To the Members of Glenmark Pharmaceuticals Limited
Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of GlenmarkPharmaceuticals Limited ("the Company") which comprise the Balance Sheet as at31 March 2016 the Statement of Profit and Loss the Cash Flow Statement for the year thenended and a summary of the significant accounting policies and other explanatoryinformation.
Managements Responsibility for the Standalone Financial Statements
2. The Companys Board of Directors is responsible for the matters stated inSection 134(5) of the Companies Act 2013 ("the Act") with respect to thepreparation of these standalone financial statements that give a true and fair view ofthe financial position financial performance and cash flows of the Company in accordancewith the accounting principles generally accepted in India including the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014 (as amended). This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act; safeguarding theassets of the Company; preventing and detecting frauds and other irregularities; selectionand application of appropriate accounting policies; making judgments and estimates thatare reasonable and prudent; and design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
3. Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.
4. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.
5. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe standalone financial statements are free from material misstatement.
6. An audit involves performing procedures to obtain audit evidence about the amountsand the disclosures in the financial statements. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe financial statements whether due to fraud or error. In making those risk assessmentsthe auditor considers internal financial controls relevant to the Companyspreparation of the financial statements that give a true and fair view in order to designaudit procedures that are appropriate in the circumstances. An audit also includesevaluating the appropriateness of the accounting policies used and the reasonableness ofthe accounting estimates made by the Companys Directors as well as evaluating theoverall presentation of the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone financial statements.
8. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at 31 March 2016 and its profit and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
9. As required by the Companies (Auditors Report) Order 2016 ("theOrder") issued by the Central Government of India in terms of Section 143(11) of theAct we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4of the Order.
10. Further to our comments in annexure A as required by Section 143(3) of the Act wereport that:
a. we have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit;
b. in our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c. the standalone financial statements dealt with by this report are in agreement withthe books of account; d. in our opinion the aforesaid standalone financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014 (as amended);
e. on the basis of the written representations received from the directors as on 31March 2016 and taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2016 from being appointed as a director in terms of Section164(2) of the Act;
f. we have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as of 31 March 2016 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 12 May 2016 as per Annexure B expressed unqualified opinion.
g. with respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us: i. asdetailed in Note 28 to the standalone financial statements the Company has disclosed theimpact of pending litigations on its standalone financial position;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;
iii. there were no amounts which were required to be transferred to the InvestorEducation and Protection Fund by the Company.
ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OFGLENMARK PHARMACEUTICALS LIMITED ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH2016
Based on the audit procedures performed for the purpose of reporting a true and fairview on the financial statements of the Company and taking into consideration theinformation and explanations given to us and the books of account and other recordsexamined by us in the normal course of audit and to the best of our knowledge and beliefwe report that: (i) (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assetsunder which fixed assets are verified in a phased manner over a period of three yearswhich in our opinion is reasonable having regard to the size of the Company and thenature of its assets. In accordance with this program certain fixed assets were verifiedduring the year and no material discrepancies were noticed on such verification. (c) Thetitle deeds of all the immovable properties (which are included under the head fixedassets) are held in the name of the Company.
(ii) In our opinion the management has conducted physical verification of inventory atreasonable intervals during the year and no material discrepancies between physicalinventory and book records were noticed on physical verification.
(iii) The Company has granted unsecured loans to companies covered in the registermaintained under Section 189 of the Act; and with respect to the same: (a) in our opinionthe terms and conditions of grant of such loans are not prima facie prejudicial to thecompanys interest.
(b) the schedule of repayment of principal and payment of interest has been stipulatedand the receipts of the principal amount and the interest are regular;
(c) there is no overdue amount in respect of loans granted to such companies firmsLLPs or other parties.
(iv) In our opinion the Company has complied with the provisions of Sections 185 and186 of the Act in respect of loans investments guarantees and security.
(v) In our opinion the Company has not accepted any deposits within the meaning ofSections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules 2014 (asamended). Accordingly the provisions of clause 3(v) of the Order are not applicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the Rules made by the Central Government for the maintenance of cost records undersub-section (1) of Section 148 of the Act in respect of Companys products/servicesand are of the opinion that prima facie the prescribed accounts and records have beenmade and maintained. However we have not made a detailed examination of the cost recordswith a view to determine whether they are accurate or complete.
