Deloitte Haskins & Sells

Transcription

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2 Deloitte Haskins & Sells Chartered Accountants 12. Dr. Annie 6esant Road Opp. Shiv Sagar Estate Worli, Mumbai India Tel: +91 (22) Fax: +91 (22) To the Board of Directors of Lupin Pharmaceuticals, Inc. We have audited the Balance Sheet of Lupin Pharmaceuticals Inc. ("the Company") as at 3 1" March, 2010, the Profit and Loss Account and also the Cash Flow Statement of the Company for the year ended 3 1" March, 2010 (the financial statements) attached hereto, which have been prepared in accordance with the Generally Accepted Accounting principles in India. This report is issued solely for the purpose of consolidation of accounts by the holding company, Lupin Limited and to comply with the provisions of Section 212 of the Companies Act, 1956 and should not be used for other purposes. 1 This report does not include a statement on the matters specified in paragraphs 4 and 5 of the Companies (Auditor's Report) Order, 2003, issued by the Central Government in terms of section 227(4A) of the Companies Act, 1956, since in our opinion and according to the information and explanations given to us, the said Order is not applicable to the company. Respective Responsibilities of the Management and Auditors The management of the Company is responsible for the preparation of these financial statements. It is our responsibility to form an independent opinion, based on our audit of the statements and to express our opinion thereon. 4 I i B Basis of Opinion. I We conducted our audit in accordance with the auditing standards issued by the Institute of Chartered Accountants of India. An audit includes examination, on a test basis of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the management in the preparation of the financial statements and whether the accounting policies are appropriate to the circumstances related to the Company, consistently applied and adequately disclosed. We planned and performed audit so as to obtain all information and explanation, which to the best of our knowledge and,belief were necessary for the purpose of our audit. Opinion a) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report, are in agreement with the books of accounts of the Company and comply with the accounting standards referred to in Section 21 l(3c) of the Companies Act, 1956.

3 b) In our opinion and to the best of our information and according to the explanations given to us, the %inancia1 statements read with the accounting policies and notes thereon give a true and fair view; (i) in the case of the Balance Sheet, of the state of affairs of the Company as at 3 1" March, ; (ii) (iii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. ' For DELOITTE HASKINS & SELLS Chartered Accountants MUMBAI: 3 May, Partner Membership No.30802

4 Share capital Reserves and Surplus 2 18,191,408 12, , , ,855 Total 18,491,408 12,750, , Total 18,491, , ,855 For Lupin Pharmaceuticals Inc. Vinita Gupta Managing Director Place : Baltimore, U.S.A Date : APRI t 28/20 t o r! II. APPLICATION OF FUNDS Fixed Assets Gross block Less : Depreciation Net Block ,849 29,357 10, , Deferred Tax Asset (Net) [Refer note 2.7(b) of Schedule '101 Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank balances Loans and Advances Less : Current Llabilffles and Provisions Current Liabilities Provisions Net Current Assets Significant AcwunUng Pollcles and Notes forrnlng part oflaccounts In terms of our report attached For Deloltte Haskins &Sells Chartered Accountants M. S. Dharmadhikari Partner Place : Mumbai Date : ~C)V3,2oj 0

5 . I. EXPENDITURE Cost of Goods Sold Payments to and provisions for employees Operating and other expenses Depreciation , , ,563, ,925, ,017,494 Proflt Before Tax 10,605,367 6,438, , ,124 Provision for Tax Current Tax 4, ,464, ,990 Deferred Tax (26,736) 435,964 (1.270) Income Tax earlier year ( ) (28,874) 4,864,092 2,330, ,228 Proflt after Tax 5,741, , Add : Surplus brought forward from previous year 12,450,133 8,343, , ,171 ' Balance carried to Balance sheet , , Lim.*YI..> >,..... :,.,..>*;.2i...:pv. p. I.,SF?,. ::,..:....,..... ' ".+'.M"......,..... Lupin Pharmaceuticals, Inc...._ Profit and Loss account for the Year ended 31st March, INCOME FROM OPERATIONS Sales Other Income Schedules Year Ended Year Ended Year Ended Year Ended US $ us s Rupees ('000) Rupees ('000) Earning per share Basic and Diluted [Refer noti 2.8 of Schedule '107 Nominal value of each equity share is US$ 1, Rs. Rs Slgniflcant Accounting Policies and Notes fonnlngs 10 part of Ac&unts In terms of our report attached For Deloitte Haskins &,Sells Chartered Accountants For Lupin Pharmaceuticals Inc. M. S. Dharmadhikari Partner Place : Mumbai Date : prr7 3,e 0) 0 Vinlta Gupta Managing Director Place : Baltimore, U.S.A Date: IP$cR/L 281,2010

