Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of ' 10 per share. Each holder of equity shares is entitled to one vote 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 in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders 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 shareholders.

No shares are bought back by the Company during the period of 5 years immediately preceding the Balance Sheet date.

No shares are allotted as fully paid up by way of bonus shares during the period of 5 years immediately preceeding the Balance Sheet date.

No shares are reserved for issue under options and contracts/commitments for the sale of shares/ disinvestment.

No shares are allotted as fully paid up pursuant to contracts without being payment received in cash during the period of 5 years immediately preceeding the Balance Sheet date.

This reserve represents the cumulative profits / (Losses) of the Company and effects of remeasurement of defined benefit obligations. This reserve can be utilised in accordance with the provisions of the Act.

In November 2022, final dividend of ' 11.5 per share (total dividend ' 1 909 lakhs) for the year ended June 30, 2022 was paid to holders of fully paid equity shares. In February 2023, interim dividend of ' 45 per share (total dividend ' 7 470 lakhs).

In November 2021, final dividend of ' 130 per share (total dividend ' 21 579 lakhs) for the year ended June 30, 2021 was paid to holders of fully paid equity shares. In May 2022, a special interim dividend of ' 41 per share (total dividend ' 6 806 lakhs was paid to holders of fully paid equity shares.

33 Segment information33.1 General Information

The Company’s chief operating decision maker (CODM) examined the Company’s performance based on its business unit ‘Pharmaceuticals’

The Company will now operate under only one segment i.e. Pharmaceuticals.

33.2 Geographical segment information

In respect of secondary segment information, the Company has identified its geographical segment as (i) India and (ii) Outside India.

34 Financial instruments & related disclosures34.1 Capital management

The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Equity share capital and other equity are considered for the purpose of Company's capital management.

The Company is not subject to any externally imposed capital requirements.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders if any, return on capital to shareholders or issue new shares.

34.3 Fair value measurements

The carrying amount of financial assets and financial Liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

34.4 Financial risk management objectives

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, 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.The Company has exposure to the following risks arising from financial instruments:

34.4.1 Credit risk management

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. 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 doubtful debts and impairment that represents its estimate of incurred 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.

Company’s exposure to credit risk by age of the outstanding from various customers is as per note 13.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at 30 June 2023 related to several customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

The movement in the allowance for impairment in respect of trade receivables during the year is as per note 13.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of ? 43 505 lakhs (30 June 2022 ? 31 940 lakhs). The credit

worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

34.4.2 Liquidity risk management

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 of 30 June 2023 the Company has working capital of ? 49 220 lakhs (30 June 2022: ? 37 614 lakhs) including cash and cash equivalents and other bank balances of ? 43 505 lakhs (30 June 2022: ? 31 940 lakhs). Working capital is calculated as current assets less current liabilities.

34.4.3 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) 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 longterm 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.

34.4.4 Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the entity.

Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in EURO and USD against the respective functional currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and interest rate exposure.

34.4.5 Foreign currency sensitivity analysis

The Company is mainly exposed to the currencies stated above.

The following table details impact to profit or loss of the Company by sensitivity analysis of a 10% increase and decrease in the respective currencies against the functional currency of the Company. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change on foreign currency rates.

34.4.6 Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate sensitivity - fixed rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit and loss, and the Company does not have any designated derivatives. Therefore, a change in interest rates at the reporting date would not affect profit and loss for any of these fixed interest bearing financial instruments.

35 Share-based paymentsa) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “International Stock Ownership Plan” (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA. Every employee who opts for the scheme contributes by way of payroll deduction up to a specified percentage (upto 15%) of base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee's contribution (restricted to 2.5% of his base salary). Such contribution is charged under employee benefits expense.

The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange and are purchased on behalf of the employees at market price on the date of purchase. During the year ended June 30, 2023, 2 506.10 (Previous period ended June 30, 2022: 2 043.58) shares excluding dividend were purchased by employees at weighted average fair value of ' 11 896.54 (Previous period ended June 30, 2022: ' 11 655.75) per share. The Company’s contribution during the year on such purchase of shares amounts to ' 77.21 Lakhs (Previous period ended June 30, 2022: ' 60.97 lakhs) has been charged under employee benefits expense under Note 28.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “Employee Stock Option Plan” whereby specified employees of its subsidiaries covered by the plan are granted an option to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA at a fixed price (grant price) for a fixed year of time. The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange. The Options Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years and have a 5/10 years life cycle.

