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Sun Pharmaceuticals Industries Ltd.

BSE: 524715 Sector: Health care
NSE: SUNPHARMA ISIN Code: INE044A01036
BSE LIVE 12:55 | 27 Feb 677.25 1.85
(0.27%)
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674.95

HIGH

684.80

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671.75

NSE LIVE 12:55 | 27 Feb 677.05 2.50
(0.37%)
OPEN

674.10

HIGH

685.50

LOW

671.10

OPEN 674.95
PREVIOUS CLOSE 675.40
VOLUME 240780
52-Week high 890.85
52-Week low 572.40
P/E
Mkt Cap.(Rs cr) 162492.59
Buy Price 677.25
Buy Qty 764.00
Sell Price 677.85
Sell Qty 235.00
OPEN 674.95
CLOSE 675.40
VOLUME 240780
52-Week high 890.85
52-Week low 572.40
P/E
Mkt Cap.(Rs cr) 162492.59
Buy Price 677.25
Buy Qty 764.00
Sell Price 677.85
Sell Qty 235.00

Sun Pharmaceuticals Industries Ltd. (SUNPHARMA) - Auditors Report

Company auditors report

TO THE MEMBERS OF

SUN PHARMACEUTICAL INDUSTRIES LIMITED

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying standalone financial statements of SUN PHARMACEUTICALINDUSTRIES LIMITED ("the Company") which comprise the Balance Sheet as at 31stMarch 2016 the Statement of Profit and Loss and the Cash Flow Statement for the yearthen ended and a summary of the significant accounting policies and other explanatoryinformation.

MANAGEMENT’S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

The Company’s Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Company in accordance with theaccounting principles generally accepted in India including the Accounting Standardsprescribed under section 133 of the Act as applicable.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

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 and the Order under section 143(11) ofthe Act.

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under Section 143(10) of the Act. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor’s 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 control relevant to the Company’spreparation 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 Company’s Directors as well as evaluating theoverall presentation of the financial statements.

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.

OPINION

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 31st March 2016 and its loss and its cash flows for the year ended on that date.

EMPHASIS OF MATTER

We draw attention to Note 55 to the standalone financial statements. As referred to inthe said Note remuneration to the Managing Director and a Whole-time Director of theCompany for the previous year ended 31st March 2015 is in excess of the limits specifiedunder Schedule V to the Act by Rs. 20.7 Million. In this regard we have been informed bythe Management of the Company that they have made further representations to the CentralGovernment in respect of their applications for approving the amounts of maximumremuneration for the three years ending 31st March 2017 including for the excess amountsalready paid / provided. The response in respect of the foregoing is awaited from theCentral Government.

Our opinion is not modified in respect of this matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by Section 143(3) of the Act we report that:

a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes 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 Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account.

d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards prescribed under section 133 of the Act as applicable.

e) On the basis of the written representations received from the directors as on 31stMarch 2016 taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2016 from being appointed as a director in terms of Section164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company’s internal financial controlsover financial reporting.

g) With respect to the other matters to be included in the Auditor’s 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. The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer Note 28(A)(i) to the standalone financialstatements;

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts – Refer Notes 6 and 9 to the standalone financial statements;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company except a sum of Rs. 9.8 Millionwhich are held in abeyance due to pending legal cases.

2. As required by the Companies (Auditor’s Report) Order 2016 ("theOrder") issued by the Central Government in terms of Section 143(11) of the Act wegive in "Annexure B" a statement on the matters specified in paragraphs 3 and 4of the Order.

For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
RAJESH K. HIRANANDANI
Partner
(Membership No. 36920)
Place: Mumbai
Date: 30th May 2016

ANNEXURE "A" TO THE INDEPENDENT AUDITOR’S REPORT

(REFERRED TO IN PARAGRAPH 1(F) UNDER ‘REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS’ OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SUN PHARMACEUTICALINDUSTRIES LIMITED)

REPORT ON THE INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING UNDER CLAUSE I OFSUBSECTION 3 OF SECTION 143 OF THE COMPANIES ACT 2013 "THE ACT"

We have audited the internal financial controls over financial reporting of SunPharmaceutical Industries Limited ("the Company") as of 31st March 2016 inconjunction with our audit of the standalone financial statements of the Company for theyear ended on that date.

MANAGEMENT’S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company’s management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls Over Financial Reportingissued by the Institute of Chartered Accountants of India (the "Guidance Note").These responsibilities include the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the orderly andefficient conduct of its business including adherence to company’s policies thesafeguarding 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.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on the Company’s internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note and the Standards on Auditing prescribed under Section 143(10) ofthe Act to the extent applicable to an audit of internal financial controls. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls over financial reporting was established and maintained and if suchcontrols operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor’s judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company’s internal financial controlssystem over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A company’s internal financial control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal financial control overfinancial reporting includes those policies and procedures that (1) pertain to themaintenance of records that in reasonable detail accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany’s assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

OPINION

In our opinion to the best of our information and according to the explanations givento us the Company has in all material respects an adequate internal financial controlssystem over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31st March 2016 based on the internal controlover financial reporting criteria established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
RAJESH K. HIRANANDANI
Partner
(Membership No. 36920)
Place: Mumbai
Date: 30th May 2016

ANNEXURE "B" TO THE INDEPENDENT AUDITOR’S REPORT

(REFERRED TO IN PARAGRAPH 2 UNDER ‘REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS’ SECTION OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SUN PHARMACEUTICALINDUSTRIES LIMITED)

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The Company has a program of verification of fixed assets to cover all the items ina phased manner over a period of three years which in our opinion is reasonable havingregard to the size of the Company and the nature of its assets. Pursuant to the programcertain fixed assets were physically verified by the Management during the year. Accordingto the information and explanations given to us no material discrepancies were noticed onsuch verification.

