To the Members of Cipla Limited
To the Members of Cipla Limited
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ('ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Report on the Audit of the Standalone Financial Statements
Opinion
1. We have audited the accompanying standalone financial statements of Cipla Limited ('the Company"), which comprise the Balance Sheet as at 31 March 2025, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flow and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ('the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards ('Ind AS") specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2025, and its profit (including other comprehensive income/ (loss)), its cash flows and the changes in equity for the year ended on that date.
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5. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Key audit matter
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How our audit addressed the key audit matter
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DPCO matters: (Refer note 9, 16 and 38B to the Standalone
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Our audit of DPCO matters included, but was not limited to, the
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Financial Statements)
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following procedures:
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The Company had received several demand notices/
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a) Obtained an understanding of the management's process
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communications from the National Pharmaceutical Pricing
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for updating the status of the matters and assessed the
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Authority ("NPPA") commencing from the year 1998 seeking
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appropriateness of the Company's accounting policies related to
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recovery of alleged overcharging regarding scheduled drugs under the Drugs (Prices Control) Orders-1995 ("DPCO").
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provisions and contingent liabilities in accordance with Ind AS 37; b) Evaluated the design and tested the operating effectiveness of
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Based on Hon'ble Supreme Court ("SC") judgement, during the financial year ended 31 March 2003, the Company deposited H 175.08 Crores with NPPA under protest, representing 50% of the alleged overcharged amounts in respect of demand notices raised till 2003, and got the stay on the Hon'ble Bombay High Court order for recovery of overcharged amount.
Post 2003, the Company continued to receive demands ("Subsequent demands") alleging overcharging which included several duplicate notices/ communications.
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key controls around above process;
c) Inspected correspondence with the Holding Company's external legal counsel in order to corroborate our understanding of these matters, accompanied by discussions with both internal and external legal counsels. Tested the objectivity and competence of such management experts involved;
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Key audit matter
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How our audit addressed the key audit matter
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The Company has reviewed all the notices/ communications
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d) Obtained direct confirmation from the external legal counsel
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received which are attributable to the Company and are under
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handling DPCO matters with respect to the legal determination
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litigation. After removing duplications, the amount covered by
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of the liability arising from such matters, conclusion of the matters
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the notices/communications aggregates to H 2,011 Crores with the
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in accordance with the requirements of Ind AS 37 and disclosures
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principal of H 863 Crores and interest of H 1,148 Crores, wherein
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to be made in the financial statements. Evaluated the response
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based on facts and legal advice, the Company has carried a total
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received from the external legal counsel to ensure that the
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provision of H 86.12 crores (including interest) as at 31 March 2025.
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conclusions reached are supported by sufficient legal rationale;
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The amounts involved are material and the application of
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e) Assessed the appropriateness of methods used, and the reliability of
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accounting principles as given under Ind AS 37, Provisions,
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underlying data for the calculations made for quantifying the amounts
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Contingent Liabilities and Contingent Assets ('Ind AS 370, in
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involved. Tested the arithmetical accuracy of such calculations; and
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order to determine the amounts to be recognised as liability
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f) Evaluated the appropriateness and adequacy of disclosures
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or to be disclosed as a contingent liability or not, is inherently
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given in the standalone financial statements, including disclosure
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subjective and needs careful evaluation and significant
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of the significant litigations of the Company, in accordance with
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judgement to be applied by the management.
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applicable accounting standards.
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Considering the materiality and the inherent subjectivity which
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Based on the audit procedures performed, the judgements made by
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involves significant management judgment in predicting the
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the management were reasonable and disclosures made in respect
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outcome of the matter, DPCO matters have been considered
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of these matters were appropriate in the context of the Standalone
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to be a key audit matter for the current period audit.
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financial statements taken as a whole.
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Recoverability of investments in subsidiaries: (Refer note 5
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Our audit included, but was not limited to, the following procedures:
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and note 35(b) to the Standalone Financial Statements)
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a) Obtained an understanding of the management's process for
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The Company has investments of H 10,331.57 crores in
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identification of impairment indicators and evaluated the design
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subsidiaries being carried at cost/ deemed cost in accordance
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and tested the operating effectiveness of key controls over such
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with Ind AS 27, Separate Financial Statements. At each period
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identification and impairment assessment of identified investments;
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end, the management reviews whether any impairment
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b) Obtained the impairment assessment workings prepared by the
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indicators exist in the carrying value of investments, in accordance with the requirements of Ind AS 36, "Impairment
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management and its experts;
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of Assets" ('Ind AS 360. The Company assesses the recoverable
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c) Involved auditor's experts to assess the appropriateness of
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amounts of each investment when impairment indicators exist.
