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Sun Pharmaceuticals Industries Ltd.

BSE: 524715 Sector: Health care
BSE 00:00 | 19 Sep 647.30 5.00






NSE 00:00 | 19 Sep 648.85 6.35






OPEN 652.00
VOLUME 596394
52-Week high 678.80
52-Week low 434.80
P/E 147.45
Mkt Cap.(Rs cr) 155,307
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 652.00
CLOSE 642.30
VOLUME 596394
52-Week high 678.80
52-Week low 434.80
P/E 147.45
Mkt Cap.(Rs cr) 155,307
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sun Pharmaceuticals Industries Ltd. (SUNPHARMA) - Director Report

Company director report

Your Directors take pleasure in presenting the Twenty-Fifth Annual Report and Company'sAudited Financial Statements for the financial year ended March 31 2017.


(Rs. in Million)
Standalone Consolidated
Particulars Year ended March 31 2017 Year ended March 31 2016 Year ended March 31 2017 Year ended March 31 2016
Total Revenue 78067.0 78636.9 315784.4 284870.3
Profit Before Tax (324.4) (10820.6) 90478.7 65706.3
Tax Expense:
-Current Tax 25.1 54.5 4046.4 11954.1
-Deferred Tax Charge / Credit - - 8069.3 (2816.4)
(Loss) / Profit after tax (349.5) (10875.1) 78363.0 56568.6
Share in profit / (loss) of associates and non- Profit controlling interests - - 78363.0 56568.6
Share of Profit of Associates / Joint ventures (Net) - - 99.3 14.5
Net Profit after taxes and share of profit / (loss) of associates and joint ventures but before non-controlling interests
Total Other Comprehensive Income (633.8) (247.9) (14871.9) 14353.4
Total Comprehensive Income (983.3) (11123.0) 63590.4 70936.5
Total Comprehensive Income for the period attributable to:
-Owners of the Company (983.3) (11123.0) 56306.1 58251.6
-Non-Controlling Interest 7284.3 12684.9
Opening balance in Retained Earnings 126353.4 146184.5 251630.4 216743.1
Amount available for appropriation (949.6) (11141.9) 68933.4 45109.6
Dividend on Equity Shares (2406.8) (7219.5) (2406.8) (7219.5)
Corporate Dividend tax (74.7) (1469.7) (490.0 ) (1469.7)
Transfer to various Reserves:
-Capital redemption Reserve (7.5) - (7.5) -
-Debenture redemption Reserve - - (1041.7) (1041.7)
-Capital reserve - - (50.6) (188.9)
-Buy-back of equity shares by overseas subsidiary company - - (10110.3) (302.3)
-Legal reserve - - - (0.2)
-General reserve - - - -
Closing balance in Retained Earnings 122914.8 126353.4 306456.9 251630.4

Figures for Financial Year 2015-16 have been restated as per Ind AS and therefore maynot be comparable with financials for Financial Year 2015-16 approved by the Directors anddisclosed in the Financial Statement of previous year.


Your Directors are pleased to recommend an equity dividend of Rs. 3.50/-(Rupees Threeand Fifty Paise only) per equity share of Rs.1/- each [previous year Rs. 1/- per equityshare of Rs.1/- each] for the year ended March 31 2017 subject to the approval of theequity shareholders at the ensuing Annual General Meeting.


The changes in the capital structure of the Company during the year under review areas follows:

i. The Company allotted 62682 equity shares of Rs.1/- each under Sun Employee StockOption Scheme-2015.

ii. On October 18 2016 the Company completed Buyback of 7500000 (Seventy FiveLakhs) fully paid-up equity shares of Rs. 1/- each (representing about 0.31% of the totaloutstanding pre Buyback equity shares of our Company) at a price of Rs. 900/- (Rupees NineHundred only) per equity share for an aggregate amount of Rs. 6750000000/- (Rupees SixBillion Seven Fifty Million only) from the equity shareholders/ beneficial owners holdingequity shares as on Record July 15 2016 on proportionate basis through the tender offerroute using mechanism for acquisition of shares through Stock Exchange.

Consequent to above changes the paid up share capital of the Company decreased to Rs.2399291181/- (Rupees Two Billion Three Hundred Ninety-Nine Million Two Hundred NinetyOne Thousand One Hundred Eighty-One only) as on March 31 2017 from Rs. 2406728499/-(Rupees Two Billion Four Hundred Six Million Seven Hundred Twenty-Eight Thousand FourHundred Ninety-Nine only).

