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Dr Reddys Laboratories

BSE: 500124|NSE: DRREDDY|ISIN: INE089A01023|SECTOR: Pharmaceuticals
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Notes to Accounts Year End : Mar '17

1. FIRST-TIME ADOPTION OF IND AS (CONTINUED)

The Company does not have any arrangements containing a lease as defined under Appendix C to Ind AS 17, Determining whether an arrangement contains a lease. Consequently, this exemption is not applicable to the Company.

Estimates

The estimates at 1 April 2015 and at 31 March 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:

- FVTOCI - Quoted equity shares

- Impairment of financial assets based on expected credit loss model

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2015, the date of transition to Ind AS and as of 31 March 2016.

Reconciliation of equity as previously reported under Previous GAAP and that computed under Ind AS

a) Proposed dividend

Under Indian GAAP, proposed dividends including dividend distribution tax are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. Therefore, the liability of '' 4,1 00 for the year ended on 31 March 2015 recorded for dividend has been derecognized against retained earnings on 1 April 2015.

b) FVTOCI financial assets

Under Indian GAAP, the Company accounted for long-term investments in quoted equity shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated such investments as FVTOCI investments. Ind AS requires FVTOCI investments to be measured at fair value. At the date of transition to Ind AS, difference between the instruments fair value and Indian GAAP carrying amount has been recognized as a separate component of equity, in the retained earnings, net of related deferred taxes.

2. FIRST-TIME ADOPTION OF IND AS (CONTINUED)

c) Mutual funds

Under Indian GAAP, investments in mutual funds are accounted for as short-term investments and accordingly they are carried at lower of cost and fair value. Under Ind AS, the Company has designated such investments as FVTPL investments. Ind AS requires FVTPL investments to be measured at fair value. At the date of transition to Ind AS, difference between the instruments fair value and Indian GAAP carrying amount has been recognized as a separate component of equity, in the retained earnings, net of related deferred taxes.

d) Deferred tax

Indian GAAP requires deferred tax accounting using the statement of profit and loss approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.

e) Trade receivables

Under Ind AS, impairment allowance has been determined based on Expected Credit Loss model (ECL). Due to ECL model, the group impaired its trade receivable by '' 40 on 1 April 2015 which has been eliminated against retained earnings.

f) In-process research and development expenditure

Under Indian GAAP, in-process research and development expenditure does not qualify for capitalization as intangible asset. Under Ind AS, such expenditure is allowed to be capitalized as intangible asset. As the asset is not available for use yet, it is not subject to amortization. However, the same is tested for impairment following the guidance available under Ind AS 38, Intangible assets.

g) Sale of goods

Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods is included as part of sales in the face of statement of profit and loss. Thus sale of goods under Ind AS for the year ended 31 March 2016 has increased by Rs, 842 with a corresponding increase in cost of material consumed.

h) Defined benefit liabilities

Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to the statement of profit and loss. Under Ind AS, remeasurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus the employee benefit cost is reduced by Rs, 183 and remeasurement gains/ losses on defined benefit plans has been recognized in the OCI, net of tax.

i) Share-based payments

Under Indian GAAP, the Company recognized only the intrinsic value of the options granted as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period. An additional expense of Rs, 16 has been recognized in the statement of profit and loss for the year ended 31 March 2016.

*Represents Rs,600 thousands (31 March 2016: Rs,600 thousands) rounded off to millions above.

3.RELATED PARTIES

a. List of all subsidiaries and joint ventures:

Subsidiaries including step down subsidiaries:

