To the Members of Glenmark Pharmaceuticals Limited
Report on the Audit of the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of GlenmarkPharmaceuticals Limited ('the Company') which comprise the Balance Sheet as at 31 March2019 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Cash Flows and the Statement of Changes in Equity for the year then endedand a summary of the significant accounting policies and other explanatory information.
2. 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 Companies Act 2013 ('Act') in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India including IndianAccounting Standards ('Ind AS') specified under Section 133 of the Act of the state ofaffairs (financial position) of the Company as at 31 March 2019 and its profit (financialperformance including other comprehensive income) its cash flows and the changes inequity for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing specified underSection 143(10) of the Act. Our responsibilities under those standards are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial StatementsSection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India ('ICAI') together withthe ethical requirements that are relevant to our audit of the financial statements underthe provisions of the Act and the rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements for the financial yearended 31 March 2019 ('the current period'). These matters were addressed in the context ofour audit of the financial statements as a whole and in forming our opinion thereon andwe do not provide a separate opinion on these matters.
5. We have determined the matters described below to be the key audit matters to becommunicated in our report.
|Key audit matter ||How our audit addressed the key audit matter |
Impairment of investment in and loans to subsidiaries:
|Our audit included but was not limited to the following procedures: |
|The Company has investments in subsidiaries of Rs 32391.70 million as at 31 March 2019 being carried at cost in accordance with Ind AS 27 Separate Financial Statements. Further the Company has loans receivable of Rs 62639.26 million from subsidiaries outstanding as at 31 March 2019. Refer note 5 to the standalone financial statements. || Obtained understanding of management's process for identification of indicators of impairment and tested the design and operating effectiveness of internal controls over such identification and impairment measurement of identified investments and loans; |
|The Company assesses the recoverable amount of each investment and loan when impairment indicators exist by comparing the fair value and carrying amount of the investment as on the reporting date and reviewing the business plans to determine if there would be sufficient cash flows to repay the loans. || Evaluated the design and tested the operating effectiveness of key controls around fair valuation of investments and cash flow projections; |
| || Reconciled the cash flows to the business plans approved by the respective Board of Directors of each of the subsidiaries; |
|The recoverable amount of the aforesaid investments in and loans receivable from each subsidiary has been determined by the management using discounted cash flow ('DCF') valuation method on the business plans for each subsidiary. This assessment is complex and requires estimation and judgment around the assumptions usee therein. The key assumptions underpinning management's assessment of the recoverable amounts include but are not limited to projections of future cash flows revenue growth rates terminal values operating profit margins estimated future operating and capital expenditure external market conditions and the discount rates. Changes to these assumptions could lead to material changes in estimated recoverable amounts resulting in consequent accounting implications for the impairment of investments and loans to the subsidiary. || Assessed the appropriateness of valuation methodologies used by the management and evaluated and challenged management's assumptions such as implied growth rates during explicit period terminal growth rate targeted savings and discount rate and operating margins for their appropriateness based on our understanding of the business of the respective subsidiaries past results and external factors such as industry trends probability of success of molecules and industry forecasts; |
| || Obtained and evaluated sensitivity analysis performed by the management on key assumptions of implied growth rates during explicit period terminal growth rate and discount rate; |
| || Tested the mathematical accuracy of the management computations with regard to cash flows and sensitivity analysis; |
| || Performed independent sensitivity analysis of aforesaid key assumptions to assess the effect of reasonably possible variations on the current estimated recoverable amounts of investments of and loans receivables from respective subsidiaries to evaluate sufficiency of headroom between recoverable values and carrying amounts; |
| || Compared the estimate made in the prior year to the actual performance for the current year; |
| || Involved auditor's experts to assess the appropriateness of the valuation methodologies used by the management. |
| ||Evaluated the adequacy of disclosures given in the standalone financial statements in accordance with applicable accounting standards. |
Information other than the Financial Statements and Auditor's Report thereon
6. The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Annual Report but does not includethe financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we donot express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information and in doing so consider whether the other information ismaterially inconsistent with the financial statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact. We have nothing to report in this regard.
Responsibilities of Management for the Standalone Financial Statements
7. The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the state of affairs (financial position) profit orloss (financial performance including other comprehensive income) changes in equity andcash flows of the Company in accordance with the accounting principles generally acceptedin India including the Ind AS specified under Section 133 of the Act. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.
8. In preparing the financial statements management is responsible for assessing theCompany's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Company or to cease operations or has no realisticalternative but to do so.
