1 A - OVERVIEW
Lupin Limited (''the Company'') was incorporated in 1983 as Lupin
Chemicals Private Limited. Lupin Laboratories Limited which was
incorporated in 1972 was amalgamated with the Company w.e.f.
01.04.2000, pursuant to an Order passed by the Mumbai High Court. The
Company is an innovation led transnational pharmaceutical Company
producing a wide range of quality generic and branded formulations and
bulk drugs. The Company along with its subsidiaries has manufacturing
locations spread across India and Japan with trading and other
incidental and related activities extending to world markets.
a) Rights attached to Equity Shares
The Company has only one class of equity shares with voting rights
having a par value of Rs 2 per share. The Company declares and pays
dividends in Indian Rupees.The dividend proposed by the Board of
Directors is subject to the approval of the shareholders at the ensuing
Annual General Meeting.
During the year ended 31 March 2012, the amount of per share dividend
recognised as distributions to equity shareholders is Rs 3.2 (31 March
2011: Rs 3.0)
In the event of liquidation of the Company, the shareholders of equity
shares will be entitled to receive remaining assets of the Company
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
a) Foreign Currency Term Loans from Banks consist of two loans of USD
20 million (Rs 1,017.5 million) each. One of the loans carries interest
@ LIBOR plus 1.55% and is repayable after 3 years in installments of
USD 10 million (Rs 508.8 million) each from the date of their
origination on 10th December 2012 and 7th January 2013. Second loan
bears interest @ LIBOR plus 1.05% and is repayable after 3 years in
installments of USD 10 million (Rs 508.8 million) each from the date of
their origination on 3rd June 2013 and 29th July 2013.
b) Deferred Sales Tax Loan is interest free and payable in 5 equal
annual installments after expiry of initial 10 years moratorium period
from each such year of deferral period from 1998-99 to 2009-10.
c) Term Loans from CSIR carry interest of 3% p.a. and is payable in 8
annual installments of Rs 30.9 million each alongwith interest.
d) Term Loans from DST carry interest of 3% p.a. and is payable in 7
annual installments of Rs 10.4 million each alongwith interest.
e) The Company has not defaulted on repayment of loans and interest
during the year.
a) Working Capital Loans from Consortium of Banks comprise of Cash
Credit, Short-Term Loans, Packing Credit, Post Shipment Credit, Bills
Discounted and Overseas Import Credit and are secured by hypothecation
of inventories and trade receivables, and all other moveable assets,
including current assets at godowns, depots, in course of transit or on
high seas and a second charge on immovable properties and moveable
assets of the Company both present and future.
b) Secured Working Capital Loans from Banks include foreign currency
loans of Rs 5,536.3 million (previous year Rs 6,039.2 million).
c) Unsecured Working Capital Loans from Banks comprise of Cash Credit
and Short-Term Loans.
d) Unsecured Working Capital Loans from Banks include foreign currency
loans of Rs 2,716.9 million (previous year Rs 1,161.8 million).
e) Working Capital Loans from Banks in foreign currency carries
interest rate in the range of 1.5% to 3% p.a. and those in Indian
Rupees carries interest rate in the range of 11% to 13% p.a.
f) The Company has not defaulted on repayment of loans and interest
during the year.
2. Estimated amount of contracts remaining to be executed on capital
account and not provided for, net of advances, Rs 1518.2 million
(previous year Rs 1278.0 million).
3. Contingent Liabilities:
(Rs in million)
As at As at
a) Income tax demands / matters in
respect of earlier years, pending in
appeals [Rs 17.7 million (previous
year Rs 152.4 million)] consequent to
department preferring appeal against
the order of the Appellate Authority
passed in favour of the Company.
Amount paid there against and
included under note 19 Short-Term
Loans and Advances Rs 27.0 million
(previous year Rs nil). 44.7 152.4
b) Excise duty, Service tax and Sales
tax demands for input tax credit
disallowances and demand for additional
Entry Tax arising from dispute on
applicable rate are in appeals and
pending decisions. Amount paid there
against and included under note 19
Short-Term Loans and Advances
Rs 28.4 million (previous year
Rs 29.0 million). 416.8 195.1
c) Claims against the Company not
acknowledged as debts [excluding
interest (amount unascertained) in
respect of a claim] for transfer
charges of land, octroi duty,
employee claims, power and stamp duty.
