C Nature and purpose of reserves:

1 Capital Reserve

The Capital Reserve was created as per the requirements of earlier provision of the Companies Act, 1956. Such reserve is not available for distribution to the shareholders.

2 Capital Redemption Reserve

The Company has redeemed 1,350,000 7% Redeemable Cumulative Preference Shares of H 100/- each face value at par out of profits of the Company on various dates. Accordingly, a sum equal to the nominal amount of the preference shares i.e. H 135 Million (including H 50 Million pertaining to current year), out of the profits, has been transferred to Capital redemption reserve, as and when Preference Shares were redeemed.

During the current year, the Company bought back and accounted buy back of 6,474,276 equity shares. As per Companies Act, 2013, capital redemption reserve is created when company purchases its own shares out of free reserves or securities premium. A sum equal to the nominal value of the shares so purchased is transferred to capital redemption reserve. Accordingly, H 6.47 Million has been transferred from Retained Earnings to Capital Redemption Reserve. The reserve is utilised in accordance with the provisions of Section 69 of the Companies Act, 2013.

3 Securities Premium

Securities premium comprises of the premium on issue of shares. The reserve can be utilised in accordance with the specific provision of the Companies Act, 2013.

4 General Reserve

The Company has transferred a portion of the net profit before declaring dividend to general reserve pursuant to the earlier provisions of the Companies Act, 1956. Transfer to general reserve is not mandatorily required under the Companies Act, 2013.

5 Retained Earnings

Retained earnings are the profits earned till date, less any transfers to other reserves and dividends distributed.

b. Terms/rights attached to Equity Shares

The Company has only one class of equity shares having a face value of H 1/- per share. All the equity shares rank pari passu in all respect. Every holder of equity shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. The equity share holders are entitled to dividend, if declared by the shareholders in an Annual General Meeting, in proportion to the number of equity shares held by the shareholders. 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 shareholders.

c. Terms/rights attached to Preference Shares

The Company’s preference shares carry dividend at the rate of 7% per annum subject to approval of the shareholders at an Annual General Meeting. The holder of the preference shares is entitled to one vote per share only on resolutions placed before the Company which directly affect the rights attached to the preference shares. In the event of liquidation of the Company before redemption of the preference shares, the holder of the preference shares will have priority over equity shares in the payment of dividend and repayment of capital. 7% redeemable preference shares issued by the Company have been classified as a financial liability.

d. The Company has redeemed all 7% Redeemable cumulative preference shares of H 100/- each at par on various dates.

e. The Company has issued on 20 January 2023, 50,324,324 Equity Shares of H 1/- each face value pursuant to conversion of Convertible Warrants on preferential issue basis. The Company has issued and allotted, 1,000,000 Equity Shares to Mr. Mark Saldanha and 49,324,324 Equity Shares to OrbiMed Asia IV Mauritius FVCI Limited at a price of H 74.00 per Equity Share pursuant to conversion of convertible warrants issued on preferential basis on receipt of the balance 75% of the issue price. The Company had received 25% of the issue price at the time of issue of convertible warrants. The Company has raised H 3,724 Million from the above preferential issue.

f. The Company has not issued bonus shares during the period of five years immediately preceding the reporting date.

g. The Board of Directors at its meeting held on 08 July, 2022 had approved the proposal to buy back its own fully paid up Equity Shares of face value H 1/- each up to a maximum price of H 60 per Equity Share (“Maximum Buyback Price”) payable in cash for an aggregate buy back consideration not exceeding H 600 Millions (“Maximum Offer Size”) through the Open Market route on the Stock Exchanges from the equity shareholders / beneficial owners of the Equity Shares of the Company (other than those who are promoters, members of the promoter group and persons in control of the Company).

During the year, the Company bought back and accounted buy back of 6,474,276 equity shares which were extinguished on or before 18 January 2023 and completed the aforesaid buyback offer.

Aforesaid buyback offer resulted in a cash outflow of H 401.66 Million (including transaction costs of H 7.22 Million and tax on buyback of H 73.30 Million). The volume weighted average buyback price is H 49.60 per equity share comprising 1.58% of the pre buyback paid up equity share capital of the Company.

The Company funded the buy back from its free reserves, including securities premium, as explained in Section 68 of the Companies Act, 2013. In accordance with Section 69 of the Companies Act, 2013, the Company has created “Capital Redemption Reserve” of H 6.47 Million equal to the nominal value of the shares bought back as an appropriation from Retained earnings.

The Company has not bought back equity shares for consideration other than cash during the period of five years immediately preceding the reporting date.

