1. Company overview
Ranbaxy Laboratories Limited (''the Company'') together with its
subsidiaries and an associate, operates as an integrated international
pharmaceutical organisation with businesses encompassing the entire
value chain in the marketing, production and distribution of
The Company''s shares are listed for trading on the National Stock
Exchange and the Bombay Stock Exchange in India. Its Global Depository
Shares (representing equity shares of the Company) are listed on the
Luxembourg Stock Exchange. During the current year, the Company has
issued redeemable non-convertible debentures which are listed for
trading on the National Stock Exchange in India.
a. Rights, preferences and restrictions attached to shares
As per the Memorandum of Association, the Company''s authorised share
capital consists of equity shares and preference shares. Preference
shares shall be entitled for such rate of dividend as may be decided by
the Directors of the Company at the time of issue of such shares and
shall rank in priority to the equity shares including arrears, if any,
in the event of the winding up of the Company, but shall not be
entitled to any further participation in the profts or surplus assets
of the Company. Preference shares are entitled to one vote per share at
meetings of the Company only in respect of resolutions directly
affecting their rights. However, a cumulative preference shareholder
acquires voting rights on par with an equity shareholder if the
dividend on preference shares has remained unpaid for a period of not
less than two years.
All equity shares rank equally with regard to dividends and share in
the Company''s residual assets. The equity shares are entitled to
receive dividend as declared from time to time. The voting rights of an
equity shareholder on show of hand or through proxy shall be in
proportion to his share of the paid-up equity capital of the Company.
On winding up of the Company, the holders of equity shares will be
entitled to receive the residual assets of the Company, remaining after
distribution of all preferential amounts in proportion to the number of
equity shares held.
b. Equity shares reserved for issue under employee stock options:
Refer to note 34 for number of stock options against which equity
shares to be issued by the Company upon vesting and exercise of those
stock options by the option holders as per the relevant scheme.
c. During the year ended 31 December 2012, the Company has issued
440,000 (previous year 325,000) equity shares of Rs. 5 (previous year
Rs. 5) each issued for cash at par to Ranbaxy ESOP Trust (Trust), set
up to administer Employees Stock Option Plan (ESOP - 2011). Out of the
total equity shares issued to the Trust, 238,762 equity shares
(previous year Nil equity shares) have been allocated by the Trust to
the respective employees upon exercise of stock options from time to
time under ESOP - 2011. As at 31 December 2012, 526,238 equity shares
(previous year 325,000 equity shares) are pending to be allocated to
the employees upon exercise of stock options (For ESOP - 2011 details,
refer to note 34).
d. During the fve years period ended 31 December 2012 and 31 December
2011, neither any bonus shares or shares issued for consideration other
than cash that have been issued nor any shares that have been bought
e. Issued, subscribed and paid-up share capital include 8,963,108
(previous year 7,460,842) Global Depository Shares (GDSs) representing
8,963,108 (previous year 7,460,842) equity shares of Rs. 5 (previous
year Rs. 5) each constituting 2.12% (previous year 1.77%) of the
issued, subscribed and paid-up share capital of the Company.
* Amount disclosed under the head Other current liabilities (Refer to
** On 23 November 2012, the Company had issued redeemable
non-convertible debentures for a period of 36 months at a coupon rate
of 9.20% p.a. Such debentures are secured by a pari-passu frst ranking
charge on the Company''s fxed assets so as to provide a fxed asset cover
1.25x and are listed on the National Stock Exchange.
@ ECBs include loan taken for YEN Nil equivalent to Rs. Nil (previous
year for YEN 5.9 billion equivalent to Rs. 4,052.12) which carries
interest at applicable LIBOR plus margin (38 basis points for YEN 3
billion and 55 basis points for YEN 2.9 billion). Loan of YEN 2.9
billion was taken on 30 March 2007 and has been repaid on 29 March
2012. Further, loan of YEN 3 billion was taken on 1 August 2007 and has
been repaid on 31 July 2012.
Further, ECBs also include 7 loans for USD 228.34 equivalent to Rs.
12,502.76 (previous year 6 loans for USD 186.67 equivalent to Rs.
9,940.18). For the loans outstanding at the Balance Sheet date, terms
of repayment, rate of interest for USD borrowings are as follows :
(i) USD 50 million equivalent to Rs. 2,737.75 (previous year USD Nil
equivalent Rs. Nil), which carries interest at applicable LIBOR plus
margin (100 basis points). The loan was taken on 20 September 2012 and
is repayable on 19 September 2017.