1 Aurigene Discovery Technologies (Malaysia) SDN BHD, Malaysia

2 Aurigene Discovery Technologies Inc., USA

3 Aurigene Discovery Technologies Limited, India

4 beta Institut gemeinnutzige GmbH, Germany

5 betapharm Arzneimittel GmbH, Germany

6 Cheminor Investments Limited, India

7 Cheminor Employees Welfare Trust, India

8 Chienna B.V., Netherlands (Merged with Dr. Reddy''s Research and Development B.V. w e f from 1 January 2017)

9 Chirotech Technology Limited, UK

10 Dr. Reddy''s Bio-sciences Limited, India

11 Dr. Reddy''s Farmaceutica Do Brasil Ltda., Brazil

12 Dr. Reddy''s Laboratories (Australia) Pty. Limited, Australia

13 Dr. Reddy''s Laboratories (EU) Limited, UK

14 Dr. Reddy''s Laboratories (Proprietary) Limited, South Africa

15 Dr. Reddy''s Laboratories (UK) Limited, UK

16 Dr. Reddy''s Laboratories Canada, Inc., Canada

17 Dr. Reddy''s Laboratories Inc., USA

18 Dr. Reddy''s Laboratories International SA, Switzerland

19 Dr. Reddy''s Laboratories Japan KK, Japan

20 Dr Reddy''s Laboratories Kazakhstan, Kazakhstan (from 30 November 2016)

21 Dr. Reddy''s Laboratories LLC, Ukraine

22 Dr. Reddy''s Laboratories Louisiana LLC, USA

23 Dr. Reddy''s Laboratories New York, Inc., USA

24 Dr. Reddy''s Laboratories Romania S.R.L., Romania

25 Dr. Reddy''s Laboratories SA, Switzerland

26 Dr. Reddy''s Laboratories SAS, Colombia

27 Dr. Reddy''s Laboratories Tennessee, LLC, USA

28 Dr. Reddy''s New Zealand Limited, New Zealand

29 Dr. Reddy''s Pharma SEZ Limited, India

30 Dr. Reddy''s Research and Development B.V. (formerly Octoplus BV)

31 Dr, Reddy''s Research Foundation, India

32 Dr. Reddy''s Singapore PTE Limited, Singapore

33 Dr. Reddy''s Srl, Italy

34 Dr. Reddy''s Venezuela, C.A., Venezuela

4. RELATED PARTIES (CONTINUED)

35 DRL Impex Limited, India

36 Eurobridge Consulting B.V., Netherlands

37 Idea2Enterprises (India) Private Limited, India

38 Imperial Credit Private Limited, India (acquired w e f from 22 February 2017)

39 Industrias Quimicas Falcon de Mexico, S.A.de C.V, Mexico

40 Lacock Holdings Limited, Cyprus

41 OctoPlus Development B.V. (Merged with Dr. Reddy''s Research and Development B.V. w e f from 1 January 2017)

42 OctoPlus PolyActive Sciences B.V.( Merged with Dr. Reddy''s Research and Development B.V. w e f from 1 January 2017)

43 OctoPlus Sciences B.V.( Merged with Dr. Reddy''s Research and Development B.V. w e f from 1 January 2017)

44 OctoPlus Technologies B.V.( Merged with Dr. Reddy''s Research and Development B.V. w e f from1 January 2017)

45 OctoShare B.V.( Merged with Dr. Reddy''s Research and Development B.V. w e f rom 1 January 2017)

46 OOO Dr. Reddy''s Laboratories Limited, Russia

47 OOO DRS LLC, Russia_

48 Promius Pharma LLC, USA

49 Reddy Antilles N.V., Netherlands

50 Reddy Cheminor S.A., France (liquidated during the year)

51 Reddy Holding GmbH, Germany

52 Reddy Netherlands B.V., Netherlands

53 Reddy Pharma Iberia SA, Spain

54 Reddy Pharma Italia S.R.L, Italy

55 Reddy Pharma SAS, France

Joint ventures

Kunshan Rotam Reddy Pharmaceutical Company Enterprise over which the Company exercises joint control with other joint venture partners and

56

Limited (Reddy Kunshan), China holds 51.33% of equity shares

Enterprise over which the Company''s step down subsidiary exercises joint control with other joint venture partner and holds 50% of equity shares DRSS Solar Power Private Limited, India Enterprise over which the Company exercises joint control with other joint venture partners and

5 (under liquidation) holds 26% of equity shares

Enterprise over which the Company exercises joint control with other joint venture partners and

6 DRES Energy Private Limited, India holds 26% of equity shares

. List of other related parties with whom transactions have taken place during the current and/or previous year:

1 Dr. Reddy''s Institute of Life Sciences Enterprise over which whole-time directors have significant influence

2 Stamlo Hotels Limited Enterprise controlled by whole-time directors

3 Green Park Hotels and Resorts Limited Enterprise controlled by relative of a whole-time director

4 K Samrajyam Mother of Chairman

5 G Anuradha Spouse of Chief Executive Officer

6 Deepti Reddy Spouse of Chairman

7 G Mallika Reddy Daughter of Chief Executive Officer

8 G V Sanjana Reddy Daughter of Chief Executive Officer

9 Dr. Reddys Foundation Enterprise over which whole-time directors and their relatives have significant influence

10 Pudami Educational Society__Enterprise over which whole-time directors and their relatives have significant influence_

Further, the Company contributes to the Dr. Reddy''s Laboratories Gratuity Fund, which maintains the plan assets of the Company''s Gratuity Plan for the benefit of its employees.

In accordance with the provisions of Ind AS 24 Related Party Disclosures and the Companies Act, 2013, Company''s Directors, members of the Company''s Management Council and Company Secretary are considered as Key Management Personnel.

List of Key Management Personnel of the Company is as below:

J__K Satish Reddy__Whole-time director_

2__G V Prasad__Whole-time director_

_3__Anupam Puri__Independent director_

4 Bharat Narotam Doshi Independent director

2.22 RELATED PARTIES (CONTINUED)__

_5__Dr. Ashok Ganguly__Independent director_

6 Dr. Bruce LA Carter Independent director

_7__Dr. Omkar Goswami__Independent director_

_8__Hans Peter Hasler__Independent director_

_9__J P Moreau (till 31 July 2015)__Independent director_

10 Kalpana Morparia Independent director

1_1__Ravi Bhoothalingam (till 27 July 2016)__Independent director_

1 2__Sridar Iyengar__Independent director_

1 3__Abhijit Mukherjee__Management council_

14 Alok Sonig Management council

1_5__Dr. Amit Biswas__Management council_

1 6__Dr. Cartikeya Reddy__Management council_

1 7__Dr. Chandrasekhar Sripada__Management council_

18 Dr. K V S Ram Rao Management council

1 9__Dr. Raghav Chari (till 31 October 2016)__Management council_

2 0__Ganadhish Kamat (from 18 April 2016)__Management council_

2 1__J Ramachandran (from September 2016)__Management council_

22 M V Ramana Management council

2 3__Samiran Das__Management council_

2 4__Saumen Chakraborty__Management council_

2 5__Umang Vohra (till 25 September 2015) and__Management council_

26 Sandeep Poddar Company secretary

Equity held in subsidiaries and joint venture has been disclosed under Financial assets-Investments (Note 2.4 A). Loans and advances to subsidiaries and joint venture have been disclosed under Loans (Note 2.4 C). Other receivables from subsidiaries and joint venture have been disclosed under Other financial assets (Note 2.4 D).

