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Cipla Ltd.

BSE: 500087 Sector: Health care
NSE: CIPLA ISIN Code: INE059A01026
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OPEN 570.45
VOLUME 61703
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P/E 47.74
Mkt Cap.(Rs cr) 45,487
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Sell Price 0.00
Sell Qty 0.00
OPEN 570.45
CLOSE 570.45
VOLUME 61703
52-Week high 621.90
52-Week low 479.00
P/E 47.74
Mkt Cap.(Rs cr) 45,487
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cipla Ltd. (CIPLA) - Director Report

Company director report

The Directors take pleasure in presenting the Eightieth Annual Report of the Companyalong with the audited financial statements for the financial year ended 31stMarch 2016.

Financial Summary

Rs. in crore

Year ended 31st March 2015

Year ended 31st March 2016

Standalone Consolidated Standalone Consolidated
10373 11620 Gross total revenue 12445 14067
1540 1654 Profit before tax 1740 2007
1181 1181 Profit for the year 1398 1506
5330 5412 Surplus brought forward from last balance sheet 6277 6358
- - Adjustment of tax on dividend of previous year 13 13
6511 6593 Profit available for appropriation 7688 7877
161 161 Dividend 161 161
33 33 Tax on dividend 33 33
- - Transfer to general reserve - -
40 41 Adjustment of depreciation - -
6277 6358 Surplus carried forward 7494 7683


The Directors recommend a dividend of '2 per equity share (100%) for the year 2015-16.The dividend if sanctioned at the Annual General Meeting will be paid to those memberswhose names appear in the Company's Register of Members on Wednesday 14thSeptember 2016. In respect of shares held in dematerialised form the dividend will bepayable on the basis of beneficial ownership as per details furnished by NationalSecurities Depository Limited and Central Depository Services (India) Limited.


Global Business Review

With a vibrant presence globally Cipla is well-poised for growth that advances itsgoal of ensuring affordable access to healthcare for all.

To build a concrete foundation for sustainable long-term growth the Company isinvesting heavily in its pipeline making choices with respect to its operating model incertain markets and exploring initiatives to simplify the business. The financial yearunder review has been important for the Company to drive execution of these choices andenhance the resilience of its business model.

The Company's revenue from operations on a consolidated basis during the financial year2015-16 amounted to '13678 crore against '11345 crore in the previous year recording agrowth of 20.6%. The income from operations for the Company's domestic business increasedby 5.9% from '4825 crore in the previous financial year to '5111 crore in the financialyear under review. Total exports increased by 36.4% during the year to '8261 crore.During the year under review EBIDTA margin reduced by 0.8 percentage points. This wasprimarily due to the change in product mix higher investments in research anddevelopment and ongoing complexity reduction initiatives. Profit for the year increasedby 27.5% to '1506 crore from '1181 crore in the previous financial year.

India Ratings and Research Private Limited a Fitch Group Company assigned a Long-TermIssuer Rating of IND AAA with a stable outlook to the Company. The rating is the highestassigned in Fitch's rating scale and indicates the highest degree of safety regardingtimely servicing of financial obligations and lowest credit risk.

No material changes and commitments have occurred after the close of the year till thedate of this Report which affect the financial position of the Company.


As one of India's leading pharmaceutical companies

Cipla is in a strong position to fulfill its commitment to provide modern andaffordable medicines to patients. This year despite pricing challenges and the impact ofa weak monsoon Cipla's domestic revenues for its prescription business grew by 16%compared to the industry growth of 14% as per IMS Health data.

The India business contributed ~40% to overall Company revenues with new productscontributing 4.5% of total India business revenues.

The prescription business accounted for 81% of India business revenues and market sharefor this segment currently stands at 5.3%. The Company grew faster than the market inAnti- infectives Gastrointestinal and Urology. The respiratory business saw strong uptakewith over 20% growth in the COPD portfolio.

Cipla continues to focus on high-value opportunities to build out its specialtyportfolio through a mix of in-licensing and in-house innovation and development.In-licensing gained momentum in FY 2015-16 with 6 deals executed in oncology respiratoryand dermatology segments. The Company also initiated several high value innovationprojects of which a few are likely to be commercialized in FY 2016-17.

With the successful launch of Sofosbuvir in India for the treatment of Hepatitis-CCipla has expanded access to the drug with nearly 10000 patients being treated under thebrand name HepCvir in its first 12 months.

Cipla continues to build out its Hepatitis franchise in order to improve access tobreakthrough therapies for patients with HepCvir + Ledipasvir / Daclatasvir combinations.

Cipla also entered new areas through a partnership model - Cutisera in cosmetologyNasovac S in vaccines and Reteplase in the Anti-Thrombolytic segment.

In the coming years the domestic business will continue to focus on enhancing depth ofportfolio in priority therapy areas and increasing sales force productivity with therollout of Customer Relationship Management (CRM) and Sales Force Automation (SFA)systems.

Through this Cipla aims to grow above market rate of growth and strengthen leadershipposition in priority therapy areas in the Indian market.

South Africa

Cipla is one of the largest pharmaceutical companies in South Africa with a privatemarket share of more than 5%. South Africa contributed 11.5% to the overall revenues on aconsolidated basis. The business however was impacted due to the depreciation of the SouthAfrican Rand in FY 2015-16. In local currency terms South Africa business revenue hasgrown at ~25% in FY 2015-16 against the previous year. Cipla's private market business hasgrown at 14% for the same period with market leadership in the Respiratory

CNS and Oncology segments and contributes over 60% of South Africa business revenue.The sales and distribution arrangement with Teva Pharmaceuticals (Pty) Ltd an affiliateof Teva Pharmaceutical Industries Ltd. has gained traction through FY 2015-16 with strongperformance on products such as Copaxone further cementing the Company's status as apreferred "Partner of Choice". Cipla has also introduced low cost vaccines inthe South African market through an exclusive agreement with the Serum Institute of India.This is in line with the Company's goal to advance healthcare for all in South Africa.

Cipla also won Government tenders in antiretrovirals (ARV) respiratory and newer areassuch as mental health cardiovascular and women's health categories achieving significantgrowth in the tender business over the previous year. The newly set up state-of-the-artdistribution centre facility has doubled the Company's existing capacity and conferredcompetitive advantage by helping to improve customer service levels enhance complianceand reduce the cost of distribution.

Capitalizing on its defined future portfolio key development and in-licensingprojects and streamlined global organizational structure Cipla South Africa willcontinue to leverage synergies from its international family. The Cipla brand inspirestrust and has become a household name among consumers pharmacies prescribers and keyopinion leaders. Going forward several Sub-Saharan markets will also be covered by theSouth African organization.

North America

In the last quarter of financial year 2015-16 Cipla successfully completed theacquisition of two US-based entities InvaGen Pharmaceuticals Inc. and ExelanPharmaceuticals Inc. in a transaction valued at US$ 550 mn. InvaGen Pharmaceuticals is ahigh volume generics business platform that provides Cipla with a strong US-basedmanufacturing setup and access to large wholesalers/ retailers in the US. The platformincludes 42 approved ANDAs and ~30 pipeline products that are expected to be approved overthe next 4 years. It also has filed 5 potential first-to-file products which is expectedto bring tremendous value in the coming 5-6 years. There are no material overlaps in thebusiness and the current portfolio and the pipeline is largely complementary to Cipla'sproducts. InvaGen Pharmaceuticals' manufacturing footprint spans ~350000 sq.ft. of GMParea with 3 units located in Long Island

New York and a total production capacity of 12 billion tablets.

