Ranbaxy Laboratories

1.  Share capital
 
 a] Share capital includes:
 
 [i] 293,698,988 (Previous year 293,698,988) Equity shares of Rs. 5 each
 allotted as fully paid bonus shares by capitalisation out of securities
 premium and reserves.
 
 [ii] 6,562,308 (Previous year 6,562,308) Equity shares of Rs. 5 each
 allotted as fully paid up pursuant to contract without payment being
 received in cash.
 
 [iii] On October 28, 2008 Daiichi Sankyo Company Limited, Japan
 (Daiichi Sankyo) acquired majority stake in the Company.  The Company
 issued the following shares/ warrants to Daiichi Sankyo.
 
 a) 46,258,063 (Previous year Nil) Equity shares of Rs. 5 each allotted
 as fully paid up on a preferential basis to Daiichi Sankyo.
 
 b) 23,834,333 warrants issued to Daiichi Sankyo on October 20, 2008.
 Each warrant will convert into one equity share of Rs. 5 each at a
 premium of Rs. 732 per share at any time between six months to eighteen
 months from the date of allotment of warrants (Rs. 73.70 per warrant
 being 10% of the exercise price received).
 
 As of December 31, 2008 Daiichi Sankyo holds 63.92% of the total
 outstanding equity share capital of the Company. Pursuant to the change
 in the ownership of the Company, the Board of Directors of the Company
 was re-constituted on December 19, 2008.
 
 2.  Fixed assets
 
 a] Land includes:
 
 [i] cost of leasehold land Rs. 265.30 million (Previous year Rs. 226.19
 million).
 
 [ii] freehold land, valued at Rs. 12.24 million (Previous year Rs.
 12.24 million) purchased alongwith building etc.
 
 [iii] cost of land Rs. 26.56 million (Previous year Rs. 26.56 million)
 pending registration in the name of the Company.
 
 b] Buildings include Rs. 500 (Previous year Rs. 500) representing
 unquoted fully paid shares of Rs. 50 each in a co-operative housing
 society.
 
 3.  Foreign Currency Convertible Bonds (TCCB)
 
 The Company has outstanding zero coupon foreign currency convertible
 bonds (FCCB) aggregating to US $ 440 million. The Bond holders have the
 option to convert FCCB into common equity shares of the Company at a
 price of Rs. 716.32 per share (subject to adjustment, if any) witii a
 fixed exchange rate of Rs. 44.15 per US $ 1, at any time on or after
 April 27, 2006 and but before March 09, 2011.
 
 The FCCB may be redeemed, in whole, at the option of the Company at any
 time on or after March 18, 2009, but before February 06, 2011, subject
 to the satisfaction of certain conditions. The FCCBs are redeemable on
 March 18, 2011, at a premium of 26.765 percent of their principal
 amount unless previously converted, redeemed, purchased or cancelled.
 
 Pursuant to the change of control of the Company and as required by the
 Offering Circular of the FCCB, the bondholders had the right for early
 redemption of these bonds, which was subject to the approval of Reserve
 Bank of India (RBI) for any early redemption prior to March 18, 2011.
 Accordingly, the Company made an application with the RBI for the early
 redemption, which has not been granted.
 
 12. The Company has identified Micro, Small and Medium Enterprises on
 the basis of information made available by the respective suppliers or
 vendors of the Company.  As of December 31, 2008 there are no dues to
 Micro, Small and Medium Enterprises that are reportable under the
 Micro, Small and Medium Enterprises Act, 2006.
 
 4.  Share-based compensation
 
 In accordance with the guidance note -18 Employees share base payment
 the following information relates to the stock options granted by the
 Company.
 
 The Companys Employee Stock Option Schemes (ESOSs) provide for the
 grant of stock options to eligible management employees and Directors
 of the Company and subsidiaries. The ESOSs are administered by the
 Compensation Committee of the Board of Directors of the Company
 (Committee). Options are granted on the basis of performance and the
 grade of the employee. Presently there are three ESOSs (ESOS I, ESOS
 II and ESOS 2005). Options are granted at the discretion of the
 committee to select employees depending upon certain criterion.
 