Further on May 26 2017 the Company alloted 3000 equity shares of Rs.1/- each underSun Employee Stock Option Scheme - 2015 and 12000 equity shares of Rs.1/- each under SunEmployee Stock Option


During the year the Board of Directors at its meeting held on November 10 2016approved the Scheme of Arrangement among Sun Pharma Medisales Private Limited RanbaxyDrugs Limited Gufic Pharma Limited Vidyut Investments Limited (collectively known as"Transferor Companies" which are the wholly owned subsidiaries of the Company)and the Company and their respective members and creditors ("Scheme ofArrangement"). The Hon'ble National Company Law Tribunal at Ahmedabad vide its orderApril 18 2017 dispensed with convening of secured meeting creditors of theCompany and ordered to convene the meeting of equity shareholders and unsecured creditorsof the Company on June 20 2017 to approve the Scheme of Arrangement. The appointed datefor the said amalgamation is other date as may be agreed between the Transferor Companiesand the Company and approved by the National Company Law Tribunal. Pursuant to Scheme ofArrangement no consideration shall be paid and no shares of the Company shall be issuedand allotted on amalgamation. The Scheme of Arrangement will enable the Company toconsolidate and effectively manage the Transferor Companies and the Company in a singleentity which will provide several benefits including synergy economies of scale attainefficiencies and cost competitiveness


The extract of Annual Return as provided under sub-section (3) of Section 92 of theCompanies Act 2013 (‘the Act') as prescribed in form MGT-9 is enclosed as"Annexure A" to this Report.


The statement containing the salient features of the Financial Datei. Statements .of the Company's subsidiaries/ joint ventures/ associate companies of the Company is givenin Form AOC 1 which forms a part of this Annual Report.

The highlights of performance of subsidiaries joint ventures and associate companiesand their contribution to the overall performance of the Company during the financialConsolidated Financial Statements forming part of this Annual Report.

Details pertaining to companies that became subsidiaries/ joint ventures /associatesand those that ceased to be the subsidiaries/ joint ventures/ associates of the Companyduring the year are provided in Note 39 of the notes to the Consolidated FinancialStatements forming part of this Annual Report.


Mr. Israel Makov and Mr. Sailesh T. Desai Directors of the Company retire by rotationand being eligible offer themselves for reappointment at the ensuing Annual GeneralMeeting.

Mr. Kalyanasundaram Subramanian was appointed as an Additional and Whole-time Directorof the Company without remuneration w.e.f. February 14 2017 as per the provisions ofSection 161(1) of the Act and he shall hold the office upto the date of ensuing AnnualGeneral Meeting.The Board recommends appointment of Mr. Kalyanasundaram Subramanian as aWhole-time Director of the Company for a period of 2 (Two) years upto February 13 2019dated without any remuneration for approval of the members at the ensuing Annual GeneralMeeting.

The term of appointment of Mr. Dilip S. Shanghvi as Managing Director will expire onMarch 31 2018. He has made significant contribution to overall growth of the Company'sbusiness. Your Directors recommend the re-appointment of Mr. Dilip S. Shanghvi for afurther period of five years from April 1 2018 to March 31 2023 at remuneration asproposed in the resolution.

Appropriate resolutions being placed for your approval at the ensuing Annual GeneralMeeting. Your Directors recommend the appointment of the aforesaid was within the periodprescribed under the Directors by the Members at the ensuing Annual General Meeting.

Mr. Uday Baldota Chief Financial Officer of the Company has resigned as ChiefFinancial Officer w.e.f. June 19 2017 to assume office as Chief Executive Officer of TaroPharmaceutical Industries Limited a subsidiary of the Company and Mr. C.S. Muralidharanhas been appointed as Chief Financial Officer w.e.f June 19 2017 at Board Meeting held onMay 26 2017.


The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of independence as prescribed undersub-section (6) of Section 149 of the Act and as per SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations 2015").



For the purpose of selection ofany

Remuneration Committee identifies persons of integrity who possess equired forthe relevantexpertise experienceandleadershipqualities position. The Committee alsoensures that the incumbent fulfills such criteria with regard to qualifications positiveattributes Independence age and other criteria as laid down under the Act ListingRegulations 2015 or other applicable laws. The Board has on the recommendation of theNomination & Remuneration Committee on remuneration of Directors & Key ManagerialRemuneration Policy of the Company is Corporate Governance Report which forms part tothis Report.


In compliance with the requirements of Regulation 25(7) the Listing Regulations 2015the Company has put in place a Familiarisation Programme for the Independent Directors tofamiliarise them with the Company their roles rights responsibilities in the Companynature of the Company operates business model etc. The details of the FamiliarisationProgramme conducted are available on the website of the Company and maybe accessed through the web link:


The Board of Directors of the Company met 6 (Six) times during the previous financialyear on May 30 2016; June 23 2016; August 12 2016; September 17 2016; November 102016 and February 14 2017. The particulars of attendance of the Directors at the said theappointment of the Directors are meetings are detailed in the Corporate Governance Reportof the Company which forms a part of this Report. The intervening gap between theMeetings Act and Listing Regulations 2015.



During the year the evaluationof the annual performance of individual directorsincluding the Chairman of the Company and Independent Directors Board and Committees ofthe Board was carried out under the provisions of the Act and relevant Rules and theCorporate Governance requirements as prescribed under

Regulation 17 of Listing Regulations SEBI dated January 5 2017 with respect toGuidance Note on Board Evaluation. The Nomination and Remuneration Committee had approvedthe indicative criteria for the evaluation based on the SEBI

Guidance Note on Board Evaluation.

