FUTURE GLENMARK Auditors Report

Report on the Standalone Financial Statements


1. We have audited the accompanying standalone financial statements of Glenmark Pharmaceuticals Limited. (‘the Company’), which comprise the Balance Sheet as at 31 March 2017, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.


Management’s Responsibility for the Standalone Financial Statements


2. The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (‘the Act’) with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs (financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (‘Ind AS’) specified under Section 133 of the Act.


This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.


Auditor’s Responsibility


3. Our responsibility is to express an opinion on these standalone financial statements based on our audit.


4. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.


5. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether these standalone financial statements are free from material misstatement.


6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.


7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on these standalone financial statements.


Opinion


8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Ind AS specified under Section 133 of the Act, of the state of affairs of the Company as at 31 March 2017, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.


Other Matter


The Company had prepared separate sets of statutory financial statements for the year ended 31 March 2016 and 31 March 2015 in accordance with Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) and in accordance with the Accounting Standards prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 on which we issued auditor’s reports to the shareholders of the Company dated 12 May 2016 and 29 May 2015 respectively. These financial statements have been adjusted for the differences in the accounting principles adopted by the Company on transition to Ind AS, which have also been audited by us. Our opinion is not modified in respect of this matter.


Report on Other Legal and Regulatory Requirements


9. As required by the Companies (Auditor’s Report) Order, 2016 (‘the Order’) issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order.


10. Further to our comments in Annexure A, as required by Section 143(3) of the Act, we report that:


a) we have sought and obtained all the information and explanations which to the best of 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 the Company so far as it appears from our examination of those books;


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


d) in our opinion, the aforesaid standalone financial statements comply with Ind AS specified under Section 133 of the Act;


e) on the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2017 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 2017 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 11 May 2017 as per Annexure B expressed an unqualified opinion;


g) with respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 (as amended), in our opinion and to the best of our information and according to the explanations given to us:


i. as detailed in Note 31 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position;


ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;


iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company;


iv. the company, as detailed in Note 37 to the standalone financial statements, has made requisite disclosures in these standalone financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8 November 2016 to 30 December 2016. Based on the audit procedures performed and taking into consideration the information and explanations given to us, in our opinion, these are in accordance with the books of account maintained by the company.


ANNEXURE A


Annexure A in the Independent Auditor’s report of even date to the members of Glenmark Pharmaceuticals Limited, on the standalone financial statements for the year ended 31 March 2017


Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, and to the best of our knowledge and belief, we report that:


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


(b) The Company has a regular program of physical verification of its fixed assets under which fixed assets are verified in a phased manner over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. In accordance with this program, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification.


(c) The title deeds of all the immovable properties which are included under the head ‘Property, plant and equipment’ are held in the name of the Company.


ii. In our opinion, the management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies between physical inventory and book records were noticed on physical verification.


iii. The Company has granted unsecured loans to companies covered in the register 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, prima facie, prejudicial to the company’s interest;


(b) the schedule of repayment of principal and payment of interest has been stipulated and the receipts of the principal amount and the interest are regular;


(c) there is no overdue amount in respect of loans granted to such companies, firms, LLPs or other parties.


iv. In our opinion, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of loans, investments, guarantees and security.


v. In our opinion, the Company has not accepted any deposits within the meaning of Sections 73 to 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 (as amended). 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 pursuant to the Rules made by the Central Government for the maintenance of cost records under sub-section (1) of Section 148 of the Act in respect of Company’s products and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the cost records with a view 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, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues, as applicable, to the appropriate authorities. Further, no undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable.


(b) The dues outstanding in respect of income-tax, sales-tax, service-tax, duty of customs, duty of excise and value added tax on account of any dispute, are as follows:


Statement of Disputed Dues














































Name of the statute



Nature of dues



Amount (Rs. in million)



Amount paid under Protest (Rs. in million)



Period to which the amount relates



Forum where dispute is pending



Income tax Act, 1961



Disallowed development of new product expenditure u/s 35(2AB)*



49.23



A.Y. 2005-06



High Court, Mumbai



Income tax Act, 1961



Disallowance for income added to MAT book profit



0.82



-



A.Y. 2006-07



Commissioner of Income Tax (Appeal)



