.51 - 97.51 0.46 0.22 0.24 - 100% Sri Lanka Reports Statutory Salient FeaturesSalient ofStatements Financial ofand Associates Subsidiaries 25 Cipla Pharma Lanka (Private) Limited LKR 0.3975 0.04 0.94 72.42 71.45 - 111.21 3.04 0.95 2.10 - 100% Sri Lanka 26 Cipla Maroc SA MAD 7.4549 102.00 (10.04) 124.23 32.27 - 94.32 4.96 7.37 (2.41) - 60% Morocco 27 Cipla Australia Pty. Ltd. AUD 46.0750 1.15 (2.31) 77.93 79.08 - 102.40 (8.37) (2.38) (5.99) - 100% Australia 28 Cipla Brasil lmportadora E Distribuidora De Medicamentos Ltda. BRL 14.4701 18.88 (3.17) 20.44 4.72 - 0.00 0.25 - 0.25 - 100% Brazil 29 Cipla (EU) Limited United 121-230 USD 75.6650 2,779.67 0.12 3,782.51 1,002.72 - 130.58 (106.04) - (106.04) - 100% Kingdom 30 Cipla (UK) Limited United GBP 93.5025 - - - - - 0.40 (0.03) (0.01) (0.02) - 100% Kingdom 31 Cipla Philippines Inc. PHP 1.4803 1.41 (0.63) 1.03 0.25 - - (0.27) 0.00 (0.27) - 100% Philippines 32 Cipla Colombia SAS COP 0.0186 6.76 (5.83) 24.71 23.78 - 4.33 (8.73) (2.42) (6.31) - 100% Cololmbia 33 Cipla (Jiangsu) Pharmaceutical Co., Ltd CNY 10.6450 141.61 - 142.74 1.13 - - 0.02 - 0.02 - 80% China 34 Cipla (China) Pharmaceutical Co., Ltd CNY 10.6450 7.39 0.31 8.55 0.85 - 6.22 0.35 0.02 0.34 - 100% China Statements Financial 35 Cipla USA Inc. USD 75.6650 18.16 189.83 1,773.93 1,565.94 - 2,804.49 93.72 22.57 71.15 - 100% USA 36 InvaGen Pharmaceuticals Inc. USD 75.6650 3,287.65 (1,044.45) 3,896.40 1,653.20 - 1,409.20 (214.05) (63.16) (150.89) - 100% USA 37 Exelan Pharmaceuticals Inc. USD 75.6650 3.78 40.36 338.36 294.22 - 611.94 27.22 3.97 23.25 - 100% USA 38 Cipla Technologies LLC USD 75.6650 310.98 (103.42) 221.62 14.06 - - (61.37) (13.06) (48.31) - 100% USA 39 Madison Pharmaceuticals Inc. USD 75.6650 0.00 - 0.00 ------100% USA 40 Cipla Kenya Limited KES 0.7203 0.01 1.65 42.57 40.91 - 34.53 1.21 0.95 0.26 - 100% Kenya 41 Inyanga Trading 386 Proprietary Limited ZAR 4.2325 0.00 0.00 0.00 - - 0.00 0.01 - 0.01 - 100% South Africa 231-423 42 Cipla Medpro Holdings Proprietary Limited ZAR 4.2325 0.00 (0.13) 0.00 0.13 - - (0.04) 0.11 (0.15) - 100% South Africa 43 Cape to Cairo Exports Proprietary Limited ZAR 4.2325 0.00 (0.00) 0.00 0.00 ------100% South Africa 421 44 Cipla Dibcare Proprietary Limited ZAR 4.2325 0.00 0.17 0.17 ------100% South Africa 422 Salient Features of Financial Statements of Subsidiaries and Associates Statement pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of the Companies (Accounts) Rules, 2014 in form AOC-1 related to Creating Hope Since 85 Years85 Since Hope Creating Subsidiaries and Associate Companies Part (A) : Information on Subsidiaries H in Crores Exchange Investment Reserves Profit Provision Profit % of Sr. Name of the Subsidiary Reporting rate as on Share Total Total other than Proposed Country of and Turnover * before for after Share No. Company currency 31st March Capital Assets Liabilities Investment Dividend Incorporation Surplus Taxation* Taxation* Taxation* Holding 2020 in subsidiary 45 Cipla Life Sciences Proprietary Limited ZAR 4.2325 0.00 111.44 111.45 0.01 - 0.61 0.60 0.05 0.55 - 100% South Africa 46 Cipla-Medpro Proprietary Limited ZAR 4.2325 0.00 328.89 332.24 3.35 - 55.25 48.38 13.57 34.81 - 100% South Africa 47 Cipla-Medpro Distribution Centre Proprietary Limited ZAR 4.2325 0.00 (1.36) 43.45 44.81 - 56.58 - 0.44 (0.44) - 100% South Africa 48 Cipla Medpro Botswana Proprietary Limited ZAR 4.2325 0.00 - 0.00 ------100% Botswana 49 Cipla OLTP (Pty) Limited (formerly known as Cipla Nutrition Proprietary Limited) ZAR 4.2325 0.00 (21.34) 0.54 21.88 - 0.03 0.02 - 0.02 - 100% South Africa 50 Medpro Pharmaceutica Proprietary Limited ZAR 4.2325 0.00 130.20 1,257.06 1,126.85 - 1,506.84 105.21 32.82 72.39 - 100% South Africa 51 Anmaraté Proprietary Limited ZAR 4.2325 0.00 0.23 0.23 - - - (0.10) (0.01) (0.09) - 100% South Africa 52 Mirren Proprietary Limited ZAR 4.2325 0.00 42.28 79.62 37.34 - 68.58 3.36 0.80 2.55 - 100% South Africa 53 Cipla Health Employees Stock Option Trust INR 1.0000 0.00 0.00 