7. BUYBACK OF EQUITY SHARES

The Board of Directors of the Company, in their meeting held on 17 February 2016, approved a proposal to buy back equity shares of the Company, subject to approval by the Company''s shareholders, for an aggregate amount not exceeding '' 15,694 and at a price not exceeding '' 3,500 per equity share. The plan involved the purchase of such shares from shareholders of the Company (including persons who become shareholders by cancelling American Depository Shares and receiving underlying equity shares, and excluding the promoters and promoter group of the Company) under the open market route in accordance with the provisions contained in the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 and the Companies Act, 2013 and rules made there under. The shares bought back under this plan were required to be extinguished in accordance with the provisions of the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 and the Companies Act, 2013 and rules made there under.

The Company''s shareholders approved the buyback plan on 1 April 2016, and implementation of the buyback plan commenced on 18 April 2016 and ended on 28 June 2016.

Under this plan, the Company bought back and extinguished 5,077,504 equity shares for an aggregate purchase price of '' 15,694. The aggregate face value of the equity shares bought back was '' 25.

8.EMPLOYEE STOCK INCENTIVE PLANS

Dr. Reddy''s Employees Stock Option Plan -2002 (the DRL 2002 Plan):

The Company instituted the DRL 2002 Plan for all eligible employees pursuant to the special resolution approved by the shareholders in the Annual General Meeting held on 24 September 2001. The DRL 2002 Plan covers all employees of DRL and its subsidiaries and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, eligible employees). The Nomination, Governance and Compensation Committee of the Board of DRL (the Committee) administer the DRL 2002 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2002 Plan vest in periods ranging between one and four years and generally have a maximum contractual term of five years.

The DRL 2002 Plan, as amended at Annual General Meetings of shareholders held on 28 July 2004 and on 27 July 2005, provides for stock option grants in two categories:

Category A: 300,000 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B: 1,995,478 stock options out of the total of 2,295,478 options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., '' 5 per option).

Under the DRL 2002 Plan, the exercise price of the fair market value options granted under Category A above is determined based on the average closing price for 30 days prior to the grant in the stock exchange where there is highest trading volume during that period. Notwithstanding the foregoing, the Committee may, after obtaining the approval of the shareholders in the Annual General Meeting, grant options with a per share exercise price other than fair market value and par value of the equity shares.

The weighted average grant date fair value of par value options granted under category B above of the DRL 2002 Plan during the years ended 31 March 2017 and 31 March 2016 was '' 3,266 and '' 3,350 per option, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2017 and 31 March 2016 was '' 3,292 and '' 3,504 per share, respectively.

The aggregate intrinsic value of options exercised under the DRL 2002 Plan during the years ended 31 March 2017 and 31 March 2016 was '' 584 and '' 679, respectively. As of 31 March 2017, options outstanding under the DRL 2002 Plan had an aggregate intrinsic value of '' 867 and options exercisable under the DRL 2002 Plan had an aggregate intrinsic value of '' 107.

The term of the DRL 2002 plan was extended for a period of 10 years effective as of 29 January 2012 by the shareholders at the Company''s Annual General Meeting held on 20 July 2012.

9. EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

Dr. Reddy''s Employees ADR Stock Option Plan, 2007 (the DRL 2007 Plan):

The Company instituted the DRL 2007 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on 27 July 2005. The DRL 2007 Plan became effective upon its approval by the Board of Directors on 22 January 2007. The DRL 2007 Plan covers all employees and directors (excluding promoter directors) of DRL and its subsidiaries (collectively, eligible employees). The Committee administers the DRL 2007 Plan and grants stock options to eligible employees. The Committee determines which eligible employees will receive the options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for all options issued on the date of grant. The options issued under the DRL 2007 Plan vest in periods ranging between one and four years and generally have a maximum contractual term of five years.

The DRL 2007 Plan provides for option grants in two categories:

Category A: 382,695 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the fair market value of the underlying equity shares on the date of grant; and

Category B: 1,148,084 stock options out of the total of 1,530,779 stock options reserved for grant having an exercise price equal to the par value of the underlying equity shares (i.e., '' 5 per option).

The weighted average grant date fair value of par value options granted under category B of the DRL 2007 Plan during the years ended 31 March 2017 and 31 March 2016 was Rs, 3,266 and Rs, 3,465, respectively. The weighted average share price on the date of exercise of options during the years ended 31 March 2017 and 31 March 2016 was Rs, 3,268 and Rs, 3,575, respectively.

The aggregate intrinsic value of options exercised under the DRL 2007 Plan during the years ended 31 March 2017 and 31 March 2016 was Rs, 110 and Rs, 116, respectively. As of 31 March 2017, options outstanding under the DRL 2007 Plan had an aggregate intrinsic value of Rs, 232 and options exercisable under the DRL 2007 Plan had an aggregate intrinsic value of Rs, 17.

During the year ended 31 March 2015, the Company adopted a new program to grant performance linked stock options to certain employees under the DRL 2002 Plan and the DRL 2007 Plan. Under this program, performance targets are measured each year against pre-defined interim targets over the three year period ending on 31 March 2017 and eligible employees are granted stock options upon meeting such targets. The stock options so granted are ultimately vested with the employees who meet subsequent service vesting conditions which range from one to four years. After vesting, such stock options generally have a maximum contractual term of five years.

10. EMPLOYEE STOCK INCENTIVE PLANS (CONTINUED)

Valuation of stock options:

The fair value of stock options granted under the DRL 2002 Plan and the DRL 2007 Plan has been measured using the Black-Scholes-Merton model at the date of the grant.