NOTE 36 : EMPLOYEE POST- RETIREMENT BENEFITS

The following are the employee benefit plans applicable to the employees of the Company

i Defined Contribution Plan

The Company also has a defined contribution plan. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

The Company’s contribution to Provident Fund H 31.63 Million (31 March 2022: H 25.76 Million) has been recognised in Profit or Loss under the head Employee Benefits Expense.

ii Gratuity (Defined benefit plan)

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is an unfunded plan.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligations 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 defined benefit obligations has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

k Through its defined benefit plan, the Company is exposed to a number of risks, the most significant of which are detailed below:

1. Changes in bond yields: A decrease in bond yields will increase plan liabilities.

2. Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

3. Salary growth risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. An increase in the salary of the plan participants will increase the plan’s liability.”

iii Other long term employee benefits:

Compensated Absences: (included as a part of salaries and wages in Note 32 - Employee benefits expense) All eligible employees can carry forward and avail / encash leave as per Company’s policies.

36.1 Employee Stock Option Plan

The Shareholders of the Company at the 30th Annual General Meeting held on 29 August 2022, approved Marksans Employees Stock Option Scheme 2022. Under the said scheme, the Company can grant a total of 8,186,273 options to the eligible employees for issue and allotment of equal number of equity shares of H 1/- each face value. The exercise price and other terms and conditions shall be as decided by the Compensation Committee at the time of grant of options from time to time. However, the said scheme has not been implemented yet.

NOTE 37 : CAPITAL MANAGEMENT

The Company’s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term/ long term debt as may be appropriate.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans and long-term and other strategic investment plans. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. The current capital structure of the Company is equity based with no financing through borrowings except through leasing. The Company is not subject to any externally imposed capital requirements. Net debt and equity is given in the table below:

A. Accounting classification and fair values

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

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

Fair value of cash and bank balances, trade receivables and other financial assets, trade payables, other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31, 2022.

During the reporting period ending March 31, 2023 and March 31, 2022, there were no transfers between Level 1 and Level 2 fair value measurements.

Fair value hierarchy :

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

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities included in level 3.

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.

B. Financial Risk Management Framework

The Company’s activities expose it to variety of financial risks namely market risk, credit risk and liquidity risk. The Company has various financial assets such as deposits, trade and other receivables and cash and bank balances directly related to their business operations. The Company’s principal financial liabilities comprise of trade and other payables.

The Company’s senior management’s focus is to foresee the unpredictability and minimize potential adverse effects on the Company’s financial performance. The Company’s overall risk management procedures to minimise the potential adverse effects of financial market on the Company’s performance are as follows :

(i) Credit risk analysis

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.

The Company has significant concentration of credit risk with respect to the sale of goods as the Company sells majority of the productions to the group companies. Management closely monitors the credit quality and collectability of receivables. Since majority of the Company’s sales are to the group companies, there is no credit risk attached to the Company’s receivables. Outstanding customer receivables other than group companies are regularly monitored and any shipments to new overseas customers are generally covered by letters of credit or other forms of credit insurance. The management continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery. The Company establishes an allowances for credit losses and impairment that represents its estimates of Expected Credit Loss (ECL).

The Company held cash and cash equivalents and other bank balances of H 4,402.62 Million at 31 March, 2023 (31 March, 2022: H 2,240.48 Million). The cash and cash equivalents are held with bank and financial institution counterparties with good credit ratings.

Trade and other receivables

As at the year ending 31 March 2023 and 31 March 2022, two customer is exceeding 10% of the Company’s total trade receivables.

The Company continuously monitors defaults of customers and other counterparties, identified either individually or by the Company, and incorporates this information into its credit risk controls. The Company’s policy is to deal only with creditworthy counterparties.

The Company’s management considers that all the above financial assets that are not impaired at each of the reporting dates and are of good credit quality, including those that are past due.

Summary of the Company’s exposure to credit risk by age of the outstanding from various customers is in Note 10.

Further, management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk.

Other than trade and other receivables, the Company has no other financial assets that are past due but not impaired.

(ii) Liquidity risk analysis

Liquidity risk is the risk that company will not be able to meet its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or encounters difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The Company manages liquidity risk by maintaining sufficient cash and bank balance and availability of funding through adequate amount of committed credit facilities.

The Company’s activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks)

(a) Foreign Currency risk

The Company’s foreign currency risk arises from its foreign operations, investments in foreign subsidiaries and foreign currency transactions. The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.

Since a major part of the Company’s revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Company’s performance. Consequently, the overall objective of the foreign currency risk management is to minimize the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD, GBP & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges its trade receivables based on historical trends, budgets and monthly sales estimates. The foreign exchange forward contracts are denominated in the same currency as the highly probable forecast sales.

(b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Since the Company does not have any interest bearing borrowings, the exposure to risk of changes in market interest rates is minimal.

(c) Other Price Risk:

The Company’s equity exposure in Subsidiaries, are carried at cost or deemed cost and these are subject to impairment testing as per the policy followed in this respect.

