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Cipla Ltd.

BSE: 500087 Sector: Health care
NSE: CIPLA ISIN Code: INE059A01026
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NSE 16:04 | 17 Aug 1025.75 -8.80
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OPEN 1034.90
PREVIOUS CLOSE 1033.85
VOLUME 27521
52-Week high 1083.15
52-Week low 850.00
P/E 28.29
Mkt Cap.(Rs cr) 82,758
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1034.90
CLOSE 1033.85
VOLUME 27521
52-Week high 1083.15
52-Week low 850.00
P/E 28.29
Mkt Cap.(Rs cr) 82,758
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cipla Ltd. (CIPLA) - Auditors Report

Company auditors report

To the Members of Cipla Limited

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements ofCipla Limited ('the Company') which comprise the Balance Sheet as at 31st March 2022the Statement of Profit and Loss (including Other Comprehensive Income) the Statement ofCash Flow and the Statement of Changes in Equity for the year then ended and a summary ofthe significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according tothe explanations given to us the aforesaid standalone financial statements give theinformation required by the Companies Act 2013 ('the Act') in the manner so required andgive a true and fair view in conformity with the Indian Accounting Standards ('Ind AS')specified under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 and other accounting principles generally accepted in India of thestate of affairs of the Company as at 31st March 2022 its profit (including othercomprehensive income) and its cash flows and the changes in equity for the year ended onthat date.

Basis of opinion

3. We conducted our audit in accordance with the Standards on Auditingspecified under section 143(10) of the Act. Our responsibilities under those standards arefurther described in the Auditor's Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Company inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia (' IC AI') together with the ethical requirements that are relevant to our audit ofthe financial statements under the provisions of the Act and the rules thereunder and wehave fulfilled our other ethical responsibilities in accordance with these requirementsand the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Key Audit Matters

4. Key audit matters are those matters that in our professionaljudgment were of most significance in our audit of the standalone financial statements ofthe current period. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters.