The Chairman of the Company interacted with each Director individually for evaluationof performance directors. The evaluation for the performance of the Board as a whole andof the Committees were conducted by questionnaires. theNomination In a separate meeting ofIndependent Directors performance of Non Independent Directors and performance of theBoard as a whole was evaluated. Further they also evaluated the performance of theChairman of the Company taking into account the views of the Executive Directors andNon-executive Directors.

The performance of the Board was evaluated by the Board after framed a policy seekinginputs from all the Directors on the basis of various criteria Personnel. The such asstructure and diversity of the Board experience of Director as Annexure B to strategyand performance evaluation secretarial support evaluation of risk evaluationofperformance of the management and feedback independence of the management from the Boardetc. The performanceoftheCommittees was evaluated by the Board after seeking inputs fromthe Committee members on the basis of criteria such as mandate and compositioneffectiveness of the committee structure of the committee and meetings independencecommitt fromof the Board and contribution to decisions of the Board. The Nominationand Remuneration Committee reviewed industry in which the performance of the individualDirectors on the basis of the criteria such as knowledge and competency availability andattendance commitment independence independent views and judgement etc.


Your Company recognises that employees are the most valuable resource and endeavors toenable its employees to meet business e requirements while meeting their careeraspirations. The Human achieving Resourceagendacontinues sustainable and responsiblegrowth by building the right capabilities in the organisation. It continues to focus onprogressive employee relations policies and building a high-performance culture with agrowth mind-set where employees are engaged and efficient. Globally the Company associatecompanies) has a dedicated human capital of over 30000 employees at various locationsacross our Corporate Office R & D Centers & more than 42 active Manufacturinglocations dedicated Sales Professionals across various geographies. Your Directors wouldalso like to take this opportunity to express their appreciationfor the hard work andcommitment of the employees of the Company and look forward to their continuedcontribution. Information as per Section 197 (12) of the Act read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is providedin "Annexure B" to this report. Further the information pertaining to5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 pertaining to the names and other particulars of employees is available forinspection at the Registered office of the Company during business hours and pursuant tothe proviso to Section 136 (1) of the Act the report and the accounts are being sent tothe members excluding this. Any shareholder interested in obtaining a copy of the same maywrite to the Company Secretary/Compliance Officer at Corporate office or Registered officeaddress of the Company.


Your Company strongly believes in providing a safe and harassment free workplace foreach and every individual working for the Company through various interventions andpractices. It is the continuous endeavor of the Management of the Company to create andprovide an environment to all its employees that is free from discrimination and TheCompany has adopted a policy on prevention prohibition and redressal of sexual harassmentat workplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder. The Companyarranged various interactive awareness workshops in this regard for the employees in themanufacturing sites R & D set ups & Corporate Office during the financialyear.The Company submitted the Annual returns to the local authorities under the abovementioned act . During the financial year ended March 31 2017 no complaint pertaining tosexual harassment was received by the Company.


Statutory Auditors

DeloittHaskins & Sells LLP TheCompany'sAuditorMessrs. Chartered Accountants(Firm's Regn No. 117366W/W-100018) were appointed as the Statutory Auditors of theCompany for a period of three years at the 22nd Annual General Meeting of the Company andthey shall retire at the conclusion of the ensuring 25th Annual General Meeting of theCompany. The Auditors' Report for the financial year ended March 31 2017 has been issuedwith an unmodified subsidiaryand opinion by the Statutory Auditors. The Board ofDirectors placed on record their appreciation for the retiring

The Board of Directors of the Company had proposed and recommended the appointment ofM/s. S R B C & Co LLP Chartered Accountants (Firm Registration No. 324982E/E300003)as the statutory auditors of the Company for a period of 5(Five) years from the conclusionof 25th Annual General Meeting of the Company upto the conclusion of the 30th AnnualGeneral Meeting of the Company subject to approval of members at the ensuing 25th AnnualGeneral Meeting and ratification Annual General Meeting of Chartered Accountants haveconfirmed Section 141 of the Act and the Rules framed thereunder for the appointment asAuditors of the Company and as required under Regulation 33 of the Listing Regulations2015.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Messrs C. J. Goswami & Associates Practicing Company Secretaries Mumbai toundertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexedherewith as "Annexure C". The Secretarial Audit Report does not containany qualification reservationor adverse remark.

Cost Auditor

The Company has appointed Messrs. Kailash Sankhlecha & Associates CostAccountants Vadodara as Cost Auditor of our Company for conducting Cost Auditincludingsexualharassment. in respect of Bulk Drugs & Formulations of your Company forthe year 2017-18.


The particulars of loans guarantees and investments have been disclosed in theFinancial Statements.


The policy on Related Party Transactions as approved by the Board is available on thewebsite of the Company and can be accessed through the web link All contracts/arrangements/transactions entered by theCompany during the previous financial year with the related parties were in the ordinarycourse of business and on arm's length basis.

The Company has entered into material Related Party Transactions i.e. transactionsexceeding turnover as per the last auditedfinancialstatements during the year with SunPharma Laboratories Limited a wholly owned subsidiary. The transactions entered intobetween a holding company and its wholly owned subsidiary do not require approval of theshareholders.