The company’s current investments which are fair valued through profit and loss and are not material. Accordingly, other price risk of the financial instrument to which the company is exposed is not expected to be material.

Exposure to interest rate risk

Since the Company does not have any interest bearing financial liabilities, a change in interest rates at the reporting date would not have any significant impact on the financial statements of the Company. The Company’s investments are primarily in fixed rate interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk.

All transactions with related parties are made in the ordinary course of business and the same is at arm’s length. Outstanding balances at the year end are unsecured and interest free and settlement occurs in cash. The Company has not recorded any impairment for receivables. This assessment is undertaken each financial year through examining the financial position of the related parties and the market in which related parties operate.

C. Information about major customers

During the years ended 31 March 2023 and 31 March 2022, revenues from transactions with a single customer amount to 10% or more of the Company’s revenues from customers includes 3 customers amounting to H 5,443.73 Million and H 5,719.57 Million respectively.

NOTE 42 : CONTINGENT LIABILITIES, CONTINGENT ASSETS AND COMMITMENTS

Contingent liabilities (to the extent not provided for)

(i) It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above pending resolution of the proceedings as it is determinable only on receipt of judgments / decisions pending with the forums / authorities.

(ii) The Company does not expect any reimbursements in respect of the above contingent liabilities.

(iii) The Company’s pending litigations comprise of claims against the Company pertaining to proceedings pending with direct tax authorities. The Company has reviewed its proceedings and has adequately provided for where provisions are required or disclosed as contingent liabilities where applicable, in its standalone financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its standalone financial statements.

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The areas for CSR activities are community healthcare, free food, sanitation & hygiene, environmental sustainability and education. A CSR committee has been formed by the Company as per the Act. The funds were primarily utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013:

The Company does not have any outstanding loans or borrowings (except redeemable preference shares) and repayment to lenders during the current and previous year. The Company has been sanctioned working capital limits from a bank through collateral security of equitable / registered mortgage on first pari-passu charge basis of whole of the movable fixed assets including without limitation movable plant and machinery, capital work in process, machinery spares, tools and accessories and other movables, present and future. Land bearing plot number L-82 & L-83, Phase II - E admeasuring 23,900 sq. mtrs. of the property known as Verna Industrial Estate situated in Goa together with all buildings and structures, machinery etc. on the said properties and hypothecation and first pari-passu change over the Company’s entire current assets both present and future with other consortium member banks.

NOTE 46 : SUBSEQUENT EVENTS

a. The Board of Directors, in the meeting held on 30 May 2023, has declared payment of interim dividend of H 0.50 per equity share of H 1/- each (50%) for the financial year 2022-23.

b. On 11 October 2022, the Company had entered in to a Business Transfer Agreement with Tevapharm India Private Limited to acquire its manufacturing facility relating to the manufacture and supply of pharmaceutical formulations in Goa as a going concern on a slump sale basis. Manufacturing site is spread across 47,597 square meters. This manufacturing facility has approvals to manufacture products from EU, Health Canada and Japanese Health Authority. The transaction is in cash consideration. Subsequent to 31 March, 2023, the Company has completed the said acquisition for a consideration of H 779.47 Million (excluding other acqusition cost) from Tevapharm India Private Limited. No impact for the said acquisition has been given in these standalone financial statements as this is a non adjusting event.

1 During the year the Company has redeemed at par entire 500,000 7% Redeemable cumulative preference shares aggregating to H 50 Million.

2 Due to the increase in the shareholder’s equity on account of conversion of warrants (Refer note 16 share capital)

3 Due to the increase in the trade receivables.

4 Due to the increase in the current assets mainly on account of increae in the cash and cash equivalents and other bank balances.

5 Due to increase in current assets on account of higher working capital levels.

NOTE 48 : OTHER STATUTORY INFORMATION

a. Details of benami property held

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

b. Borrowing secured against current assets

The Company has been sanctioned working capital limits in excess of H 50 Million in aggregate from a Bank on the basis of security of current assets. Quarterly returns are filed with such Bank which are in agreement with the books of account.

c. Wilful defaulter

The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

d. Relationship with struck off companies

The Company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

e. Compliance with number of layers of companies

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

f. Compliance with approved schemes of arrangements

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

g. Utilisation of borrowed funds and share premium

1. The Company has not advanced or loaned or invested funds to any other persons or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

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

(b) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries

2. The Company has not received any fund from any persons or entities, 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

h. Undisclosed income

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

i. Details of crypto currency or virtual currency

The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.

j. Valuation of PP&E and intangible asset

The Company has not revalued its property, plant and equipment (including right to use assets) or intangible assets or both during the current or previous year.

k. Title deeds of Immovable Properties

Title deeds of all immovable properties are held in the name of the Company.