(c) According to the information and explanations given to us and the records examinedby us and based on the examination of the registered sale deed / transfer deed /conveyance deed / agreement for sale along with registered power of attorney / consentterms taken on record by the Honorable Bombay City Civil Court at Bombay / sharecertificate / other documents evidencing title provided to us we report that the titledeeds comprising all the immovable properties of freehold land and buildings are held inthe name of the Company as at the balance sheet date except the following:

Particulars of the freehold land Gross / Net Block as at 31st March 2016 Remarks
(Rs. in Million)
Located in Himachal Pradesh admeasuring 645150 Square meters 76.3 The title deeds are in the name of Ranbaxy Laboratories Limited erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act 1956 in terms of the approval of the Honorable High Courts of Gujarat and Punjab and Haryana.
Located in Punjab admeasuring 370527 Square meters 27.2
Located in Haryana admeasuring 64161 Square meters 109.0
Located in Madhya Pradesh admeasuring 91330 5.8
Square meters
Located in Karnataka admeasuring 30362 Square meters 28.3
Located in Punjab admeasuring 8364 Square meters 2.5 The title of this land is under dispute in respect of which we have been informed by the Management of the Company that they have filed a Special Leave Petition with the Honorable Supreme Court against the order passed by the Honorable High Court of Punjab and Haryana and the matter is under adjudication.

In respect of a building where the Company is entitled to the right of occupancy anduse and disclosed as fixed assets in the standalone financial statements we report thatthe agreement / non-convertible preference shares / compulsorily convertible debenturesentitling the right of occupancy and use of building are in the name of the Company as atthe balance sheet date.

In respect of immovable properties of land and buildings that have been taken on leaseand disclosed as fixed assets in the standalone financial statements the lease agreementsare in the name of the Company where the Company is the lessee in the agreement exceptthe following:

Particulars of the leasehold land Gross Block as at 31st March 2016 Net Block as at 31st March 2016 Remarks
(Rs. in Million) (Rs. in Million)
Located in Maharashtra admeasuring 20000 Square meters. * 25.8 17.0 The lease agreements are in the name of Crosslands Research Laboratories Limited which was merged with Ranbaxy Laboratories Limited erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act 1956 in terms of the approval of the Honorable High Courts of Gujarat and Punjab and Haryana.
*includes composite consideration for land and building.
Located in Goa admeasuring 1000 Square meter 3.3 2.6
Located in Punjab admeasuring 323866 Square meters 239.6 210.8 The lease agreements are in the name of Ranbaxy Laboratories Limited erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act 1956 in terms of the approval of the Honorable High Courts of Gujarat and Punjab and Haryana.
Located in Madhya Pradesh admeasuring 630552 Square meters 229.0 220.1
Located in Gujarat admeasuring 24000 Square meters 1.0 0.6 The lease agreement is in the name of Gujarat Lyca Limited erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act 1956 in terms of the approval of the Honorable High Court of Gujarat.

(ii) As explained to us the inventories excluding stocks with some of the thirdparties were physically verified during the year by the Management at reasonableintervals and no material discrepancies were noticed on physical verification. In respectof inventories lying with third parties these have substantially been confirmed by them.

(iii) According to the information and explanations given to us the Company has notgranted loans secured or unsecured during the year to companies firms LimitedLiability Partnerships or other parties covered in the register maintained under Section189 of the Companies Act 2013 ("the Act") and hence reporting under clause(iii)(a) of paragraph 3 of the Order is not applicable. In respect of loans secured orunsecured granted during earlier years to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct:

(a) In respect of loans granted to wholly owned subsidiaries where the aggregateamount involved is Rs. 4.8 Million (including interest accrued) the repayments orreceipts of principal amounts and interest where due during the year have been regularas per stipulations and in respect of loans granted to an associate there is no repaymentor receipt of the principal amount of Rs. 512.0 Million and the interest thereon of Rs.151.5 Million which are overdue as per the stipulations.

(b) There is no overdue amount remaining outstanding as at the balance sheet dateexcept in respect of amounts of Rs. 512.0 Million and Rs. 135.8 Million of principal andinterest respectively aggregating to Rs. 647.8 Million given to an associate which hasbeen overdue for more than 90 days where there is no evidence of reasonable steps havingbeen taken for the recovery of the principal outstanding or interest receivable. Asrepresented by the Management of the Company the Company is evaluating various options torecover its dues in respect of principal amount and interest.