The disclosure of Related Party Transactions as required under Section 134(3)(h) of theAct in Form AOC 2 is not applicable for the current year.


The details pertaining to composition of included in the Corporate Governance Reportwhich forms a part of this Report.


The Company has developed & implemented an integrated Enterprise Risk ManagementFramework through which it identifies monitors mitigates & reports key risks thatimpacts its ability to meet the strategic objectives. The Board of Directors haveconstitutedaRiskManagementCommittee which is entrusted with the responsibility ofoverseeing various strategic operational and financial risks that the organisationfacesalong with the adequacy of mitigation plans to Risk Management Policy in place that wasreviewed and approved by the Board. The Corporate Governance Report which forms a part ofthis Report contains the details of Risk ManagementCommittee.


The Company has in place well defined and adequate internal financial controlframework. During the year under review such controls were tested and no materialweaknesses in their design or operations were observed.


In compliance with the requirements of Section 135 read with the Companies (CorporateSocial Responsibility Policy) ed a Corporate constitut Rules2014theBoardofDirectorshaveSocial Responsibility (CSR) Committee. The details of membership of the Committee &the meetings held are detailed in the Corporate Governance Report forming part of thisReport. The contents of the CSR Policy of the Company as approved by the Board on therecommendation of the CSR Committee is available on the of the Company and can be accessedthrough the web link: http:// The average net profits of theCompany for last three financial years is negative therefore the

Company was not required to spend on CSR activities during the previous year. Howeverthe Company has voluntarily spent on CSR activities and the annual report on CSRactivities of voluntary expenditure incurred by the Company and brief details on the CSRactivities are given intenpercentoftheannualconsolidated "Annexure D".


In accordance with the Regulation 43A of Listing Regulations 2015 the Company hasformulated Dividend Distribution Policy and the same is annexed herewith as "AnnexureE". The policy is also available on the website of the Company and can beaccessed through the web link:


The Company has not accepted any deposit from the Public during AuditCommitteeare theyear under review under the provisions of the Act and the rules framed thereunder.


The Management Discussion and Analysis as prescribed under Part B of Schedule V readwith Regulation 34 (3) of the Listing Regulations 2015 is provided in a separate sectionand forms a part of this Report.


Report on Corporate Governance and the Company regarding compliance of the conditionsofCorporate Governance as stipulated in Part C of Schedule V of the Listing Regulations2015 are enclosed as addresssuchrisks.Thereisanoverarching a separate section and forms apart of this Report.



The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as Section 134(3)(m) of the Act read with Rule 8 of The Companies(Accounts) Rules 2014 is annexed herewith as "Annexure F".


The Company has two Employees' Stock Option Schemes one theAct through Trust Route andthe other by Direct Route both inherited from erstwhile Ranbaxy Laboratories Limited("Ranbaxy"). The scheme through Direct Route has been named as Sun PharmaEmployee Stock Option Scheme 2015 and the one through Trust Route as Sun Pharma EmployeeStock Option Plan 2015. Both the schemes were adopted by the Company with certainamendments consequent upon merger of erstwhile Ranbaxy into the Company. The both theSchemes are in compliance with Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014.

Disclosures with respect to the Employees' Stock Option Schemes in compliance withSecurities and Based Employee Benefits) Regulations 2014 areavailableonthe Company'swebsite and can be accessed at: http://www.sunpharma. com/pdflist/all-documents.


There are no significant and material orders passed by the regulators or courts ortribunals which impact the going concern status and Company's operations in future.


To create enduring value for all stakeholders and ensure the highest level of honestyintegrity and ethical behaviour in all its operations the Company has adopted a‘Global Whistle Blower Policy' for Sun Pharmaceutical Industries Limited (SPIL) andall its subsidiaries in addition to the existing Global Code of Conduct that governs theactions of its employees. Further details on vigil mechanism of the Company are providedin the Corporate Governance Report forming part of this report.


Pursuant to the requirements under Section 134(5) read with Section 134(3)(c) of theAct with respect to Directors' Responsibility Statement it is hereby confirmed that:

a) in the preparation ofthe annual accounts for the financial year ended March 312017 the applicable accounting have been followed and there are no material departuresfrom the same;

b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2017 and of loss of theCompany for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting with the provisions of this Act for safeguarding the assets of the Company andfor preventing and detectingfraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis;

e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operating f) theDirectors have devised proper systems to ensure compliance with the provisions of allapplicable BoardofIndia(Share laws and that suchsystemswereadequateandoperating.


The consolidated financial statements for the year ended March 31 2017 has beenprepared in accordance with Indian Accounting Standards (Ind AS) notified under Standards)Rules 2015 together with the comparative period data as at and for the previous yearended March 31 2016. Further the Company has prepared the opening consolidated balancesheet as at April 1 2015 (the transition date) in accordance with Ind AS.