Exelan Pharmaceuticals is a sales and marketing company with a focus on genericpharmaceuticals for the government and institutional market. Both companies together hadannual revenues of over US$ 230 mn as of December 2015.

This acquisition is aligned with Cipla's global growth strategy to grow its presence inthe US pharmaceutical market and increase its position amongst key pharmaceuticalwholesalers and retailers. Having its own manufacturing base and supply chain will furtherstrengthen Cipla's presence in the US and its commitment to make high quality medicationaccessible to patients in the country. Cipla's strategy in the US is to deliver itscomplex generics and respiratory portfolio of products.

The North American business contributed 15% to overall revenues (including the impactof acquisitions) and recorded 117% growth for the year. Growth was driven primarily by theCompany's partnership with Teva Pharmaceutical Industries Ltd. for Esomeprazole and thesuccessful launch of its own label products in the US market.

Cipla currently has over 165 ANDAs filed in the US. Of these the Company has approvalfor over 85.

As Cipla scales its US business next year it will target launch of five to sevenproducts from the InvaGen pipeline and eight to ten products from Cipla's pipelineincluding some in limited competition areas. In parallel the Company will continue tobuild on its successful partnerships for launch of first-to- market and differentiatedgenerics such as Nexium and Pulmicort.

Cipla has already established a strong US team which has been deeply involved inCipla's launch of its own label products in the US as well as in the evaluation ofinorganic growth opportunities such as InvaGen. This team shall drive the transition andintegration work streams along with key InvaGen personnel.

Cipla has a full integration plan in place that draws on its experience of a number ofsuccessful recent integrations such as in South Africa.


The European business contributed 4% to the overall revenues recording a growth of 30%in revenues for the year on the back of its performance in both front-end and B2B markets.

Cipla is focused on adding innovative elements to products services and informationthrough research and partnerships. The Company's flagship product thesalmeterol-fluticasone MDI is now in the market in Sweden Romania Netherlands GermanyCroatia Czech Republic Slovakia Belgium and Hungary. The Company has furtherstrengthened its respiratory platform with the launch of Mometasone FluticasoneIpratropium Salbutamol respules and Ipratropium MDI across multiple European markets in FY2015-16.

The Company continues to evolve its business model in Europe with the intention ofbalancing its portfolio with the best commercial options.

International - Rest of the World

International is defined as all export markets for Cipla excluding North AmericaEurope and South Africa. With a diverse range of more than 1000 products and over 150global partners across 100+ countries Cipla has a presence in Africa the Middle EastLatin America Asia Pacific China and Russia. International contributes 25% of Companyrevenues and grew by 14% over the last year.

In recent years Cipla has implemented a business model change in 15 countriesincluding Morocco Algeria Yemen Sri Lanka and Uganda adopting the direct-to-market(DTM) approach. DTM markets had robust growth of ~25% in FY 2015-16 over the previousyear. This growth rate has been achieved despite continuing challenges related to thesituation in Yemen and currency devaluation in several emerging markets.

The Company now holds a leadership position in several markets such as Uganda SriLanka Yemen and North Africa.

Cipla's business in partnership-led markets (B2B) saw a growth of 8% in FY 2015-16 overthe previous year. The Company is proactively simplifying its businesses rationalisingmarkets where necessary and focusing only on high-growth markets where it holds aleadership position.

The Cipla Global Access business recorded growth of 12% over the previous year andreflects Cipla's continued commitment to the cause of ensuring access to life-savingmedicines for patients worldwide.

Active Pharmaceutical Ingredients (APIs)

Cipla's API legacy spans over five decades of having serviced the world's largestpharmaceutical companies with more than 200 generic and complex APIs.

Cipla takes pride in its state-of- the-art API plants which meet stringent quality andcurrent good manufacturing practices (cGMP) requirements all approved by the US FDA andother major international regulatory agencies.

With a total API manufacturing capacity of 1000 MT the Company continues to be one ofthe significant API players in the industry supporting internally as well as globalcustomers. A substantial portion of the APIs manufactured by Cipla are consumed internallywith a significant increase in consumption due to the new launches and front ending inseveral markets globally.

Revenue from external customers registered a year-on-year growth of 7%. More than 70%of the total sales were from regulated markets and over one-third of our API sales in FY2015-16 were to the top generics players in the world. The gastroenterology andantiretroviral segments continue to be major contributors to the business.

Cipla continues to build its future pipeline of complex products with its establishedrobust portfolio selection process providing early launch capabilities along withIntellectual Property (IP) advantages. Deep vertical integration scale and moreimportantly its investments in manufacturing and quality have helped the Company build aquality product pipeline.

Cipla APIs cover a broad spectrum of therapeutic categories with 23 Drug Master Files(DMF) filed in FY 2015-16 in various countries. Cipla is also ramping up its filings forregulated markets with a robust pipeline of over 40 APIs at various stages of developmentanticipated to be commercialised starting 2018. The Company is expected to continue thestrong pipeline building momentum in the coming years as well.


Cipla Respiratory continues to bring effective and affordable therapy to patientssuffering from diseases such as Asthma COPD PAH and Allergic Rhinitis. This year CiplaRespiratory provided patients in 100+ countries the world's largest portfolio ofinhalation products with 28 drug formulations across a range of devices to suitindividual patient needs. In Europe we launched several inhalation products includingthe ICS-LABA Salmeterol Fluticasone in a pMDI (metered dose inhaler). Cipla's RespiratoryCenter of Excellence also made significant progress on the development of critical newproducts for the US and other priority markets.

Over the last 40 years Cipla has invested significantly in creating three dedicatedmanufacturing sites for Respiratory. The Company manufactures four major dosage forms i.e.metered dose inhalers (pMDIs) dry powder inhalers (DPIs) nasal sprays and nebulisers inaddition to a range of inhalation devices. This year the Company was amongst the largestmanufacturers of pMDIs with capacity to produce over 100 million inhalers. In additionthe Company has built a team of world-class specialists across Manufacturing QualityControl Quality Assurance Supply-Chain who continue to collaborate seamlessly acrossfunctions.

Cipla Respiratory has unique end- to-end capability covering the value chain from APIformulation device development and manufacturing to doctor and patient initiatives. TheCompany has played a leading role across countries in patient awareness acceptancecompliance and usage physician training medical camps and counselling. In India CiplaRespiratory has played a pioneering role in driving the conversion of patients from oralto inhaled therapy for the treatment of Respiratory disease. This year the Companyfurther strengthened and adapted where necessary its pioneering "BreatheFree"patient awareness and education programs across key markets outside India such as SouthAfrica and Sri Lanka.