5. We have determined the matters described below to be the key auditmatters to be communicated in our report.

Key audit matter How our audit addressed the key audit matter
Drugs (Prices Control) Orders (DPCO) matters Our audit of DPCO matters included but was not limited to the following procedures:
The Company is regulated by National Pharmaceutical Pricing Authority Government of India (NPPA). There are a number of legal and regulatory cases of which the most significant Drugs (Prices Control) Orders (DPCO) as disclosed in Note 37(B)(ii) to the standalone financial statements relating to overcharging of certain drugs under DPCO. a) Obtained an understanding of the management's process for updating the status of the matters assessment of accounting treatment in accordance with Ind AS 37 and for measurement of amounts involved;
According to NPPA's public disclosure the total demand against the Company aggregates to Rs 3703.40 crores as at 31st March 2022 of which: b) Evaluated the design and tested the operating effectiveness of key controls around above process;
a) Rs 3456.39 crores relates to matters pending at Honourable Bombay High Court wherein the Holding Company has deposited Rs 175.08 crores being 50% of the total demand of Rs 350.15 crores as at 1st August 2003 under protest pursuant to direction of Honourable Supreme Court of India; and c) Inspected correspondence with the Company's external legal counsel in order to corroborate our understanding of these matters accompanied by discussions with both internal and external legal counsels. Tested the objectivity and competence of such management experts involved;
b) Rs 247.01 crores relates to other matters wherein based on facts and legal advice the Company has recorded a charge of Rs 7.34 crores (including interest) during the year ended 31st March 2022 and carries a total provision of Rs 118.49 crores (including interest) as at 31st March 2022. d) Obtained direct confirmation from the external legal counsel handling DPCO matters with respect to the legal determination of the liability arising from such matters conclusion of the matters in accordance with the requirements of Ind AS 37 and disclosures to be made in the financial statements. Evaluated the response received from the external legal counsel to ensure that the conclusions reached are supported by sufficient legal rationale;
The amounts involved are material and the application of accounting principles as given under Ind AS 37 Provisions Contingent Liabilities and Contingent Assets ('Ind AS 37') in order to determine the amounts to be recognised as liability or to be disclosed as a contingent liability or not is inherently subjective and needs careful evaluation and significant judgement to be applied by the management. e) Assessed the appropriateness of methods used and the reliability of underlying data for the calculations made for quantifying the amounts involved. Tested the arithmetical accuracy of such calculations; and
Considering the materiality and the inherent subjectivity which involves significant management judgment in predicting the outcome of the matter DPCO matters have been considered to be a key audit matter for the current period audit. f) Evaluated the Company's disclosures for adequate disclosure regarding the significant litigations of the Company.
Based on the audit procedures performed the judgements made by the management were reasonable and disclosures made in respect of these matters were appropriate in the context of the standalone financial statements taken as a whole.
Revenue from operations: Our audit included but was not limited to the following procedures:
(refer note 1.13 and 25 to the Standalone financial statements)
The Company recognises revenue from the sales of pharmaceutical products to resellers or distributors out-licensing arrangements and service fee. The Company recognises revenue from product sales when control of the product transfers generally upon shipment or delivery to a customer. The Company records product sales net of estimated incentives/discounts returns rebates and other related charges. The actual point in time when revenue is recognised varies depending on the specific terms and conditions of the sales contracts entered with customers. a) Obtained an understanding of the management's process for revenue recognition (from sale to customers out- licensing arrangements and service fee) judgments in estimation and accounting treatment of discount schemes returns rebates and regulatory compliance requirements;
Further the Company has a large number of customers operating in various geographies and sales contracts with customers have a variety of different terms relating to the recognition of revenue the entitlement to sales rebates the right to return and price adjustments. Sales arrangements in certain jurisdictions lead to material deductions to gross sales in arriving at revenue. b) Evaluated the design and tested the operating effectiveness of the Company's internal controls including general IT controls key IT application controls exercised by the management over recognition of revenue and measurement of various discount schemes returns and rebates;
The Company also has development and commercialisation arrangements relating to research and development of new products. This includes in-licensing and out-licensing arrangements and other types of complex agreements. c) Evaluated the terms of the licensing arrangements to determine satisfaction of performance obligations under the contracts for appropriate revenue recognition and tested allocation of consideration between performance obligations to verify deferral of revenue in respect of unsatisfied performance obligations;
We identified recognition of revenue from operations as a key audit matter because: d) Performed substantive testing by selecting samples of revenue transactions pertaining to sale of products during the year and verified the underlying supporting documents including contracts agreements sales invoices and dispatch/shipping documents;
a) Accrual towards rebates discounts returns and allowances is complex and requires significant judgments and estimates in relation to contractual agreements/ commercial terms across various geographies. Any change in these estimates can have a significant financial impact. e) Performed cut-off testing procedures by testing samples of revenue transactions recorded during the year in specific periods before and after year end to conclude there has not been overstatement/ understatement of revenue recorded for the year;
b) The nature of development and commercialisation arrangements are often inherently complex and unusual requiring significant management judgment to be applied in respect of revenue recognition. f) Obtained management workings for amounts recognised towards discount schemes returns and rebates during the year and as at year end. On a sample basis tested the underlying calculations for amounts recorded as accruals and provisions towards the aforementioned obligations as per the terms of related schemes contracts and regulations and traced the underlying data to source documents;
c) The Company considers revenue as key benchmark for evaluating performances and hence there is risk of revenue being overstated due to pressure to achieve targets earning expectations or incentive schemes linked to performance for a reporting period. g) Evaluated historical accuracy of the Company's estimates of year-end accruals pertaining to aforesaid arrangements made in the previous years to identify any management bias;
