22.2 Rights Attached to Equity Shares

The Company has only one class of equity shares with voting rights having a par value of H 2 per share. The Company declares and pays dividends in Indian Rupees. Any interim dividend paid is recognised on the approval by Board of Directors.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the numbers of equity shares held by shareholders.

Dividends and tax thereon have not been recognised as liabilities in the year to which they pertain to and is recorded in the year in which they have been approved in the Annual General Meeting.

22.8 Equity shares extinguished on buy-back

For the year ended on 31 March 2024

Board of Directors have approved buy back of its 10,28,881 equity shares, being 0.82% of the total paid up equity share capital (prior buyback) at H 2,770 per equity share for an aggregate amount of H 285.00 Crore on 02 May 2024.

For the year ended on 31 March 2023

The Board of Directors of the Company, at its meeting held on 10 March 2023 had approved the proposal of Buy-back of 22,10,500 fully paid-up equity shares of the Company of face value of H 2 each at a price of H 1,425/- per equity share, on a proportionate basis, for an aggregate amount not exceeding H 315.00 Crore through the tender offer process (“Buyback"), in accordance with the provisions of the Companies Act, 2013, and rules made thereunder, and

the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 (the “SEBI Buyback Regulations"). The buyback issue opened on 31 March 2023 and closed on 10 April 2023. The Company has taken the impact of buyback in previous financial year and paid in current financial year, for this Company has utilised its General Reserve (H 315.00 Crore) for the buyback of its equity shares. Total transaction cost of H 2.36 Crore (current year H 0.92 Crore and previous year H 1.44 Crore) incurred towards buyback and tax of H 73.28 Crore was offset from retained earnings. In accordance with Section 69 of the Companies Act 2013, the Company has created Capital Redemption Reserve of H 0.44 Crore equal to the nominal value of the shares bought back as an appropriation from the General Reserve.

For the year ended on 31 March 2022

The Company bought back 11,20,000 equity shares for an aggregate amount not exceeding of H 285.60 Crore being 1.29% of the total paid up equity share capital (prior buyback) at H 2,550 per equity share. The equity shares bought back were extinguished on 28 February 2022.

For the year ended on 31 March 2021

The Company bought back 7,35,000 equity shares for an aggregate amount not exceeding of H 136 Crore being 0.84% of the total paid up equity share capital (prior buyback) at H 1,850 per equity share. The equity shares bought back were extinguished on 30 December 2020.

For the year ended on 31 March 2019

The Company bought back 7,69,230 equity shares for an aggregate amount not exceeding of H 100 Crore being 0.87% of the total paid up equity share capital (prior buyback) at H 1,300 per equity share. The equity shares bought back were extinguished on 26 March 2019.

45. Capital Management:

Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return (EBIT) on capital, as well as the level of dividends to equity shareholders. The Company's objective for capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans.

47. Employee Benefits

As required by Ind AS 19 'Employee Benefits' the disclosures are as under:

47.1 Defined Contribution Plans

The Company offers its employee's defined contribution plans in the form of provident fund (PF) and Employees' pension scheme (EPS) with the government, and certain state plans such as Employees' State Insurance (ESI). PF and EPS cover substantially all regular employees and the ESI covers certain employees. Contributions are made to the Government's administered funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into the Pension fund is made only by the Company. The contributions are normally based on a certain proportion of the employee's salary. The Company does not have any liability beyond depositing these amounts in to the government administered fund. During the year, the Company has made the following contributions:

47.2 Defined benefit plans

Gratuity:

The Company makes annual contributions to Employees' Group Gratuity-cum Life Assurance (Cash Accumulation) Scheme of LIC, a funded defined benefit plan for qualifying employees. The Companies scheme provides for payment to vested employees as under:

On normal retirement/ early retirement/ withdrawal/ resignation:

As per the provisions of Payments of Gratuity Act, 1972 with vesting period of 5 years of service. A benefit ceiling of H 0.20 Crore is applied only for Directors.

On the Death in Service:

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2024. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company's financial statements as at the Balance Sheet date:

Although the analysis does not take into account full distribution of cash flows expected under the plan, it does provide an approximation of sensitivity of assumptions. The estimate of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

47.3 Leave Encashment

The Company's employees are entitled for compensated absences which are allowed to be accumulated and encashed as per the Company's policies. The liability of compensated absences, which is non-funded, has been provided based on report of independent actuary using “Projected Unit Credit Method".