(ii) USD 30 million equivalent to Rs. 1,642.65 (previous year USD 30
million equivalent Rs. 1,597.50), which carries interest at applicable
LIBOR plus margin (200 basis points). The loan was taken on 30 June
2011 and is repayable on 29 June 2017.
(iii) USD 30 million equivalent to Rs. 1,642.65 (previous year USD 30
million equivalent to Rs. 1,597.50), which carries interest at
applicable BBA 6 months LIBOR plus margin (100 basis points). The said
loan was taken on 9 September 2010 and is repayable on 8 September
(iv) USD 50 million equivalent to Rs. 2,737.75 (previous year USD 50
million equivalent to Rs. 2,662.50), which carries interest at
applicable USD/ Japanese YEN LIBOR plus margin (150 basis points). It
was taken on 12 August 2010 and is repayable on 11 August 2015.
(v) USD 40 million equivalent to Rs. 2,190.20 (previous year USD 40
million equivalent to Rs. 2,130), which carries interest at applicable
6 months LIBOR plus margin (175 basis points). The loan was taken on 25
March 2011 and is repayable fully by 24 March 2017 in 3 installments
viz; 30% of the drawn amount at the end of 4th year and 5th year each
and 40% of the drawn amount at the end of the 6th year.
(vi) USD 20 million equivalent to Rs. 1,095.10 (previous year USD 20
million equivalent Rs. 1,065), which carries interest at applicable
LIBOR plus margin (195 basis points). It was taken on 10 June 2011 and
is repayable on 9 June 2014.
(vii) USD 8.34 million equivalent to Rs. 456.66 (previous year USD
16.67 million equivalent to Rs. 887.68), which carries interest at
applicable LIBOR plus margin (53 basis points). It was taken on 30
April 2007 and is repayable in 3 equal annual installments commencing
29 April 2011.
$ The Company has taken a loan of Rs. 2,500 (previous year Rs. Nil)
which carries interest at applicable bank base rate plus margin (60
basis point). The loan was taken on 3 October 2012 and is repayable on
2 October 2015.
# Represents term loan taken for research and development from
Department of Science and Technology taken on 31 May 2007 which carries
interest of 3% per annum and is repayable in 10 annual installments of
Rs. 5.50 each along with interest.
^ The Company has not defaulted on repayment of loan and interest
during the year.
@@ A provision is estimated for expected sales return in sale of
products made during the year on the basis of past experience and
contractual obligation with the customer. It is expected that the
entire sale return will happen over the next twelve months.
$$ The Company is negotiating towards a settlement with the Department
of Justice (DOJ) of the USA for resolution of potential civil and
criminal allegations by DOJ. Accordingly, the Company had recorded a
provision of Rs 26,480 (USD 500 Million) in the year ended 31 December
2011, which on a consideration of the progress in the matter so far,
the Company believes will be suffcient to resolve all potential civil
and criminal liability. The Company and its subsidiaries are in the
process of negotiations which will conclusively pave the way for a
Comprehensive DOJ Settlement. The settlement of this liability is
expected to be made by the Company in compliance with the terms of
settlement, once concluded and subject to other regulatory/statutory
Any gain/ loss on account of changes in exchange rate and related
interest expense is presented in the relevant items in the Statement of
Proft and Loss and interest accrued but not due is presented in ''Other
payables'' under ''Other liabilities'' in note 11.
* Rounded off to Rs. Nil.
** NCRP denotes non convertible redeemable preference shares.
^ Partly paid-up Rs. 100 per share.
# includes Rs. 7,028.59 (previous year Rs. 7,028.59) paid as share
$ During the current year, the Company has sold its investments in
Ranbaxy Drugs and Chemicals Company, Ranbaxy Life
Sciences Research Limited, Ranbaxy SEZ Limited, Solus Pharmaceuticals
Limited and Rexcel Pharmaceuticals Limited to Ranbaxy Drugs Limited
(RDL) for a total consideration of Rs. 1,774.01 which is expected to
be received over next twelve months on a deferred basis and hence
disclosed as Loans and advances to subsidiaries under Short-term
loans and advances in note 16. The Hon''ble High Court of Delhi and the
Hon''ble High Court of Punjab and Haryana at Chandigarh has approved the
scheme of merger of all above mentioned companies with RDL from
appointed date of 1 April 2012. The scheme will become effective on
fling of the orders with the Registrar of Companies.
@ During the current year, the Company (in addition to provision for
other-than-temporary diminution amounting to Rs. 1,700 as at 31
December 2011) has created a further provision for other-than-temporary
diminution of Rs. 1,030 in the value of its non-current investment in
Ranbaxy Pharmacie Generiques SAS, France (a wholly owned subsidiary of
the Company). The calculation of provision involves usage of
assumptions and signifcant judgement based on valuation
methodologies/judgement. Due to change in market conditions and
considering actual performance and future projections of the business,
the management believes it is prudent to further impair this
investment. It will be evaluated on a going forward basis for any
^^ In December 2012, the Company approved the proposal to integrate the
business operations and management of Ranbaxy Unichem Co. Ltd.