(vii) (a) Undisputed statutory dues including provident fund employees stateinsurance income-tax sales-tax service tax duty of customs duty of excise valueadded tax cess and other material statutory dues as applicable have generally beenregularly deposited to the appropriate authorities though there has been a slight delayin a few cases. Further no undisputed amounts payable in respect thereof were outstandingat the year-end for a period of more than six months from the date they became payable.
(b) The dues outstanding in respect of income-tax sales-tax service tax duty ofcustoms duty of excise and value added tax on account of any dispute are as follows:
Statement of Disputed Dues
|Name of the statute ||Nature of dues ||Amount ( Rs in Million) ||Amount paid under Protest ( Rs in Million) ||Period to which the amount relates ||Forum where dispute is pending |
|Income Tax Act 1961 ||Disallowed expenditure on development of new product u/s 35(2AB)* ||49.23 ||- ||A.Y. 2005-06 ||Honble High Court at Mumbai |
|Income Tax Act 1961 ||Disallowance for income added to MAT book profit. ||0.82 ||- ||A.Y. 2006-07 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961 ||Transfer Pricing Adjustment ||12.47 ||7.00 ||A.Y. 2008-09 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961 ||Transfer Pricing Adjustment ||9.84 ||- ||A.Y. 2009-10 ||Commissioner of Income Tax (Appeals) |
|Income Tax Act 1961 ||Transfer Pricing Adjustment disallowance of sales promotion expenses and allocation of interest and R&D expenses to tax holiday units ||65.96 ||29.40 ||A.Y. 2011-12 & A.Y. 2012-13 ||Commissioner of Income Tax (Appeals) |
|Central Sales Tax Act 1956 ||Rejection of C Forms ||2.89 ||- ||F.Y. 2007-08 ||Deputy Commissioner of Commercial Taxes (Appeal) Gujarat |
|Central Sales Tax Act 1956 ||Rejection of C Forms ||1.24 ||- ||F.Y. 2011-12 ||Addl. Commissioner of Commercial Taxes (Appeal) Goa |
|The Goa VAT Act 2005 ||Disallowance of Input Tax Credit ||5.36 ||- ||F.Y. 2011-12 ||Addl. Commissioner of Commercial Taxes (Appeal) Goa |
|The Central ||Levy of penalty for non submission of ||10.00 ||- ||April 2003 to ||Customs Excise and Service Tax |
|Excise Act 1944 ||proof of export || || ||Sept 2007 ||Appellate Tribunal Mumbai |
|The Central ||Levy of penalty for non submission of ||16.31 ||- ||April 2003 to ||Customs Excise and Service Tax |
|Excise Act 1944 ||proof of export* || || ||Sept 2007 ||Appellate Tribunal Mumbai |
|The Central Excise Act 1944 ||Disallowance of Rebate Claims ||0.59 ||0.59 ||F.Y. 2009-10 ||Jt. Secretary Dept of Revenue Ministry of Finance |
|The Central Excise Act 1944 ||Disallowance of Rebate Claims* ||17.19 ||17.19 ||F.Y. 2010-11 ||Jt. Secretary Dept of Revenue Ministry of Finance |
|The Central Excise Act 1944 ||Disallowance of CENVAT Credit ||2.76 ||0.28 ||April 2009 to March 2012 ||Commissioner of Central Excise (Appeal) Mumbai |
|The Finance Act 1994 ||Demand of Service Tax under reverse charge mechanism ||29.68 ||- ||April 2004 to April 2006 ||Customs Excise and Service Tax Appellate Tribunal Mumbai |
|The Central ||Excise duty demanded on domestic ||14.18 ||14.18 ||Jun 2005 to Dec 2009 ||Customs Excise and Service Tax |
|Excise Act 1944 ||clearance of certain products || || || ||Appellate Tribunal Mumbai |
|The Central Excise Act 1944 ||Excise duty demanded on domestic clearance of certain products* ||7.99 ||7.99 ||Jan 2010 to Mar 2011 ||Customs Excise and Service Tax Appellate Tribunal Mumbai |
|The Central Excise Act 1944 ||Disallowance of Rebate Claims ||5.48 ||5.48 ||Apr 2008 to Mar 2011 ||Jt. Secretary Dept. of Revenue Ministry of Finance |
|The Central Excise Act 1944 ||Disallowance of CENVAT Credit ||1.44 ||1.44 ||April 2009 to March 2011 ||Commissioner of Central Excise (Appeal) Mumbai |
|The Central Excise Act 1944 ||Disallowance of Rebate Claims for third party products ||6.23 ||6.23 ||December 2013 to December 2015 ||Commissioner of Central Excise (Appeal) Mumbai |
* These cases have been decided in favour of the Company by Appellate authorities. Theconcerned revenue department has gone for further appeal against the decision.