Income tax Act, 1961



Transfer pricing adjustment, disallowances of sales promotion expenses



20.45



-



A.Y. 2013-14



Income Tax Appellate Tribunal, Mumbai



Income tax Act, 1961



Disallowance of R&D expenses



15.76



-



A.Y. 2009-10



Commissioner of Income Tax (Appeal)
























































































































Income tax Act, 1961



Transfer Pricing adjustment & allocation of R&D expenses to tax holiday units



39.82



-



A.Y. 2009-10



High Court, Mumbai



Central Sales tax Act, 1956



Rejection of C forms



2.89



-



F.Y. 2007-08



Deputy Commissioner of Commercial Taxes (Appeals), Gujarat



Central Sales tax Act, 1956



Rejection of C forms



1.24



F.Y. 2011-12



Additional Commissioner of Commercial Taxes (Appeals), Goa



The Goa VAT Act 2005



Disallowance of Input tax Credit



5.36



F.Y. 2011-12



Deputy Commissioner of Commercial Taxes (Appeals), Goa



The Gujarat VAT Act 2003



Disallowance of Input tax Credit



1.11



-



FY 2011-12



Joint commissioner of commercial taxes (Appeals), Gujarat



The Goa VAT Act 2005



Disallowance of Input tax Credit on capital goods



3.88



-



F.Y. 2012-13



Deputy Commissioner of Commercial Taxes (Appeals), Goa



The Central Excise Act 1944



Levy of penalty for non submission of proof of exports



10.00



-



Apr 2003 to Sept 2007



Customs, Excise and Service Tax Appellate Tribunal, Mumbai



The Central Excise Act 1944



Levy of penalty for non submission of proof of exports*



16.31



-



Apr 2003 to Sept 2007



Customs, Excise and Service Tax Appellate Tribunal, Mumbai



The Central Excise Act 1944



Disallowances of Rebate claims*



17.19



17.19



F.Y. 2010-11



Jt. Secretary, Dept. of Revenue, Ministry of Finance



The Central Excise Act 1944



Excise Duty on domestic clearance



14.18



14.18



Apr 2005 to Apr 2009



Customs, Excise and Service Tax Appellate Tribunal, Mumbai



The Central Excise Act 1944



Excise Duty on domestic clearance*



7.99



7.99



Jan 2010 to Mar 2011



Customs, Excise and Service Tax Appellate Tribunal, Mumbai



The Central Excise Act 1944



Disallowances of Rebate claims



5.48



5.48



Apr 2008 to Mar 2011



Jt. Secretary, Dept. of Revenue, Ministry of Finance



The


Finance Act 1994



Disallowance of availment of Cenvat credit of service tax



2.25



-



Apr 2008 to Mar 2012



Customs, Excise and Service Tax Appellate Tribunal, Mumbai



The


Finance Act 1994



Demand for service tax under reverse mechanism



29.68



Apr 2004 to Apr 2006



Customs, Excise and Service Tax Appellate Tribunal, Mumbai



* These cases have been decided in favour of the Company by the appellate authorities. The concerned revenue department has gone for further appeal against the decision.


** A.Y. / F.Y. - Assessment year / Financial year


viii. The Company has not defaulted in repayment of loans or borrowings to any bank or financial institution or government during the year. The Company did not have any outstanding debentures during the year.


ix. The Company did not raise moneys by way of initial public offer or further public offer (including debt instruments). In our opinion, the term loans were applied for the purposes for which the loans were obtained.


x. No fraud by the Company or on the company by its officers or employees has been noticed or reported during the period covered by our audit.


xi. Managerial remuneration has been paid and provided by the company in accordance with the requisite approvals mandated by the provisions of Section 197 of the Act read with Schedule V to the Act.


xii. In our opinion, the Company is not a Nidhi Company. Accordingly, provisions of clause 3(xii) of the Order are not applicable.


xiii. In our opinion all transactions with the related parties are in compliance with Sections 177 and 188 of Act, where applicable, and the requisite details have been disclosed 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 private placement of shares or fully or partly convertible debentures.


xv. In our opinion, the company has not entered into any non-cash transactions with the 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 Reserve Bank of India Act, 1934.


For Walker Chandiok & Co LLP


Chartered Accountants


Firm’s Registration No.: 001076N/N500013


per Ashish Gupta


Partner


Membership No.: 504662


Place: Mumbai


Date: 11 May 2017

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