(''Unichem''), its subsidiary, with Daiichi Sankyo (Thailand) Ltd, a
subsidiary of Daiichi Sankyo.
As at 31 December 2012 and 31 December 2011, in view of accumulated tax
losses and absence of virtual certainty, deferred tax assets have been
recognised only to the extent of deferred tax liabilities (primarily
arising from depreciation, amortisation and impairment). Deferred tax
assets not carried forward include Rs. 1,929 (previous year Rs. 1,929)
relating to premium on redemption of FCCBs recorded through securities
premium account which has been claimed as allowable deduction in the
previous year on payment basis. Accordingly, utilization/ recognition
thereof in future period will be recorded by crediting securities
premium account. Further, deferred tax assets not carried forward
include Rs. 45.34 (previous year Rs. 439.24) relating to loss on
effective portion of forward exchange contract adjusted in hedging
# The Company has given a part of its premises under cancellable
operating lease arrangement to a related party. Lease rentals amounting
to Rs. 126.00 (previous year Rs. 126.30) has been recognised in the
Statement of Proft and Loss. As only a portion of these premises has
been let out, the gross carrying amount and the accumulated
depreciation of leased premises/ assets is not separately identifable.
^ During the current and previous year, the Company has accrued an
expense as claims and contractual expense towards a portion of proft
payable to another party in relation to sales of a product.
# The Company has taken certain facilities under cancellable and
non-cancellable operating lease arrangements with lease term ranging
from 11 months to 10 years, which are subject to renewal at mutual
consent thereafter. The cancellable arrangements can be terminated by
either party after giving due notice. The future minimum lease payments
in respect of non-cancellable operating leases as at 31 December 2012
and 31 December 2011 are:
2. Employee share-based payment plans
The Company''s Employee Stock Option Schemes (ESOSs) provide for the
grant of stock options to eligible employees and Directors of the
Company and its subsidiaries. The ESOSs are administered by the
Compensation Committee (Committee) of the Board of Directors of the
Company. Options are granted at the discretion of the committee to
selected employees depending upon certain criterion. As at 31 December
2012, there were four ESOSs, namely, ESOS I, ESOS II, ESOS 2005
and ESOP 2011.
The ESOSs limits the maximum grant of options to an employee at 25,000
for ESOS I, 40,000 for ESOS II and 300,000 for ESOS 2005 in any given
year. ESOS I and II provide that the grant price of options is to be
determined at the average of the daily closing price of the Company''s
equity shares on the NSE during a period of 26 weeks preceding the date
of the grant. ESOS 2005 provides that the grant price of options will
be the latest available closing price on the stock exchange on which
the shares of the Company are listed, prior to the date of the meeting
of the Committee in which the options are granted. If the shares are
listed on more than one stock exchange, then the stock exchange where
there is highest trading volume on the said date shall be considered.
The options vests evenly over a period of fve years from the date of
grant. Options lapse, if they are not exercised prior to the expiry
date, which is ten years from the date of grant.
During the previous year, the Company had introduced a new ESOS scheme
namely Ranbaxy Employees Stock Option Plan 2011 ESOP - 2011 with
effect from 1 July 2011. This scheme limits the maximum grant of
options to an employee or a director at 30,000 in any given year. ESOP
2011 provides that the grant price will be the face value of the equity
share. The options vests evenly over a period of three years from the
date of grant. Options lapse, if they are not exercised prior to the
expiry date, which is three months from the date of the vesting. The
Company has formed Ranbaxy ESOP Trust (''Trust'') to administer ESOP -
2011 scheme. The Company will issue shares to the Trust which will
allocate the shares to the respective employees upon exercise of stock
options from time to time under ESOP - 2011.
The Shareholders'' Committee have approved issuance of options under the
ESOS as per details given below:
3. Employee benefts expense
The Company primarily provides the following retirement benefts to its
(b) Provident fund
* Past service credit is due to revision in the retirement age from 58
years to 60 years except for few employees who have opted for
retirement age of 58 years.
Further, during the year, the Company has recognised an expense of Rs.
240.85 (previous year Rs. 209.39) pertaining to employers'' contribution
to provident fund including portion paid to the statutory authorities,
which is included in Employee benefts expense in note 28.