h) Tested all the manual sales-related adjustments made to revenue comprising of variable consideration under Ind AS 115 to ensure the appropriateness of revenue recognition during the year; and
i) Evaluated the adequacy of disclosures in the standalone financial statements.
Based on audit procedures performed we determined that the revenue recognition and measurement is appropriate in the context of the standalone financial statements taken as a whole.
Recoverability of investments in subsidiaries: Our audit included but was not limited to the following procedures:
The Company has investments of Rs 8877.47 crores in subsidiaries being carried at cost in accordance with Ind AS 27 Separate Financial Statements. The Company assesses the recoverable amounts of each investment when impairment indicators exist by comparing the fair value (less costs of disposal) and carrying amount of that investment as on the reporting date. a) Obtained an understanding of the management's process for identification of impairment indicators and tested the design and operating effectiveness of internal controls over such identification and impairment measurement through fair valuation of identified investments;
Management's assessment of whether there are impairment indications and estimate of the recoverable amounts of the identified investments determined through discounted cash flow valuation method requires significant judgment in carrying out the impairment assessment. The key assumptions used in management's assessment of the recoverable amounts include but are not limited to projections of future cash flows growth rates discount rates estimated future operating and capital expenditure. Changes to these assumptions could lead to material changes in estimated recoverable amounts resulting in either impairment or reversals of impairment taken in prior years. b) Involved auditor's experts to assess the appropriateness of the valuation methodologies used by the management;
Considering the materiality and the inherent subjectivity which involves significant management judgment in predicting future cash flow projections recoverability of investments in subsidiaries has been considered to be a key audit matter for the current period audit. c) Reconciled the cash flows to the business plans approved by the respective Board of Directors of the identified investee companies;
d) Evaluated and challenged management's assumptions such as implied growth rates during explicit period terminal growth rate targeting savings and discount rate for their appropriateness based on our understanding of the business of the respective investee companies past results and external factors such as industry trends and forecasts including the possible impact of COVID-19 pandemic on such assumptions;
e) Obtained and evaluated sensitivity analysis performed by the management on key assumptions of implied growth rates during explicit period terminal growth rates and discount rates;
f) Tested the mathematical accuracy of the management computations with regard to cash flows and sensitivity analysis;
g) Performed independent sensitivity analysis of aforesaid key assumptions to assess the effect of reasonably possible variations on the current estimated recoverable amount for each of the identified investments to evaluate sufficiency of headroom between recoverable value and carrying amount; and
h) Evaluated the adequacy of disclosures given in the standalone financial statements including disclosure of significant assumptions judgements and sensitivity analysis performed in accordance with applicable accounting standards.
Based on the audit procedures performed we determined that the management's assertion on the recoverability of investments in subsidiaries is appropriate in the context of the standalone financial statements taken as a whole.
Provision for Obsolescence of Inventory Our audit of provision for obsolescence of inventory included but was not limited to the following procedures:
(refer note 1.3.2(v) 1.11 and 9 to the standalone financial statements)
The Company held inventories aggregating Rs 3199.05 crores as at 31st March 2022 comprising of raw materials work-inprogress stock-in-trade finished goods packaging materials and stores spares and consumables on which the Company has recorded an obsolescence provision amounting to Rs 494.86 crores during the current year. a) Obtained an understanding of management's process to identify slow-moving obsolete and other non-saleable inventory and process of consequent measurement of required provision for obsolescence.
At each reporting period end the management assesses whether there is any objective evidence indicating that the net realisable value of any item of inventory is below its carrying value. If so such inventories are written down to their net realisable value in accordance with the requirements of Ind AS 2 Inventories ('Ind AS 2'). b) Evaluated the appropriateness of related accounting policies adopted by the Company in accordance with the requirements of Ind AS 2 ('Ind AS 2');
The factors that the Company considers in determining the provision for slow moving obsolete and other non-saleable inventory include estimated remaining shelf life product discontinuances price changes ageing of inventory and introduction of competitive new products to the extent each of these factors impact the Company's business and markets. The Company considers all these factors and adjusts the inventory provision to reflect its actual experience on a periodic basis. c) Evaluated the design implementation and tested the operating effectiveness of key controls that the Company has in relation to aforesaid process;
Considering the inherent nature of the industry particularly limited useful life of inventories the aforesaid determination is complex on account of estimation of consumption patterns prescription patterns alternate product availability alternate uses changing regulations which involves significant management judgement and high estimation uncertainty. This complexity was particularly further increased during the current year due to introduction of certain products in Company's portfolio leading to an increased charge to the Statement of Profit and Loss in the current year as compared to earlier years in this respect. d) Evaluated the nature source and reliability of all the information used by the management for arriving at the estimates for determination of provision for obsolescence of inventory;
Considering the above provision for obsolescence of inventory has been considered as key audit matter for the current period audit. e) For the provisions made in respect of expired or nearexpiry inventory balances tested such identification from the batch-wise expiry information and reperformed computations to validate the accuracy and completeness of such provision estimates;
f) For the provisions made in respect of other non-saleable inventory discussed with the senior management the triggers taken into account for such identification and evaluated the same in view of our understanding of the business and industry conditions. Assessed the projected sale estimates made by the management in respect of balance inventory of aforesaid specific products that is expected to be sold in the near future for its appropriateness basis past trends and market conditions. Further reperformed computations to validate the accuracy and completeness of such provision estimates; and
g) Evaluated appropriateness of disclosures made in the financial statements.
Based on the audit procedures performed the management's assessment provision for obsolescence of inventory balances was determined to be appropriate in the context of the standalone financial statements taken as a whole.