0.00 0.00 - 0.00 0.00 0.00 0.00 - 100% India 54 Cipla Employee Stock Option Trust INR 1.0000 0.00 0.00 0.00 0.00 - 0.00 0.00 0.00 0.00 - 100% India * Converted using average rate ** 95.46% is held by Cipla Limited and 4.54% is held through Cipla Health Employees Stock Option Trust Annual Annual Report 2019-20 Salient Features of Financial Statements of Subsidiaries and Associates Overview Corporate Statement pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of the Companies (Accounts) Rules, 2014 in form AOC-1 related to Subsidiaries and Associate Companies Part (B) : Associates Shares of Associate held by the Company on 31st March, 2020 Profit/Loss for the year ended 31st March 2020 Networth 001-120 attributable Description Latest to of how Reason Amount of Considered Not Audited Extent of Shareholding there is why the Sr. Name of the Investment in Considered Balance No. of shares Holding as per latest significant associate No. associate in Associate Consolidation in Sheet % audited influence is not (J in Crores) (J in Crores) Consolidation Date Balance (refer note consolidated Sheet 44) (J in Crores) Reports Statutory Salient FeaturesSalient ofStatements Financial ofand Associates Subsidiaries 1 Stempeutics Research Private Limited 31/03/20 2,05,02,525.00 69.97 40.78% - (6.95) (0.65) - - 2 Avenue Therapeutics, Inc. 31/12/19 58,33,333.00 242.05 33.30% 209.04 (38.11) - - - 3 Brandmed (Pty) Limited 31/03/20 375.00 31.62 30.00% 25.38 (2.40) - - - 121-230 4 AMPSolar Power Systems Private Limited 31/03/20 90,000.00 9.00 26.00% 0.55 - - - - Statements Financial 231-423 423 Annual Report 2019-20 GRI Standard Index GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer Reporting Practice GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI 102: General 102-45 Entities included in the FORM NO. MGT-9 (Page no. 157-163) Disclosures 2016 consolidated financial statements Shareholding Pattern (Page no. 216) General Disclosures 102-46 Defining report content and About this Report (Page no. 004) Organizational Profile topic boundaries GRI 102: General 102-1 Name of the organization About Cipla (Page no. 005) 102-47 List of material topics Materiality Assessment (Page no. 046-047) Disclosures 2016 102-2 Activities, brands, products, About Cipla (Page no. 005) 102-48 Restatements of information No restatements and services BRR Section A (Page no. 176) 102-49 Changes in reporting About this Report (Page no. 004) 102-3 Location of headquarters Corporate Information (Page no. 015) Materiality Assessment (Page no. 046-047) 102-4 Location of operations BRR Section A (Page no. 176) 102-50 Reporting period About this Report (Page no. 004) 102-5 Ownership and legal form Shareholding Pattern (Page no. 216) 102-51 Date of most recent report Prior to this, Cipla published its previous annual 102-6 Markets served Global Reach (Page no. 010-011) report 'Healthcare with a purpose' for FY 2018-19. 102-7 Scale of the organization Sustainability Highlights (Page no. 008-009) 102-52 Reporting cycle About this Report (Page no. 004) 102-53 Contact point for questions About this Report (Page no. 004) 102-8 Information on employees Human Capital (Page no. 076) regarding the report and other workers 102-54 Claims of reporting About this Report (Page no. 004) 102-9 Supply Chain Our Value Creation Model (Page no. 041) in accordance with the GRI Relationship Capital (Page no. 095) Standards 102-10 Significant changes to the Relationship Capital (Page no. 095) 102-55 GRI content index GRI Standard Index (Page no. 424-432) organization and its supply chain Shareholding Pattern (Page no. 216) 102-56 External assurance Independent Assurance Statement (Page no. 221- 102-11 Precautionary principle or Our Integrated Approach to Risk Management 223) approach (Page no. 048-051) 102-12 External initiatives About this Report (Page no 004) Topic Specific Disclosures Relationship Capital (Page no 090) Financial Capital and MDA 102-13 Membership of associations Relationship Capital (Page no. 090) Pricing Pressures Strategy GRI 103: 103-1 Explanation of the material Management discussion and Analysis (Page no. 121- GRI 102: General 102-14 Statement from senior Chairman's message (Page no. 016-017) Management topic and its boundary 141) Disclosures 2016 decision maker Executive Vice-Chairperson’s Message (Page no. Approach 2016 103-2 The management approach Management discussion and Analysis (Page no. 121- 018-019) MD & GCEO's Message (Page no. 020-021) and its components 141) Ethics and Integrity 103-3 Evaluation of the Management discussion and Analysis (Page no. 121- management approach 141) GRI 102: General 102-16 Values, principles, OneCipla Credo (Page no. 006) Non-GRI Pricing Pressures Management discussion and Analysis (Page no. 121- Disclosures 2016 standards, and norms of behavior 141) Governance Growth opportunities GRI 102: General 102-18 Governance structure Board of Directors (Page no. 012) GRI 103: 103-1 Explanation of the material Strategy Strengthened for a Sustainable Tomorrow Disclosures 2016 Management topic and its boundary (Page no. 034-040) Stakeholder Engagement Approach 2016 103-2 The management approach Strategy Strengthened for a Sustainable Tomorrow GRI 102: General 102-40 List of stakeholder groups Stakeholder Engagement (Page no. 044-045) and its components (Page no. 034-040) Disclosures 2016 102-41 Collective bargaining Human Capital (Page no. 082) 103-3 Evaluation of the Strategy Strengthened for a Sustainable Tomorrow agreements management approach (Page no. 034-040) 102-42 Identifying and selecting Stakeholder Engagement (Page no. 044-045) Growth opportunities Strategy Strengthened for a Sustainable Tomorrow stakeholders (Page no. 034-040) 102-43 Approach to stakeholder Stakeholder Engagement (Page no. 044-045) engagement 102-44 Key topics and concerns Stakeholder Engagement (Page no. 044-045) raised 424 Creating Hope since 85 Years GRI Standard Index 425 Annual Report 2019-20 GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer Capital Productivity – balancing growth, profitability and returns Intellectual Capital GRI 103: 103-1 Explanation of the material Financial Capital (Page no. 052-057) Investment in R&D Management topic and its boundary GRI 103: 103-1 Explanation of the material Intellectual Capital (Page no. 065) Approach 2016 103-2 The management approach Financial Capital (Page no. 052-057) Management topic and its boundary Management Discussion and Analysis (Page no. and its components Approach 2016 127-129) 103-3 Evaluation of the Financial Capital (Page no. 052-057) 103-2 The management approach Intellectual Capital (Page no. 065) management approach and its components Management Discussion and Analysis (Page no. Non-GRI Capital Productivity – balancing Financial Capital (Page no. 052-057) 127-129) growth, profitability and returns 103-3 Evaluation of the Intellectual Capital (Page no. 065) Manufacturing Capital management approach Management Discussion and Analysis (Page no. 127-129) Ensuring product quality and safe product destruction Non-GRI Investment in R&D Intellectual Capital (Page no. 065) GRI 103: 103-1 Explanation of the material Manufacturing Capital (Page no. 058-63) Management Discussion and Analysis (Page no. Management topic and its boundary 127-129) Approach 2016 103-2 The management approach Manufacturing Capital (Page no. 058-63) Focus on intellectual property and its components GRI 103: 103-1 Explanation of the material Intellectual Capital (Page no. 066-067) 103-3 Evaluation of the Manufacturing Capital (Page no. 058-63) Management topic and is boundary management approach Approach 2016 103-2 The management approach Intellectual Capital (Page no. 066-067) Non-GRI Ensuring product quality and safe Manufacturing Capital (Page no. 058-63) and its components product destruction 103-3 Evaluation of the Intellectual Capital (Page no. 066-067) Pharmacovigilance management approach GRI 103: 103-1 Explanation of the material Manufacturing Capital (Page no. 063) Non-GRI Focus intellectual property Intellectual Capital (Page no. 066-067) Management topic and its boundary Focus on Innovation Approach 2016 103-2 The management approach Manufacturing Capital (Page no. 063) and its components GRI 103: 103-1 Explanation of the material Intellectual Capital (Page no. 070-073) 103-3 Evaluation of the Manufacturing Capital (Page no. 063) Management topic and its boundary management approach Approach 2016 103-2 The management approach Intellectual Capital (Page no. 070-073) Non-GRI Pharmacovigilance Manufacturing Capital (Page no. 063) and its components 103-3 Evaluation of the Intellectual Capital (Page no. 070-073) Systems and Processes management approach GRI 103: 103-1 Explanation of the material Manufacturing Capital (Page no. 058-63) Non-GRI Innovation for Core (Generics) and Intellectual Capital (Page no. 070-073) Management topic and its boundary Non - Core (Specialty) Approach 2016 103-2 The management approach Manufacturing Capital (Page no. 058-63) Human Capital and its components 103-3 Evaluation of the Manufacturing Capital (Page no. 058-63) Human Resource development management approach GRI 103: 103-1 Explanation of the material Human Capital (Page no. 075-76) Non-GRI Systems and Processes (enhancing Manufacturing Capital (Page no. 058-63) Management topic and its boundary productivity and efficiency and Approach 2016 103-2 The management approach Human Capital (Page no. 075-76) quality) and its components Data Integrity 103-3 Evaluation of the Human Capital (Page no. 082) GRI 103: 103-1 Explanation of the material Manufacturing Capital (Page no. 062-063) management approach Management topic and its boundary GRI 401: 401-1 New employee hires and Human Capital (Page no. 077) Approach 2016 103-2 The management approach Manufacturing Capital (Page no. 062-063) Employment 2016 employee turnover and its components 401-2 Benefits provided to full-time Human Capital (Page no. 081) 103-3 Evaluation of the Manufacturing Capital (Page no. 062-063) employees that are not provided to management approach temporary or part-time employees Non-GRI Data Integrity Manufacturing Capital (Page no. 062-063) 401-3 Parental leave Human Capital (Page no. 082) 426 Creating Hope since 85 Years GRI Standard Index 427 Annual Report 2019-20 GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI 404: Training 404-1 Average hours of training Human Capital (Page no. 079) Protection of human rights and Education per year per employee GRI 103: 103-1 Explanation of the material Human Capital (Page no. 082) 2016 404-2 Programs for upgrading Human Capital (Page no. 079) Management topic and its boundary employee skills and transition Approach 2016 103-2 The management approach Human Capital (Page no. 082) assistance programs and its components 404-3 Percentage of employees Human Capital (Page no. 080) 103-3 Evaluation of the Human Capital (Page no. 082) receiving regular performance and management approach career development reviews GRI 407: Freedom 407-1: Operations and suppliers Human Capital (Page no. 082) Ensuring employee health and safety of Association in which the right to freedom GRI 103: 103-1 Explanation of the material Human Capital (Page no. 083) and Collective of association and collective Management topic and its boundary Bargaining bargaining may be at risk Approach 2016 103-2 The management approach Human Capital (Page no. 083) GRI 408: Child 408-1 Operations and suppliers at Human Capital (Page no. 082) and its components Labor 2016 significant risk for incidents of child 103-3 Evaluation of the Human Capital (Page no. 083) labor management approach GRI 409: Forced 409-1 Operations and suppliers Human Capital (Page no. 082) GRI 403: 403-1 Occupational health and Human Capital (Page no. 083) or Compulsory at significant risk for incidents of Occupational safety management system Labor 2016 forced or compulsory labor Health and Safety 403-2 Hazard identification, Human Capital (Page no. 083) GRI 