# Represents employers'' contribution to provident fund made by the
Company to provident fund trust administered by the Company, net for
reversal of unrecognised defcit of Rs. Nil (previous year Rs. 43.95) as
at the beginning of the year (previous year being the frst year of
actuarial valuation) and unrecognised surplus of Rs. 80.43 (previous
year Rs. 32.45) as at 31 December 2012 (in absence of any right to
claim the surplus), both being considered in actuarial valuation.
Figures in italics are for the year ended 31 December 2011.
## 10% for all future years (previous year 10% for the frst two years
and 7% thereafter). The salary increase takes account of infation,
seniority, promotion and other relevant factors on long term basis.
** On the basis of average rate of earnings expected on the funds
Figures/ percentages in italics are for the year ended 31 December
4. Hedging and derivatives
a) The Company uses various forms of derivative instruments such as
foreign exchange forward contracts (including instruments which are in
substance forward contracts), options, currency swaps, currency cum
interest rate swaps and interest rate swaps to hedge its exposure to
movements in foreign exchange and interest rates. These derivatives are
not used for trading or speculation purposes.
b) The Company classifes some of its derivative contracts that hedge
foreign currency risk associated with highly probable forecasted
transactions as cash fow hedges and measures them at fair value. As at
31 December 2012, these highly probable forecasted transactions are
expected to occur over a period of January 2013 to July 2013 year
(previous year from January 2012 to July 2013 years) which also
approximates/ coincides with maturity of hedging instruments. The
effective portion of such cash fow hedges is recorded as part of
reserves and surplus within hedging reserveand re-classifed in the
Statement of Proft and Loss as revenue in the period corresponding to
the occurrence of the highly probable forecasted transactions. The
ineffectiveness arising from cash fow hedges which is recognised in
Statement of Proft and Loss is not material.
- accounted for in accordance with AS 30, Financial
instruments-recognition and measurement, to the extent not covered
under AS 11.
# Cumulative mark to market loss (net), on above instruments Rs.
15,463.51 (previous year Rs. 21,057.64) which has been determined based
on valuation provided by banks i.e counter party.
* designated as cash fow hedge instruments. ** structured options @
2.00 to 2.5 times.
^ PCFC represents packing credit loans taken in foreign currency.
@ Net of forward contracts of USD 145.64 million (previous year USD 54
million), currency swaps of USD 120 million (previous year USD Nil) and
currency cum interest rate swaps of USD 100 million (previous year USD
@@ Net of currency swaps of JPY Nil (previous year JPY 5,900 million)
and interest rate swap on JPY Nil (previous year JPY 2,900 million)
$$ Exposures in other currencies which are not signifcant has been
aggregated for this disclosure.
5. Related party disclosures
A] Names of related parties
Related parties with whom no transactions have taken place during the
year or previous year:
i) Subsidiaries including step down subsidiaries
Vidyut Investments Limited, India
Ranbaxy (Netherlands) BV, The Netherlands
Ranbaxy Signature LLC, USA
Be-Tabs Investments (Proprietary) Limited, South Africa
Terapia Distributie S.R.L., Romania (Merged with Terapia S.A., Romania
w.e.f. 7 February 2012)
Offce Pharmaceutique Industriel et Hospitalier SARL, France
Ranbaxy Holdings (UK) Ltd., United Kingdom (''UK'')
Ranbaxy Do Brazil Ltda., Brazil
Ranbaxy Pharma AB, Sweden
Ranbaxy USA Inc., USA
Ranbaxy GmbH, Germany (from 9 November 2012)
Ranbaxy Mexico Servicios S.A.de C.V., Mexico (upto 29 July 2011)
ii) Associate company
Shimal Research Laboratories Limited, India (upto 30 June 2011)
Related parties with whom transactions have taken place during the year
or previous year:
i) Holding company (also being the ultimate holding company)
Daiichi Sankyo Company Limited, Japan
ii) Fellow subsidiaries
Daiichi Sankyo India Pharma Private Limited, India
Daiichi Sankyo Chemical Pharma Co., Ltd., Japan
Daiichi Sankyo Propharma Co., Ltd., Japan
Daiichi Sankyo Development Limited, UK
Ranbaxy Mexico S.A.de C.V., Mexico (from 30 July 2011)
Daiichi Sankyo Inc., USA
iii) Subsidiaries including step down subsidiaries / partnership frms
Ranbaxy Drugs and Chemicals Company, India (Company with unlimited