Accordingly, H 33.07 Crore (Previous Year H 2714 Crore) being liability as at the year-end for compensated absences as per actuarial valuation has been provided in the accounts.

48. Share-Based Payments

Company has established “Employee Stock Options Scheme 2011" ('ESOP-2011') and “Share-based Incentive Plan 2019" as approved in earlier year by the shareholders of the Company and Compensation committee of Board of Directors for key Employees of the Group. The options issued under the above scheme vest in a phased manner.

During the year, the Company made the decision to withdraw the Employee Stock Options Scheme 2011 in the Nomination & Remuneration Committee meeting held on 31 January 2024, with immediate effect.

Valuation of Stock Options

The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. They key inputs and assumptions used are as follows:

Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted.

Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Remuneration and Compensation Committee.

Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.

Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

Fair Value Hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have declared buyback NAV. The mutual funds are valued using the closing NAV.

Level 2: The fair value of financial instruments that are not traded in an active market (like Mark to market derivatives and Non-convertible market link debenture) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value as instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Measurement of Fair Values:

Valuation techniques and significant unobservable inputs:

The following tables show the valuation techniques used in measuring Level 2 & Level 3 fair values, for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used:

B. Financial Risk Management

Company has exposure to following risks arising from financial instruments:

i. credit risk

ii. liquidity risk

iii. market risk

iv. currency risk

Risk Management Framework

Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. Management is responsible for developing and monitoring the Company's risk management policies, under the guidance of Audit Committee.

Company's risk management policies are established to identify and analyse the risks faced by it, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. Company, through its training and procedures aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

Company's Audit committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit committee.

i. Credit Risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and mutual funds, foreign exchange transactions and other financial instruments.

a) Trade Receivables

Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Trade receivables, which are non-interest bearing, are mainly from stockists, distributors and customers and are generally on 14 days to 270 days credit term excluding wholly-owned subsidiaries. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.

As at 31 March 2024, Company had 32 customers, excluding wholly-owned subsidiaries (31 March 2023: 37 customers) that owed the Company more than H 0.50 Crore each and accounted for approximately 27% and 26% respectively of the total outstanding as at 31 March 2024 and 31 March 2023.

Expected Credit Loss Assessment

As per simplified approach, the Company makes provision of expected credit losses on trade receivable using a provision matrix to mitigate the risk of default payment and make appropriate provision at each reporting date wherever required. The trend of the bad debts is negligible.

ii. Liquidity Risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company's objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including bilateral loans, debt, and overdraft from banks at an optimised cost. Working capital requirements are adequately addressed by internally generated funds. Trade receivables are kept within manageable levels.

Company aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities over the next six months. The ratio of cash and cash equivalents and other highly marketable debt investments to outflows is 0.62 at 31 March 2024 (0.86 at 31 March 2023).

Exposure to liquidity Risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.

b) Financial Instruments

Company limits its exposure to credit risk by investing in liquid securities issued by mutual funds having a credit ranking of at least 3 and above from CRISIL or equivalent rating agency. Company monitors changes in credit risk by tracking published external credit ranking. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties.

iii. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments.

The Company's activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures to foreign exchange fluctuations. All such transactions are carried out within the guidelines set by the risk management committee.

Sensitivity Analysis on Interest rate

The Company's fixed rate bank deposits and securities are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flow will fluctuate because of a change in market interest rates.

Sensitivity Analysis on Equity prices

The Company has invested its surplus funds primarily in debt based mutual funds. The value of investment in these mutual fund schemes is reflected though Net Asset Value (NAV) declared by the Asset Management Company on daily basis. The Company has not performed a sensitivity analysis on these mutual funds based on estimated fluctuations in their NAV as in management's opinion, such analysis would not display a correct picture.

iv. Currency Risk

Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of Company. The currencies in which these transactions are primarily denominated are US dollars, Australian dollars, Great Britain Pound and Euro.

At any point in time, Company covers foreign currency risk by taking appropriate percentage of its foreign currency exposure, as approved by risk management committee in line with the laid down policy approved by the Board. Company uses forward exchange contracts to mitigate its currency risk, most with a maturity of less than one year from the reporting date. In respect of other monetary assets and liabilities denominated in foreign currencies, the Company's policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

52. Disclosure for Leases under Ind AS 116 - "Lease":

Company has taken various premises under operating lease. These are generally cancellable and ranges from 11 months to 5 years and are renewable by mutual consent on mutually agreeable terms. Some of these lease agreements have price escalation clauses. There are no restrictions imposed by these lease arrangements and there are no sub leases. There are no contingent rents. A single discount rate has been applied to a portfolio of leases with reasonably similar characteristics.