412: Human 412-2 Employee training on human Human Capital (Page no. 079) risk assessment, and incident Rights Assessment rights policies or procedures investigation Succession Planning 403-3 Occupational health Human Capital (Page no. 083) GRI 103: 103-1 Explanation of the material Human Capital (Page no. 078) services Management topic and its boundary 403-4 Worker participation, Human Capital (Page no. 083) Approach 2016 103-2 The management approach Human Capital (Page no. 078) consultation, and communication and its components on occupational health and safety 103-3 Evaluation of the Human Capital (Page no. 078) 403-5 Worker training on Human Capital (Page no. 084) management approach occupational health and safety Non-GRI Succession Planning Human Capital (Page no. 078) 403-6 Promotion of worker health Human Capital (Page no. 083) Relationship Capital 403-7 Prevention and mitigation Human Capital (Page no. 083) of occupational health and safety Sustainable supply chain impacts directly linked by business GRI 103: 103-1 Explanation of the material Relationship Capital (Page no. 087) relationships Management topic and its boundary 403-9 Work-related injuries Human Capital (Page no. 083) Approach 2016 103-2 The management approach Relationship Capital (Page no. 087) Promoting diversity and its components GRI 103: 103-1 Explanation of the material Human Capital (Page no. 075-076) 103-3 Evaluation of the Relationship Capital (Page no. 087) Management topic and its boundary management approach Approach 2016 103-2 The management approach Human Capital (Page no. 075-076) GRI 204: 204-1 Proportion of spending on Relationship Capital (Page no. 098) and its components Procurement local suppliers practices 2016 103-3 Evaluation of the Human Capital (Page no. 082) management approach GRI 405: Diversity 405-1 Diversity of governance Human Capital (Page no. 075) and Equal bodies and employees Corporate Governance Report (Page no. 184-186) Opportunity 2016 GRI 406: Non- 406-1 Incidents of discrimination Human Capital (Page no. 082) discrimination and corrective actions taken 2016 428 Creating Hope since 85 Years GRI Standard Index 429 Annual Report 2019-20 GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer Enhancing availability and affordability of medicines GRI 413: Local 413-1 Operations with local Social Capital (Page no. 101-111) Communities 2016 community engagement, impact GRI 103: 103-1 Explanation of the material Relationship Capital (Page no. 087) assessments, and development Management topic and its boundary programs Approach 2016 103-2 The management approach Relationship Capital (Page no. 087) and its components 413-2 Operations with significant actual and potential negative 103-3 Evaluation of the Relationship Capital (Page no. 087) impacts on local communities management approach Natural Capital Non-GRI Enhancing availability and Relationship Capital (Page no. 087-089) Energy efficiency and managing our carbon emissions affordability of medicines GRI 103: 103-1 Explanation of the material Natural Capital (Page no. 113, 114-115, 116) Improving Patient experience Management topic and its boundary GRI 103: 103-1 Explanation of the material Relationship Capital (Page no. 087) Approach 2016 103-2 The management approach Natural Capital (Page no. 113, 114-115, 116) Management topic and its boundary and its components Approach 2016 103-2 The management approach Relationship Capital (Page no. 087) 103-3 Evaluation of the Natural Capital (Page no. 113, 114-115, 116) and its components management approach 103-3 Evaluation of the Relationship Capital (Page no. 087) GRI 302: Energy 302-1 Energy consumption within Natural Capital (Page no. 114-115) management approach 2016 the organization Non-GRI Improving Patient experience Relationship Capital (Page no. 091-093) 302-4 Reduction of energy Natural Capital (Page no. 114-115) GRI 416: Customer 416-1 Assessment of the health Relationship Capital (Page no. 094-095) consumption Health and Safety