6 As at 31st March 2009 Rs.'OM) (n.932~ (25.286) US$ I US $ US$ 1 US $ Rs'000 1 Rs'W Rs'000 1 RsYXK) A. Cash flow from operating actlvitles Profd before Tax Adjustments For : I Depreclatlon 10,605, I Inkrest Income Exchange Rate dhferm on translation other than operating Exchange Difference [See Note 1 below] Operating profit before wawng capital changes Adlustments for : Trade and other Receivables Inventories Trade and other Payables Cash generated from operation Direct TWs paid (net) Net cash generated from operating sctlvltles (A) 8. Cash flow from Investing actlvitles : Purchase of fixed assets Interest Received I~et cash (used ln)/from Imstlng actlvltles (8) ( I ( 3 7 2, 1 1 g ) l (17,676)l1 4,579 1 INet Increasa in Cash and Cash Equivalents Cash and Cash Equivalents at the beginning of the year Cash and Cash Equivalents at the end of the year Notes: 1) Cash and Cash Equivalents Include: Cash and Bank balances (as stated in Schedule "4') Exchange Difference unreallsed Loss I (Gain) Total Net unreallsed exchange difference lossl(galn) during the year 3) The cash Row statement has been prepared under the 'lndii method' as set out in the Accounting Standard (AS3psh Row Statemew. 4) Prevlous year's fig~ses regtwped or reclassifled, wtwever necessary, to correspond wtth figures of arrrent year. In terms of our repwt attached, For Deloffle Hasklm 8 Sells Chartered Accountants As at 31st March 2010 R5.w For Lupin Pharmaandlcals Inc. M,S.Qharmadhikafl Partner Place : Mumbal Date : MCfy3,201 0 Place : BaMmore. U.S.A 'Date: PB62IL 28, a 10

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8 As at 31st Mar 2010 Net Block 10,673 3,376 4,729 18,778 3,310.. As at 31st March , ,310?.,. '.', ,... Gross Block (at cost) Depreciation Net Block Description I As at AS at Upto For the Upto As at As at 1st April 2009 Additions 31st Mar st March 2009, Year 31st Mar st Mar st March 2009 Computers Furniture and Fittings Office and other Equipment Total I I I I I I 241,849 I 397, , ,234 71, , , ,615 Description Gross Block (at cost) Depreciation As at 1st April 2009 Additions As at 31st Mar 2010 Upto 31st March 2009 For the Year Upto 3lst Mar 2010 Computers Furniture and Fittings Office and other Equipment 3,139 5,615 1,719 12,372 2,250 4,262 15,511 7,865 5,981 3,059 3, ,779 1, ,838 4,489 1,252 Total 10,473 18,884 29,357 7,163 3,416 10,579 Previous Year 10, ' 10,473 4,851 2,312 7,163

9 Finished goods 75, ,949,368 3,383,961 1,366,872 Total 132,184,396 73,575,558 5,935,080 3, Total 5,258,388 1, ,615 Sundry Debtors (Unsecured) 75,366,619 26,949,368 3,383,961 1,366,872 Debts outstanding for a period exceeding slx months (Include:. US $350,236 (WOO0 15,276) considered doubtful of recovery,(previous Year US $ Nil (WOO0 Nil)) Other debts Due from Holding Company Lupin Limited Due from a fellow subsidiary Lupin Atlantis Holdings S.A Provision for Doubtful Debtors Cash and Bank Balances Cash in hand Bank Balances with non scheduled banks In Current Account with : BB&T (Maximum amount outstanding during the year US $ (WOO ,974), (Previous year US $ (Rs'OOO 1,568,286)) Ciibank N.A (Maximum amount outstanding during the year US $1,826,466 (WOO0 87,497). (Previous year US $ 1,635,923 (RsW 74,000)) I In Deposit Account with Citibank N.A (including interest accrued US $ 12 (WOO0 1). Previous year US $23 (WWO 1)) (Maximum amount outstanding during the year US $5228 (WOW 235). (Previous year US $5215 (WOW 265 )) Loans and Advances (Unsecured, considered good) Advances recoverable in cash or in kind or for value to be received Deposits Advance payment of Income Tax (Net of Provisions) Total 6,455,941 5,168, , ,169

10 11 8,475, ,736,390 Others 38,796, ,038 Total 199,911,812 95,55;?624 8,976,042 4,846,428 Provisions For Taxation (Net of advance Tax) For price differential ' [Refer note 2.10 of Schedule '107.' Total 2,134, ,794 95,856 12,974..,