Amount paid there against without
admitting liability and included
under note 19 Short-Term Loans and
Advances Rs 78.6 million (previous
year Rs 76.8 million). 432.9 311.1
d) Counter guarantee given to GIDC
in connection with repayment of loan
sanctioned by a financial institution
to a company, jointly promoted by an
Association of Industries (of which,
the Company is a member) and GIDC. 7.5 7.5
e) Guarantees given in respect of
standby letter of credit issued by
the Company''s bankers in connection
with the credit facilities availed
for its subsidiaries aggregating
Rs nil (previous year Rs 221.6 million). - 214.4
f) Letter of comfort issued by the
Company towards the credit facilities
sanctioned by the bankers of subsidiary
companies aggregating Rs 118.6 million
(previous year Rs 102.9 million). 81.4 37.5
g) Corporate guarantee given in respect
of credit facility sanctioned by bankers
of subsidiary companies aggregating
Rs 3034.2 million (previous year
Rs 78.2 million). 2902.8 26.9
h) Financial guarantee given to third
party on behalf of subsidiary for
contractual obligations. 152.6 133.8
i) Bank Guarantees given on behalf of
the Company to third party. 15.9 -
The Company does not envisage any likely reimbursements in respect of
4. a) During the year, the Company, through its wholly owned
subsidiary Lupin Holdings B.V., Netherlands
(LHBV), acquired / subscribed to the equity stake of the
following 100% subsidiaries:
i) Additional investment in Hormosan Pharma GmbH, Germany at a total
cost of Rs 177.1 million.
ii) Additional investment in Lupin Philippines Inc., Philippines at a
total cost of Rs 6.1 million.
iii) Additional investment in Lupin Mexico SA de CV, Mexico at a total
cost of Rs 8.6 million.
b) During the year, Kyowa Pharmaceutical Industry Co. Ltd., Japan
(wholly owned subsidiary of LHBV) acquired 99.99% equity stake of I''rom
Pharmaceutical Co. Ltd., Japan at a total cost of Rs 2289.4 million.
The above acquisitions / subscriptions are based on the net asset
values, the future projected revenues, operating profits, cash flows
etc. of the investee companies.
5. Segment Reporting:
The Company has presented data relating to its segments based on its
consolidated financial statements, which are presented in the same
Annual Report. Accordingly, in terms of paragraph 4 of the Accounting
Standard 17 (AS 17) Segment Reporting, no disclosures related to
segments are presented in this standalone financial statement.
* Excluding service tax.
** Includes payment for taxation matters to an affiliated firm covered
by a networking arrangement which is registered with the Institute of
Chartered Accountants of India.
6. Employees Stock Option Plans:
a. The Company implemented Lupin Employees Stock Option Plan 2003
(ESOP 2003), Lupin Employees Stock Option Plan 2005 (ESOP 2005)
and Lupin Subsidiary Companies Employees Stock Option Plan 2005
(SESOP 2005), Lupin Employees Stock Option Plan 2011 (ESOP 2011)
and Lupin Subsidiary Companies Employees Stock Option Plan 2011
(SESOP 2011) as approved in earlier years by the Shareholders of the
Company and the Remuneration / Compensation Committee of the Board of
Directors. Details of the options granted during the year under the
plans are as under:
7. Stock Appreciation Rights:
During the year, the Company has granted Stock Appreciation Rights
(SARs) to certain eligible employees in accordance with Lupin
Employees Stock Appreciation Rights Scheme (LESARs 2011) approved
by the Board of Directors (Board) at their Board Meeting held on
September 13, 2011. Under the scheme, eligible employees are entitled
to receive appreciation in value of shares on completion of the vesting
The Scheme is administered through the Lupin Employees Benefit Trust
(the Trust) as settled by the Company. The Trust is administered
by an independent Trustee. At the end of the vesting period of 3 years,
the equity shares will be sold in the market by the Trust and the
appreciation on the same (if any) will be distributed to the said
employees, subject to vesting conditions.
As approved by the Board, the Company has advanced an interest free
loan of Rs 220.1 million to the Trust during the year to acquire
appropriate number of Equity Shares of the Company from the market on
the grant date of SARs and the loan outstanding as at the balance sheet
date aggregating to Rs 220.1 million is included under Long-Term
Loans and Advances (Refer note 14).