and safety impacts of product and GRI 305: 305-1 Direct (Scope 1) GHG Natural Capital (Page no. 116) service categories Emissions 2016 emissions 416-2 Incidents of non-compliance 305-2 Energy indirect (Scope 2) Natural Capital (Page no. 116) concerning the health and safety GHG emissions impacts of products and services 305-4 GHG emissions intensity Natural Capital (Page no. 116) GRI 417: Marketing 417-1 Requirements for product and Relationship Capital (Page no. 094-095) Water Management and Labeling service information and labelling GRI 103: 103-1 Explanation of the material Natural Capital (Page no. 113, 117-118) 417-2 Incidents of non-compliance Management topic and its boundary concerning product and service Approach 2016 103-2 The management approach Natural Capital (Page no. 113, 117-118) information and labelling and its components 417-3 Incidents of non- 103-3 Evaluation of the Natural Capital (Page no. 113, 117-118) compliance concerning marketing management approach communications GRI 303: Water 303-1 Water withdrawal by source Natural Capital (Page no. 117-118) GRI 418: Customer 418-1 Substantiated complaints Relationship Capital (Page no. 094-095) and Effluents 2016 303-3 Water recycled and reused Natural Capital (Page no. 117-118) Privacy concerning breaches of customer privacy and losses of customer Waste Management data GRI 103: 103-1 Explanation of the material Natural Capital (Page no. 113, 118, 119-120) Social Capital Management topic and its boundary Approach 2016 103-2 The management approach Natural Capital (Page no. 113, 118, 119-120) Community engagement and its components GRI 103: 103-1 Explanation of the material Social Capital (Page no. 101) 103-3 Evaluation of the Natural Capital (Page no. 113, 118, 119-120) Management topic and its boundary management approach Approach 2016 103-2 The management approach Social Capital (Page no. 101) and its components 103-3 Evaluation of the Social Capital (Page no. 101) management approach 430 Creating Hope since 85 Years GRI Standard Index 431 Annual Report 2019-20 GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI Standard Disclosure Title Reference/ Page Number/ Direct Answer GRI 306: Effluents 306-1 Water discharge by quality Natural Capital (Page no. 118) GRI 103: 103-1 Explanation of the material Strategy Strengthened for a Sustainable Tomorrow and Waste 2016 and destination Management topic and its boundary (Page no. 039) 306-2 Waste by type and disposal Natural Capital (Page no. 119-120) Approach 2016 Intellectual Capital (Page no.073) method 103-2 The management approach Strategy Strengthened for a Sustainable Tomorrow 306-3 Significant spills Natural Capital (Page no. 119-120) and its components (Page no. 039) Intellectual Capital (Page no.073) 306-4 Transport of hazardous Natural Capital (Page no. 119-120) waste 103-3 Evaluation of the Strategy Strengthened for a Sustainable Tomorrow management approach (Page no. 039) Others Intellectual Capital (Page no.073) Regulatory Environment Non-GRI Digital Strategy Strengthened for a Sustainable Tomorrow GRI 103: 103-1 Explanation of the material Management discussion and Analysis (Page no. (Page no. 039) Management topic and its boundary 123-125) Intellectual Capital (Page no.073) Approach 2016 103-2 The management approach Management discussion and Analysis (Page no. and its components 123-125) 103-3 Evaluation of the Management discussion and Analysis (Page no. management approach 123-125) Non-GRI Regulatory Environment Management discussion and Analysis (Page no. 123-125) Focus on Corporate Governance – Business ethics, Enterprise wide risk management and Compliance GRI 103: 103-1 Explanation of the material Corporate Governance Report (Page no. 207-208) Management topic and its boundary Our Integrated Approach to Risk Management Approach 2016 (Page no. 048-051) Statutory Reports (Page no. 121-238) 103-2 The management approach Corporate Governance Report (Page no. 207-208) and its components Our Integrated