11 Lupin Pharmaceuticals, Inc. Schedules formlng part of Profit and Loss Account for the Year ended 31st March SCHEDULE "6" OTHER INCOME Service Charges [Refer Note 2.3 of Schedule '101 Bank Interest Exchange difference on translation [Net] ~iscellaneous Income SCHEDULE 7" COST Opening Stock Add : Purchases Less : Closing Stock OF GOODS SOLD SCHEDULE "8" PAYMENTS TO AND PROVlSlON FOR EMPLOYEES Salaries Wages and Bonus Contribution to other funds Staff welfare expenses Year Ended Year Ended Year Ended Year Ended US S US $ Rupees ('000) Rupees ('000) 103, ,848 Total 33,909,645 17, ,766, , ,619.: 26,949,368 3,363,961 1, Total 324,665, ,587 15,665,041 11,181, , ,488 11,468 Total 15,745,388 11,231, , SCHEDULE "9"OPERATING AND OTHER EXPENSES Travelling and Conveyance Rent Insurance (Net of recoveries US Rs '000 15,263, Previous Year US $ Rs '00029,759) Legal and Professional Fees Selling and Promotion expenses Freight.Forwarding and Distribution Audit fees (including service Tax Rs'W0 196, Previous year Rs' ) Postage and Telephone Expenses Rates and Taxes Provision for doubtful debts Bad debts written off Exchange difference on translation [Net] Miscellaneous expenses (Includes recruitment fees, office expenses, bank charges etc.) Total , ,476,287 1,315,656

12 Lupin Pharmaceuticals, Inc. SCHEDULES FORMING PART OF THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT I SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING PART OF ACCOUNTS These financial statements are prepared solely for the purposes of consolidation by the holding company, Lupin Limited (LL) and to comply with the provisions of Section 212 of the lndian Companies Act, 1956 applicable to LL. I 1. Significant Accounting Policies: 1.1 Basis of preparation of Financial Statements: The accompanying financial statements have been prepared as per the historical cost convention and in accordance with generally accepted accounting principles in India, the provisions of the Companies Act, 1956 and the applicable'accounting standards. 1.2 llse of Estimates: The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are rewgnised in the period in which the results are knownlmaterialise. I 1.3 Translation to lndian Rupees: The local accounts are maintained in local and funh~onal currency, which is the US dollars (US $). Considering the operations of the Company as integral to the parent company, the financial statements have been translated to lndian Rupees on the following basis I i) All income and expenses are translated at the average rate of exchange prevailing during the year. ii) ~onetary assets and liabilities are translated at the closing rate on the Balance sheet date. I iii) Nonmonetary assets and liabilities and share capital are translated at historical rate. iv) The resulting exchange difference is accounted in 'Exchange Difference on translation account' and is chargedlcredited to the Profit and Loss Account. 1.4 Revenue Recognition: i) Revenue from sale of goods is recognized when the Company transfers the significant risks and rewards in respect of ownership of products. ii) Revenue from service charges is recognized on rendering of the related services in accordance with the terms of the agreements. I r"'

13 iii) iv) Revenue from sale of goods is stated net of returns, applicable trade discounts, rebates and allowances. Revenue is rewgnised when it is reasonably certain that the ultimate collection will be made. v) Interest income is recognized on time proportion basis. 1.5 Fixed Assets: Fixed Assets are recorded at cost of acquisition less accumulated depreciation and accumulated impairment/losses, if any. Cost includes directly attributable expenses incurred for acquisition of assets. 1.6 Depreciation: Depreciation on fixed assets is provided on Straight Line Method, over the useful life of the assets, as estimated by the management as under: Computers 3 years Furniture and fittings 5 years Ofice and other equipments 7 years 1.7 Inventories: Inventories of traded finished goods are valued at cost or net realizable value which ever is less. Cost is determined on FirstinFirstout basis. Cost comprises of purchase price and other related costs incurred in bringing the inventories to their present location and condition. 1.8 Income Tax: Income Taxes are accounted for in accordance with Accounting Standard 22 on "Accounting for Taxes on Income", (AS 22). Tax expense comprises both current tax and deferred tax. Current tax is measured at the amourjt expected to be paid or recovered from the tax authorities using applicable tax rates as per the US Tax Laws. Deferred tax assets and liabilities are recognized for future tax consequence attributable to timing differences between taxable income and accounting income that are measured at relevant tax rates. At each balance sheet date the Company reassesses unrealized deferred tax assets, to the extent they become reasonably certain or virtually certain of realisation, as the case may be. 1.9 Borrowing Costs: Borrowing costs attributable to the acquisition or constryction of qualifying assets is capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.

