Notes for changes in current year:

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

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

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

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

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

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

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

Notes for changes in previous year:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(a) repayable on demand; or

(b) without specifying any terms or period of repayment

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

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

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

Terms and rights attached to equity shares

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

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

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

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

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

Nature and purpose of reserve:-

Capital reserve

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

Securities premium reserve

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

General reserve

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

Employee stock options/ESAR

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

Retained earnings

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

Financial Instruments fair value through other comprehensive income

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

Cash flow hedge reserve

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

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

(iii) Contract assets

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

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

Note 37: Discontinuing/restructuring operations

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

restructuring/transfer of:

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

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

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

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

Notes:

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

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

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

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

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

B. Details of other litigations:-

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

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

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

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

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

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

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

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

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

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

Note 39: Employee benefitsa. Description of the plan:

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

b. Governance of the plan:

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

c. Investment strategy:

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

The sensitivity analysis above has been determined based on reasonable possible changes of the respective assumption occurring at the end of the reporting period while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

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

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

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

- Company's own financial instrument

- Property occupied by or other assets used by the Company

h. Compensated absences note:

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

B. Employee Stock Appreciation Rights ('ESARs')

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

Note 42: Segment information

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

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

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

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

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

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

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

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

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

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

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

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

Note 45: Financial instruments A. Fair value measurement

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

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

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

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

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

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

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

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

B. Financial risk management objectives and policies

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

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

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

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

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

Market risk

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

• currency risk;

• other price risk; and

• interest rate risk

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

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

(c) Interest rate risk

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

Credit risk

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

T rade and other Receivables

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

Cash and cash equivalents and investments:

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

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

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

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

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

Expected credit loss:

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

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

(d) Impact of hedging activities

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

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

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

A. Risk Management

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

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

Note 48: Earnings Per Share (EPS)

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

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

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

Note 49: Income Tax Search and Survey

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

Note 50: Reclassification note

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

Note 51: Subsequent events

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

Note 52: Unforeseeable losses

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

Note 53: Impact of Code on Social Security, 2020

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

Note 54: Authorisation of financial statements

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