9. Those Board of Directors are also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance withStandards 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 Auditing we exerciseprofessional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances Under Section 143(3)(i)of the Act we are also responsible for explaining our opinion on whether the Company hasadequate internal financial controls system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe financial statements or if such disclosures are inadequate to modify our opinion.Our conclusions are based on the audit evidence obtained up to the date of our auditor'sreport.
However future events or conditions may cause the Company to cease to continue as agoing concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
12. We communicate with those charged with governance regarding among other mattersthe planned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
13. We also provide those charged with governance with a statement that we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.
14. From the matters communicated with those charged with governance we determinethose matters that were of most significance in the audit of the financial statements ofthe current period and are therefore the key audit matters. We describe these matters inour auditor's report unless law or regulation precludes public disclosure about the matteror when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
15. As required by Section 197(16) of the Act we report that the Company has paidremuneration to its directors during the year in accordance with the provisions of andlimits laid down under Section 197 read with Schedule V to the Act.
16. As required by the Companies (Auditor's Report) Order 2016 ('the Order') issued bythe Central Government of India in terms of Section 143(11) of the Act we give in theAnnexure A a statement on the matters specified in paragraphs 3 and 4 of the Order
17 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 statements comply with Ind ASspecified under Section 133 of the Act;
e) On the basis of the written representations received from the directors and taken onrecord by the Board of Directors none of the directors is disqualified as on 31 March2019 from being appointed as a director in terms of Section 164(2) of the Act;
f) We have also audited the internal financial controls over financial reporting(IFCoFR) of the Company as on 31 March 2019 in conjunction with our audit of thestandalone financial statements of the Company for the year ended on that date and ourreport dated 29 May 2019 as per Annexure B expressed unmodified opinion;
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 (as amended) inour opinion and to the best of our information and according to the explanations given tous:
i. the Company as detailed in Note 30 to the standalone financial statements hasdisclosed the impact of pending litigations on its financial position as at 31 March 2019;
ii. the Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses as at 31 March 2019;
iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company during the year ended 31 March2019;
iv. the disclosure requirements relating to holdings as well as dealings in specifiedbank notes were applicable for the period from 8 November 2016 to 30 December 2016 whichare not relevant to these standalone financial statements. Hence reporting under thisclause is not applicable.
|For Walker Chandiok & Co LLP |
|Chartered Accountants |
|Firm's Registration No.: 001076N/N500013 |
|Ashish Gupta |
|Membership No.: 504662 |
|Place: New Delhi |
|Date: 29 May 2019 |
Annexure A to the Independent Auditor's Report of even date to the members of GlenmarkPharmaceuticals Limited on the Standalone Financial Statements for the year ended 31March 2019
Based on the audit procedures performed for the purpose of reporting a true and fairview on the standalone financial statements of the Company and taking into considerationthe information 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 full
particulars including quantitative details and situation of property plant andequipment.
(b) The Company has a regular program of physical verification of its property plantand equipment under which property plant and equipment are verified in a phased mannerover a period of - three years which in our opinion is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this program certainproperty plant and equipment were verified during the year and no material discrepancieswere noticed on such verification.
(c) The title deeds of all the immovable properties owned by the Company (which areincluded under the head 'Property plant and equipment) are held in the name of theCompany.