The Black-Scholes-Merton model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. In respect of par value options granted under category B, the expected term of an option (or option life) is estimated based on the vesting term, contractual term, as well as expected exercise behavior of the employees receiving the option. In respect of fair market value options granted under category A, the option life is estimated based on the simplified method. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company''s publicly traded equity shares. Dividend yield of the options is based on recent dividend activity. Risk-free interest rates are based on the government securities yield in effect at the time of the grant. These assumptions reflect management''s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company''s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years.

The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

No employee of the Company received grant of options during the year amounting to 5% or more of options granted or exceeding 1% of issued capital of the Company.

Share-based payment expense

For the years ended 31 March 2017 and 31 March 2016 the Company recorded employee share-based payment expense of '' 377 and '' 442, respectively. As of 31 March 2017, there was approximately '' 432 of total unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 2.95 years.

11. EMPLOYEE BENEFITS

Gratuity benefits provided by the Company

In accordance with applicable Indian laws, the Company has a defined benefit plan which provides for gratuity payments (the Gratuity Plan) and covers certain categories of employees in India. The Gratuity Plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amount of the payment is based on the respective employee''s last drawn salary and the years of employment with the Company. Effective 1 September 1999, the Company established the Dr. Reddy''s Laboratories 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. Trustees administer the contributions made to the Gratuity Fund. Amounts contributed to the Gratuity Fund are invested in bonds issued by Government of India, corporate debt securities and in equity securities of Indian companies.

(1) The Company enters into derivative financial instruments with various counterparties, principally financial institutions and banks. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward option and swap contracts. The most frequently applied valuation techniques include forward pricing, swap models and Black-Scholes-Merton models (for option valuation), using present value calculations.

The models incorporate various inputs including foreign exchange spot and forward rates, interest rate curves and forward rate curves. As at 31 March 2017, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

Derivative financial instruments

The Company is exposed to exchange rate risk that arises from its foreign exchange revenues and expenses, primarily in US dollars, UK pounds sterling, Russian roubles, Venezuelan bolivars and Euros, and foreign currency debt in US dollars, Russian roubles and Euros. The Company uses forward contracts, option contracts and currency swap contracts (collectively, derivatives) to mitigate its risk of changes in foreign currency exchange rates.

12.FINANCIAL INSTRUMENTS (CONTINUED)

The counterparty for these contracts is generally a bank or a financial institution. The Company had a derivative financial asset and derivative financial liability of Rs, 220 and Rs, 6, respectively, as at 31 March 2017 as compared to derivative financial asset and derivative financial liability of Rs, 175 and Rs, 52, respectively, as at 31 March 2016 towards these derivative financial instruments.

Further, in respect of these foreign exchange derivative contracts, the Company has recorded, as part of foreign exchange gain and losses, a net gain of Rs, 945, and a net gain of Rs, 275 for the years ended 31 March 2017 and 31 March 2016 respectively.

Hedges of highly probable forecasted transactions

The Company classifies its derivative contracts that hedge foreign exchange risk associated with its highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded as a component of equity within the Company''s hedging reserve, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is immediately recorded in the statement of profit and loss as a foreign exchange gain and losses.

The Company also designates certain non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign exchange risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships. Re-measurement gain/loss on such non derivative financial liabilities is recorded as a component of equity within the Company''s hedging reserve, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted transactions.

In respect of the aforesaid hedges of highly probable forecasted transactions, the Company recorded, as a component of equity, a net gain of Rs, 145, and a net loss of Rs, 65 for the years ended 31 March 2017 and 31 March 2016 respectively.

The Company also recorded, as a component of revenue, a net gain of Rs, 136 and Rs, 299 during the years ended 31 March 2017 and 31 March 2016, respectively.

The net carrying amount of the Company''s hedging reserve as a component of equity before adjusting for tax impact was a gain of Rs, 129 as at 31 March 2017, as compared to a loss of Rs, 19 as at 31 March 2016.

Hedges of changes in the interest rates

Consistent with its risk management policy, the Company uses interest rate swaps (including cross currency interest rate swaps) to mitigate the risk of changes in interest rates. The Company does not use them for trading or speculative purposes.

The changes in fair value of such interest rate swaps (including cross currency interest rate swaps) are recognized as part of finance cost.

As at 31 March 2017 and 31 March 2016, the Company had no outstanding interest rate swap arrangements.

13. FINANCIAL RISK MANAGEMENT

The Company''s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company''s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company''s risk management assessment and policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company''s risk assessment and management policies and processes.

a. 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. 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. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables and investments.

Trade 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.

Investments

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 counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

14. FINANCIAL RISK MANAGEMENT (CONTINUED)

Financial assets that are neither past due nor 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 March 2017. Of the total trade receivables, '' 31,071 as at 31 March 2017 and '' 25,826 as at 31 March 2016 consisted of customer balances that were neither past due nor impaired.

On account of adoption of Ind AS 109, the Company uses Expected Credit Loss (ECL) model for assessing the impairment loss. 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.

Loans and advances

Loans and advances are predominantly given to subsidiaries for the purpose of working capital and other business requirements.

b. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company''s reputation.

As at 31 March 2017 and 31 March 2016, the Company had unutilized credit limits from banks of Rs, 12,437 and Rs, 12,304 respectively.