8 Post Employment Benefits:
(i) Defined Contribution Plans:
The Company makes contributions towards provident fund and
superannuation fund to a defined contribution retirement benefit plan
for qualifying employees. The superannuation fund is administered by
the Life Insurance Corporation of India (LIC). Under the plan, the
Company is required to contribute a specified percentage of payroll
cost to the retirement benefit plan to fund the benefits.
The Company recognised Rs 120.1 million (previous year Rs 96.0 million)
for superannuation contribution and Rs 1.5 million (previous year Rs 3.8
million) for provident fund contributions in the Statement of Profit
(ii) Defined Benefit Plan:
A) The provident fund plan of the Company, except one plant, is
operated by the Lupin Limited Employees Provident Fund Trust (the
Trust). Eligible employees receive benefits from the said
Provident Fund. Both the employees and the Company make monthly
contributions to the Provident Fund Plans equal to a specified
percentage of the covered employee''s salary. The minimum interest
rate payable by the Trust to the beneficiaries every year is being
notified by the Government. The Company has an obligation to make good
the shortfall, if any, between the return from the investments of the
trust and the notified interest rate.
The ASB Guidance on Implementing AS-15, Employee Benefits (revised
2005) issued by Accounting Standards Board (ASB) states that benefit
plans involving employer established provident funds, which require
interest shortfalls to be recompensed are to be considered as defined
benefit plans. As per the Guidance Note from the Actuarial Society of
India, the Company has obtained the actuarial valuation of interest
rate obligation in respect of Provident Fund and shortfall aggregating
Rs 24.6 million has been provided for. The Company has an obligation to
service the shortfall on account of interest generated by the fund and
on maturity of fund investments and hence the same has been classified
as Defined Benefit Plan.
The Company recognised Rs 175.7 million (Previous year Rs 137.0 million)
for provident fund contributions in the Statement of Profit and Loss.
B) The Company makes annual contributions to the Group Gratuity cum
Life Assurance Schemes administered by the LIC of India, a funded
defined benefit plan for qualifying employees. The scheme provides for
payment as under:
a) On normal retirement / early retirement / withdrawal / resignation:
As per the provisions of the Payment of Gratuity Act, 1972 with vesting
period of 5 years of service.
b) On death in service:
As per the provisions of the Payment of Gratuity Act, 1972 without any
The most recent actuarial valuation of plan assets and the present
value of the defined benefit obligation for gratuity were carried out
as at March 31, 2012. The present value of the defined benefit
obligations and the related current service cost and past service cost,
were measured using the Projected Unit Credit Method.
Based on the actuarial valuation obtained in this respect, the
following table sets out the status of the gratuity plan and provident
fund plan and the amounts recognised in the Company''s financial
statements as at the balance sheet date.
9. Details of Derivative Contracts:
The Company enters into forward and option contracts in order to hedge
and manage its foreign currency exposures towards future export
earnings. Such derivative contracts (including contracts for a period
extending beyond the financial year 2012-13) are entered into by the
Company for hedging purposes only, and are accordingly classified as
cash flow hedges.
The changes in the fair value of the derivative contracts during the
year ended March 31, 2012 aggregating Rs 631.9 million (previous year Rs
126.3 million) designated and effective as hedges have been debited to
the Cash Flow Hedge Reserve and Rs 4.7 million (previous year Rs 20.3
million credited) is debited to the Statement of Profit and Loss, being
the ineffective portion thereof.
10. The aggregate amount of revenue expenditure incurred during the
year on Research and Development and shown in the respective heads of
account is Rs 4630.4 million (previous year Rs 4310.9 million).
11. The information regarding Micro Enterprises and Small Enterprises
has been determined to the extent such parties have been identified on
the basis of information available with the Company. This has been
relied upon by the auditors.