Refer Note 45 to the standalone financial statements.

(iv) The Company has not granted any loans made investments or provided guarantees orsecurities during the year covered under Section 185 and 186 of the Act and hencereporting under clause (iv) of paragraph 3 of the Order is not applicable.

(v) According to the information and explanations given to us the Company has notaccepted any deposit from the public in accordance with the provisions of Sections 73 to76 or any other relevant provisions of the Act and the rules framed thereunder and hencereporting under clause (v) of paragraph 3 of the Order is not applicable.

(vi) The maintenance of cost records has been specified by the Central Government undersub-section (1) of Section 148 of the Act. We have broadly reviewed the cost recordsmaintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014as amended prescribed by the Central Government under sub-section (1) of Section 148 ofthe Act and are of the opinion that prima facie the prescribed cost records havebeen made and maintained. We have however not made a detailed examination of the costrecords with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has generally been regular in depositing undisputed statutory duesincluding Provident Fund Employees’ State Insurance Income-tax Sales Tax ServiceTax Customs Duty Excise Duty Value added Tax Cess and other material statutory duesapplicable to it with the appropriate authorities though there have been slight delays infew cases.

(b) There were no undisputed amounts payable in respect of Provident FundEmployees’ State Insurance Income-tax Sales Tax Service Tax Customs Duty ExciseDuty Value added Tax Cess and other material statutory dues in arrears as at 31st March2016 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax Sales Tax Service Tax Customs Duty Excise Dutyand Value added Tax which have not been deposited as at 31st March 2016 on account ofdisputes are given below:

Name of Statute Nature of Dues Forum where dispute is pending Period to which the amount relates Amount (Rs. in Million)# Amount paid / adjusted under protest (Rs. in Million)
Income Tax Act 1961 Income Tax Interest and Penalty Commissioner (Appeals) 1998-99 to 2000-01 2005-06 to 2010-11 3419.6 2712.7
Income Tax Appellate Tribunal (ITAT) 1995-96 to 1999-00 2001-02 to 2004-05 2007-08 2009-10 and 2010-11 3313.2 5706.5
Sales Tax Act/ VAT (Various States) Sales Tax Interest and Penalty Assistant / Additional / Senior Joint Commissioner 1999 - 00 2000-01 and 2002- 03 to 2012-13 2.7 0.6
Appellate Authority 1998-99 2008-09 2012-13 and 2013-14 2.8 0.4
Tribunal 1998-99 to 2003-04 3.0 -
High Court 1999-00 2001-02 to 2003-04 and 2005-06 to 2010-11 23.5 5.1
Entry Tax Madhya Pradesh Commercial Tax Appellate Board 2009-10 2.5 -
The Central Excise Act 1944 Service Tax Customs Excise and Service Tax Appellate Tribunal (CESTAT) Delhi 2006 to 2011 4.4 -
Customs Act 1962 Custom Duty Penalty and Interest High Court 2000-01 16.1 -
The Central Excise Act 1944 Excise Duty Interest and Penalty Settlement Commission 2000-01 4.2 -
Commissioner (Appeals) 2001-02 to 2014-15 57.1 4.5
Tribunal 2001-02 to 2014-15 1364.2 204.6
High Court 2001-02 to 2004-05 and 2008- 09 to 2013-14 73.1 3.2
Supreme Court 2002-03 to 2003-04 16.9 16.9

# Net of amount paid / adjusted under protest

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions banks and government and dues to debenture holders.

(ix) In our opinion and according to the information and explanations given to usmoney raised by way of the term loans have been applied by the Company during the year forthe purposes for which they were raised. The Company has not raised money by way ofinitial public offer further public offer (including debt instruments) during the year.

(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the Company and no material fraud on the Company by its officersor employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in excess of the limits and approvalsprescribed under Section 197 read with Schedule V to the Act to the following managerialpersonnel:

Managerial Position Excess amount of remuneration paid / provided Rs. ( In Million) Financial year ended Treatment of the excess remuneration in the respective year standalone financial statements Steps taken by the Company for securing refund
Managing Director 10.5 31st March 2015 Charged to the Statement of Profit and Loss We have been informed by the Management of the Company that they have made further representations to the Central Government in respect of their applications for approving the amounts of maximum remuneration for the three years ending 31st March 2017 including for the excess amounts already paid / provided. Refer Note 55 to the standalone financial statements
Whole time Director 10.2 31st March 2015 Charged to the Statement of Profit and Loss

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) ofparagraph 3 of the Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to usthe Company is in compliance with Sections 177 and 188 of the Act where applicable forall transactions with the related parties and the details of related party transactionshave been disclosed in the standalone financial statements as required by the applicableaccounting standards.

(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures and hence reporting underclause (xiv) of paragraph 3 of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to usduring the year the Company has not entered into any non-cash transactions with itsdirectors or directors of its subsidiary or associate company or persons connected withthem and hence provisions of Section 192 of the Act are not applicable.

(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934.

For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
RAJESH K. HIRANANDANI
Partner
(Membership No. 36920)
Place: Mumbai
Date: 30th May 2016