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the valuation methodologies and the reasonableness of the assumptions used by the management's expert to determine the
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Based on its assessment, the Company have recorded reversal of impairment loss of H 294.66 crores in the current year.
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recoverable amounts;
d) Reconciled the cash flows to the business plans approved by the
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Management's assessment of whether there are impairment indicators and estimate of the recoverable amounts of
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respective Board of Directors of the identified investee companies;
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the identified investments determined through discounted
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e) Evaluated and challenged management's assumptions such as
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cash flow valuation method requires significant judgment in
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implied growth rates during explicit period, terminal growth rate,
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carrying out the impairment assessment. The key assumptions
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targeting savings and discount rate for their appropriateness
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used in management's assessment of the recoverable amounts
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based on our understanding of the business of the respective
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include, but are not limited to, projections of future cash flows,
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investee companies, past results and external factors such as
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growth rates, discount rates, estimated future operating and
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industry trends and forecasts;
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capital expenditure. Changes to these assumptions could
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f) Obtained and evaluated sensitivity analysis performed by the
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lead to material changes in estimated recoverable amounts,
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management on key assumptions of implied growth rates during
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resulting in either impairment or reversals of impairment taken in prior years.
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explicit period, terminal growth rates and discount rates;
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Key audit matter
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How our audit addressed the key audit matter
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Considering the materiality and the inherent subjectivity
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g)
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Tested the mathematical accuracy of the management
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which involves significant management judgment in predicting
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computations;
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future cash flow projections, recoverability of investments in
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h)
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Performed independent sensitivity analysis of aforesaid
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subsidiaries has been considered to be a key audit matter for
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key assumptions to assess the effect of reasonably possible
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the current period audit.
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i)
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variations on the current estimated recoverable amount for each of the identified investments to evaluate sufficiency of headroom between recoverable value and carrying amount; and
Evaluated the appropriateness and adequacy of disclosures given in the standalone financial statements, including disclosure of significant assumptions, judgements and sensitivity analysis performed, in accordance with applicable accounting standards.
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Based on the audit procedures performed, we determined that the management's assertion on the recoverability of investments in subsidiaries is appropriate in the context of the standalone financial statements taken as a whole.
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Revenue from operations: (refer note 1.3.9 and 26 to the
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Our audit included, but was not limited to, the following procedures:
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Standalone financial statements)
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a)
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Obtained an understanding of the management's process for revenue
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The Company recognizes revenue from sales of
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recognition, judgments in estimation and accounting treatment of
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pharmaceutical products, when control of the product is
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discount schemes, returns, rebates and other price adjustments;
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transferred. The Company records product sales net of
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b)
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Evaluated the design and tested the operating effectiveness of
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estimated discounts, right to returns, rebates and other
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the key controls, including general IT controls, key IT application
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price adjustments. The actual point in time when revenue
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controls exercised by the management, over recognition of
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is recognized varies depending on the specific terms and
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revenue and measurement of various discount, right to returns,
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conditions of the sales contracts entered with customers.
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rebates and other price adjustments;
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Further, the Company has a large number of customers
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c)
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Performed substantive testing by selecting samples of revenue
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operating in various geographies and sales contracts with
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transactions pertaining to sale of products during the year and
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customers have different terms relating to the recognition
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verified the underlying supporting documents including contracts,
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of revenue leading to material deductions from gross sales which includes discounts, right to return, rebates and other
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agreements, sales invoices and dispatch/ shipping documents;
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price adjustments in accordance with principles of Ind AS 115, "Revenue from Contracts with Customers" ('Ind AS 115').