Information other than the Financial Statements and Auditor's Reportthereon

6. The Company's Board of Directors are responsible for the otherinformation. The other information comprises the information included in the AnnualReport but does not include the standalone financial statements and our auditor's reportthereon.

Our opinion on the standalone financial statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statementsour responsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained in the audit or otherwise appears to be materially misstated. Ifbased on the work we have performed we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.

Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements

7. The accompanying standalone financial statements have been approvedby the Company's Board of Directors. The Company's Board of Directors are responsible forthe matters stated in section 134(5) of the Act with respect to the preparation andpresentation of these standalone financial statements that give a true and fair view ofthe financial position financial performance including other comprehensive incomechanges in equity and cash flows of the Company in accordance with the Ind AS specifiedunder section 133 of the Act and other accounting principles generally accepted in India.This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Company and forpreventing 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.

8. In preparing the financial statements the Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intend to liquidate theCompany or to cease operations or has no realistic alternative but to do so.

9. Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

Auditor's Responsibilities for the Audit of the Standalone FinancialStatements

10. Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith Standards on Auditing will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in the aggregate they could reasonably be expected to influence the economic decisionsof users taken on the basis of these financial statements.

11. As part of an audit in accordance with Standards on Auditingspecified under section 143(10) of the Act we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol;

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3) (i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls system with reference tofinancial statements in place and the operating effectiveness of such controls;

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management;

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the financial statements or if such disclosures are inadequate tomodify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditor's report. However future events or conditions may cause the Companyto cease to continue as a going concern; and

• Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

12. We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

13. We also provide those charged with governance with a statement thatwe have complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

14. From the matters communicated with those charged with governancewe determine those matters that were of most significance in the audit of the financialstatements of the current period and are therefore the key audit matters. We describethese matters in our auditor's report unless law or regulation precludes public disclosureabout the matter or when in extremely rare circumstances we determine that a mattershould not be communicated in our report because the adverse consequences of doing sowould reasonably be expected to outweigh the public interest benefits of suchcommunication.

Report on Other Legal and Regulatory Requirements

15. As required by section 197(16) of the Act based on our audit wereport that the Company has paid remuneration to its directors during the year inaccordance with the provisions of and limits laid down under section 197 read withSchedule V to the Act.

16. As required by the Companies (Auditor's Report) Order 2020 ('theOrder') issued by the Central Government of India in terms of section 143(11) of the Actwe give in the Annexure I a statement on the matters specified in paragraphs 3 and 4 ofthe Order to the extent applicable.

17. Further to our comments in Annexure I as required by section143(3) of the Act based on our audit we report to the extent applicable that:

a) We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purpose of our auditof the accompanying standalone financial statements;

b) In our opinion proper books of account as required by law have beenkept by the Company so far as it appears from our examination of those books;

c) The standalone financial statements dealt with by this report are inagreement with the books of account;

d) In our opinion the aforesaid standalone financial statements complywith Ind AS specified under section 133 of the Act;

e) On the basis of the written representations received from thedirectors and taken on record by the Board of Directors none of the directors isdisqualified as on 31st March 2022 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 withreference to financial statements of the Company as on 31st March 2022 and the operatingeffectiveness of such controls refer to our separate Report in Annexure II wherein wehave expressed an unmodified opinion; and

g) With respect to the other matters to be included in the Auditor'sReport in accordance with rule 11 of the Companies (Audit and Auditors) Rules 2014 (asamended) in our opinion and to the best of our information and according to theexplanations given to us:

i. the Company as detailed in note 37 to the standalone financialstatements has disclosed the impact of pending litigations on its financial position asat 31st March 2022.

ii. As detailed in note 50 the Company did not have any long-termcontracts including derivative contracts for which there were any material foreseeablelosses as at 31st March 2022;

iii. There has been no delay in transferring amounts required to betransferred to the Investor Education and Protection Fund by the Company during the yearended 31st March 2022;

iv. a. The management has represented that to the

best of its knowledge and belief other than as disclosed in note 43(j) and 43 (k) to the standalone financial statements no funds have been advanced orloaned or invested (either from borrowed funds or securities premium or any other sourcesor kind of funds) by the Company to or in any person or entity(ies) including foreignentities ('the intermediaries') with the understanding whether recorded in writing orotherwise that the intermediary shall whether directly or indirectly lend or invest inother persons or entities identified in any manner whatsoever by or on behalf of theCompany ('the Ultimate Beneficiaries') or provide any guarantee security or the like onbehalf the Ultimate Beneficiaries;

b. The management has represented that to the best of its knowledgeand belief as disclosed in note 43 (f) to the standalone financial statements no fundshave been received by the Company from any person(s) or entity(ies) including foreignentities ('the Funding Parties') with the understanding whether recorded in writing orotherwise that the Company shall whether directly or indirectly lend or invest in otherpersons or entities identified in any manner whatsoever by or on behalf of the FundingParty ('Ultimate Beneficiaries') or provide any guarantee security or the like on behalfof the Ultimate Beneficiaries; and

c. Based on such audit procedures performed as considered reasonableand appropriate in the circumstances nothing has come to our notice that has caused us tobelieve that the management representations under sub-clauses (a) and (b) above containany material misstatement.

v. a. The final dividend paid by the Company during the year ended 31stMarch 2022 in respect of such dividend declared for the previous year is in accordancewith section 123 of the Act to the extent it applies to payment of dividend.

b. As stated in note 46 (B) (b) to the accompanying standalonefinancial statements the Board of Directors of the Company have proposed final dividendfor the year ended 31st March 2022 which is subject to the approval of the members at theensuing Annual General Meeting. The dividend declared is in accordance with section 123 ofthe Act to the extent it applies to declaration of dividend.