 The ESOSs limits the maximum grant of options to an employee at 25,000
 for ESOS I and 40,000 each for ESOS II and 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 Companys
 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 five 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 the grant.
 
 As the number of shares that an individual employee is entitled to
 receive and the price of the option is known on the grant date, the
 grants made pursuant to the ESOSs are considered fixed grants.
 
 5.  Hedging and Derivatives
 
 Pursuant to ICAI Announcement Accounting for Derivatives on the early
 adoption of Accounting Standard 30 - Financial Instruments:
 Recognition and Measurement (AS 30), the Company has early adopted
 AS 30 with effect from October 1, 2008, to the extent that the adoption
 does not conflict existing mandatory accounting standards and other
 authoritative pronouncements, company law and other regulatory
 requirements. Pursuant to the adoption:-
 
 a) Transitional loss representing the loss on fair valuation of foreign
 currency options, determined to be ineffective cash flow hedges on the
 date of adoption, amounting to Rs. 11,780.96 million (net of tax) has
 been adjusted against the opening balance of General Reserve Account in
 the Balance Sheet.
 
 b) Loss on the fair valuation of forward covers, which qualify as
 effective cash flow hedge amounting to Rs. 722.56 million (net of tax),
 on the date of adoption, has been recognised in the hedging reserve
 account.
 
 6.  During the year the Company was sanctioned a grant of Rs.15
 million for research and development from Department of Bio-technology.
 Out of the sectioned amount, the Company has received Rs. 5 million
 which is recognised in financials as liability since the research
 activity for which the grant was received has not started till December
 31, 2008.
 
                                                           Rs. Million
                                               2008               2007
 
 7.    Contingent liabilities
 
 Claims not acknowledged as debts          1,681.30           1,460.46
 
 Indirect taxes                              249.93             234.22
 
 Guarantees to banks on account of:
 
 Others                                       10.94
 
 - Includes Rs. 352.81 million (Previous year Rs.348.57 million)
 deposited under protest.
 
 Interest on certain claims may be payable as and when the outcome of
 the related claim is determined and has not been included above.
 
 8.  Estimated amount of contracts remaining to be executed on capital
 account and investments not provided for, net of advances.
 
 9.  FOOD AND DRUG ADMINISTRATION (FDA) INVESTIGATION
 
 a) On February 25, 2009 the Company received a letter from the US FDA
 indicating that the Agency had invoked its Application Integrity Policy
 (AfP) against the Paonta Sahib facility (the facility).
 
 The management of the Company believes that mere was no falsification
 of data generated at the facility and also believes that there is no
 indicatoin of a pattern and practice of submitting untrue statements of
 material fact and other improper conduct. Accordingly, the Company
 based on opinion from its legal council believe that it is more likely
 that no incremental present obligation exists at the balance sheet
 date.
 
 b) On September 16, 2008, the Company received 2 warning letters and an
 Import Alert from the US FDA, covering 30 generic drugs being
 manufactured at its Paonta Sahib and Dewas plants. The alert excludes
 one product namely, Gancyclovir capsules, which will continue to be
 sold in the United States market. The issue raised in the warning
 letters relate to Current Good Manufacturing Practice being followed
 at the said plants and does not in any way raises questions on
 products quality, safety or effectiveness. Consequent to Import Alert
 the Company is not able to sell the products covered under Import Alert
 and accordingly, it has recorded a provision of Rs. 2,631.11 million
 towards inventory and sales return. The Company has filed responses to
 both warning letters and expects that matter will be resolved favorably
 in the near future.
 
 c) The United States Department of Justice (DOJ) filed a motion on July
 3, 2008, seeking certain documents.  On the submission of these
 documents, the DOJ withdrew the motion on October 7, 2008.
 
 d) The company continues to fully cooperate witth the concerned
 authorities for their final clearance, pending which mere would be
 delays for new product approvals and sales of existing products to
 United States of America.
 
 10.  Previous year figures
 
 Previous year figures have been regrouped/tecasted wherever considered
 necessary to make them comparable with those of the current year.