(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 loans to wholly owned subsidiaries covered in theregister maintained under Section 189 of the Act; and with respect to the same:
(a) in our opinion the terms and conditions of grant of such loans are not primafacie prejudicial to the Company's interest;
(b) the schedule of repayment of principal and interest has been stipulated wherein theprincipal amounts are repayable on demand and since
the repayment of such loans has not been demanded in our opinion repayment of theprincipal amount and interest is regular;
(c) there is no overdue amount in respect of loans granted to such companies
(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 given
(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 Company's products 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) The Company is regular in depositing undisputed statutory
dues including provident fund employees' state insurance income-tax goods andservice tax sales-tax service tax duty of customs duty of excise value added taxcess and other material statutory dues as applicable to the appropriate authoritiesFurther no undisputed amounts payable in respect thereof were outstanding at the year-endfor a period of more than six months from the date they become payable
(b) There are no dues in respect of sales tax and duty of customs that have not beendeposited with the appropriate authorities on account of any dispute The dues outstandingin respect of income tax duty of excise and value added tax on account of any disputeare as follows:
Statement of Disputed Dues
|Name of the Statute ||Nature of Dues ||Amount (in Rs Million) |
|Amount Paid Under Protest (In Rs Million) ||Period to which the amount related |
| Forum where dispute is pending |
|Income Tax Act 1961 ||Income Tax ||49.23 ||- ||2004-05 ||High Court Mumbai |
| || ||5.49 ||5.49 ||2007-08 ||The Supreme Court of India |
| || ||500.44 ||- ||2010-11 to 2012-13 ||Income Tax Appellate Tribunal |
| || ||752.03 ||- ||2005-06 to 2014-15 ||Commissioner of Income Tax (Appeal) |
|Gujarat Vat Act 2005 ||Value Added ||129.14 ||- ||2011-12 to 2014-15 ||JCCT (A) Gujarat |
|Goa Vat Act 2005 ||Tax ||4.78 ||- ||2012-13 to 2014-15 ||ACCT (A) Goa |
|The Central Excise ||Excise Duty ||15.75 ||15.75 ||2013-14 to 2015-16 ||Joint Secretary GOI MOF Dept of Revenue |
|Act 1944 || ||1.58 ||1.58 ||2012-13 to 2018-19 ||Commissioner of Central Excise (Appeal) |
| || ||10.86 ||1086 ||2004- 05 to 2005- 06 ||Customs Excise and Service Tax Appellate Tribunal (CESTAT) |
|The Finance Act 1994 ||Service Tax ||4.97 ||0.37 ||2012-13 to 2014-15 ||Commissioner of Central Tax (Appeal) |
| || ||67.62 ||5.07 || 2018-19 ||Customs Excise and Service Tax Appellate Tribunal (CESTAT) |
(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 thepurposes 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 ofclause 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 Ind AS
(xiv) During the year the Company has not made any preferential allotment or privateplacement of shares or fully or partly convertible debentures
(xv) In our opinion the Company has not entered into any non-cash transactions withthe directors or persons connected with them covered under Section 192 of the Act
(xvi) The Company is not required to be registered under Section 45-IA of the ReserveBank of India Act 1934
For Walker Chandiok & Co LLP
Firm's Registration No: 001076N/N500013
|Ashish Gupta |
|Membership No: 504662 |
|Place: New Delhi |
|Date: 29 May 2019 |
Annexure B to the Independent Auditor's Report of even date to the members of GlenmarkPharmaceuticals Limited on the Standalone Financial Statements for the year ended 31stMarch 2019
Independent Auditor's 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 at and for the year ended 31 March 2019 wehave audited the internal financial controls over financial reporting ('IFCoFR') of theCompany as at that date.
Management's Responsibility for Internal Financial Controls
2. The Company's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Company considering the essential components of internalcontrol stated in the guidance note on audit of Internal Financial Controls over FinancialReporting ('the Guidance Note') issued by the Institute of Chartered Accountants of India('the ICAI'). These responsibilities include the design implementation and maintenance ofadequate internal financial controls that were operating effectively for ensuring theorderly and efficient conduct of the Company's business including adherence to theCompany's policies the safeguarding of its assets the prevention and detection of fraudsand errors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Act.
3. Our responsibility is to express an opinion on the Company's IFCoFR based on ouraudit. We conducted our audit in accordance with the Standards on Auditing issued by theICAI and deemed to be prescribed under Section 143(10) of the Act to the extentapplicable to an audit of IFCoFR and the guidance Note issued by the ICAI. ThoseStandards and the guidance note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate IFCoFR wereestablished and maintained and if such controls operated effectively in all materialrespects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the IFCoFR and their operating effectiveness. Our audit of IFCoFR includes 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 auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto 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 Company's IFCoFR.
Meaning of Internal Financial Controls over Financial Reporting
6. A Company's IFCoFR is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A Company'sIFCoFR include those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures 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
7 Because of the inherent limitations of IFCoFR including the possibility of collusionor improper management override of controls material misstatements due to error or fraudmay occur and not be detected. Also projections of any evaluation of the IFCoFR to futureperiods are subject to the risk that the IFCoFR may become inadequate because of changesin conditions or that the degree of compliance with the policies or procedures maydeteriorate.
8. In our opinion the Company has in all material respects adequate internalfinancial controls over financial reporting and such controls were operating effectivelyas at 31 March 2019 based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the guidance note issued by the ICAI.
|For Walker Chandiok & Co LLP |
|Chartered Accountants |
|Firm's Registration No.: 001076N/N500013 |
|Ashish Gupta |
|Membership No.: 504662 |
|Place: New Delhi |
|Date: 29 May 2019 |