Cadila Healthcare

1 A During the year, the comoany implemented a Composite Scheme of
 Arrangement [ the scheme ] with Carnation Nutra-Analogue Foods Limited
 [ CARNATON ] [ New name changed to Zydus Wellness Limited J, a
 subsidiary Company and Zydus Hosoitals & Medical Research Private
 Limited 1 ZHMRPL ] which was approved by the order of the Honable
 Gupnt High Court, dated October 23,2008.
 
 B The Scheme envisaged Demerger of Consumer Products Division [ CPD ]
 of the Company into CARNATION, Amalgamation of ZHMRPL with the Company
 and Utilisation of Securities Premium Account of the Company in the
 prescribed manner besides the accounting treatment of the Scheme.
 
 C Both the demerger and amalgamation have been accounted under the
 Amalgamation in the nature of merger in terms of Accounting Standard
 [ AS-14 ] on Accounting for Amalgamation.
 
 2 Demerger of Consumer Products Division [ CPD ] of the Company into
 CARNATION:
 
 The appointed date of the demerger [ Demerger Appointed Date ] under
 the Scheme was April 1,2008, while the effective date was November 30,
 2008.
 
 CARNATION is engaged in the business of manufacturing & marketing of
 consumer products.  I
 
 CPD includes all the business undertakings, properties & supplies of
 whatsoever nature & goods pertaining to CPD, which deals in consumer
 health products.
 
 AH the assets & liabilities of CPD have been transferred at the value
 appearing in the books of the comoany as on the Demerger Appointed
 Date, on a going concern basis.  
 
 In consderation, CARNATION allotted 33,496,989 equity shares of Rs.
 10/- each, fully paid to the shareholders of the Company [ in the ratio
 of four Equity Shares of Rs. 10/- each fully paid of CARNATION for
 every fifteen equity shares of Rs. 5/- each fully paid uo of the
 Company held by them ].
 
 The excess of book value of assets over liabilities of CPD transferred
 to CARNATION amounting to Rs. 47 Millions has been debited to the
 securities premium account in the Company. Such reduction has been
 effected as an Integral part of the scheme and the same does not
 involve either diminution of the liability in respect of unpaid share
 capital or payment to shareholders of any paid up share capital.
 
 E Amalgamation of ZHMRPL with the Comtwuy:
 
 The appointed date of the amagamaton [ Amalgamation Appointed Date ]
 under the Scheme was July 1, 2008, while the effective date was
 February 4,2009.
 
 ZHMRPL as incorporated to establish hospitals and medical research
 facilities, but no activities had begun.
 
 All the assets & liabilities of ZHMRPL have been transferred to the
 company at value appearing in the books of ZHMRPL as on the
 Amalgamation
 
 Appointed Date on going concern basis, except that the 90 millions
 Equity Shares of the Company held by ZHMRPL stand cancelled.
 
 In consideration, the Company allotted 100,885,305 Equity Shares of Rs.
 5/- each of the Company as fully paid to the shareholders of ZHMRPL
 
 The Scheme provided for the right of ZHMRPL to declare and pay
 dividends to its share holders for the accounting period after the
 Amalgamation
 
 Apoointed Date, hut nrior to the Amalgamation Effective Date.
 Accordingly ZHMRPL had decared an interim dividend of Rs. 363 Millions
 to its share holders out of the final dividend of Rs. 405 Millions for the
 year 2007-08 declared and paid by the Company, which ZHMRPL received in
 July, 2008 and therefore not considered in the basis for arriving at share
 exchange ratio under the Scheme. The difference amount of dividend
 received and interim dividend paid by ZHMRPL of Rs. 42 Millions has
 been transferred to Profit 8i Loss Account by the Company, as a part of
 accounting of the transactions of the Scheme.
 
 The excess of face value of shares issued as aforesaid over the book
 value of assets less liabilities of ZHMRPL transferred to the Company
 under the Scheme amounting to Rs. 122 Mitlions in aggregate has been
 debited to the capital reserve account Rs. 6 Millions, Capital
 Redemption Reserve Account Rs. 32 Millions and Securities Premium
 Account Rs. 84 Millions by the Company.
 
 - Reorganization of Reserves of the Company;
 
 From the effective date, Rs..2000. Millions stand cedited to
 International Business Development Reserve Account [ IDBR ] from the
 balance of securities premium account. IDBR would he available towards
 certan Exoenses incurred by the Company, to the extent of available
 balance in ID3R.
 