As at 31 March 2017, the Company had working capital (current assets less current liabilities) of Rs, 43,358, including cash and cash equivalents of Rs, 668, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of Rs, 2,110 and investments in FVTPL financial assets of Rs, 10,881. As at 31 March 2016, the Company had working capital of Rs, 58,224, including cash and cash equivalents of Rs, 2,021, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of Rs, 10,660 and investments in FVTPL financial assets of Rs, 22,320.

c. 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 (such as interest rates, foreign currency exchange rates and commodity prices) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short-term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company''s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

Foreign exchange risk

The Company''s foreign exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in US dollars, Russian roubles, UK pounds sterling, and Euros) and foreign currency borrowings (in US dollars and Russian roubles,). A significant portion of the Company''s revenues are in these foreign currencies, while a significant portion of its costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these foreign currencies, the Company''s revenues measured in Indian rupees may decrease. The exchange rate between the Indian rupee and these foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, the Company uses both derivative and non derivative financial instruments, such as foreign exchange forward contracts, option contracts, currency swap contracts and foreign currency financial liabilities, to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

The details in respect of the outstanding foreign exchange forward and option contracts are given in note 2.34 above.

In respect of the Company''s forward contracts, option contracts and currency swap contracts, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such contracts would have resulted in:

- a Rs, 1,154/(710) increase/(decrease) in the Company''s hedging reserve and a Rs, 1,707/(1,854) increase/(decrease) in the Company''s net profit from such contracts, as at 31 March 2017;

- a Rs, 1,511/(424) increase/(decrease) in the Company''s hedging reserve and a Rs, 1,193/(1,588) increase/(decrease) in the Company''s net profit from such contracts, as at 31 March 2016.

The carrying value of the Company''s foreign currency borrowings designated in a cash flow hedge as of 31 March 2017 was '' Nil. In respect of these borrowings, a 10% decrease/increase in the respective exchange rates of each of the currencies underlying such borrowings would have resulted in a '' 182 increase/decrease in the Company''s hedging reserve as at 31 March 2016.

(1) Others include currencies such as UK pounds sterling, Swiss francs and Venezuelan bolivars.

For the years ended 31 March 2017 and 31 March 2016, every 10% depreciation/appreciation in the exchange rate between the Indian rupee and the respective currencies for the above mentioned financial assets/liabilities would affect the Company''s net profit by approximately '' 1,866 and '' 224, respectively.

Interest rate risk

As of 31 March 2017 and 31 March 2016, the Company had '' 18,061 of loans carrying a floating interest rate of LIBOR minus 30 bps to LIBOR plus 82.7 bps and '' 27,730 of foreign currency loans carrying a floating interest rate of LIBOR minus 5 to LIBOR plus 125 bps, respectively. These loans expose the Company to risk of changes in interest rates. The Company''s treasury department monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary.

For details of the Company''s short-term and long-term loans and borrowings, including interest rate profiles, refer to note 2.8A and 2.8B of these financial statements.

For the years ended 31 March 2017 and 31 March 2016, every 10% increase or decrease in the floating interest rate component (i.e., LIBOR) applicable to its loans and borrowings would affect the Company''s net profit by approximately '' 23 and '' 11, respectively.

The Company''s investments in term deposits (i.e., certificates of deposit) with banks and short-term liquid mutual funds are for short durations, and therefore do not expose the Company to significant interest rates risk.

Commodity rate risk

Exposure to market risk with respect to commodity prices primarily arises from the Company''s purchases and sales of active pharmaceutical ingredients, including the raw material components for such active pharmaceutical ingredients. These are commodity products, whose prices may fluctuate significantly over short periods of time. The prices of the Company''s raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in the Company''s active pharmaceutical ingredients business are generally more volatile. Cost of raw materials forms the largest portion of the Company''s operating expenses. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies. As of 31 March 2017, the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

15. CONTINGENT LIABILITIES AND COMMITMENTS

A. Contingent liabilities (claims against the company not acknowledged as debts)

The Company is involved in disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time to time in the ordinary course of business. The more significant matters are discussed below. Most of the claims involve complex issues. Often, these issues are subject to uncertainties and therefore the probability of a loss, if any, being sustained and an estimate of the amount of any loss is difficult to ascertain. Consequently, for a majority of these claims, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the proceedings. This is due to a number of factors, including the stage of the proceedings (in many cases trial dates have not been set) and the overall length and extent of pre-trial discovery; the entitlement of the parties to an action to appeal a decision; clarity as to theories of liability; damages and governing law; uncertainties in timing of litigation; and the possible need for further legal proceedings to establish the appropriate amount of damages, if any. In these cases, the Company discloses information with respect to the nature and facts of the case. The Company also believes that disclosure of the amount sought by plaintiffs, if that is known, would not be meaningful with respect to those legal proceedings.

Although there can be no assurance regarding the outcome of any of the legal proceedings or investigations referred to in this note, the Company does not expect them to have a materially adverse effect on its financial position, as it believes that the likelihood of loss in excess of amounts accrued (if any) is not probable. However, if one or more of such proceedings were to result in judgments against the Company, such judgments could be material to its results of operations in a given period.

(i) Product and patent related matters

Matters relating to National Pharmaceutical Pricing Authority

Norfloxacin, India litigation

The Company manufactures and distributes Norfloxacin, a formulations product, and in limited quantities, the active pharmaceutical ingredient norfloxacin. Under the Drugs Prices Control Order (the DPCO), the National Pharmaceutical Pricing Authority (the NPPA) established by the Government of India had the authority to designate a pharmaceutical product as a specified product and fix the maximum selling price for such product. In 1995, the NPPA issued a notification and designated Norfloxacin as a specified product and fixed the maximum selling price. In 1996, the Company filed a statutory Form III before the NPPA for the upward revision of the maximum selling price and a writ petition in the Andhra Pradesh High Court (the High Court) challenging the validity of the designation on the grounds that the applicable rules of the DPCO were not complied with while fixing the maximum selling price. The High Court had previously granted an interim order in favor of the Company; however it subsequently dismissed the case in April 2004.