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d)
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Performed substantive testing by selecting samples of revenue transactions pertaining to sale of products during specific periods before and after year end to ensure that the correct amount of revenue is recorded in the correct period;
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We identified the recognition of revenue from operations as a key audit matter because:
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e)
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Obtained management workings for amounts recognised
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a) Accrual towards discounts, right to returns, rebates
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towards discount schemes, right to returns and rebates and
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and other price adjustments is complex and requires
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other price adjustments during the year and as at year end. On
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significant judgments and estimates in relation to
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a sample basis, tested the underlying calculations for amounts
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contractual agreements/ commercial terms across
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recorded as accruals and provisions towards the aforementioned
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various geographies. Any change in these estimates can
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obligations, as per the terms of related schemes, contracts and
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have a significant financial impact.
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regulations and traced the underlying data to source documents;
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b) The Company considers revenue as key benchmark
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f)
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Evaluated historical accuracy of the Company's estimates of
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for evaluating performances and hence, there is risk of
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year-end accruals pertaining to aforesaid arrangements made
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revenue being overstated due to pressure to achieve targets, earning expectations or incentive schemes linked
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in the previous years to identify any management bias;
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to performance for a reporting period.
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g)
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Tested the manual sales-related adjustments made to revenue comprising of variable consideration under Ind AS 115 to ensure the appropriateness of revenue recognition during the year; and
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h)
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Evaluated the appropriateness and adequacy of disclosures given in the standalone financial statements in accordance with applicable accounting standards.
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Based on audit procedures performed, we determined that the revenue recognition and measurement is appropriate in the context of the standalone financial statements taken as a whole.
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Information other than the Standalone Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS specified under section 133 of the Act and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the standalone financial statements, the Board of Directors is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
9 The Board of Directors is also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
11. As part of an audit in accordance with Standards on Auditing, specified under section 143(10) of the Act we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Act we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;
• Conclude on the appropriateness of Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern; and
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
15. As required by section 197(16) of the Act, based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order, 2020 ('the Order') issued by the Central Government of India in terms of section 143(11) of the Act we give in the Annexure I, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
17. Further to our comments in Annexure I, as required by section 143(3) of the Act based on our audit, we report, to the extent applicable, that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books, including the manner prescribed in Rule 3(1) of Companies (Accounts) Rules 2014, except that the audit trail feature was not enabled at the database level until 7 June 2024 as further stated in paragraph 17(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended).
c) The standalone financial statements dealt with by this report are in agreement with the books of account;
d) In our opinion, the aforesaid standalone financial statements comply with Ind AS specified under section 133 of the Act;
e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2025 from being appointed as a director in terms of section 164(2) of the Act;
f) With respect to maintenance of accounts and other matters connected therewith refer to our comments in paragraph 17(b) above on reporting under Section 143(3)(b) of the Act and paragraph 17(h)(vi) below on reporting under rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as amended);
g) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company as on 31 March 2025 and the operating effectiveness of such controls, refer to our separate report in Annexure II wherein we have expressed an unmodified opinion; and
h) With respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanations given to us :
i. The Company, as detailed in note 38 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31 March 2025.;
ii. As detailed in note 52, the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31 March 2025.;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31 March 2025;
iv. a. The management has represented that, to the
best of its knowledge and belief, other than as disclosed in note 44(j) and note 44(k) to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities ('the intermediaries'), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ('the Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in note 44(f) to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ('the Funding Parties'), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
c. Based on such audit procedures performed as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the management representations under sub-clauses (a) and (b) above contain any material misstatement.
v. a. The final dividend paid by the Company during the year ended 31 March 2025 in respect of such dividend declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.
b. As stated in note 47B(b) to the accompanying standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year ended 31 March 2025 which is subject to the approval of the members at the ensuing Annual General
Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.
vi. Based on examination which included test checks, the Company in respect of financial year commencing on 1 April 2024, has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility at the application level of the accounting software and the same has been operated throughout the year for all relevant transactions recorded in the software. The audit trail feature (edit log) at the database level for the direct changes was enabled from 7 June 2024 with access management tool. Further, during our audit we did not come across any instance of such audit trail features being tampered with where such feature was enabled. Furthermore, the audit trail has been preserved by the Company as per the statutory requirements for record retention at application level since the commencement of audit trail requirement from 1 April 2023 and at the database level from 7 June 2024 onwards.
For Walker Chandiok & Co LLP
Chartered Accountants
Firm's Registration No.: 001076N/N500013
Adi P. Sethna
Partner
Membership No.: 108840
UDIN: 25108840BMNTWS9296
Place: Mumbai
Date: 13 May 2025
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