Amounts due to Micro Enterprises and Small Enterprises as on March 31,
2012 is Rs 219.4 million, interest Rs nil (previous year Rs 187.2 million,
interest Rs nil), interest paid during the year Rs nil (previous year Rs
12. During the previous year:
a) Under Sections 391-394 of the Companies Act, 1956, Lupin Pharmacare
Limited and Lupin Herbal Limited together with Novodigm Limited, wholly
owned subsidiaries of the Company (''transferor companies''), stood
amalgamated with the Company on a going concern basis effective from
May 27, 2010, pursuant to the scheme sanctioned by the Honourable High
Court of Judicature at Ahmedabad vide its order dated May 6, 2010.
b) The said amalgamation was accounted for under the Pooling of
Interests method as prescribed by the Accounting Standard 14
''Accounting for Amalgamations'' as notified by the Companies
(Accounting Standards) Rules, 2006. In terms of the Scheme, all the
assets and liabilities of the transferor companies were transferred to
the Company at their respective book values and all inter-company
balances were cancelled. Since the transferor companies were wholly
owned subsidiaries, the shares held by the Company in the aforesaid
companies stood cancelled and no shares were issued to effect the
c) Consequently, the goodwill of Rs 218.1 million arising on
amalgamation is reflected in the standalone financial statements of the
Company from the year ended March 31, 2011. The said goodwill is being
amortized over a period of five years.
13. Related Party Disclosures, as required by Accounting Standard 18
are given below:
Category I : Subsidiaries:
Lupin Pharmaceuticals Inc., USA
Kyowa Pharmaceutical Industry Co. Ltd., Japan
Lupin Australia Pty Ltd., Australia
Lupin Holdings B.V., Netherlands
Pharma Dynamics (Proprietary) Ltd., South Africa
Hormosan Pharma GmbH, Germany
Multicare Pharmaceuticals Philippines Inc., Philippines
Lupin Atlantis Holdings SA, Switzerland
Lupin (Europe) Ltd., UK
Amel Touhoku, Japan
Lupin Pharma Canada Ltd., Canada
Lupin Mexico SA de CV, Mexico (from 23rd August 2010)
Generic Health Pty Ltd., Australia (from 27th September 2010)
Bellwether Pharma Pty Ltd., Australia (from 27th September 2010)
Generic Health Inc., USA (from 27th September 2010) (upto 4th October
Max Pharma Pty Ltd., Australia (from 27th September 2010)
Lupin Philippines Inc., Philippines (from 20th December 2010)
Lupin Healthcare Ltd., India (from 17th March 2011)
Generic Health SDN. BHD., Malaysia (from 18th May 2011)
I''rom Pharmaceutical Co. Ltd., Japan (from 30th November 2011)
Category II : Key Management Personnel:
Dr. D. B. Gupta Chairman
Dr. K. K. Sharma Managing Director
Mrs. M. D. Gupta Executive Director
Mr. Nilesh Gupta Executive Director
Category III : Others (Relatives of Key Management Personnel and
Entities in which the
Key Management Personnel have control or significant influence):
Mrs. Vinita Gupta
Dr. Anuja Gupta
Mrs. Kavita Gupta Sabharwal
Dr. Richa Gupta
Mrs. Pushpa Khandelwal
Bharat Steel Fabrication and Engineering Works
D. B. Gupta (HUF)
Enzal Chemicals (India) Limited
Lupin Human Welfare and Research Foundation
Lupin International Pvt. Limited
Lupin Investments Pvt. Limited
Lupin Marketing Pvt. Limited
Matashree Gomati Devi Jana Seva Nidhi
Novamed Pharmaceuticals Pvt. Limited
Polynova Industries Limited
Rahas Investments Pvt. Limited
Synchem Chemicals (I) Pvt. Limited
Visiomed (India) Pvt. Limited
Zyma Laboratories Limited
i) Figures in brackets are for previous year.
ii) Related party relationship is as identified by the Company and
relied upon by the Auditors.
14. Excise duty (Refer note 27) includes Rs 23.2 million (previous year
Rs 2.8 million) being net impact of the excise duty provision on opening
and closing stock.
15. The Company is involved in various legal proceedings, including
product liability related claims, employment claims and other
regulatory matters relating to conduct of its business. The Company
carries product liability insurance policy with an amount it believes
is sufficient for its needs. In respect of other claims, the Company
believes, these claims do not constitute material litigation matters
and with its meritorious defenses the ultimate disposition of these
matters will not have material adverse effect on its Financial
16. No borrowing cost has been capitalised during the year.
17. The Revised Schedule VI has become effective from 1 April 2011 for
the preparation of financial statements. This has significantly
impacted the disclosure and presentation made in the financial
statements. Previous years figures have been regrouped / reclassified
wherever necessary to correspond with the current year''s classification