The weighted average share price at the date of exercise of these options was $ 131.49 (June 30, 2022: $ 158.22).

The weighted average remaining contractual Life for the share options outstanding as at June 30, 2023 was 6.47 years (June 30, 2022: 6.92 years).

The weighted fair value of options granted during the year was ' 3 788 (June 30, 2022: ' 4 931).

These fair values for share options granted during the year were calculated using binomial lattice-based model. The following tables list the inputs to the models used for the plans for the years ended June 30, 2023 and June 30, 2022, respectively:

36 Employee benefit plans36.1 Defined Benefit plans / long term benefit plan

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/ exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The 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 interest payable at the notified rate.

a) Gratuity Plan (Funded)

The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company. The Company's defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered trust, which is administered through trustees and/or Life Insurance Corporation of India. The gratuity plan is governed by the Payment of Gratulty Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member's length of service and salary at retirement age.

b) Post Retirement Medical Benefit (PRMB) (Unfunded)

The Company provides certain post-employment medical benefits to employees. Under the scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

c) Compensated absences (Unfunded)

The Company also provides for compensated absences as per its policies, which allows for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year/ period.

d) Long term service award (Unfunded)

Long term service award is given on completion of minimum 10 years of service.

These plans typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

In respect of the plan, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at June 30, 2023. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

Significant actuarial assumptions of the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

G. Sensitivity analysis Gratuity Plan (Funded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by ' 134 lakhs (increase by ' 141 lakhs) (as at June 30, 2022: decrease by ' 129 lakhs (increase by ' 135 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by ' 145 lakhs (decrease by ' 139 lakhs) (as at June 30, 2022: increase by ' 140 lakhs (decrease by ' 135 lakhs)).

Compensated absence plan (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by ' 7.5 lakhs (increase by ' 7.9 lakhs) (as at June 30, 2022: decrease by ' 4.5 lakhs (increase by ' 4.7 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by ' 7.8 lakhs (decrease by ' 7.5 lakhs) (as at June 30, 2022: increase by ' 4.8 lakhs (decrease by ' 4.7 lakhs)).

Post retirement medical benefit (PRMB) (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by ' 1.0 lakhs (increase by ' 1.1 lakhs).

If the medical inflation rate is 50 basis points higher (lower), the defined benefit obligation would increase by ' 1.10 lakhs (decrease by ' 1.05 lakhs)

The sensitivity analysis presented above may not be representative of the actual change of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method as the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the Balance Sheet.

If the discount rate is 50 basis points higher (Lower), the defined benefit obligation would decrease by ' 11.9 lakhs (increase by ' 12.6 lakhs).

If the gold inflation rate is 50 basis points higher (lower), the defined benefit obligation would increase by ' 12.5 lakhs (decrease by ' 12.0 lakhs)

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

e) Contribution to Provident fund, Superannuation fund and others

Amount of ' 991 lakhs (2022: ' 905 lakhs) is recognised as an expense and included in “Employee costs” (refer note 28) in the Statement of Profit and Loss.

In respect of provident fund set up by employer which requires interest shortfall to be met by the employer, it needs to be treated as defined benefit plan.

The Institute of Actuaries of India has issued guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 30 June 2023.

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions.

Outstanding balances at the year-end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. The Company has not recorded any impairment of receivables relating to amounts owed by related parties in the current year or prior years. (Except general provision coming in accordance with ECL Model). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

# Remuneration does not include charge for gratuity, compensated absences and share based payments, as employee-wise break-up is not available.

Amounts are inclusive of GST wherever applicable.

The Company does not face a significant Liquidity risk with regard to its Lease LiabiLities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

The Company has taken on lease certain warehouses with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. The cost of lease for the warehouses are disclosed under rent expense.

38.2 Company as a lessor38.2.1 Leasing arrangements

The Company has leased out certain office premises which have been classified as investment property. The lease term is 60 months with non cancellable period of 48 months. There is escalation clause in the lease agreement. The carrying amount of property given on operating lease and depreciation thereon for the year are:

Future cash flow in respect of the above, if any, is determinable only on receipt of judgements/decisions pending with the relevant authorities.

b) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company’s contention and issued a fresh demand notice demanding a sum of ? 3 307 lakhs (? 1 168 lakhs on account of overcharge during the said period and ? 2 138 lakhs for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon’ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon’ble Kolkata High Court stayed the demand provided it deposits a sum of ? 225 lakhs with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. The Company holds provision of ? 580 lakhs in its books towards possible liability.

c) During the year 2014, the Company had made a provision of ? 699 lakhs towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company. The provision of ?108 lakhs was transferred as a part of BPL Business transferred to Merck Life Science Private Limited. The Company holds provision of ? 591 lakhs in its books towards possible liability.

d) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on 21 June 2013 including Metformin, a formulation used by the Company in Company’s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA, however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company made a provision of ? 320 lakhs towards a possible liability which may accrue to the Company. Since Carbophage was part of the BPL business transferred to Merck Life Science Private Limited, the underlying provision was transferred out.