Cipla Respiratory has grown to almost ~US$ 400 mn accounting for ~25% of the company'srevenues. Despite aggressive competition the Company remains focused to retain leadershipin serving patients suffering from Respiratory diseases across the world.

Cipla Global Access

Since its inception Cipla's ethos has been firmly rooted in the vision "Noneshall be denied". The Company strongly believes that access to high qualityaffordable medicines is a basic human right.

Cipla Global Access (CGA) is an international tender based institutional business thatconcentrates on four key therapy areas: HIV/AIDS Malaria Multi drug-resistanttuberculosis and Reproductive health.

Cipla is among the leading manufacturers of Anti-retroviral drugs in the world. In2001 Cipla was the first pharmaceutical company to supply ARVs to countries with a highHIV burden at less than a dollar a day. Today Cipla has the highest number ofAnti-retroviral products approved for the treatment of both children and adults. Recentlya new manufacturing facility has been set up to meet the growing demand for ARV productsand expect the plant to start commercial production by June 2016.

Cipla has developed the taste- masked Lopinavir/Ritonavir pellets (FDA approved in June2015) and is going to be available shortly in 20 countries in the first year of launch in2016. In parallel with this development Cipla in collaboration with DNDi (Drugs for

Neglected Diseases initiative) and with funding support of UNITAID is working todevelop 4-in-1 taste- masked sprinkles formulations of the combination LPV/r (Lopinavir/Ritonavir) 3TC (Lamivudine) and ABC (Abacavir) or AZT (Zidovudine). The clinical trialsof the 4-in-1 formulation are run in Uganda and Kenya (Chapas study) to assess theclinical efficacy of the product and combination and the results will be made available inthe coming years. However to respond to the needs of the paediatric population and ensurethat LPV/r-based products are on the market before 4-in-1 products become available theLPV/r pellets are an alternative and a currently available option.

Cipla is also one of the largest suppliers of antimalarial drugs in the world. Thisportfolio covered treatment for over 80 million malaria patients across all the affectedcountries. The coverage is increasing every year and thus saving millions of lives. Ciplaantimalarial treatment costs less than a dollar for the entire course. Cipla has alwaysbeen at the forefront in initiatives to identify develop manufacture and supply low costtreatment with artemisinin-based combination therapies (ACTs).

Cipla is endeavouring to expand its portfolio to include more potent and saferanti-malarials using novel drug delivery systems such as Rectal Artesunate for whichCipla is submitting dossiers in several emerging markets. Rectal Artesunate is indicatedin cases of severe malaria in children between 6 months to 6 years of age. It is alife-saving drug in cases where there are no health facilities offering parenteraltreatment.

Reproductive health and family planning is an emerging segment. Cipla has aligned itsstrategy with international development initiatives to provide safe and effectivecontraceptive drugs to enable reach to over 120 million women.

Cipla has a strong second line TB drug portfolio for treating multidrug-resistant TB(MDR TB).

It is also aggressively expanding its MDR TB portfolio to meet the challenges ofresistance fast developing among TB patients due to the high rate of dropouts. Till nowCipla's SLTB (Second Line Tuberculosis) drugs catered to a moderate patient base globallybut this is likely to increase significantly with the use of new diagnostic methods ofdetection of drug-resistant TB. Future development in the MDR TB therapy area will befocused on newer molecules which can significantly reduce treatment timelines. CurrentlyCipla services around 70 countries in this area.

Cipla Global Access also caters to the developing world requirement for essentialmedications for infections caused by helminths schistosomiasis and kala azar which posemajor health threats in low and middle income countries (LMIC).

In FY 2015-16 Cipla as part of its access initiatives signed various non-exclusiveroyalty based/ free licensing agreements with innovator companies such as Gilead ViiVBMS and Janssen.

It allows for the manufacturing of generic active pharmaceutical ingredient andfinished formulations of Anti-retroviral and drugs for treatment of Hepatitis C a silentkiller which till the introduction of the current treatment was difficult and expensive totreat.

Cipla has developed and fostered robust relationships with all the major globalorganizations regulatory bodies public institutions and funding agencies that worktowards this common cause. Additionally Cipla has partnered with several globalscientific research organizations to develop innovative effective and affordableformulations for these four therapeutic areas.


CNV continues to nurture exciting businesses with a high innovation quotient preparingCipla for a future beyond generics. It had notable achievements during the year acrossits portfolio - a testimony to the care and attention that the company is devoting to itsmedium to long-term sustainability. In Cipla health it has sowed the seeds of a FMCGenterprise focused on Good Science Good Medicine. Cipla BioTec has a disruptiveBiosimilar story.

Cipla BioTec

Less than 8% of patients eligible for biopharmaceutical treatment worldwide receivetherapy. Access is not just a developing world issue; in the US and Europe less than 30%receive treatment.

In many cases patients are not treated due to the cost of biopharmaceuticals which canapproach US$ 75000 per year for treating cancer and autoimmune diseases. Biosimilars arenow approved in all major world markets however high prices still limit access.

Cipla BioTec (CBT) is building on Cipla's heritage of affordability and access bydeveloping biosimilars which will be approved in global markets and usher in a new wave ofaffordable products. CBT goal is to treat a million patients. The first product CBT124 isstarting human clinical trials. CBT's second product CBT127 is in development. CBTleverages the latest biopharmaceutical production technology to make its productsaffordable. This approach allows CBT to enable local production to make these lifechanging products. CBT is constructing commercial manufacturing capacity in two countriesto implement its "World Class Products at Affordable Prices" and "BeLocal" philosophy.

In line with this strategy the Company in July 2016 announced the signing of amemorandum of understanding (MOU) between Cipla BioTec Pvt Ltd and Dube TradeportCorporation for setting up South Africa's first state-of- the-art biotech manufacturingfacility for the production of biosimilars at a cost of a R1.3 bn. The factory whichwill be located in the Department of Trade and Industries Special Economic Zone of DubeTradeport in Durban will manufacture biosimilar drugs made from living organisms and usedin the treatment of cancer and other diseases. Construction is scheduled to start in early2017 with full operations expected to commence in the third quarter of 2018.


Regenerative Medicine is one of the new frontiers of treatment. Cipla through itsstrategic investment in Stempeutics is making Regenerative Medicine a reality.Stempeutics received Limited Marketing Approval in India for Stempeucel Stem Celltherapy to treat Buerger's Disease. This is only the 5th Stem Cell Productapproved worldwide and the first novel biologic product ever to be completely developed inIndia. Stempeucel is covered by an extensive patent estate with issued patents in theUS EU ANZ Japan and India among other territories. Cipla in collaboration withStempeutics has also launched Cutisera™ a novel skin care product using growthfactors to help reduce wrinkles and dark spots.


CipTec has initiated efforts to build a specialty pharmaceutical business in the US forCipla.

The CipTec team has evaluated several broad therapy areas such as oncology neurologydermatology ophthalmology and gastrointestinal disorders before picking neurology as thetherapy area of choice for further exploration.

Another key focus area for CipTec in 2015 was to support and build out Cipla's first USventure investment - Chase Pharmaceuticals. Chase's focus for 2015 was clinical validationof its lead asset CPC-201 for Alzheimer's disease. CPC-201 was in a Phase 2a clinicaltrial throughout 2015.