Annexure I f the Independent Auditor's Report of even date to themembers of Cipia

Limited on the standalone financial statements for the year ended 31stMarch 2022

In terms of the information and explanations sought by us and given bythe Company and the books of account and records examined by us in the normal course ofaudit and to the best of our knowledge and belief we report that:

(i) (a) (A) The Company has maintained proper records showing fullparticulars including quantitative details and situation of property plant andequipment right of use assets and investment property.

(B) The Company has maintained proper records showing full particularsof intangible assets.

(b) The Company has a regular program of physical verification of itsproperty plant and equipment right of use assets and investment property under which theassets are physically verified in a phased manner over a period of 3 years which in ouropinion is reasonable having regard to the size of the Company and the nature of itsassets. In accordance with this program certain property plant and equipment right ofuse assets and investment property were verified during the year and no materialdiscrepancies were noticed on such verification.

(c) The title deeds of all the immovable properties and includinginvestment properties held by the Company (other than properties where the Company is thelessee and the lease agreements are duly executed in favour of the lessee) are held in thename of the Company.

(d) The Company has not revalued its Property Plant and Equipment andRight of Use assets or intangible assets during the year.

(e) No proceedings have been initiated or are pending against theCompany for holding any benami property under the Benami Transactions (Prohibition) Act1988 (45 of 1988) and rules made thereunder. Accordingly reporting under clause 3(i)(e)of the Order is not applicable to the Company.

(ii) (a) The management has conducted physical verification ofinventory at reasonable intervals during the year except for goods in transit. In ouropinion the coverage and procedure of such verification by the management is appropriateand no discrepancies of 10% or more in the aggregate for each class of inventory werenoticed.

(b) The Company has not been sanctioned working capital limits by banksor financial institutions on the basis of security of current assets during any point oftime of the year. Accordingly reporting under clause 3(ii)(b) of the Order is notapplicable to the Company.

(iii) (a) The Company has not provided any loans or provided anyadvances in the nature of loans or guarantee or security to any other entity at thebeginning and during the year. Accordingly reporting under clauses 3(iii)(a) of the Orderis not applicable to the Company.

(b) The Company has not provided any guarantee or given any security orgranted any loans or advances in the nature of loans during the year. However the Companyhas made investment in 9 entities amounting to Rs 1188.86 crores (year-end balanceRs 8934.88 crores) and in our opinion and according to the information andexplanations given to us such investments made are prima facie not prejudicial to theinterest of the Company.

(c) The Company does not have any outstanding loans and advances in thenature of loans at the beginning of the current year nor has granted any loans or advancesin the nature of loans during the year. Accordingly reporting under clauses 3(iii)(c)3(iii)(d) 3(iii)(e) and 3(iii)(f) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanationsgiven to us the Company has complied with the provisions of section 186 of the Act inrespect of loans investments guarantees and security as applicable. Further theCompany has not entered into any transaction covered under section 185.

(v) In our opinion and according to the information and explanationsgiven to us the Company has not accepted any deposits or there is no amount which hasbeen considered as deemed deposit within the meaning of sections 73 to 76 of the Act andthe Companies (Acceptance of Deposits) Rules 2014 (as amended). Accordingly reportingunder clause 3(v) of the Order is not applicable to the Company.

(vi) The Central Government has specified maintenance of cost recordsunder sub-section (1) of section 148 of the Act in respect of the products of the Company.We have broadly reviewed the books of account maintained by the Company pursuant to theRules made by the Central Government for the maintenance of cost records and are of theopinion that prima facie the prescribed accounts and records have been made andmaintained. However we have not made a detailed examination of the cost records with aview to determine whether they are accurate or complete.

(vii) (a) In our opinion and according to the information andexplanations given to us the Company is regular in depositing undisputed statutory duesincluding goods and services tax provident fund employees' state insurance income-taxsales-tax service tax duty of customs duty of excise value added tax cess and othermaterial statutory dues as applicable with the appropriate authorities. Further noundisputed amounts payable in respect thereof were outstanding at the year- end for aperiod of more than six months from the date they became payable.