Solus Pharmaceuticals Limited, India #
Ranbaxy SEZ Limited, India #
Rexcel Pharmaceuticals Limited, India #
Ranbaxy Life Sciences Research Limited, India #
Gufc Pharma Limited, India
Ranbaxy Drugs Limited, India
Solrex Pharmaceuticals Company, India (a Partnership frm)
Ranbaxy (Hong Kong) Limited, Hong Kong
Ranbaxy Inc., USA
Ranbaxy Laboratories Inc., USA
Ranbaxy Egypt (L.L.C.), Egypt
Ranbaxy Farmaceutica Ltda., Brazil
Ranbaxy-PRP-(Peru) S.A.C, Peru
Ranbaxy Australia Pty Ltd., Australia
Ranbaxy Unichem Co. Ltd., Thailand
Ranbaxy Italia S.p.A, Italy
Ranbaxy Malaysia Sdn. Bhd., Malaysia
Ranbaxy (Poland) S. P. Z.O.O, Poland
Ranbaxy Nigeria Limited, Nigeria
Ranbaxy Europe Limited, UK
Ranbaxy (UK) Limited, UK
Basics GmbH, Germany
Ranbaxy Mexico S.A.de C.V., Mexico (upto 29 July 2011)
ZAO Ranbaxy, Russia
Terapia S.A., Romania
Ranbaxy Pharmaceuticals Inc., USA
Ohm Laboratories Inc., USA
Ranbaxy Ireland Limited, Ireland
Ranbaxy (South Africa) Proprietary Limited, South Africa
Laboratorios Ranbaxy S.L., Spain
Ranbaxy Pharmacie Generiques SAS, France
Ranbaxy Pharmaceuticals Canada Inc., Canada
Sonke Pharmaceuticals (Proprietary) Limited, South Africa
Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal
Ranbaxy Belgium N.V., Belgium
Be-Tabs Pharmaceuticals (Proprietary) Limited, South Africa
Rexcel Egypt LLC, Egypt
Ranbaxy Morocco LLC, Morocco (from 4 February 2011)
Ranbaxy Pharmaceuticals Ukraine LLC, Ukraine (from 13 June 2012)
iv) Associate company
Zenotech Laboratories Limited, India
v) Key management personnel
Mr. Arun Sawhney, Managing Director (from 20 August 2010 to 4 August
2011) and CEO and Managing Director (from 5 August 2011)
# Refer to note 14 for details on merger of these subsidiaries with
* a) On the basis of a legal advice, the Company is of the view that
the appointment and payment of remuneration to
Mr. Arun Sawhney, CEO and Managing Director for the full year ended 31
December 2011 is in accordance with the conditions stipulated under the
Notifcation no. GSR 534(E) dated 14 July 2011 read with the
clarifcation dated 16 August 2012 issued by the Ministry of Corporate
b) Does not include liabilities in respect of gratuity, pension and
compensated absences as the same is determined on an actuarial basis
for the Company as a whole
# Include proceeds from sale of investments to Ranbaxy Drugs Limited, a
subsidiary company, is considered as loan to subsidiary (Refer to note
Key management personnel
As at 31 December 2012, amount payable to key management personnel is
Rs. 13.41 (previous year Rs. Nil) included under ''Other current
liabilities - payable to employees''.
Further, during the current year and previous year, the Company has
granted stock options to Arun Sawhney, key management personnel in
respect of which Rs. 4.35 (previous year Rs. 1.18) has been recognised
as an expense which is included in Employee stock option expense in
note 28 of the Statement of Proft and Loss. The deferred employee stock
option expense in respect of such stock options as at 31 December 2012
is Rs. 8.48 (previous year Rs. 5.82).
6. During the quarter ended 31 December 2012, the Company has made a
voluntary recall of Atorvastatin Calcium Tablets from the USA market.
The amount represents consequential cost (sales return, inventory write
off and customer claim) recognised by the Company.
* The Company has received demands for payment to the credit of the
Drug Prices Equalisation Account under Drugs (Price Control) Order,
1995 (''DPCO'') which is being contested by the Company in respect of its
various products. Further, the Company has deposited Rs. 325.59
(previous year Rs. 325.59) under protest.
** The Company has been contesting a case with the Municipal
Corporation of Mohali (MCM) under which MCM is contesting that Octroi
has to be paid by the Company at 1% as against 0.5% being paid by the
Company. The amount above represents the difference payable.
*** These represent cases pending at various forums on account of
employee/worker related cases, State electricity board, Punjab Land
Preservation Act, etc. iii) In respect of matters in (a), (b) and (c)
above, the amount represents the demands received under the respective
demand/ show cause notices/ legal claims, wherever applicable.
7. Segment information
In accordance with AS 17, Segment Reporting, segment information has
been given in the consolidated fnancial statements of the Company, and
therefore, no separate disclosure on segment information is given in
these fnancial statements.