ICRA Ltd. has reaffirmed the highest credit rating of ‘[ICRA] A1+'/‘[ICRA]AAA(Stable)' for the bank facilities long term/short term borrowings and commercial paperprograms of the Company. Further CRISIL Ltd. has also reaffirmed the highest creditrating of ‘CRISIL A1+ and CRISIL AAA/Stable' for short term and long term bankfacilities of the Company.


The Business Responsibility Report of the Company for the year ended March 31 2017 inline with Green initiative is made available on the website of the Company(http://www.sunpharma. com/pdflist/all-documents) and and is available at the Registeredoffice / Corporate office of the Company for inspection. A copy of the aforesaid reportshall be standards made available to such of those shareholders who are desirous andinterested upon receipt of a written request from them.


Your Directors wish to thank all stakeholders employees and business partnersCompany's bankers medical profession and business associates for their continued supportand valuable cooperation.

The Directors also wish to express their gratitude the faith that they continue torepose in the Company.

in accordance For and on behalf of the Board of Directors
Israel Makov
May 26 2017



(i) Ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year 2016-17 and the percentage increase inremunerationofeachDirectorChiefFinancialOfficer and Company Secretary during thefinancial year 2016-17:

Name of Director and Key Managerial Personnel Designation Ratio of remuneration (1) of each Director to Remuneration in median remuneration of employees % increase /(decrease) (1) in the Financial Year 2016-2017
Mr.Israel Makov Non-executive Chairman 2.30 11.1%
Mr. Dilip S. Shanghvi (2) Managing Director 90.40 15.0%
Mr. Sudhir V. Valia (2) Whole-Time Director 90.40 15.0%
Mr. Sailesh T. Desai (2) Whole-Time Director 31.89 15.0%
Mr. Kalyanasundaram Subramanian(3) Whole-Time Director - Not Applicable
Mr. S. Mohanchand Dadha Non-executive Independent Director 3.91 6.3%
Mr. Hasmukh S. Shah Non-executive Independent Director 3.91 (10.5)%
Mr. Keki M. Mistry Non-executive Independent Director 3.68 45.5%
Mr. Ashwin S. Dani Non-executive Independent Director 2.30 25.0%
Ms. Rekha Sethi Non-executive Independent Director 2.99 18.2%
Mr. Uday Baldota(4) Chief Financial Officer Not Applicable 23.3%
Mr. Sunil Ajmera(4) Company Secretary Not Applicable 29.0%

(1) Remunerationto Non Executive Directors consists onlyofsittingattended during the year. Nofeesand commission basedonthenumberofmeetings was paidto Non-Executive Directors for the year 2016-17. e Directors given above are calculated asper the remuneration entitledto them as approved by the Board of executiv (2)Thedetailsofremunerationfor

Directors within the limited approved by members & subject to the approval ofCentral Government. However the actual amount paid during the year as per Form 16 for Mr.Dilip S. Shanghvi is Rs. 28.5 Million Mr. Sudhir Valia is Rs. 28.2 Million and Mr.Sailesh T. Desai is Rs. 11.6 Million.

(3) Appointed as an Additional and Whole-time Director w.e.f. February 142017 without remuneration since he is also whole-time Laboratories Limited (SPLL) theCompany's wholly owned subsidiary and receives remuneration from SPLL.

(4) Remuneration is as per Form 16 .

(ii) the percentage increase in the median remuneration of employees in the financialyear 2016-17 (Median -2017/Median 2016): 7.9% (iii) the number of permanentemployees on the rolls of the Company as on March 31 2017: 17516 (iv) Averagepercentile increase already made in the salaries of employees other than the managerialpersonnel in the last financial and its comparison with the percentileincrease in themanagerial remuneration and exceptional circumstances for increase in the managerialremuneration:

Average percentage increase made in the salaries of employees other than the KeyManagerial Personnel in the financial March 31 2017 was 13.5% and the increase in the KeyManagerial Personnel remuneration was 19.4%. The remuneration of Key Managerial Personnelhas been decided in line with our overall reward philosophy of paying for performance(individual as well as Company performance) and ensuring market competitiveness.

(v) It is hereby affirmed that the remuneration paid is as per the RemunerationPolicy for Directors Key Managerial Employees.

For and on Behalf of Board of directors
May 26 2017 Israel Makov
Mumbai Chairman



The Board of Directors (the "Board") of the Sun Pharmaceutical IndustriesLimited (the "Company") recognises the need to lay down a broad framework forconsidering decisions by the Board of the Company withregardtodistributionof dividend(including any interim dividend) to its equity shareholders and/ or retaining or ploughback of its profits.

The Policy sets out the circumstances and different factors for of taking suchdecisions consideration by the Board at the time of distribution or of retention ofprofits in the providing transparency to the equity shareholders. The Policy is not an‘alternative' but a ‘Guide' to the decision of the Board for recommendingdividend which may be made after taking into consideration all the relevant circumstancesenumerated hereunder and such other factors as may be decided as relevant by the Board.

While recommendation of Dividend shall be guided by this Policy in extraordinarycircumstances the Board shall have complete liberty to recommend dividend in deviation tothis policy if so deemed necessary in the best interests of the Company and itsstakeholders.