This trial will complete in April 2016. The preliminary data shows that the drug hasdemonstrated vastly better tolerability and dose and has also demonstrated promisingsigns regarding cognitive improvement and functional improvement in Alzheimer's patients.CipTec participated in two additional rounds of funding for Chase to support clinicalprograms as well as key management hires.

Cipla Health - A Cipla initiative towards improving lives of Indian Consumers

The consumer healthcare business was spun-out into a separate company Cipla Health Ltd(CHL) effective March 2016. CHL also attracted investment from a leading private equityfund Fidelity (FIL Capital Investments) in April 2016.

Cipla incubated its consumer healthcare business two years ago with a vision to improvethe lives of Indian consumers and leverage the trends of shifting focus in health fromillness to wellness.

A dedicated team was formed with professionals from diverse background of healthcareand FMCG to lead this business. The first consumer brand Nicotex a smoking cessationproduct was first piloted in South India in January 2015 and was launched nationally inOctober 2015. The launch has been a great success with Nicotex helping thousands ofconsumers towards quitting smoking.

Currently CHL is on a good momentum on business with the Nicotex marketing campaignwinning prestigious awards such as Effie Gold Goa Fest - a big win for such a youngbrand. CHL aims to foray into other categories in the consumer healthcare space and offera series of wellness products to Indian consumers in the coming years.


Investing for Future

Cipla's Integrated Product Development (IPD) majorly includes development of APIsformulations development Analytical Clinical Regulatory Device Quality by Design andPharmacovigilance functions.

Cipla's R&D expense increased from 5.6% of total revenue in FY 2014-15 to 6.3% inFY 2015-16. As we invest for the future our total project R&D spend has been risingsteadily.

On the Development portfolio front we have over 200 formulations development projectsunderway of which the top 50 projects address a market size of US$ 30 bn based oninnovator sales. Of these top 50 projects most projects account for the US and alsoinclude inhalation and injectable delivery forms including complex &first-to-file opportunities. Our new filings in formulation segment in FY 2015-16 stand at7 ANDAs for North America 19 filings (187 MAs) for Europe and over 700 filings forInternational markets in addition to 1000+ renewals. We expect to file 20 to 25 ANDAs inFY 2016-17 including some respiratory and oncology filings with some potential first tofile opportunities.

This year Cipla has also received approvals of 4 ANDAs including Celecoxib. More than100 MAs approval in Europe includes key approval of Fluticasone+ Salmeterol-MDIFluticasone MDI Ipra+Sal (Ipratropium Bromide+Salbutamol Sulphate) Respules Ipratropiumin key EU Markets and more than 200 approvals in International (rest of the world)markets.

The Company has enhanced the depth of its respiratory offering this year with newproduct launches for Fluticasone Salmeterol Mometasone Fluticasone IpratropiumSalbutamol Respules and Ipratropium MDI across multiple markets in Europe.

Cipla has completed expansion of its R&D Centre with new buildings and majorlaboratory facilities at Vikhroli Mumbai. IPD has also expanded R&D applicationsacross multiple technology platforms. These includes Implants Ready to Dilute (RTD)injections Depot injections nanotechnology unit dose nasal sprays and spray patches.The Company is also investing in various API technologies like Green chemistry Flowchemistry & Peptide synthesis.

Cipla has consistently enhanced efficiency across all IPD Functions through"Jagruti" transformation programmes resulting in reduced timelines developmentcosts and more timely regulatory approvals.


Cipla expanded its manufacturing footprint through the acquisition of InvaGen'sfacility in the US adding capacity of 12 billion units of oral solids.

In India Cipla continued its focus on domestic and international markets throughincreased capacity of 3.2 billion units out of which a state- of-the-art moderntechnology plant with a capacity of 1.2 billion units is dedicated for ARVs(Anti-retroviral) in sync with the organization's vision of "None shall bedenied".

All manufacturing sites continued to focus on project improvement across asset andmaterial productivity energy efficiency and manpower utilization.

Serviceability of formulation products was significantly improved through releasingcapacities by network balancing within units. The organization continued its focus onreducing process and product complexities by applying lean tools for business processsimplification. Cipla's Uganda plant increased portfolio capability to reduce theturnaround time for the African market.

Cipla commissioned additional API manufacturing capacity of 50 Metric Tonne/yearspecifically for Hydrogenation Process. The company scaled-up 15 key APIs with continuedfocus on yield improvement cycle time reduction and cost improvement projects. Cipla iscontinuously working on reduction of Volatile Organic Compounds by reducing solvent lossesacross Cipla sites.

The Company continues to upgrade its manufacturing facilities in terms of technologyautomation safety environment and systems as well as procedures for energy and waterconservation.


Cipla Quality as a centre of excellence assures a culture of compliance and followssystematic interventions to consistently meet or exceed quality standards.

Cipla's focus during the year has been to enhance its Quality Management Systems tomeet and/or exceed the current expectations of Regulatory Bodies such as US FDA MHRATGA MCC APVMA WHO etc.

Cipla has all state-of-the-art manufacturing facilities that are cGMP compliant inconformity with national and international standards. Several dosage forms and APIsmanufactured at the Company's facilities continue to be approved by major internationalregulatory agencies.

These agencies include the US FDA MHRA (UK) TGA (Australia) PIC (Germany) MCC(South Africa) APVMA (Australia) the Department of Health (Canada) ANVISA (Brazil) theDanish Medical Agency and the WHO.

In addition during the year the first phase of Laboratory Information ManagementSystem (LIMS) has been completed across all Cipla Laboratories which significantlyimproves compliance in our laboratories.

Threats Risks Concerns

The pharmaceutical industry has always been under intense scrutiny by variousregulatory authorities both Indian and international. This trend continues resulting inregulatory standards being upgraded all the time.

The Company continues to track all these changes increase vigilance and strives tomaintain the highest quality standards. Recent changes by the price regulator in Indiahave resulted in significant challenges for the pharma industry. There is a lot ofconfusion in the interpretation of provisions of the Drugs (Prices Control) Order 2013and its implementation and this has affected the availability of some drugs. The Companyis very concerned about these developments and is taking steps to resolve the issuesthrough various forums.

Cipla has some pending legal cases related to alleged "overcharging" inrespect of certain drugs under the Drugs (Prices Control) Order 1995.

The status of these cases as of the date of approval of financial statements have beensummarised in the Notes to the accounts.

Further vide Order dated 20th July 2016 the Hon'ble Supreme Court havetransferred back the writ petitions to Hon'ble Bombay High Court along with directionsthat 50% of the alleged "overcharged" amount mentioned in its earlier Orderdated 1st August 2003 should be deposited by the Petitioners in the BombayPetitions within 6 weeks. Accordingly the Company will be depositing a sum of '175.07crore on or before 31st August 2016. The Company has been legally advised thaton the merits of the cases that there is very little likelihood of these demandscrystallising. Hence no provision is considered necessary in respect of notices of demandreceived by the Company up to date aggregating to '1768.51 crore. However anyunfavourable outcome in these proceedings could have an adverse impact on the Company.