(b) According to the information and explanations given to us thereare no statutory dues referred in sub-clause (a) which have not been deposited with theappropriate authorities on account of any dispute except for the following:

Name of the statute Nature of dues Gross Amount (? in crores) Amount paid under Protest (? in crores) Period to which the amount relates Forum where dispute is pending
Income Tax Act 1961 Income tax 283.10 187.64 AY 2009-2010 AY 2013-2014 AY 2015-2016 and AY 2018-2019 Commissioner of Income Tax (Appeals)
Income Tax Act 1961 Income tax 33.19 33.04 AY 2014-2015 Income Tax Appellate Tribunal
Central Excise Act 1944 Excise duty 17.24 1.92 2011-12 and 2016-17 Customs Excise and Service tax Appellate Tribunal (CESTAT) (East Zonal Bench)
Central Excise Act 1944 Excise duty 65.44 3.26 2008-09 to 2015-16 CESTAT (South Zonal Bench)
Central Excise Act 1944 Excise duty 66.56 3.39 2008-09 to 2016-17 CESTAT (West Zonal Bench)
Central Excise Act 1944 Excise duty 12.68 1999-00 to 2004-05 Commissioner of Excise Pune Raigad Goa Mumbai
Central Excise Act 1944 Excise duty 3.19 0.21 2009-10 to 2016-17 Commissioner (Appeals)
Central Excise Act 1944 Excise duty 0.02 0.01 2001-02 to 2006-07 Honourable High Court Mumbai
Central Excise Act 1944 Excise duty 7.79 - 2015-16 to 2017-18 Principal Commissioner Bengaluru
Central Excise Act 1944 Excise duty 0.02 - 2000-01 and 200304 Honourable Supreme Court
Central Excise Act 1944 and CENVAT Credit Rule 2004 Excise duty 0.44 - 2007-08 to 2009-10 CESTAT (West Zonal Bench)
Central Excise Act 1944 and CENVAT Credit Rule 2004 Excise duty 1.02 0.07 2011-12 and 2015-16 to 2017-18 Commissioner (Appeals)
Cenvat Credit Rule 2004 Excise duty 0.06 0.03 2012-13 and 2013-14 CESTAT (East Zonal Bench)
Cenvat Credit Rule 2004 Excise duty 1.31 0.98 2008-09 to 2010-11 2016-17 and 2017-18 Commissioner (Appeals) Siliguri Sikkim
Cenvat Credit Rule 2004 Excise duty 0.03 - 2011-12 to 2013-14 CESTAT (South Zonal Bench)
Customs Act 1975 Custom Duty 9.39 4.67 2009-10 to 2014-15 CESTAT (South Zonal Bench)
Customs Act 1975 Custom Duty 0.17 0.08 2017-18 to 2019-20 Commissioner of Customs (Appeals) Mumbai Zone-III
Customs Act 1975 Custom Duty 1.57 0.11 2017-18 to 2018-19 2020-21 CESTAT (West Zonal Bench)
Customs Act 1975 Custom Duty 5.20 2.35 2016-17 and 2017-18 CESTAT (West Zonal Bench)
Central Goods and Service Tax Act 2017 Goods and service tax 1.07 0.54 2017-18 Commissioner (Appeals) Bengaluru
Central Goods and Service Tax Act 2017 Goods and service tax 2.53 2.30 2017-18 Additional Commissioner CGST and Central Excise Goa
Central Goods and Service Tax Act 2017 Goods and Service tax 0.09 0.09 2017-18 Superintendent CGST and Central Excise Mumbai
Central Goods and Service Tax Act 2017 State Goods & Service Tax Act 2017 Goods and Service tax 0.20 0.14 2017-18 to 2021-22 Joint Commissioner (Appeal) -Vijayawada Andhra Pradesh
Finance Act 1994 Service tax 38.85 1.46 2008-09 to 2012-13 2016-17 to 2017-18 CESTAT (West Zonal Bench)
Finance Act 1994 Service tax 0.09 0.07 2012-13 to 2017-18 Commissioner (Appeals) Baddi (Himachal Pradesh)
Gujarat Value Added Tax Act 2003 Value added tax 0.38 0.13 2013-14 Gujarat Value Added Tax Tribunal Ahmedabad Gujarat
Bihar Value Added Tax Act 2005 Value Added Tax 2.36 0.41 2013-14 to 2015-16 Joint Commissoner of Commercial Tax (Appeals) Patna Central Division Patna
Andhra Pradesh VAT Act 2005 Value Added Tax 0.13 0.13 2005-06 Telangana VAT Appellate Authority Hyderabad Rural Division
The Chhattisgarh VAT (Amendment) Act 2005 Value Added Tax 0.01 0.01 2014-15 Appellate authority- Commissioner Raipur Chhattisgarh
Maharashtra Value Added Tax Act 2002 Value Added Tax 0.04 - 2002-03 Joint Commissioner of Sales-Nagpur
Maharashtra Value Added Tax Act 2002 Value Added Tax 0.52 0.07 2007-08 and 201314 Deputy Commissioner of Sales Tax - LTU Mazgaon Mumbai
Rajasthan Value Added Tax Act 2003 Value Added Tax 0.83 0.29 2002-03 and 2011-12 Appellant CTO Anti Evasion Rajasthan Circle II Jaipur
Goa Value Added Tax Act 2005 Value Added Tax 0.12 - 2006-07 Commercial Tax Office Margo ward Goa
Uttar Pradesh Value Added Tax Act 2008 Value Added Tax 0.09 0.04 2011-12 Joint Commissioner of Commercial Tax Corporate Circle Lucknow
West Bengal Value Added Tax Act 2003 Value Added Tax 0.02 - 2002-03 Honourable High Court Kolkata
Uttar Pradesh Value Added Tax Act 2003 Value Added Tax 0.01 0.01 2011-12 Joint Commissioner of Commercial Tax Corporate Circle Lucknow
West Bengal Value Added Tax Act 2003 Value Added Tax 2.53 0.24 2015-16 Senior Joint Commissioner Sales Tax Central Audit Unit Kolkata
West Bengal Value Added Tax Act 2003 Value Added Tax 0.12 0.02 2001-02 and 200506 The West Bengal Taxation Tribunal Extraordinary Jurisdiction Kolkata
West Bengal Value Added Tax Act 2003 Value Added Tax 0.05 2009-10 West Bengal Sales Tax Appellate - Revisional Board Kolkata
West Bengal Value Added Tax Act 2003 Value Added Tax and Central Sales Tax 0.23 0.02 2017-18 Senior Joint Commissioner Commercial Taxes/Central Audit Unit - I Kolkata
Central Goods and Service Tax Act 2017 Goods and Service Tax 12.34 2017-18 to 2019-20 Directorate General of GST Intelligence West Zone at Mumbai