The Policy reflects the intent of the Company to reward its equity shareholders bysharing a portion of its profits after adjusting for accumulated losses if any and alsoretaining sufficient funds for future growth of the Company. The Company intends to paysubject to the circumstances and factors enlisted hereon dividend which shall beconsistent with the performance of the Company over the years.

Subject to the considerations as provided in the Policy the Board shall determine thedividend payout in a particular year after taking into consideration performance of theCompany the advice of management including the CFO and other relevant factors.

The Policy shall not apply to:

Determination and declaring dividend on preference shares if any. f any dividend payout


The Securities and Exchange Board of India ("SEBI") vide its Notificationdated July 8 2016 has amended the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (the "Listing Regulations") by inserting to make it mandatoryto have a Dividend Distribution Policy in place by the top five hundred listed companiesbased on their market capitalisation calculated ofeveryyear.TheCompanybeingoneofthetopfive hundred listed Companies in India on the basisof market capitalisation requires to comply withtherequirementsofRegulation . 43A


The Policy shall become effective from the date of its adoption by the Board i.e.November 10 2016. of


The Board of Directors shall have the power to recommend final dividend to the equityshareholders for their approval in the Annual General Meetingof the Company. Subject tocompliance with the provisions of Companies Act 2013 including the Rules made thereunderand other relevant regulations if any the Board of Directors shall also have theabsolute power to declare interim dividend during any financial year out of the surplus inthe profit and loss account and out of profits of interim dividend is sought to bedeclared as and when they consider it fit in compliance other relevant regulations.Interim Dividend may be paid in order to supplement the annual dividend or in exceptionalcircumstances.


Dividend shall normally be declared from the profit earned the Company during therelevant financial for accumulated losses & unabsorbed depreciationif any and out ofthe carried forward profits not transferred to any reserves. However under specialcircumstances Dividend may be declared out of the accumulated profits earned by it theoperating in previous years and transferred by it to the free reserves and financialsubject to compliance with the requirements of the relevant provisions of the CompaniesAct 2013 including the Rules made thereunder.


The Board shall consider the circumstances provided below after analyzingbeforedetermination the prospective opportunities and threats viability of the . Thedecision options ofdividendpayoutorretention of dividend payout shall majorly be based onthe aforesaid factors considering the balanced interest of the stakeholders and thebusiness requirements of the Company. 43Ainorder

Accumulated Losses if any

The profits earned by the Company during any financial year shall be first utilised toset off the accumulated losses/ unabsorbed depreciation if any of the Company from theprevious financial years.

Operating cash flow of the Company

The Board will consider the impact of proposed dividend on the operating cash flow oftheCompanyandshallsatisfy itself of its adequacy before taking a decision on whether todeclare dividend or retain its profits.

Transfer to Reserves and other Statutory Requirements

The Board shall examine the implication requirements including payment of DividendDistribution Tax transfer of a certain portion of profits to Reserves if applicable onthe financials of the Company at the time of taking decision with regard to dividenddeclarationor retention

Covenants with lenders/ Debenture Trustees if any

The decision of dividend pay-out shall also be subject to compliance with covenantscontained in any agreement entered into by the Company with the Lenders/ DebentureTrustee's from timeto time if any.

Prudential & Strategic requirements

The Board shall analyse the ongoing and prospective projects and strategic decisionsincluding need for replacement of tc. before capitalassetsexpansionandmodernisationrecommending Dividend Pay-out for any financialyear with an object to build a healthyreserve of retained earnings to augment long term strength and to build a pool ofinternally generated funds to provide long-term resources as well as resource-raisingpotential for the Company;

Expectations of major stakeholders including small shareholders

The Board while considering the decision of dividend pay-out or entire profitsand/or out orretention of the accumulated profitsof the Company shall as far aspossible considertheexpectationsof the major stakeholders including the smallshareholders of the Company who generally expect a regular dividend payout.


In addition to the the Board shall inter alia consider the following financialparameters while taking decisions of a dividend payout during a particular year-

Return on invested capital

The efficiency with which the Company uses its capital will impact the decision ofdividend declaration.

Magnitude of earnings of the Company

Since dividend is directly linked with the availability of earning over the longhaul the magnitude of earnings will significantly relevantstatutory impact the dividenddeclaration decisions of the Company. etc.

Cost of borrowings

The Board will analyze the requirement of necessary funds considering the long term orshort term projects proposed to be undertaken by the Company and the viability of theoptions in terms of cost of raising necessary funds from outsiders such as bankerslending institutions or by issuance of debt securities or plough back its own funds.

Obligations to creditors

The Company should be able to repay its debt obligations without much difficulty over areasonable period of time. The decision of dividend declaration shall be taken afterconsidering the volume of such obligations and time period of repayment

Adequacy of profits

If during any financialyear the Board determines that the profits of the Company areinadequate on standalone basis and/or consolidated basis the Board may decide not todeclare dividends for that financial

Post dividend Earning Per Share (EPS)

The post dividend EPS can have strong impact on the funds of the Company thusimpacting the overall operations on day-to-day basis and therefore affects the profitsand can impact the decision for dividend declaration during a particular year.