The Industry is concerned about the recent actions by the Ministry of Health in banninga large number of Fixed Dose Combinations and this led to various litigations being filedby the industry associations and several companies in the court.

A final judgment is still awaited.

Cipla operates in a number of markets where geo-political risks exist.

No significant or material orders have been passed by the Regulators or Courts orTribunals which may impact the going concern status of the Company and its futureoperations.

Health Safety & Environment (HSE)

HSE measures remain a priority for Cipla. The company continues to upgrade HSE standardat all locations. ISO 50001 is implemented at Patalganga Kurkumbh

Bengaluru Goa and Indore locations to benchmark energy conservation threshold levelsfor a greener environment.

Cipla's manufacturing facilities at Goa Bengaluru Baddi Indore Kurkumbh Patalgangaand Sikkim are certified for ISO 14001 and OHSAS 18001 standards.

Hazards and risk associated with site activities are identified across allmanufacturing locations and risk control and mitigation measures are continuouslyimplemented. Our facilities have been regularly audited and HAZOP studies of new productshave been done as part of continuous improvement in HSE systems. Online systems are inplace to monitor applicable legal compliances. The Company organised specialised safetytraining such as process safety road safety and behavioural safety to increase safetyawareness at all working levels.

Safety week and electrical safety day were celebrated and fire service day was observedat the manufacturing units to create awareness among the employees. Fire safety and roadsafety training is conducted in schools nearby to our manufacturing facilities.

World Environment Earth Day were celebrated by conducting green drive programme of masstree plantation. The Company continues to maintain modern well-equipped effluenttreatment plants and effluent testing system at its manufacturing facilities. Treatedwater from this facilities is recycled and used for utility or gardening.

The Company's various locations have received HSE awards including best environmenthealth and safety practices National award for Excellence in Energy Management andGreenco (Silver rating) award for Kurkumbh facility.

Internal Control Systems and their adequacy

The Company's internal control procedures are adequate to ensure compliance withvarious policies practices and statutes in keeping with the organization's pace of growthand increasing complexity of operations.

The Company maintains a system of internal controls designed to provide reasonableassurance regarding the following:

• Effectiveness and efficiency of operations

• Adequacy of safeguards for assets

• Prevention and detection of frauds and errors

• Accuracy and completeness of the accounting records

• Timely preparation of reliable financial information Key controls have beentested during the year and corrective and preventive actions are taken for any weakness.

The internal controls and governance process are duly reviewed for their adequacyeffectiveness through periodic audits by Cipla's independent internal audit functionsupported by various internal auditors and are found to be adequate. Risk based internalaudit plan is approved by the Audit Committee which also reviews adequacy andeffectiveness of the Company's internal financial controls. The Audit Committee isperiodically briefed on the corrective and preventive action taken to mitigate identifiedrisks. During the year under review no fraud was reported by the auditors to the AuditCommittee / Board of Directors.

Corporate Social Responsibility (CSR)

The CSR policy is available on the Company's website at Responsibility_Policy.pdf.

The Annual Report on CSR initiatives as required under section 135 of the CompaniesAct 2013 and the Companies (Corporate Social Responsibility Policy) Rules 2014 asamended from time to time forms part of this Report as Annexure I.

Business Responsibility Report

As mandated by the Securities and Exchange Board of India (SEBI) a standalone BusinessResponsibility Report (BRR) forms part of the Annual Report and is available on theCompany's website at . The BRRcontains a detailed report on Business Responsibilities vis-a-vis the nine principles ofthe National Voluntary Guidelines on Social Environmental and Economic Responsibilitiesof Business framed by the Union Ministry of Corporate Affairs. Any shareholder interestedin obtaining a copy may write to the Company Secretary at the Registered Office of theCompany.


Directors' Responsibility Statement Pursuant to section 134(3)(c) of the Companies Act2013 it is confirmed that the Directors have:

i. followed applicable accounting standards in the preparation of the annual accountsand there are no material departures for the same;

ii. selected such accounting policies and applied them consistently and made judgementsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company as at 31st March 2016 and of the profit of theCompany for that period;

iii. taken proper and sufficient care for maintenance of adequate accounting records inaccordance with the provisions of the Companies Act 2013 for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities;

iv. prepared the annual accounts on a going concern basis;

v. laid down internal financial controls to be followed by the Company and that suchinternal financial controls are adequate and were operating effectively; and

vi. devised proper systems to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively.

Corporate Governance

A report on Corporate Governance along with a certificate from Dr. K. R. ChandratrePractising Company Secretary regarding compliance with Clause 49 of the erstwhile ListingAgreement and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015("SEBI Listing Regulations") forms part of this report.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

As required under Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 the relevant information and data are annexed tothis report as Annexure II.

Disclosure under The Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013

The Company has in place a Policy on Prevention Prohibition and Redressal of SexualHarassment at workplace in line with the requirements of The Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013. An Internal ComplaintsCommittee (ICC) has been set up to redress complaints received regarding sexualharassment.

The policy has set guidelines on the redressal and enquiry process that is to befollowed by complainants and the ICC whilst dealing with issues related to sexualharassment at the workplace towards any employee. All employees (permanent temporarycontractual and trainees) are covered under this policy. All employees are treated withdignity with a view to maintain a work environment free of sexual harassment whetherphysical verbal or psychological.

A total of 14 cases were reported under the Prevention of Sexual Harassment Policyduring the financial year 2015-16 out of which 2 cases were under investigation at theend of financial year. Subsequently all the cases were satisfactorily addressed andappropriate action was taken.

Employee Stock Option Scheme

As required under the Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 the applicable disclosures as on 31st March 2016are available on the Company's website at information.html.

There is no material change in the Employee Stock Option Schemes during the financialyear under review and the Employee Stock Option Schemes are in compliance with theSecurities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014.

Human Resources

The Human Resources function contributes to Cipla's growth story by working as astrategic partner to the business. The technical and quality demands of pharma combinedwith our own vision to grow significantly over the next few years are driving the need forus to build an agile engaged and energized work force. While doing this your Companycontinues to retain focus on Cipla values and its core philosophy of placing people beforeprofits. Our core objective has been to build organizational capability through skillenhancement across levels sales force training and enhancing competencies in line withchanging business needs.

There has also been a focus on strengthening existing middle and senior leadership.

The Company has institutionalized a robust performance management process; individualgoals and key performance indicators have been aligned to organizational goals andimperatives.

In making "Caring for Life" translate to "Caring for employees"various employee centric interventions like people friendly policies and work- lifebalance have been launched. While serving global customers employing people across theglobe is an equally important aspect of our vision thereby building a truly globalcompany. Employees are motivated through various skill-development engagement andvoluntary programs. We also ensure that employees are aligned with our organizationalculture and values whilst never losing sight of our business objectives.