** A.Y./F.Y. Assessment year / Financial year
(viii) The Company has not defaulted in repayment of loans or borrowings to any bank orfinancial institution or government during the year. The Company did not have anyoutstanding debentures during the year.
(ix) The Company did not raise moneys by way of initial public offer or further publicoffer (including debt instruments). In our opinion the term loans were applied for thepurpose for which the loans were obtained.
(x) No fraud by the Company or on the Company by its officers or employees has beennoticed or reported during the period covered by our audit.
(xi) Managerial remuneration has been paid and provided by the Company in accordancewith the requisite approvals mandated by the provisions of Section 197 of the Act readwith Schedule V to the Act. (xii) In our opinion the Company is not a Nidhi Company.Accordingly provisions of clause 3(xii) of the Order are not applicable.
(xiii) In our opinion all transactions with the related parties are in compliance withSections 177 and 188 of Act where applicable and the requisite details have beendisclosed in the financial statements etc. as required by the applicable accountingstandards.
(xiv) During the year the Company has made preferential allotment of shares. Inrespect of the same in our opinion the Company has complied with the requirement ofSection 42 of the Act and the Rules framed thereunder. Further in our opinion theamounts so raised have been used for the purposes for which the funds were raised.
(xv) Based on the representation provided by the management the Company has notentered into any non-cash transactions with the directors or persons connected with themcovered under Section 192 of the Act. (xvi) The company is not required to be registeredunder Section 45-IA of the Reserve Bank of India Act 1934.
ANNEXURE B TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE TO THE MEMBERS OFGLENMARK PHARMACEUTICALS LIMITED ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH2016
Independent Auditors report on the Internal Financial Controls under Clause (i)of Sub-section 3 of Section 143 of the Companies Act 2013 ("the Act")
1. In conjunction with our audit of the standalone financial statements of GlenmarkPharmaceuticals Limited ("the Company") as of and for the year ended 31 March2016 we have audited the internal financial controls over financial reporting (IFCoFR) ofthe company of as of that date.
Managements Responsibility for Internal Financial Controls
2. The Companys Board of Directors is responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the designimplementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of the companys business including adherence to companys policiesthe safeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Companys IFCoFR based onour audit. We conducted our audit in accordance with the Standards on Auditing issued bythe Institute of Chartered Accountants of India (ICAI) and deemed to be prescribed undersection 143(10) of the Act to the extent applicable to an audit of IFCoFR and theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the ICAI. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate IFCoFR were established and maintained and ifsuch controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR included obtaining anunderstanding of IFCoFR assessing the risk that a material weakness exists and testingand evaluating the design and operating effectiveness of internal control based on theassessed risk. The procedures selected depend on the auditors judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Companys IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A companys IFCoFR is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A companys IFCoFR includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detailaccurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorisations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the companys assets that could have a material effect on thefinancial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
7. Because of the inherent limitations of IFCoFR including the possibility ofcollusion or improper management override of controls material misstatements due to erroror fraud may occur and not be detected. Also projections of any evaluation of the IFCoFRto future periods are subject to the risk that IFCoFR may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31 March 2016 based on the internalcontrol over financial reporting criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India.
For Walker Chandiok & Co LLP
Firms Registration No.: 001076N/N500013
per Ashish Gupta
Membership No.: 504662
Date: 12 May 2016