The Company filed a review petition in the High Court in April 2004 which was also dismissed by the High Court in October 2004. Subsequently, the Company appealed to the Supreme Court of India, New Delhi (the Supreme Court) by filing a Special Leave Petition.

During the year ended 31 March 2006, the Company received a notice from the NPPA demanding the recovery of the price charged by the Company for sales of Norfloxacin in excess of the maximum selling price fixed by the NPPA, which was '' 285 including interest. The Company filed a writ petition in the High Court challenging this demand order. The High Court admitted the writ petition and granted an interim order, directing the Company to deposit 50% of the principal amount claimed by the NPPA, which was '' 77. The Company deposited this amount with the NPPA in November 2005. In February 2008, the High Court directed the Company to deposit an additional amount of '' 30, which was deposited by the Company in March 2008. In November 2010, the High Court allowed the Company''s application to include additional legal grounds that the Company believed strengthened its defense against the demand. For example, the Company added as grounds that trade margins should not be included in the computation of amounts overcharged, and that it was necessary for the NPPA to set the active pharmaceutical ingredient price before the process of determining the ceiling on the formulation price. In October 2013, the Company filed an additional writ petition before the Supreme Court challenging the inclusion of Norfloxacin as a specified product under the DPCO. In January 2015, the NPPA filed a counter affidavit stating that the inclusion of Norfloxacin was based upon the recommendation of a committee consisting of experts in the field. On 20 July 2016, the Supreme Court remanded the matters concerning the inclusion of Norfloxacin as a specified product under the DPCO back to the High Court for further proceedings.

During the three months ended 30 September 2016, the Supreme Court dismissed the Special Leave Petition pertaining to the fixing of prices for Norfloxacin formulations.

During the three months ended 31 December 2016, a writ petition pertaining to Norfloxacin was filed by the Company with the Delhi High Court. Such writ petition is pending for admission.

Based on its best estimate, the Company has recorded a provision for potential liability for sale proceeds in excess of the notified selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

16.CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

Litigation relating to Cardiovascular and Anti-diabetic formulations

In July 2014, the NPPA, pursuant to guidelines issued in May 2014 and the powers granted by the Government of India under the Drugs (Price Control) Order, 2013, issued certain notifications regulating the prices for 108 formulations in the cardiovascular and anti-diabetic therapeutic areas. The Indian Pharmaceutical Alliance (IPA), in which the Company is a member, filed a writ petition in the Bombay High Court challenging the notifications issued by the NPPA on the grounds that they were ultra vires, ex facie and ab initio void. The Bombay High Court issued an order to stay the writ in July 2014. On 26 September 2016, the Bombay High Court dismissed the writ petition filed by the IPA and upheld the validity of the notifications/orders passed by the NPPA in July 2014. Further, on 25 October 2016, the IPA filed a Special Leave Petition with the Supreme Court, which was dismissed by the Supreme Court.

During the three months ended 31 December 2016, the NPPA issued show-cause notices relating to a few products of the Company for recovery of the allegedly overcharged amounts. The Company has responded to these notices.

On 20 March 2017, the IPA filed an application before the Bombay High Court for the recall of the judgment of the High Court dated 26 September 2016 on the grounds that certain information important for the determination of the issue was not disclosed by the counsel representing the Union of India during the proceedings before the Bombay High Court.

On 26 April 2017, the Bombay High Court heard the recall application and directed the matter to the same bench of judges of the Bombay High Court which passed the original judgment on 26 September 2016. Further, it also directed the Union of India and others to file their reply.

During the three months ended 31 March 2017, the NPPA issued demand notices to the Company relating to the foregoing products for the allegedly overcharged amounts, along with interest. The Company has responded to these notices.

Based on its best estimate, the Company has recorded a provision of '' 374 under other selling expenses as a potential liability for sale proceeds in excess of the notified selling prices, including the interest thereon, and believes that the likelihood of any further liability that may arise on account of penalties pursuant to this litigation is not probable.

In the event the Government of India pursues litigation against the Company on the aforementioned NPPA matters for the excess sales proceeds and the Company is unsuccessful in such litigation, it will be required to remit the sale proceeds in excess of the notified selling prices to the Government of India with interest and could potentially include penalties, which amounts are not readily ascertainable.

(ii) Environmental matters Land pollution

The Indian Council for Environmental Legal Action filed a writ in 1989 under Article 32 of the Constitution of India against the Union of India and others in the Supreme Court of India for the safety of people living in the Patancheru and Bollarum areas of Medak district of the then existing undivided state of Andhra Pradesh. The Company has been named in the list of polluting industries. In 1996, the Andhra Pradesh District Judge proposed that the polluting industries compensate farmers in the Patancheru, Bollarum and Jeedimetla areas for discharging effluents which damaged the farmers'' agricultural land. The compensation was fixed at '' 0.0013 per acre for dry land and '' 0.0017 per acre for wet land. Accordingly, the Company has paid a total compensation of '' 3. The Company believes that the likelihood of additional liability is remote. The Andhra Pradesh High Court disposed of the writ petition on 12 February 2013 and transferred the case to the National Green Tribunal (NGT), Chennai, India. The interim orders passed in the writ petitions will continue until the matter is decided by the NGT. The NGT has, through its order dated 30 October 2015, constituted a Fact Finding Committee. The NGT has also permitted the alleged polluting industries to appoint a person on their behalf in the Fact Finding Committee. However, the Company along with the alleged polluting industries have challenged the constitution and composition of the Fact Finding Committee. The NGT has directed that until all the applications challenging the constitution and composition of the Fact Finding Committee are disposed of, the Fact Finding Committee shall not commence its operation.