Internal Factors

- Product/ Project expansion plan

The Company's growth oriented decision to conserve cash in the Company for futureexpansion plan impacts shareholders expectation for the long run which shall have theBoard before taking dividend decision.

- General Working capital requirement

In addition to requirements within the Company will also impact the decision ofdividend declaration.

- Past performance/ reputation of the Company oThetrendoftheperformance/reputation that has been during the past years determine theexpectation of the shareholders.

External Factors

- Macroeconomic conditions

Considering the state of economy in the Country the policy decisions that may beformulated by the Government and other similar conditions which may have a bearing on oraffect the business of the Company during uncertain or recessionary economic and businessconditions the Board may consider retaining a larger part of the profits to haveunforeseen circumstances.

- Capital Market

When the markets are favorable dividend pay-out can be liberal. However in case ofunfavorable Capital market conditions Board payout in order to conserve cash outflows.

- Statutory Restrictions

The Board will keep in mind any restrictions on payment of dividends by virtue of anyregulation or be applicable to the Company at the time dividend.

- Tax implications

Dividend distribution tax or any tax deduction at source as required by applicable taxregulations in India as may be applicable at the time bearing on the quantum of Dividenddeclared by the Company.


The Company is committed to deliver sustainable value to all its stakeholders. TheCompany strives to distribute an optimal and appropriate level of the profits earned by itin its business and investing activity with the equity shareholders in the form ofdividend. As explained in the earlier part of this Policy to consideredby determining thedividend pay-out is dependent upon several factors both internal to a business andexternal to it. Taking into consideration the aforementioned factors the Board shall haveabsolute discretionto determine & recommend appropriate Dividend pay- out for therelevant financial theabove thegeneralworkingcapital



The Board may retain its earnings in order to make better utilisationof the availablefunds and increase the value of the stakeholders in the long run. The retained earnings ofthe Company may inter alia be utilised for the following purposes:

To meet the working capital/ business needs of the Company

To fund the project expansion plans of the Company; in the international market Tofund the research expenditures of ongoing research projects specifically those in theadvanced development stages

Towards replacement/ up-gradation /modernisation of reservestoabsorb equipment's& plants;

Towards investment in long term/ short term strategic joint ventures and/orpartnerships and/or subsidiary companies ;

To fund mayresortto new acquisitions conservativedividend & investments.

Towards diversification of business;

Such other manner astheBoardmaydeemfitfrom time to loancovenant as may time.declarationof


The Board may review and amend or modify this policy in whole or in part at any time.

declaration of dividend shall have




1. Steps taken or impact on Conservation of Energy

Reduce electricity cost by employing Open access power purchase.

Install & use of energy efficient Screw compressor instead of reciprocatingcompressor

Use of energy Screw Chillier instead of Reciprocating Chillier.

Electricity usages are reduced by confined control on lightings.

Optimised compressed air requirement by installation dedicated compressor with lowpressure delivery & by arresting compressed air leakages - installed separate headerfor air supply to ETP as per their requirement.

Optimised brine requirement by installation dedicated brine machine as per Processrequirement.

Operate high pressure pumps of Filtration VFD to reduce Energy usage.

Improve boiler system efficiency by improving condensate recovery installationcondensate recovery units & by recovering flash steam - Direct purging of steam intohot water system cleaning & maintenance activity of Solar panel during the year.

Lightings load

Use of Solar water system for Canteen use.

Reduction boiler.

Opt TOD base Electricity bill option to get benefit in electricity bill.

Maintain Power Factor near to unity & reduced contract demand.

2. Steps taken by the Company for utilising alternate sources of energy

In following factories biomass briquettes are used instead of conventionalfuel.-Ahmednagar Panoli Mohali Silvassa Dadra Karkhadi Dewas MKM Chennai.

Note:-Inyear2016-17Biomassfired Boiler is installed in Dewas plant

In MKM Chennai Partially mills.

3. Capital investment on energy conservation equipments

Capital investment of Rs. 1898 lakh is done on energy conservation equipments.


a. Research and Development

1. Specific areas in which R&D is carried out by the Company

We continue to increase investments for generic and specialty pharmaceutical researchand technology. Additionally patient friendly formulations for existing molecules whichoffer increased convenience to patients are being developed. This research supports ourgeneric business across all the markets we are present in and ensures we have a healthypipeline for future growth. It also helps us in enhancing our specialty pipeline forglobal markets. Unit with open loop

At our modern R&D centres expert scientist teams are engaged in complexdevelopmental research projects in process chemistry and dosage forms including complexgenerics based on drug delivery systems. This work across formulations and API supportsthe short medium and long term business needs of the Company in global marketsbyinstallation of LEDlightings. including India.

