Aurobindo Pharma

1.  Capital Commitments
 
 Estimated amount of contracts (net of advances) remaining to be
 executed on capital account and not provided for Rs.1,212.2 (Rs.178.6).
 
 2.  Contingent Liabilities
 
                                               2007-2008      2006-2007
 
 a. Claims against the company not 
    acknowledged as debts                           4.9          4.9
 
 b. Outstanding bank guarantees on account of:
 
 i. Subsidiary Company                               -           4.6
 
 ii.Others                                         256.2        64.0
 
 c. Bills discounted with banks                    323.5       400.5
 
 d. Outstanding letters of credit for 
    import of materials                            444.9       518.3
 
 e. Direct and Indirect Taxes                      263.5       210.7
 
 f. Dossier sales                                  131.3       110.9
 
 g. During the financial year 2005-2006, the Company had issued 60,000
 Zero Coupon Foreign Currency Convertible Bonds of USD 1,000 each. The
 bonds are redeemable at a premium of 39.954% of its principal amount on
 the maturity date, or in whole at any time on or after February 25,
 2008 and on or prior to August 1, 2010 at a minimum of 130% of the
 accreted principal amount if the bonds are not converted earlier. There
 are 55,500 FCCB Bonds outstanding as at the date of the Balance Sheet.
 The payment of premium on redemption is contingent in nature, the
 outcome of which is dependant on uncertain future events. Hence, no
 provision is considered in the accounts in respect of such premium for
 the year amounting to USD 3.85 million (USD 4.79 million) equivalent to
 Rs.128.2 (Rs.204.7) and the cumulative premium amounts to USD 11.7
 million (USD 7.85 million) equivalent to Rs.469.4 (Rs.341.2) at the
 prevailing exchange rate as at the Balance Sheet date.
 
 h. During the financial year 2006-2007, the Company has issued 150,000
 Zero Coupon Foreign Currency Convertible Bonds due 2011 (Tranche A
 Bonds) of USD 1,000 each and 50,000 Forward Conversion Convertible
 Bonds due 2011 (Tranche B Bonds) of USD 1000 each.  Tranche A Bonds and
 Tranche B Bonds are redeemable at 146.285% and 146.991% respectively of
 its principal amount on the maturity date. Accordingly, the payment of
 premium on redemption is contingent in nature, the outcome of which is
 dependant on uncertain future events. Hence, no provision is considered
 in the accounts in respect of such premium for the year amounting to
 USD 18.60 million (USD 16.27 million) equivalent to Rs.691.4 (Rs.706.9)
 and the cumulative premium amounts to USD 34.87 million equivalent to
 Rs.1,398.3 at the prevailing exchange rate as at the Balance Sheet
 date.
 
 3.  Amalgamation of APL Life Sciences Limited (Life Sciences) and Senor
 Organics Private Limited (Senor) with the Company during the financial
 year 2006-2007
 
 a.  Pursuant to the approval of the shareholders of the Company at the
 Extra-ordinary General Meeting held on February 20, 2007, the Honble
 High Court of Judicature Andhra Pradesh at Hyderabad vide its Order
 passed on June 21, 2007 sanctioned the Scheme of Arrangement (Scheme)
 under Sections 391 to 394 read with Section 78 and Section 100 of the
 Companies Act, 1956 between Life Sciences and Senor, wholly owned
 subsidiaries of the Company, with the Company, with effect from April
 01, 2006, and confirmed the utilisation of Securities Premium Account
 towards adjustment of the reduction in the carrying value of certain
 assets. Accordingly, the erstwhile Life Sciences and Senor have
 amalgamated with the Company with effect from April 1, 2006. All the
 assets, liabilities and reserves of the erstwhile Life Sciences and
 Senor, were transferred to and vest with the Company. The Company has
 since made the necessary filings with the Registrar of Companies,
 Andhra Pradesh.
 
 b.  Life Sciences was engaged in the business of trading in
 pharmaceuticals, chemicals and solvent products. Senor was engaged in
 the business of active pharmaceutical ingredients and drug
 intermediates.
 
 c.  The amalgamation has been accounted for under the pooling of
 interests method as prescribed under Accounting Standard 14 issued by
 the Institute of Chartered Accountants of India. Accordingly, the
 assets, liabilities and reserves of the erstwhile Life Sciences and
 Senor as at April 1, 2006, have been taken over at their respective
 book values.
 
 d.  Erstwhile Life Sciences and Senor, being Wholly Owned Subsidiaries
 of the Company, no equity shares were issued by the Company to effect
 the amalgamation.
 
 e.  The difference between the value of the investments and the
 underlying net assets of the amalgamating companies taken over
 amounting to Rs.0.7 adjusted against Securities Premium Account as per
 the scheme during 2006-2007.
 
 4.  Secured Loans
 
 a.  Term loans are secured by:
 
 - first charge on the immovable properties both present and future, by
 equitable mortgage by deposit of title deeds by way of constructive
 delivery of the Companys lands wherever situated.
 
 - first charge on all the movable assets (save and except book debts),
 both present and future subject to prior charges created in favour of
 the Companys bankers to secure working capital requirements.
 
 - personal guarantees given by the Chairman and the Managing Director
 of the Company aggregating to Rs.Nil (Rs.802.1).
 
 b.  Other working capital loans from banks are secured by:
 
 - first charge by way of hypothecation of all the stocks, book debts
 and other current assets (both present and future).
 
 - second charge on all the fixed assets of the Company both present and
 future subject to charges created in favour of term lenders.
 
 - personal guarantees given by the Chairman and the Managing Director
 of the Company aggregating to Rs.4,275.3 (Rs.5,183.7).
 
 c.  Hire purchase loans from banks are secured by hypothecation of the
 related assets.
 