 Expenses for this purpose will include professional, legal, financial
 fees or any other commission payable during acquisition process carried
 out directly or through its subsidiary, interest expenses, loss arising
 on foreign exchange fluctuations relating to debt borrowed and interest
 paid on acquisition, research & development expenses incurred for and
 in connection with getting product registration abroad, goodwill
 arising on merger
 
 - restructuring.
 
 The Expenses would typically include expenses which cannot be
 capitalised.
 
 An identical accounting treatment should be followed even for the
 purpose of consolidated accounts.
 
 Trasfering this amount to IDBR and its subsequent utilisation at an
 approximate time amount to reduction of Securities Premium Account.
 Such reduction has been affected as and integral part of the Scheme and
 same does not involve either diminution of liability in respect of
 unpaid share capital or Payment to shareholders of any paid up share
 capital.
 
 in viow of the aforesaid Scheme, the figures of the current year are
 not fully comparable with those of the previous years.
 
 3 The Company has opted for accounting the exchange rate oifferences
 arising on the Long Term Foreign Currency Monetary Items [ LTFCMI ] in
 accordance with the notification dated March 31, 2009 under the
 Companies [ Accounting Standards ] Amendment Rules, 2009 on Accounting
 Standard 11 relating to the effects of changes in foreign exchange
 rates .
 
 A Accordingly, retrospectively from the accounting year 2007-08, the
 effects of exchange rate differences arising from long term foreign
 currency loans availed for funding acquisition of fixed assets has been
 adjusted to the cost of respective items of fixed assets. While, in
 other cases such exchange rate difference on the LTFCMI is transferred
 to * foreign currency monetary items translation difference account.
 [FCMITDA ] which is amortised during the tenure of the respective
 LTFCMI but not beyond March 31,2011.
 
 B In view of above change in policy, net profit, of the company for the
 year is lower by Rs. 79 Millions [ net of tax].
 
 4 The Company has taken various residential / office premises / godowns
 under operating lease or leave and licence agreement. The lease terms
 in respect of such premises is on the basis of individual agreement
 entered into with the respective landlords. The Company has given
 refundable interest free security deposit in accordance with the agreed
 terms. The lease payments are recognised in the profit and loss account
 under Rent in schedule 16.
 
 5 The Company has invested Rs. 50 Millions and given loans & advances
 of Rs. 122 [ As at 31-03-08 : Rs. 93 ] Millions to Dialforhealth India
 Ltd. [DIL], a wholly owned subsidiary of the Company. The accumulated 
 losses as at 31st March, 2009 amounting to Rs. 102 [ As at 31-03-08: 
 Rs. 92 ] Millions has exceeded the net worth of DIL However having 
 regard to the long term strategic investment, the diminution in the 
 value of investments in DIL is considered to be temporary and loans 
 and advances are considered good and accordingly no provision has been 
 made.
 
 6 In the year 2007-08, the company had purchased 90,750 equity shares
 of Rs. 100 each of Liva Healthcare Ltd. at a negotiated consideration
 as per the Share Purchase Agreement [ SPA ] entered with the sellers.
 During the year, the company has reached settlement with the seller in
 respect of various claims raised by the Company under SPA and
 accordingly the final consideration has been reduced by Rs. 35
 Millions. The said amount has been reduced from the investment value of
 the shares of LIVA.
 
 7 The basis of ascertaining the cost of closing stock has been changed
 from FIFO method to Moving Average method from the current year due
 to implementation of SAP software. It is not possible to ascertain
 the effect in the value of the closing stock and on profit due to this
 change.
 
 8 The Scheme of amalgamation between Zydus BSV Pharma Pvt. Ltd. and
 Zydus BSV Research and Development Pvt. Ltd., both being joint venture
 companies of Cadila Healthcare Limited, was sanctioned by Honable
 Gujarat High Court, on March 31, 2008. Pursuant to the Scheme, the
 entire business and all assets and liabilities of Zydus BSV Research
 and Development Pvt. Ltd. get transferred and vested in Zydus BSV
 Pharma Pvt. Ltd. and the Company had received 24,75,000 equity shares
 of Rs. 10 each fully paid up of Zydus BSV Pharma Pvt. Ltd. against
 9,90,000 equity shares of Rs. 10 each fully paid up of Zydus BSV
 Research and Development Pvt. Ltd. as per the share exchange ratio
 approved by the members.
 
 8 A Provision for product warranty claims in respect of the products
 sold during the year is made on the basis of managements estimation of
 probable customer claims in respect thereof considering the estimated stock
 lying with retailers. The Company does not expect any reimbursement of
 such claims in future.