Water pollution and air pollution

During the year ended 31 March 2012, the Company, along with 14 other companies, received a notice from the Andhra Pradesh Pollution Control Board (the APP Control Board) to show cause as to why action should not be initiated against them for violations under the Indian Water Pollution Act and the Indian Air Pollution Act. Furthermore, the APP Control Board issued orders to the Company to (i) stop production of all new products at the Company''s manufacturing facilities in Hyderabad, India without obtaining a Consent for Establishment, (ii) cease manufacturing products at such facilities in excess of certain quantities specified by the APP Control Board and (iii) furnish a bank guarantee to assure compliance with the APP Control Board''s orders.

17.CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

The Company appealed the APP Control Board orders to the Andhra Pradesh Pollution Appellate Board (the APP Appellate Board). The APP Appellate Board, on the basis of a report of a fact-finding advisory committee, recommended to the Andhra Pradesh Government to allow expansion of units fully equipped with Zero-Liquid Discharge (ZLD) facilities and otherwise found no fault with the Company (on certain conditions). The APP Appellate Board''s decision was challenged by one of the petitioners in the National Green Tribunal and the matter is currently pending before it.

Separately, the Andhra Pradesh Government, following recommendations of the APP Appellate Board, published a notification in July 2013 that allowed expansion of production of all types of existing bulk drug and bulk drug intermediate manufacturing units subject to the installation of ZLD facilities and the outcome of cases pending in the National Green Tribunal. Importantly, the notification directed pollution load of industrial units to be assessed at the point of discharge (if any) as opposed to point of generation.

In September 2013, the Ministry of Environment and Forests, based on the revised Comprehensive Environment Pollution Index, issued a notification that re-imposed a moratorium on expansion of industries in certain areas where some of the Company''s manufacturing facilities are located. This notification overrides the Andhra Pradesh Government''s notification that conditionally permitted expansion.

(iii) Indirect taxes related matters

Distribution of input service tax credits

The Central Excise Authorities have issued various demand notices to the Company objecting to the Company''s methodology of distributing input service tax credits claimed for one of the Company''s facilities. The below table shows the details of each such demand notice, the amount demanded and the current status of the Company''s responsive actions.

The Company believes that the likelihood of any liability that may arise on account of the allegedly inappropriate distribution of input service tax credits is not probable. Accordingly, no provision relating to these claims has been made in these financial statements as of 31 March 2017.

Value Added Tax (VAT) matter

The Company has received various demand notices from the Government of Telangana''s Commercial Taxes Department objecting to the Company''s methodology of calculation of VAT input credit. The below table shows the details of each of such demand notice, the amount demanded and the current status of the Company''s responsive actions.

The Company has recorded a provision of '' 27 as of 31 March 2017, and believes that the likelihood of any further liability that may arise on account of the allegedly inappropriate claims to VAT credits is not probable.

Others

Additionally, the Company is in receipt of various demand notices from the Indian Sales and Service Tax authorities. The disputed amount is '' 174. The Company has responded to such notices and believes that the chances of any liability arising from such notices are less than probable. Accordingly, no provision is made in these financial statements as of 31 March 2017.

18. CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

(iv) Fuel Surcharge Adjustments

The Andhra Pradesh Electricity Regulatory Commission (the APERC) passed various orders approving the levy of Fuel Surcharge Adjustment (FSA) charges for the period from 1 April 2008 to 31 March 2013 by power distribution companies from all the consumers of electricity in the then existing undivided state of Andhra Pradesh, India where the Company''s headquarters and principal manufacturing facilities are located. Separate writ petitions filed by the Company for various periods, challenging and questioning the validity and legality of this levy of FSA charges by the APERC, are pending before the High Court of Andhra Pradesh and the Supreme Court of India.

After taking into account all of the available information and legal provisions, the Company has recorded Rs, 219 as the potential liability towards FSA charges. The total amount approved by APERC for collection by the power distribution companies from the Company in respect of FSA charges for the period from 1 April 2008 to 31 March 2013 is Rs, 482. As of 31 March 2017, the Company has made payments under protest of Rs, 354 as demanded by the power distribution companies as part of monthly electricity bills. The Company remains exposed to additional financial liability should the orders passed by the APERC be upheld by the Courts.

During the three months ended 30 June 2016, the Supreme Court of India dismissed the Special Leave Petition filed by the Company in this regard for the period from 1 April 2012 to 31 March 2013. As a result, the Company recognized an expenditure of Rs, 55 (by de-recognizing the payments under protest) representing the FSA charges for the period from 1 April 2012 to 31 March 2013.

(v) Direct taxes related matters

During the year ended 31 March 2014, the Indian Income Tax authorities disallowed for tax purposes certain business transactions entered into by the Company with its wholly-owned subsidiaries. The associated tax impact is Rs, 570. The Company believes that such business transactions are allowed for tax deduction under Indian Income Tax laws and accordingly filed an appeal with the Income Tax Appellate Authorities. On 28 April 2017, the Income Tax Appellate Tribunal of Hyderabad issued a judgment in favor of the Company confirming the Company''s position.

Additionally, the Company is contesting various other disallowances by the Indian Income Tax authorities. The associated tax impact is '' 1,555. The Company believes that the chances of an unfavorable outcome in each of such disallowances are less than probable and, accordingly, no provision is made in these financial statements as of 31 March 2017.