Details of remuneration as required under section 197(12) of the Companies Act 2013read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is annexed as Annexure III. Particulars of employee remuneration asrequired under section 197(12) of the Companies Act 2013 read with Rule 5(2) and (3) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 formspart of this Report. Having regard to the provisions of the first proviso to section136(1) of the Companies Act 2013 the Annual Report excluding the said information isbeing sent to the members of the Company. The said information is available for inspectionat the registered office of the Company during working hours and any member interested inobtaining such information may write to the Company Secretary at the Registered Office ofthe Company. The said information is also available on the Company's website .

Particulars of loans guarantees or investments

Particulars of loans guarantees and investments under section 186 of the CompaniesAct 2013 are provided in Notes 13 and 40 to the financial statements.

Extract of Annual Return

As required under section 92(3) of the Companies Act 2013 the extract of AnnualReturn in Form No. MGT-9 forms part of this Report as Annexure IV.

Secretarial Audit Report

The Board had appointed M/s. BNP & Associates as the secretarial auditor for thefinancial year 2015-16. The secretarial audit report for the financial year ended 31stMarch 2016 is annexed to this report as Annexure V. The report does not contain anyqualification reservation or adverse remark.

Vigil Mechanism

The Company believes in upholding professional integrity and ethical behavior in theconduct of its business. To uphold and promote these standards the Company has formulateda Vigil Policy which serves as a mechanism for its directors and employees to reportgenuine concerns about unethical behavior actual or suspected fraud or violation of theCode of Conduct without fear of reprisal. The details of Vigil Policy is available on theCompany's website at http://www images/Vigil_Policy.pdf.

Contract and Arrangements with Related Parties

All contracts / arrangements / transactions entered by the Company with related partiesduring the financial year 2015-16 were in the ordinary course of business and on an arm'slength basis. During the year no material related party transactions were entered into bythe Company the details of which are required to be provided under section 134(3)(h) ofthe Companies Act 2013.

The policy on materiality of and dealing with related party transactions is availableon the Company's website at Related-Party-Transactions.pdf.

Internal Financial Controls

The Board has adopted policies and procedures for ensuring orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and timely preparation of reliable financialdisclosures.

Cipla has aligned its current systems of internal financial control with therequirement of Companies Act 2013 on lines of globally accepted risk based framework asissued by the Committee of Sponsoring Organisations (COSO) of the treadway commission. TheInternal Control - Integrated Framework (the 2013 framework) is intended to increasetransparency and accountability in an organisation's process of designing and implementinga system of internal control. The framework requires a company to identify and analyserisks and manage appropriate responses. The Company has successfully laid down theframework and ensured its effectiveness some of which are outlined below:

Cipla has a well-defined delegation of power with authority limits for approvingrevenue as well as expenditure. Processes for formulating and reviewing annual and longterm business plans have been laid down.

The Company has adopted accounting policies which are in line with the AccountingStandards prescribed in the Companies (Accounting Standards) Rules 2006 that continue toapply under section 133 and other applicable provisions if any of the Companies Act2013 read with Rule 7 of the Companies (Accounts) Rules 2014 and relevant provisions ofthe Companies Act 1956 to the extent applicable. These are in accordance with generallyaccepted accounting principles in India. Changes in policies if any are approved by theAudit Committee in consultation with the Statutory Auditors.

Cipla uses a SAP (ERP) system to record data for accounting and managementinformation purposes. The ERP system is configured to ensure all transactions areintegrated seamlessly with the underlying books of account. It has continued its effortsto align all its processes and controls with global best practices.

The Management periodically reviews the financial performance of the Company againstthe approved plans across various parameters and takes action wherever necessary.

Risk Management

The Company has constituted a Risk Management Committee under the Chairmanship of Mr.Subhanu Saxena Managing Director and Global Chief Executive Officer. There are no riskswhich in the opinion of the Board threaten the existence of the Company. However some ofthe risks which may pose challenges are set out in the Management Discussion and Analysiswhich forms part of this Report.


During the financial year 2015-16 your Company has not accepted any deposit within themeaning of sections 73 and 74 of the Companies Act 2013 read together with the Companies(Acceptance of Deposits) Rules 2014.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and SEBI Listing Regulations theBoard has carried out an annual performance evaluation of its own performance thedirectors individually and that of its Committees. The manner in which the evaluation hasbeen carried out is stated in the Corporate Governance Report.

Subsidiaries Associates and Joint Ventures

The Company had 55 subsidiaries/ step-down subsidiaries and Associates as on 31stMarch 2016. The consolidated financial statements presented in this annual report includefinancial results of the subsidiary companies. The names of companies which have become orceased to be Company's subsidiaries or associates or joint ventures during the year underreview is attached as Annexure VI.

The policy for determining material subsidiaries is put up on the website at determining-Material-Subsidiaries.pdf.

A report on the performance and financial position of each of the subsidiariesassociates and joint venture forms part of Consolidated Financial Statement. The financialstatement of the Company including consolidated financial statements financial statementsof subsidiary companies are available on Company's website www.cipla. com. These documents will also be available for inspection by any member at theRegistered Office of the Company during business hours. The copy of the said financialstatements will be made available to any member of the Company seeking such information.

Directors and Key Managerial Personnel

During the year under review the members approved the appointment of Ms. SaminaVaziralli as a Whole-time Director designated as "Executive Director" for aperiod of five years with effect from 10th July 2015.

Dr. Nachiket Mor resigned from the Board of Directors effective 7th August2015 due to his other commitments. The Directors place on record their appreciation of thecontributions made by him as a member of the Board.

Ms. Naina Lal Kidwai has been appointed as an Additional Director with effect from 6thNovember 2015 and holds office up to the date of the ensuing Annual General Meeting.

Mr. S. Radhakrishnan has been re-appointed by the Board of Directors as a Whole-timeDirector for a period of two years with effect from 12th November 2015 subjectto the approval of members at the ensuing Annual General Meeting.

Mr. M. K. Hamied retires by rotation and being eligible offers himself forre-appointment.

Mr. Subhanu Saxena is stepping down as the Director Managing Director and Global ChiefExecutive Officer of the Company with effect from close of business hours on 31stAugust 2016.

At the meeting of the Board of the Directors held on 12th August 2016 Mr.Umang Vohra has been appointed as an Additional Director and Managing Director and GlobalChief Executive Officer for a period of five years with effect from 1stSeptember 2016 subject to the approval of members at the ensuing Annual General Meeting.

A brief resume of the Directors seeking appointment/ re-appointment is provided in theNotice.

Pursuant to the provisions of section 203(1) of the Companies Act 2013 the KeyManagerial Personnel of the Company during the year were as follows:-

• Mr. Subhanu Saxena - Managing Director and Global Chief Executive Officer

• Mr. Rajesh Garg - Director Whole-time Director and Chief Financial Officer(Demitted office w.e.f. close of business hours on 12th June 2015.

• Mr. Umang Vohra - Global Chief Operating Officer and Global Chief FinancialOfficer (Appointed w.e.f. 1st October 2015)

• Mr. Mital Sanghvi - Company Secretary

All Independent Directors of the Company have given declarations that they meet thecriteria of independence as prescribed under section 149(6) of the Companies Act 2013 andRegulation 16(1)(b) of the SEBI Listing Regulations.

The criteria for determining qualifications positive attributes and independence of adirector are attached as Annexure VII.