Approach to Risk Management (Page no. 048-051) Statutory Reports (Page no. 121-238) 103-3 Evaluation of the Corporate Governance Report (Page no. 207-208) management approach Our Integrated Approach to Risk Management (Page no. 048-051) Statutory Reports (Page no. 121-238) Non-GRI Compliance Statutory Reports (Page no. 121-238) Anti- Fraud GRI 103: 103-1 Explanation of the material Corporate Governance Report (Page no. 207-208) Management topic and its boundary Approach 2016 103-2 The management approach Corporate Governance Report (Page no. 207-208) and its components 103-3 Evaluation of the Corporate Governance Report (Page no. 207-208) management approach Non-GRI Anti-Fraud Corporate Governance Report (Page no. 207-208) Digitisation 432 Creating Hope since 85 Years Glossary of Abbreviations 433 Annual Report 2019-20 Glossary of Abbreviations 434 Creating Hope Since 85 Years Glossary of Abbreviations 435 Annual Report 2019-20 IPD Integrated Product Development MS Market Share POSH Prevention of Sexual Harassment SFDA Saudi Food and Drug Authority ISCCM Indian Society of Critical Care MSL Mobile Science Labs POTW Publically Owned Treatment Works Single Crystal XRD Single Crystal X-ray Medicine MT Metric Tonnes PPE Personal Protective Equipment Diffraction IT Information Technology MW Megaw`att PPA Power Purchase Agreement SDRC Skill Development & Rehabilitation IVPT in vitro penetration/ permeation NC Non-compliances PR Public Relations Centre testing NCD Non-Communicable Diseases PRAKASH Programmed Approach to SKU Stock Keeping Units IRMC Investment and Risk Management NCL National Chemical Laboratory Knowledge and Sesitisation on SMEDDs Selfmicroemulsifying drug delivery Committee systems NGT National Green Tribunal Hepatitis IV Intravenous SOP Standard Operating Procedure NDA New Drug Applications PTP Principal to principal KFDA Korea Food and Drug Administration SLF Secured Land-Filling NGO Non-Governmental Organisation PVM Particle Vision Measurement KL Kilo Liter SVL Synchronous Virtual Learning NLEM National List of Essential Medicines PwD Persons with Disabilities KLD Kilo Liters per day tCO2e Tonnes of CO2 Equivalent NHI National Health Insurance PXRD Powder X-Ray Diffractometer TB Tuberculosis kW Kilo Watt NMR Non- Magnetic Resonance Q1 Quarter 1 TBI Traumatic Brain Injury kWh KiloWatt Hours NPI New Products Introduction Q2 Quarter 2 TCO Total Cost of Ownership kWp Kilo Watt Peak NRC Nomination and Remuneration Q3 Quarter 3 LABA Long Acting Beta-Agonist Committee Q4 Quarter 4 TDR Theoretical Drug Release LAMA Long-Acting Muscarinic Antagonists NRT Nicotine Replacement Therapy Qbd Quality by Design TGA Theoretical Goods Administration LATAM Latin American Regions NVG National Voluntary Guidelines QC Quality Control TJ Tera Joules LCMP Life Cycle Management Process OAD Obstructive airway diseases QMS Quality Management system TSDF Treatment, Storage and Disposal Facilities LC-MS Liquid Chromatography- Mass OAI Official Action Indicated R&D Research and Development UCPMP Uniform Code of pharmaceutical Spectrometry OECD Organisation for Economic Co- RAS Rectal Artesunate Suppository Marketing Practices LED Light-emitting diode Operation and Development RBM Result Based Management UNDP United Nations Development LEP Local EHS Procedures OHS Occupational Health and Safety RCC Renal Cell Carcinoma Programme LIMS Laboratory Information OHSMS Occupational Health and Safety RESCO Renewable Energy Service Company Management System USD US Dollar Management System RLD Reference Listed Drug LMIC Low- and Middle-Income Countries USFDA US Food and Drug Administration OPD Out Patient Department RO Reverse Osmosis LNG Liquefied Natural Gas USICON Urological Society of India OPEX Operational Expenditure RoCE Return on Capital Employed LPG Liquified Petroleum Gas USP United States Pharmacopeia OTIF On Time In Full ROiC Return on invested capital LPMS Labour Productivity Management USPTO United States Patent and Trademark OT Operational Technology