The Company has two ongoing patent litigations as on 31 March 2024. No liability is expected to arise from these litigations.

The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company's financial condition, results of operations or cash flows.

Future cash outflows in respect of liability under clause (i) is dependent on terms agreed upon with the parties, in respect of clauses (ii) to (iv) is dependent on decisions by relevant authorities of respective disputes.

Code on Social Security, 2020

The new Code on Social Security, 2020 (Code) has been enacted, which could impact the contributions by the Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the rules are yet to be framed. The Company will complete its evaluation and will give appropriate impact in its financial statements in the period in which the Code becomes effective and the related rules are published.

Commitments

Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances H 151.35 Crore (Previous Year H 86.97 Crore).

Based on the internal and external transfer pricing review and validation, the Company believes that all transactions with associated enterprises are undertaken on the basis of arm's length principle. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. Details related to ESOP given to Employees of Subsidiary provided in note 48.

In the previous year, Ajanta Pharma (Mauritius) International Limited, a wholly-owned subsidiary of Ajanta Pharma (Mauritius) Limited, was wound up and removed from register of companies u/s 308 of the Companies Act 2001 (Mauritius) by Business registration department dated 27 September 2022

55. Contribution Towards Corporate Social Responsibility ("CSR"):

As per Section 135 of the Act, a CSR committee has been formed by the Company. The funds are utilised during the year on the activities which are specified in schedule VII of the Act. The utilisation is done by way of direct and indirect contribution towards various activities.

56. The Company has presented data relating to its segments based on its consolidated financial statements, which are presented in the same Annual Report. Accordingly, in terms of paragraph 4 of the Indian Accounting Standard (Ind AS 108) “Operating Segments", no disclosures related to segments are presented in this standalone financial statement.

61. Utilisation of Borrowed Funds and Share Premium

A. The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

B. The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

62. Donation

Donation includes political contribution to Bharatiya Janata Party of H 5.00 Crore in the current year and H 4.00 Crore in the previous year (through electoral bond).

63. Impairment of Investment in Subsidiary

The Company in prior years has made full provision for investment in aggregate value of unquoted investment in Ajanta Pharma Nigeria Limited and the carrying value of investment is considered as Nil.

64. Assets Classified as Held for Sale

During the year the Company has entered into agreement for sale of its one of the freehold land assets, for which H 0.51 Crore advance has been received and recognised as Liability against Assets held for sale, subject to fulfilment of certain condition. Transaction is expected to be completed in the next year. The said freehold land assets aggregating to H 8.85 Crore has been reclassified from Property, plant and equipment to assets held for sale.

In the previous year the Company has entered into agreement for sale of its investment properties, and the said properties aggregating to H 792 Crore has been reclassified from investment properties to assets held for sale.

Rental income recognised in profit or loss for investment properties aggregates to H 0.01 Crore (previous year H 0.35 Crore). Maintenance and other expenses aggregating to H 0.01 Crore (previous year H 0.04 Crore).

The charge relating to temporary differences during the year ended 31 March 2024 are primarily on account of property plant and equipment and gain on investment at FVTPL partially offset by provision for return of expired goods, provision for loss allowance, compensated absences. The credit to temporary differences during the year ended 31 March 2023 are primarily on account of property plant and equipment and gain on investment at FVTPL partially offset by provision for return of expired goods, provision for loss allowance, compensated absences. Current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same authority.

66. Additional disclosures required by Schedule III (amendments dated 24 March 2021) to the Companies Act, 2013

A. Relationship with Struck off Company

There is no such transaction with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

B. Undisclosed Income

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

C. Utilisation of Borrowings Availed from Banks

The borrowings obtained by the Company from banks have been applied for the purposes for which such loans were taken.

D. Details of Benami Property Held

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

E. Wilful Defaulter

The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

F. Compliance with Number of Layers of Companies

The Company has complied with the number of layers prescribed under the Companies Act, 2013.

G. Compliance with Approved Scheme(s) of Arrangements

The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

H. Details of Crypto Currency or Virtual Currency

The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.