The salient aspects of Remuneration Policy have been outlined in the Report onCorporate Governance.

Neither the Managing Director nor the Whole-time Directors received any remuneration orcommission from any of the Company's subsidiaries.

Number of meetings of the Board

During the year under review

8 Board Meetings were held.

The details of the Board Meetings are stated in the Report on Corporate Governance.

Composition of Audit Committee

The details pertaining to composition of Audit Committee are included in the Report onCorporate Governance.

Cost Auditor

Pursuant to the provisions of section 148 of the Companies Act 2013 Mr. D. H. Zaveria practising Cost Accountant (Fellow Membership No. 8971) has been appointed to conductthe audit of cost records of pharmaceutical products for the financial year ended 31stMarch 2016. Pursuant to section 148(6) of the Companies Act 2013 and Rule 6(6) of theCompanies (Cost Records and Audit) Rules 2014 the Cost Audit Report in Form CRA-4 (inXBRL mode) for the year ended 31st March 2015 under the head 'Drugs andPharmaceuticals Industry' was filed with the Central Government within the prescribedtime.


M/s. V. Sankar Aiyar & Co. and M/s. R.G.N. Price & Co. joint statutoryauditors of the Company retire at the conclusion of the ensuing Annual General Meeting(AGM). In accordance with the provisions of section 139 of the Companies Act 2013 and themandatory rotation of auditor requirement it is proposed to appoint Walker Chandiok &Co LLP Chartered Accountants as statutory auditors of the Company to hold office fromthe conclusion of ensuing 80th AGM till the conclusion of 85th AGM.

The Auditors' Report for the financial year 2015-16 does not contain any qualificationreservation or adverse remark.

On behalf of the Board

Y. K. Hamied


12th August 2016


Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The information under section 134(3)(m) of the Companies Act 2013 read with Rule 8(3)of the Companies (Accounts) Rules 2014 for the year ended 31st March 2016 isgiven here below and forms part of the Directors' Report.

A. Conservation of Energy

I. The steps taken or impact on conservation of energy:

a. The Company is making continuous efforts on ongoing basis to conserve the energy byadopting innovative measures to reduce wastage and optimize consumption. Some of thespecific measures undertaken are:

i. Renewable energy utilization: Installation of roof top 140 KWp Solar power plant atPatalganga and Solar hot water system for process application at Goa & Kurkumbh. Solarhot water system for Canteen dishwasher at Indore.

ii. Carbon emission reduction program: IBR boiler installed in place of Non IBR boilerat Goa.

iii. Energy Monitoring system: Installation of utilities parameters monitoring systemat Baddi as well as Energy management system at Kurkumbh as well as Installation of IFCSystem for Compressed Air at Patalganga.

iv. Lighting system performance improvement Program: Retrofitting of LED lights inexisting light fixture at Baddi Bommasandra Goa Indore Kurkumbh Patalganga Sikkimand Virgonagar.

v. Pumping system:

Installation of new energy efficient Pumps & Motors for various types of utilitiesat Baddi Bommasandra Goa Indore Kurkumbh Patalganga Sikkim and Virgonagar.

vi. VFD system : Installation of Variable frequency drive for various process andUtility equipment like AHU Fan blower. Pumps etc. at Baddi Goa Indore KurkumbhPatalganga Virgonagar and Sikkim.

vii. Phase out Plan of equipments having life more than 10 years: Replacement of oldchillers with new energy efficient chillers in Baddi Kurkumbh and Patalganga. Replacementof Old motors with new Energy efficient motors at Kurkumbh and Virgonagar.

viii. Utility Leakages arrest Management program: Implemented well- structured Utilityleakages arrest management program at Goa Kurkumbh Indore Patalganga and Virgonagar.

ix. Energy Efficiency improvement program: Improved energy efficiency of Boiler atIndore and Air Compressor at Virgonagar through servicing / tuning of these equipment.

x. Use of Natural ventilation instead of Forced ventilation for service floor at Baddi.

xi. Installation of Energy efficient hand drier at Goa.

xii. Portable steam generator (Humidifier) has been installed in storage area atIndore to minimise AHU operations during nonworking days and thereby reduce steam usage.

xiii. ETP decanter is replaced by Volute at Patalganga and Kurkumbh.

xiv. Boiler blow down and flash steam recovery at Patalganga.

xv. Virtualization of Server at Kurkumbh.

xvi. Installation of online tube cleaning system for water plants in Kurkumbh andPatalganga plants.

b. Impact of the above measures for reduction of energy consumption and consequentimpact on the cost of production of goods:

The adoption of the above energy conservation measures have helped to curtail theproportionate increase in total energy usage consequent to overall increase in production.This has made it possible to maintain cost of production at optimum levels.

II. The steps taken by the company for utilising alternate sources of energy: Noalternate source used during the financial year 2015-16.

III. The capital investment on the energy conservation equipments: The Capitalinvestment on energy conservation equipment is Rs. 8.47 crore during the financial year2015-16.

B. Technology Absorption

(I) The efforts made towards technology absorption:

i. Development of new formulations for existing and newer active drug substances.

ii. Projects to develop APIs and formulations jointly with overseas companies.

iii. Patenting of newer processes/newer products/ newer drug delivery systems/newermedical devices/newer usage of drugs for both local and international markets.

iv. Development of new products both in the area of APIs as well as formulationsspecifically for export.

v. Development of complex generic formulations based on Nanotechnology such asNanoparticle solids

& injections liposomal injections long acting depot injections multi particulateextended release oral systems specifically for US market.

vi. Development of new drug delivery systems and new medical devices for RespiratoryNasal Transdermal dosage forms.

vii. The company operationalized pilot plant facility at Patalganga for scaling up ofsolid dosage forms.

viii. Development of new innovative technology for the manufacture of existing APIs andtheir intermediates.

ix. Development of agro technology genetics and biotechnology for cultivation ofmedicinal plants and isolation of active ingredients from plant materials.

x. Development of new drug delivery systems for existing and newer active drugsubstances as also newer medical devices.

xi. Development of methods to improve safety procedures effluent control pollutioncontrol etc.

xii. Development of products related to the indigenous system of medicines.

(II) The benefits derived like product improvement cost reduction product developmentor import substitution:

i. Successful commercial scale up of several new APIs and formulations.

ii. Development of new drug delivery systems and devices.

iii. Improved processes and enhanced productivity in both APIs and formulations.

iv. Improvement in operational efficiency through reduction in batch hours increase inbatch sizes better solvent recovery and simplification of processes.

v. Meeting norms of external regulatory agencies to facilitate more exports.

vi. Development of products for import substitution.

vii. Maximum utilization of indigenous raw materials.

(III) The details of Imported Technology (imported during the last three years reckonedfrom the beginning of the financial year) - No expenditure have been incurred onimport of new technology during the financial years

2013-14 2014-15 and 2015-15.

(IV) The expenditure incurred on Research & Development:

Rs. in crore
a. Capital 242.74
b. Recurring 792.60
Total 1035.34

The total R&D expenditure as a percentage of total turnover is around 8.50 percent.