Further, NPPA has also issued a demand order dated May 10, 2017 of ? 52 Lakhs to the Company under the provisions of Drug Prices (Control) Order, 2013 (“DPCO”) for overcharging in respect of Concor 5 mg Tablets (containing the bulk drug Bisoprolol 5 mg) with interest thereon @15% on the said amount.

The Company has challenged both the above matters by writ petition which are pending adjudication in the Bombay High Court. In the view of the management, future course of action in relation to both these matters, including any liabilities thereof will be managed directly by Merck Life Science Private Limited. Managements of the Company and Merck Life Science Private Limited are aligning this understanding basis business transfer agreements and hence, these matters are disclosed as contingent liabilities.

e) During the year 2014, Central Excise issued a show cause cum demand notice on the Company covering a period of five years for alleged wrong classification of the products, Vitamin E Acetate min. 92% for Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition. The value of total demand was ? 2 178 lakhs including penalty and interest.

Further, for same classification matter, the Company has received VAT/CST assessment orders of ? 2 178 lakhs and notices covering a period of five years disallowing VAT exemption claimed for Vitamin E Acetate, Vitamin E dry powder, Vitamin E liquid for Animal nutrition classified as Animal feed. For the orders received, the Company has contested before the respective state appellate authorities.

The Central Excise had issued show cause cum demand on similar matter in the past as well. This was contested by the Company before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

The Company based on legal opinion believes that it has a good case on merits as well as on limitations. The aforesaid amounts have already been included under contingent liability at note 40 (a) to the financial statements.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

43 (a) Reimbursement / (recovery) of expenses cross charged to related parties include payments / recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreements with Procter & Gamble Hygiene & Health Care Limited, Procter & Gamble Home Products Private Limited, Gillette Diversified Operations Pvt Ltd and Gillette India Limited.

43 (b) Certain expenses in the nature of employee costs, relocation costs and other expenses are cross charged by the Company to its fellow subsidiaries at actual. Similar expenses incurred by fellow subsidiaries are cross charged to the Company at actual.

The Board of Directors at its meeting held on August 23, 2023 have recommended a payment of final dividend of ' 50 per equity share of face value of ' 10 each for the financial year ended June 30, 2023 resulting in a dividend payout of ' 8 299.7 lakhs.

45 As per the MCA notification dated August 5, 2022, and the Companies (Accounts) Fourth Amendment Rules, 2022, the Company is required to maintain backups of books of account on servers physically located in India on a daily basis. The Company has maintained periodic backups of certain part of their books of accounts and other relevant books and papers maintained in electronic mode on servers physically located in India. This is in addition to regular backups on the Company’s Global Servers. The Company is in process of implementing a system to perform daily backups to comply with the requirements of the relevant Rules

46 Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company’s transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2022. Management believes that the Company’s transactions with related parties post March 2022 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

47 There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date.

48 (a) No transactions to report against the following disclosure requirements as notified by MCA pursuant

to amended Schedule III:

i) Crypto Currency or Virtual Currency

ii) Benami Property held under Benami Transactions (Prohibition) Act, 1988 (45 of 1988)

iii) Registration of charges or satisfaction with Registrar of Companies

iv) Relating to borrowed funds:

a) Wilful defaulter

b) Borrowings obtained on the basis of security of current assets

c) Discrepancy in utilisation of borrowings

d) Current maturity of long term borrowings

48 (b) The Company has not entered into any such transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

48 (d). Utilization of borrowed funds and share premium:

The company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(i) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(ii) Provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries.

The company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall:

(i) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(ii) Provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

49 During the earlier year, Company had impaired plant and machinary related to product oxynex whose supply terms were completed as at March 31, 2022.

The Company no longer plants for future manufacture and supply of the said product.

The impairment has been reversed during the year on actual sale of the said plant.

50 Figures for the previous year have been re-grouped/re-arranged wherever necessary to conform current period’s classification.

51 Approval of financial statements

The financial statements were approved for issue by the board of directors on August 23, 2023.