Projects in formulation development and process chemistry steam production cost byinstalling Briquette help us introduce a large number of new and novel products in the USIndia and rest of the world markets that includes differentiated products with hightechnology barriers that limits competition and thus helps counter price erosion.Expertise in medicinal/ process chemistry equips us to be integrated right up to the APIstage for important products advanced intermediates or products where the API isdifficult to source. Strong new product development capability is an important part of ourstrategy and R&D expertise helps us maintain our leadership position in the Indianand global markets with niche formulations

The R&D team also works on products that are based on complex drug deliverysystems. Complex products like steroids sex hormones peptides carbohydratesimmunosuppressant carbapenems cardiovascular and antivirals which require specialskills and technology are developed and scaled up for both API and dosage forms. Thiscomplete integration for some products helps to deliver advanced products to the marketfaster at competitive pricing.

The API process development is focused for developing and transferring commerciallyviable non-infringing and patentable novel API technologies. The development gridselection for APIs is based on the difficult-to-make API molecules and also novelpolymorphic forms and co-crystals of certain APIs for creatingvalue addition. Other areasof interest include developing differentiated particles size for APIs as per therequirement and green chemistry approaches.

2. Benefits derived as a result of the above R&D

In FY17 77 formulations were developed and filed from our R&D locations for theIndian and advanced markets and 203 dossiers were submitted for filing in emergingmarkets. All of these were based on technology developed in-house. Technology for severalAPIs was commercialised. For some of the important APIs that we already manufactureprocesses were streamlined or alteredsoastohavemoreenergy continuously upgrade theresearch understanding of the efficient or cost effective or environment friendlyprocesses Non-infringing processes were developed to gain early market entry in manyregulated markets. A large part of our external API sales is to the regulated markets ofUS / Europe and earns valuable foreign exchange as also a reputation for quality anddependability. The Company's formulation brands are exported to over 150 internationalmarkets. In addition our subsidiary Taro's formulation development capability supportsthe filing and scale up of ANDAs for the US and other markets.

During the year the Company has filed 106 Drug Master Files across various countriesincluding US India and other markets.

The Department of Scientific and Industrial Research Ministry of Science andTechnology of Government of India has granted approval to the in house research anddevelopment facilities of the Company under the provision of the Income Tax Act 1961.

3. Future plan of

We continue equipment and infrastructure to compete effectively across world markets.Our subsidiary Taro is likely to continue to invest in R&D as it ramps up its productanti-diabetic pipeline.

4. Expenditure on R&D
Rs. in Million
Year ended March 31 2017 Year ended March 31 2016
a) Capital 1392.3 543.7
b) Revenue 9038.0 9037.9
c) Total 10430.3 9581.6
d) Total R&D 13.4% 12.2%
expenditure as % of
Total Turnover

b. Technology Absorption Adaptation and

1. Efforts in brief made towards technology absorption adaptation andinnovation

The Company continues to invest on R&D both as revenue expenses as well as capitalexpenditure. A large part of the spending is for complex products specialty and ANDAfilings for the US and API technologies that are complex and may require dedicatedmanufacturing blocks. Investments have been made in creating research sites employingscientifically skilled and experienced manpower adding equipment sponsored research andin accessing world class consultants to scientific team in the technologies and therapyareas of our interest.

There has been thrust on the development of novel technologies like use of greenreagents for chemical transformations in API synthesis and ultrasonic crystallisation forachieving required particle size Capillary flow reactors for continuous process safetyrelated studies using reaction calorimetry. Product Life cycle management has beenundertaken for key products. Backward integration is a key strategic objective and many ofour products enjoy the benefit of this backward integration.

Process robustness has been implemented for wide range of products which has resultedin positive outcomes with respect to cost and increase in process capability.

Novel compact dosage forms having differentiationwith regards to improved stabilityand/or reduced pharmacokinetic variability have been developed for India market. Stableliquidinvestinpeoplecapabilitydevelopment oral formulations of labile products are inadvanced stages of product development.

2. Benefits derived as a result of the above efforts e.g. product improvementcost reduction product development import substitution

(a) Market leader for several complex products. Offers complete baskets of productsunder chronic therapeutic classes. Strong pipeline of products for future introduction inIndia emerging markets as well as US and European generic market. Ability to challengepatents in the US market and earn exclusivity.

(b) Not dependent on imported technology can make high cost products available atcompetitive prices by using indigenously developed manufacturing processes and formulationtechnologies.

(c) Offer technologically advanced which are convenient and safe for administrationpatients.

(d) We are among the few selected companies that have set up completely integratedmanufacturing capability for the production of anticancer hormones peptideimmunosuppressant and steroidal drugs.

(e) The Company has benefited to import substitution and increased revenue throughhigher exports.

(f) Clinical studies of important products (specialty complex and difficult toformulate) have been carried out at our in-house clinical pharmacology units. This hashelped to maintain R&D quality and regulatory compliance with significantly reducedcost.

3. Your Company has not imported technology during the last 5 years reckoned fromthe beginning of the financial year.


Rs. in Million
Year ended March 31 2017 Year ended March 31 2016
1. Earnings 44118.1 42171.0
2. Outgo 24484.1 21582.6



For and on behalf of the Board of Directors
May 26 2017