(viii) According to the information and explanations given to us notransactions were surrendered or disclosed as income during the year in the taxassessments under the Income Tax Act 1961 (43 of 1961) which have not been recorded inthe books of accounts.

(ix) (a) According to the information and explanations given to us theCompany does not have any loans or other borrowings from any lender. Accordinglyreporting under clause 3(ix) (a) of the Order is not applicable to the Company.

(b) According to the information and explanations given to us includingconfirmations received from banks and representation received from the management of theCompany and on the basis of our audit procedures we report that the Company has not beendeclared a willful defaulter by any bank or financial institution or other lender.

(c) In our opinion and according to the information and explanationsgiven to us the Company has not raised any money by way of term loans during the year anddid not have any term loans outstanding at the beginning of the current year. Accordinglyreporting under clause 3(ix)(c) of the Order is not applicable to the Company.

(d) In our opinion and according to the information and explanationsgiven to us and on an overall examination of the financial statements of the Companyfunds raised by the Company on short term basis have not been utilised for long termpurposes.

(e) According to the information and explanations given to us and on anoverall examination of the financial statements of the Company the Company has not takenany funds from any entity or person on account of or to meet the obligations of itssubsidiaries and associates.

(f) According to the information and explanations given to us theCompany has not raised any loans during the year on the pledge of securities held in itssubsidiaries and associate companies.

(x) (a) The Company has not raised any money by way of initial publicoffer or further public offer (including debt instruments) during the year. Accordinglyreporting under clause 3(x)(a) of the Order is not applicable to the Company.

(b) According to the information and explanations given to us theCompany has not made any preferential allotment or private placement of shares or (fullypartially or optionally) convertible debentures during the year. Accordingly reportingunder clause 3(x)(b) of the Order is not applicable to the Company.

(xi) (a) Based on examination of the books and records of the Companyand according to the information and explanations given to us considering the principlesof materiality as outlined in the Standards on Auditing we report that no fraud by theCompany or on the Company has been noticed or reported during the course of the audit.

(b) No report under section 143(12) of the Act has been filed with theCentral Government for the period covered by our audit.

(c) The whistle blower complaints received by the Company during theyear as shared with us by the management have been considered by us while determining thenature timing and extent of audit procedures.

(xii) The Company is not a Nidhi Company and the Nidhi Rules 2014 arenot applicable to it. Accordingly reporting under clause 3(xii) of the Order is notapplicable to the Company.

(xiii) In our opinion and according to the information and explanationsgiven to us all transactions entered into by the Company with the related parties are incompliance with sections 177 and 188 of the Act where applicable. Further the details ofsuch related party transactions have been disclosed in the standalone financialstatements as required under Indian Accounting Standard (Ind AS) 24 Related PartyDisclosures specified in Companies (Indian Accounting Standards) Rules 2015 as prescribedunder section 133 of the Act.