C. Foreign Exchange Earnings and Outgo

1. Activities relating to exports initiative taken to increase exports development ofnew export markets for products and services and export plans: Exports sales were '5583.57crore for the financial year 2015-16. Exports constituted more than 50% of total turnover.In addition the Company earned '38.43 crore towards technical know-how & licensingfees and '24.03 crore for other services fees. The Company continues to leverage on itsstrategic marketing alliances and partnerships in more than 100 countries.

2. Total foreign exchange used and earned:

During the year the foreign exchange outgo was '2472.88 crore and the earnings inforeign exchange was '6746.13 crore. Details of the same have been given in Notes 22 32and 33 in the Notes to the financial statements.

On behalf of the Board

Y. K. Hamied


12th August 2016

Annexure III

Details pertaining to remuneration as required under Section 197(12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014

i. The ratio of the remuneration of each Director to the median remuneration of theemployees of the Company for the financial year 2015-16:

Name Designation Ratio to median remuneration
Dr. Y. K. Hamied Chairman 1:1
Mr. M. K. Hamied Vice-Chairman 3:1
Mr. Ashok Sinha Independent Director 17:1
Dr. Peter Mugyenyi Independent Director 15:1
Mr. Adil Zainulbhai (1) Independent Director 15:1
Ms. Punita Lal (2) Independent Director 13:1
Dr. Nachiket Mor (3) Independent Director 4:1
Ms. Naina Lal Kidwai (4) Independent Director 5:1
Mr. Subhanu Saxena Managing Director and Global Chief Executive Officer 390:1
Mr. S. Radhakrishnan Whole-time Director 106:1
Mr. Rajesh Garg (5) Executive Director and Global Chief Financial Officer 361:1
Ms. Samina Vaziralli (6) Executive Director 78:1

ii. The percentage increase in remuneration of each Director Chief Financial Officerand Company Secretary during the financial year 2015-16:

Name Designation % increase in remuneration
Dr. Y. K. Hamied Chairman (98.51)
Mr. M. K. Hamied Vice-Chairman (94.58)
Mr. Ashok Sinha Independent Director 18.49
Dr. Peter Mugyenyi Independent Director 12.47
Mr. Adil Zainulbhai (1) Independent Director 65.26
Ms. Punita Lal (2) Independent Director 222.71
Dr. Nachiket Mor (3) Independent Director 5.69
Ms. Naina Lal Kidwai (4) Independent Director


Mr. Subhanu Saxena Managing Director and Global Chief Executive Officer (7.13)
Mr. S. Radhakrishnan Whole-time Director (8.59)
Mr. Rajesh Garg (5) Executive Director and Global Chief Financial Officer 129.74
Ms. Samina Vaziralli (6) Executive Director 118.37
Mr. Mital Sanghvi Company Secretary and Chief Internal Auditor 42.80
Mr. Umang Vohra (7) Global Chief Operating Officer and Global Chief Financial Officer



(1) Appointed w.e.f. 23rd July 2014

(2) Appointed w.e.f. 13th November 2014

(3) Appointed w.e.f. 13th November 2014 and resigned w.e.f. 7thAugust 2015

(4) Appointed w.e.f. 6th November 2015

(5) Demitted office as a Director Whole-time Director and Chief FinancialOfficer w.e.f. close of business hours on 12th June 2015

(6) Appointed w.e.f. 10th July 2015

171 Appointed w.e.f. 1st October 2015

iii. The percentage increase in the median remuneration of employees in the financialyear: 3.55%

iv. Number of permanent employees on the rolls of the Company as on 31stMarch 2016: 24093

v. The average annual increase excluding the managerial personnel in the financial year2015-16 was 11.88%. The increase in the average managerial remuneration for the financialyear 2015-16 was 1.17%.

vi. It is affirmed that the remuneration is as per the Remuneration Policy of theCompany.

Annexure VI

Companies which became/ceased to be Company's Subsidiaries Joint Venture or AssociateCompanies

1. Companies which have become subsidiaries during the financial year 2015-16:

Sr. No. Name of the Company
1. Cipla Health Ltd.
2. Cipla Brasil Importadora E Distribuidora De Medicamentos Ltda.
3. Cipla Maroc SA
4. Cipla Middle East Pharmaceuticals FZ-LLC
5. Quality Chemicals Ltd.
6. Cipla Philippines Inc.
7. InvaGen Pharmaceuticals Inc.
8. Exelan Pharmaceuticals Inc.
9. Cipla US Holdings Inc.

2. Companies which have ceased to be subsidiary company during the financial year2015-16:

Sr. No. Name of the Company
1. Meditab Pharmaceuticals South Africa (Pty) Ltd. (De-registered on 14th August 2015)
2. Cipla Medpro Manufacturing Proprietary Ltd. (De-registered on 16th September 2015)
3. Cipla Health Care Proprietary Ltd. (De-registered on 28th October 2015)
4. Cipla Medpro ARV Proprietary Ltd. (De-registered on 20th January 2016)
5. Cipla Medpro Cardio Respiratory Proprietary Ltd. (De-registered on 16th September 2015)
6. Cipla Personal Care Proprietary Ltd. (De-registered on 16th September 2015)
7. Gardian Cipla Proprietary Ltd. (De-registered on 20th January 2016)
8. Medpro Gen Proprietary Ltd. (De-registered on 16th September 2015)
9. Medpro Holdings Proprietary Ltd. (De-registered on 16th September 2015)
10. Medpro Pharmaceutica Africa Proprietary Ltd. (De-registered on 16th September 2015)
11. Medpro-On-Line Proprietary Ltd. (De-registered on 16th September 2015)
12. Smith and Couzin Proprietary Ltd. (De-registered on 16th September 2015)
13. Cipla US Holdings Inc. (Merged with InvaGen Pharmaceuticals Inc. on 17th February 2016)

3. No Company has becomejoint venture or associate during the financial year 2015-16.

4. Company which ceased to be joint venture or associate during the financial year2015-16:

Sr. No. Name of the Company
1. Biomab Holding Ltd. (Divested on 22ndJanuary 2016)

On behalf of the Board

Y. K. Hamied


12th August 2016

Annexure VII

Criteria for Determining Qualifications Positive Attributes and Independence ofDirector


a. The Director shall be free from any disqualifications as stipulated under theCompanies Act 2013 and rules made thereunder as well as Listing Agreement as amended fromtime to time.

b. The Director shall possess appropriate expertise experience and knowledge in one ormore fields of finance law management sales marketing administration researchcorporate governance technical operations or such other areas related to the Company'sbusiness as determined by Nomination and Remuneration Committee.

Positive Attributes:

The Director shall

a. uphold ethical standards of integrity and probity;

b. act objectively and constructively;

c. exercise responsibilities in a bona-fide manner in the interest ofthe Company;

d. assist the Company in implementing the best corporate governance practices.

Independence Criteria:

a. An Independent Director shall meet the criteria of independence as stipulated underthe Companies Act 2013 and rules made thereunder as well as Listing Agreement as amendedfrom time to time.

b. An Independent Director shall be under the obligation to inform the Board ofDirectors of any change in circumstances which may affect his/her independence.