(vi) Others

Additionally, the Company is involved in other disputes, lawsuits, claims, governmental and/or regulatory inspections, inquiries, investigations and proceedings, including patent and commercial matters that arise from time to time in the ordinary course of business. Except as discussed above, the Company does not believe that there are any such contingent liabilities that are expected to have any material adverse effect on its financial statements.

19. DIVIDEND REMITTANCE IN FOREIGN CURRENCY

The Company does not make any direct remittances of dividends in foreign currencies to American Depository Receipts (ADRs) holders. The Company remits the equivalent of the dividends payable to the ADR holders in Indian Rupees to the custodian, which is the registered shareholder on record for all owners of the Company''s ADRs The custodian purchases the foreign currencies and remits it to the depository bank which inturn remits the dividends to the ADR holders.

20. SEGMENT REPORTING

In accordance with Ind AS 108 Operating Segments, segment information has been given in the consolidated financial statements of Dr. Reddy''s Laboratories Limited and therefore no separate disclosure on segment information is given in these financial statements.

(a) Includes gross carrying value of Rs, 10 (31 March 2016: Rs, 17) and accumulated depreciation of Rs, 9 (31 March 2016: Rs, 11) towards transfers from non research and development to research and development property, plant and equipment during the year.

(b) Includes gross carrying value of Rs, 55 (31 March 2016: Rs, 32) and accumulated depreciation of Rs, 31 (31 March 2016: Rs, 23) towards transfers from research and development to non research and development property, plant and equipment during the year.

21. RECEIPT OF WARNING LETTER FROM THE U.S. FDA

The Company received a warning letter dated 5 November 2015 from the U.S. FDA relating to current Good Manufacturing Practice (cGMP) deviations at its active pharmaceutical ingredient (API) manufacturing facilities at Srikakulam, Andhra Pradesh and Miryalaguda, Telangana, as well as violations at its oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. The contents of the warning letter emanated from Form 483 observations that followed inspections of these sites by the U.S. FDA in November 2014, January 2015 and February-March 2015, respectively.

The warning letter does not restrict production or shipment of the Company''s products from these facilities. However, unless and until the Company is able to correct outstanding issues to the U.S. FDA''s satisfaction, the U.S. FDA may withhold approval of new products and new drug applications of the Company, refuse admission of products manufactured at the facilities noted in the warning letter into the United States, and/ or take additional regulatory or legal action against the Company. Any such further action could have a material and negative impact on the Company''s ongoing business and operations. During the years ended 31 March 2016 and 31 March 2017, U.S. FDA withheld approval of new products for, these facilities pending resolution of the issues identified in the warning letter. To minimize the business impact, the Company transferred certain key products to alternate manufacturing facilities.

Subsequent to the issuance of the warning letter, the Company promptly instituted corrective actions and preventive actions and submitted a comprehensive response to the warning letter to the U.S. FDA, followed by periodic written updates and in-person meetings with the U.S. FDA. The U.S. FDA completed the re-inspection of the aforementioned manufacturing facilities in the months of March and April 2017. During the re-inspections, the U.S. FDA issued three observations with respect to the API manufacturing facility at Miryalaguda, two observations with respect to the API manufacturing facility at Srikakulam and thirteen observations with respect to the Oncology formulation manufacturing facility. The Company has responded to these observations identified by the U.S. FDA, and believes that it can resolve them satisfactorily in a timely manner.

22.AGREEMENT WITH GLAND PHARMA LIMITED

On 29 November 2016, the Company entered into an agreement with Gland Pharma Limited (Gland) to license, market and distribute eight injectable ANDAs. Pursuant to the arrangement, the Company will pay Gland U.S..8 million as consideration for in-licensing the aforesaid eight ANDAs upon completion of certain milestones by Gland.

The carrying value of the intangible as on 31 March 2017 was '' 212.

23.ACQUISITION OF SELECT PRODUCTS PORTFOLIO OF UCB

On 1 April 2015, the Company entered into a definitive agreement with UCB India Private Limited and other UCB group companies (together referred to as UCB) to acquire a select portfolio of products business in the territories of India, Nepal, Sri Lanka and Maldives. The transaction included approximately 350 employees engaged in operations of the acquired India business. The acquisition is expected to strengthen the Company''s presence in the areas of dermatology, respiratory and pediatric products.

The total goodwill of '' 323 is attributable primarily to the acquired employee workforce, intangible assets that do not qualify for separate recognition and the expected synergies. The entire amount of goodwill is deductible for tax purposes.

Out of the total purchase consideration of Rs, 8,000, the Company has paid Rs, 7,936 to UCB as of 31 March 2017.

24. CAPITAL MANAGEMENT

For the purposes of the Company''s capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company''s capital management is to maximize shareholder value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants. The Company monitors capital using gearing ratio, which is total debt divided by total capital plus debt.

The capital gearing ratio as on 31 March 2017 and 31 March 2016 was 17% and 20%, respectively.

25. AUDIT OF FINANCIAL STATEMENTS

The figures for the year ended 31 March 2016 were audited by previous statutory auditors.

26. SUBSEQUENT EVENTS

There are no significant events that occurred after the balance sheet date.

27. RECENT ACCOUNTING PRONOUNCEMENTS

Standards issued but not yet effective and not early adopted by the Company.

Amendment to Ind AS 7, Statement of Cash flows

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. The Company is in the process of evaluating the impact of the aforementioned requirement on the financial statements of the Company.

Amendment to Ind AS 102, Share-based payment

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.

28.RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ''fair values'', but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification.

Further, the amendment requires the award that includes a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.

The Company is in the process of evaluating the impact of the aforementioned requirement on the financial statements of the Company.

Source : Dion Global Solutions Limited
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