(xiv) (a) In our opinion and according to the information andexplanations given to us the Company has an internal audit system as required undersection 138 of the Act which is commensurate with the size and nature of its business.

(b) We have considered the reports issued by the Internal Auditors ofthe Company till date for the period under audit.

(xv) According to the information and explanation given to us theCompany has not entered into any non-cash transactions with its directors or personsconnected with them and accordingly provisions of section 192 of the Act are notapplicable to the Company.

(xvi) (a) The Company is not required to be registered under section45-IA of the Reserve Bank of India Act 1934. Accordingly reporting under clause 3(xvi)(a) (b) and (c) of the Order is not applicable to the Company.

(d) Based on the information and explanations given to us and asrepresented by the management of the Company the Group (as defined in Core InvestmentCompanies (Reserve Bank) Directions 2016) does not have any CIC.

(xvii) The Company has not incurred any cash loss in the current aswell as the immediately preceding financial year.

(xviii) There has been no resignation of the statutory auditors duringthe year. Accordingly reporting under clause 3(xviii) of the Order is not applicable tothe Company.

(xix) According to the information and explanations given to us and onthe basis of the financial ratios ageing and expected dates of realisation of financialassets and payment of financial liabilities other information accompanying the standalonefinancial statements our knowledge of the plans of the Board of Directors and managementand based on our examination of the evidence supporting the assumptions nothing has cometo our attention which causes us to believe that any material uncertainty exists as onthe date of the audit report that Company is not capable of meeting its liabilitiesexisting at the date of balance sheet as and when they fall due within a period of oneyear from the balance sheet date. We however state that this is not an assurance as tothe future viability of the company. We further state that our reporting is based on thefacts up to the date of the audit report and we neither give any guarantee nor anyassurance that all liabilities falling due within a period of one year from the balancesheet date will get discharged by the Company as and when they fall due.

(xx) According to the information and explanations given to us doesnot have any unspent amount in respect of any ongoing or other than ongoing project undersub-section (6) and sub-section (5) of Section 135 respectively of the Act as at theexpiry of the financial year. Accordingly reporting under clause 3(xx) of the Order isnot applicable to the Company.

(xxi) The reporting under clause 3(xxi) is not applicable in respect ofaudit of standalone financial statements of the Company. Accordingly no comment has beenincluded in respect of said clause under this report.

Annexure II Report of even date to the members of Cipla Limited on thestandalone financial statements for the year ended 31st March 2022

Annexure II

Independent Auditor's Report on the Internal Financial Controls underClause (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 statementsof Cipla Limited ('the Company') as at and for the year ended 31st March 2022 we haveaudited the internal financial controls with reference to financial statements of theCompany as at that date.

Responsibilities of Management and Those Charged with Governance forInternal Financial Controls

2. The Company's Board of Directors is responsible for establishing andmaintaining internal financial controls based on internal control financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the guidance note on audit of Internal Financial Control over FinancialReporting ("the Guidance Note") issued by the Institute of Chartered Accountantsof India ("ICAI"). These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of the Company's business including adherenceto the Company's policies the safeguarding of its assets the prevention and detection offrauds and errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.

Auditor's Responsibility for the Audit of the Internal FinancialControls with Reference to Financial Statements

3. Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to financial statements based on our audit. Weconducted our audit in accordance with the Standards on Auditing issued by the ICAIprescribed under Section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls with reference to financial statements and the Guidance Noteissued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wereestablished and maintained and if such controls operated effectively in all materialrespects.

4. Our audit involves performing procedures to obtain audit evidenceabout the adequacy of the internal financial controls with reference to financialstatements and their operating effectiveness. Our audit of internal financial controlswith reference to financial statements includes obtaining an understanding of suchinternal financial controls assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's 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 sufficientand appropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to financial statements.

Meaning of Internal Financial Controls with Reference to FinancialStatements

6. A company's internal financial controls with reference to financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles. A company's internalfinancial controls with reference to financial statements include those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and (3)provide reasonable assurance regarding prevention or timely detection of unauthorisedacquisition use or disposition of the company's assets that could have a material effecton the financial statements.

Inherent Limitations of Internal Financial Controls with Reference toFinancial Statements

7. Because of the inherent limitations of internal financial controlswith reference to financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to financial statements to future periods are subject to the riskthat the internal financial controls with reference to financial statements may becomeinadequate because of changes in conditions or that the degree of compliance with thepolicies or procedures may deteriorate.

Opinion

8. In our opinion the Company has in all material respects adequateinternal financial controls with reference to financial statements and such controls wereoperating effectively as at 31st March 2022 based on 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 Control overFinancial Reporting issued by the ICAI.

.