RoE Return on Equity System Office OTC Over The Counter RPA Robotic Process Automation LTI Lost Time Injury VFD Variable Frequency Drive p.a Per annum RPN Risk Priority Number M&S Modelling and Simulation VTFD Vertical Thin Film Dryer PADER Periodic Adverse Drug Experience SAGA South Africa, Sub-Saharan Africa MAs Marketing Authorisations VVMC Vasai Virar Municipal Corporation PADO Paediatric antiretroviral drugs and and Cipla Global Access MALS Multi-Angle Light Scattering WC Working Capital formulations SAHPRA South African Health Products WFH Work From Home MCGM Municipal Corporation of Greater PAH Pulmonary Arterial Hypertension Regulatory Authority Maharashtra WHO World Health Organisation PAT Profit After Tax SCI Spinal Cord Injury MD Managing Director WHO PQ World Health Organisation Pre PbPK Physiologically-based Pharmaco SEBI Securities and Exchange Board of Qualified MEE Multi Effect Evaporators Kinetic India WTD Whole-time Directors MEHA Middle Eastern and North African PD Performance Dialogues SEC Size Exclusion Chromatography WLAP Work-Life Assistance Programme MES Manufacturing Execution System PDCA Plan, Do, Check, Act SCADA Supervisory Control & Data XRPD X-ray Powder Diffraction MHRA Medicines and Healthcare Products Ph.Eur European Pharmacopeia Acquisition Y-o-Y Year on Year Regulatory Agency Ph.Int International Pharmacopeia SEDDS Self-Emulsifying Drug Delivery ZLD Zero Liquid Discharge MHU Mobile Health Units PHARMEXCIL Pharmaceuticals Export Promotion Systems MIDNA Mi - Develop, Nurture & Achieve Council SEDI Skill and Entrepreneurship MMV Medicines for Malaria Venture PMDA Pharmaceuticals and Medical Development Institute mn Million Devices Agency, Japan SEE Social, Environmental and Economic MOU Methods of Use pMdi Pressured Metered Dose Inhaler 436 Creating Hope Since 85 Years Glossary of Abbreviations 437 Notes Notes Notes Disclaimer Except for the historical information contained herein, statements in this Annual Report may constitute ‘forward looking statements’. These forward looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include but are not limited to our ability to successfully implement our strategy, our growth and expansion plans, our ability to obtain regulatory approvals, technological changes, fluctuation in earnings, foreign exchange rates, our ability to manage international operations and exports, our exposure to market risks, as well as other risks. Cipla Limited does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date thereof. Information related to any medical products or medical devices contained herein is provided by Cipla for general information purposes only. Information on any of the medical products or medical devices may vary from country to country. A reference to a medical product or a medical device does not imply that such medical product or medical device is available in every country. The commercial availability of the medical products or medical devices listed herein for a specific country is dependent on the validity and status of existing patents and/ or marketing authorisations related to each of them. An independent enquiry regarding the availability of medical products and medical devices should be made for each individual country. The product information contained herein is not intended to provide complete medical information, and is not intended to be used as an alternative to consulting qualified doctors or healthcare professionals. Nothing contained herein should be construed as giving of advice or the making of a recommendation, and it should not be relied upon as the basis for any decision or action. It is important to only rely on the advice of a healthcare professional. www.kalolwala.co.in Cipla Limited Cipla House, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400013 Tel: (022) 2482 6000; Fax: (022) 2482 6120 Email: [email protected]; Website: www.cipla.com | : K&A & Cipla SAGA consultants Creative Corporate Identity Number: L24239MH1935PLC002380