14 1.1 0 Employee benefits: a) Defined Contribution Plan: Company's contribution paidlpayable for the year to defined contribution retirement benefit schemes are charged to Profit and Loss Account. b) Short term employee benefits: Short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized undiscounted during the period employee renders services. 'These benefits include performance incentives Impairment of assets: An asset is treated as impaired when the carrying cost of the asset exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. 'The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount Provisions, Contingent Liabilities and Contingent assets: Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements. 2 Notes to Accounts: 2.1 Company Overview: 'The Company was incorporated in United States Of America under the Laws of the State of Virginia on 30th June, 2003, and is a wholly owned Subsidiary of Lupin Limited India. Its core business is to trade in pharmaceutical products and to render marketing services related thereto. Considering the definitions of reportable business segment and reportable geographical segment contained in Accounting Standard 17 (AS 17) "Segment Reportingn, the management is of the opinion that there is only one reportable business and geographical segment, the results of which are disclosed in the financial statements. 2.3 Service charges include income accrued for reimbursement of marketing and other related expenses by LL, the holding company, and Lupin Atlantis Holdings S.A. (LAHS), a fellow subsidiary, in te~ms of marketing services agreement (MSA) (including amendments thereto) and the Service Agreement with LL and LAHS respectively, and income earned in respect of the product promoted on behalf of a party as per the terms of the agreement entered into with the said party. 2.4 The Company makes contributions towards social security to a defined contribution retirement benefit plan for qualifying employees. 'The Company recognised US $ 933,200 Rs'000 44,326 (Previous Year US $ 426,901 RslOOO 19,676), which are disclosed under Schedule 8.

15 Sr' No 2.5 Managerial Remuneration to the Managing Director: US $ US $ Rs.'000 Rs.'000 Salary and Allowances 1,862,426 1,467,525 88,465 67,638 Contribution to Other funds 17,647 24, ,109 Total 1,880,073 1,491,583 89,303 68,747 Note: Remuneration for the current year includes increased remuneration to the Managing Director w.e.f. 1' July 2009, as approved by Holding Company, Lupin Limited. 2.6 Related Parties Disclosure: Name of Related parties and description of relationship: i) Company whose control exists Lupin Limited (Holding Company) ii) Fellow Subsidiary Lupin Atlantis Holdings S.A. ii) Key Management Personnel Vinita Gupta (Managing Director) a) Related Party Transactions Description and Nature of Transaction Holding Company US $ Rs'000 Us $ Fellow Subsidiary 1 Purchase of Traded goods [excluding 275,471,653 13,051, ,228 freight, insurance etc.] (208,732,533) (9,636,675) 2. Managerial Remuneration () () () 3. Service Charges 18,506, ,600 8,277,163 Income (12,868,753) (645,892) 4. Recovery of Product 302,496 13,755 31,753 Liability Insurance (586,722 ) (29,759) () 5. Recovery of Expenses 1,208,954 () 6. Debtors Balance as at 10,776, ,887 9,664, " March (6,236,303) (316,305). 7. Creditors Balance as 118,475,603 5,319,555 42,639,825 at 31' March (73,667,004) (3,736,390) Rs'OOO 2,808,828 (> 393,165 1,508 57, ,942 1,914,528 Key Management Personnel Us $ 1,880,073 (1,491,583) Notes: 1. Related Party relationship is as identified by the Company and relied upon by the Auditors. 2. Previous year figures are in the brackets. () Rs'OOO 89,303 (68,747) ()

16 2.7 (a) The provision for current tax has been computed considering the tax laws in US and as certified by the Company's local tax consultant. (b) The deferred tax AssetsILiabilities arising out of significant timing differences are as Under: Particulars of Asat3lS' timing difference Deferred Tax Liability: Depreciation Prepaid Expense Deferred Tax Asset: Provision for Obsolete inventory Provision for expenses Provision for Price Differential (Refer note below) Provision for Sales Returns Deferred Tax Asset (net) 25, ,767 12, , , ,489 16, , , ,914 89, , ,753 1,123 9, ,904 43,593 38, ,855 6,270 13,436 4,541 30,968 42, Earnings per share is calculated as follows: Particulars For the year ended 31' March in US $ 5,741,275 For the year ended 31' March 2009 in US $ 4,107,064 ^ For the year ended 31' March in RsS ,900 For the year ended 31'' March 2009 in Rs' ,896 Profit attributable to Equity Shareholders Weighted average Basic and Diluted Rs Rs earnings per share 2.9 Additional information pursuant to the provisions of paragraphs 3,4C and 4D of part II of Schedule VI of the Indian Companies Act, 1956:

17 I. I) Details of Purchases, Turnover and Inventory

18 Signature to Schedules 1 to 10