 5.  Unsecured loans
 
 a.  Short Term Loan
 
 Short term loans from banks aggregating to Rs.370.9 (Rs.900.0) are
 personally guaranteed by the Chairman and the Managing Director of the
 Company.
 
 b.  Foreign Currency Convertible Bonds
 
 1.  60,000 Zero Coupon Foreign Currency Convertible Bonds (bonds) due
 2010 of USD 1,000 each issued in financial year 2005-06 are:
 
 i. either convertible by the holders at any time on or after September
 20, 2005 but prior to close of business (at the place the bonds are
 deposited for conversion) on August 8, 2010. Each bond will be
 converted into 83.12 fully paid up equity share with par value of Rs.5
 per share at a fixed price of Rs.522.036 per share at a fixed exchange
 rate conversion of Rs.43.3925 = USD 1.
 
 ii. or redeemable in whole but not in part at the option of the Company
 at any time on or after February 25, 2008 and on or prior to August 1,
 2010 as per the terms and conditions of the bonds mentioned in the
 Offering Circular.
 
 iii.  redeemable on maturity date at 139.954% of its principal amount
 if not redeemed or converted earlier.
 
 iv. in the opinion of the Company, bonds are convertible into equity
 shares, the creation of Debenture Redemption Reserve is not required.
 
 v. out of the above 4,500 bonds of USD 1,000 each were converted into
 374,046 equity shares of Rs.5 each at premium of Rs.517.036 during the
 year, and the total FCC8 bonds outstanding as at March 31, 2008 are
 55,500.
 
 2.  During the financial year 2006-07, the Company has issued 150,000
 Zero Coupon Foreign Currency Convertible Bonds due 2011 (Tranche A
 Bonds) of USD 1,000 each and 50,000 Forward Conversion Convertible
 Bonds due 2011 (Tranche B Bonds) of USD 1000 each, which are:
 
 i. either convertible by the Tranche A bondholders at any time on or
 after June 27, 2006 but prior to close of business (at the place the
 bonds are deposited for conversion) on May 10, 2011 and by the Tranche
 B bondholders at any time on or after May 17, 2007 (Conversion price
 setting date) but prior to close of business (at the place the bonds
 are deposited for conversion) on May 10, 2011. Each Tranche A bond will
 be converted into 44.52 fully paid up equity share with par value of
 Rs.5 per share at a fixed price of Rs.1,014.06 per share at a fixed
 exchange rate conversion of Rs.45.145 = USD 1. Each Tranche B bond will
 be converted into share of Rs.5 per share at an initial conversion
 price to be determined on Conversion Price Setting Date with a fixed
 rate of exchange on conversion of Rs.45.145 = USD 1.
 
 ii. or redeemable by the Company in respect of Tranche A bonds at the
 relevant Accreted Principal Amount, in whole but not in part at any
 time on or after November 16, 2008 and on or prior to May 10, 2011 and
 in respect of Tranche B bonds at the relevant Accreted Principal
 Amount, in whole but not in part at any time on or after May 17, 2009
 and on or prior to May 10, 2011 as per the terms and conditions of the
 bonds mentioned in the Offering Circular.
 
 iii.  redeemable at 146.285% of its principal amount on maturity date
 in respect of Tranche A bonds and at 146,991% of its principal amount
 on maturity date in respect of Tranche B bonds if not redeemed or
 converted earlier.
 
 iv.  in the opinion of the Company, bonds are convertible into equity
 shares, the creation of Debenture Redemption Reserve is not required.
 
 6.  Sundry Creditors
 
 a.  In respect of the amounts mentioned under Section 205C of the
 Companies Act, 1956 no dues are to be credited to the Investor
 Education and Protection Fund as at March 31, 2008.
 
 b.  The Company has accrued interest of Rs.1.6 (Rs.0.3) on principal
 amount of Rs.22.4 overdue to Micro, Small and Medium enterprises to the
 extent identified and the unpaid amount as at year end is Rs.1.9
 (Rs.0.3).
 
 7.  Export Incentives
 
 Sales include export incentives on account of various schemes amounting
 to Rs.164.0 (Rs.86.3).
 
 8.  Miscellaneous Expenses under Schedule 20 include an amount of
 Rs.Nil (Rs.59.4) incurred towards claim for invocation of corporate
 guarantee given to a bank on behalf of erstwhile joint venture.
 
 9.  Leases
 
 a.  Operating Lease
 
 Operating leases are mainly in the nature of lease of office premises
 with no restrictions and are renewable/cancelable at mutual consent.
 There is no escalation clause in the lease agreement. There are no
 restrictions imposed by lease arrangements. There are no sub-leases.
 
 b.  Finance Lease
 
 i.  Building includes factory buildings acquired on finance lease. The
 agreement is silent on renewal terms and transfer of legal title at the
 end of lease term.
 
 ii.  The lease agreement did not specify minimum lease payments over
 the future period. The factory building is acquired on lease at a
 consideration of Rs.64.7 (Rs.64.7).
 
 iii.  The net carrying amount of the buildings obtained on finance
 lease Rs.53.4 (Rs.56.0).
 
 iv.  The Company has not recognised any contingent rent as expense in
 the statement of Profit and Loss Account.
 
 v.  There is no escalation clause in the lease agreement. There are no
 restrictions imposed by lease arrangements. There are no sub- leases.
 
 10. In accordance with para 10 of Notified Accounting Standard 9 on
 Revenue Recognition, excise duty on sales amounting to Rs.1,163.9
 (Rs.1,011.5) has been reduced from sales in Profit and Loss Account and
 excise duty on increase/decrease in stock amounting to Rs.35.1
 (Rs.19.4) has been considered as income in Schedule 16 of the financial
 statements.