Description
The report for the financial year 2009 - 2010 of ranbaxy.
New Boundaries. New Horizons.
Annual Report 2009
The true hallmark of leadership is the ability to overcome challenge and emerge stronger from the experience. The year gone by has been difficult for global economies. But rather than deter us, it has inspired us to look within and seek beyond; to discover ways of making our Hybrid Business Model more robust and generate synergies across the value chain. We have set in motion synergies, aimed at tapping opportunities beyond new boundaries. The scope is now wide - across geographies and functions. From being arguably India's most global company, we are now amongst the world's top 20 pharmaceutical players, globally. Already, there is visible progress in our thrust markets. A key priority now is strengthening our leadership position in the domestic market. Due emphasis is being given to effective cross-functional teamwork, with a view to inculcate a vibrant, enabling and empowering work culture, so vital for continued growth. The accruing benefits of synergized expertise are beginning to appear, both at the front and back ends; and this is just the start… an apt entry point for achieving our ambitious 3-year strategy plan.
CONTENTS
Chairman's Message.............................................3 CEO & Managing Director's Message ..................7 Global Pharmaceuticals Business .......................10 Therapy Focus ..................................................13 Research & Development ...............................15 Financial Review...............................................18 Global Human Resources ..................................20 Corporate Social Responsibility and...................22 Environment, Health & Safety Corporate Governance.......................................26 Certificate from CEO and CFO .........................37 Board of Directors .............................................38 Report of the Directors ......................................39 Ten Years at a Glance.........................................52 Auditors’ Report ................................................53 Financial Statements of Ranbaxy Standalone .........................................................56 Consolidated Indian GAAP .............................100
Ranbaxy Laboratories Limited Annual Report 2009
02
Chairman's Message
CHAIRMAN'S MESSAGE
READY FOR THE NEXT LEVEL
Dr. Tsutomu Une
Chairman
Dear Shareholders, O n behalf of the Ranbaxy family, may I extend our best wishes to all of you. As the Chairman of the Board of Ranbaxy, I feel it is an honour and privilege to be associated with one of the top global generic pharmaceutical companies which has leadership position in India. The year 2009 was very significant for your Company, as it witnessed many important and strategic changes. The most significant was the change in Management, that is leading to the institutionalisation of a transformed culture, with a strong orientation on quality, professionalism, organisational values and stakeholder relationships. In May 2009, the executive leadership of Ranbaxy was reconstituted. I was elected as the Chairman of the Board and Mr. Atul Sobti took over as CEO and Managing Director. This was done with a view to accelerate the realisation of the Hybrid Business Model of Ranbaxy and Daiichi Sankyo. In recognition of the rapid changes in the business environment evident in both developed and emerging countries, the integration of the respective strengths of both Companies has already been set in motion. In the past year, I along with other Board members have been working ceaselessly to integrate the best functionalities of both Companies, in a corporate culture that is
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Ranbaxy Laboratories Limited Annual Report 2009
responsive and focused on realising the immense value inherent in this unique transformation. We fully support the leadership of Mr. Sobti, who has abundant corporate experience in successfully handling similar leadership roles. Under his guidance, I am confident Ranbaxy will achieve excellence in providing future strategy & stability, operational execution, transparency and reliability. The Board has taken some strategic decisions that are aimed at securing the future growth of Ranbaxy. In doing so, we have revisited operations in some specific countries, to consolidate our presence and create value through further efficiencies and cost synergies. One of the key focus areas has been cost containment. This will be an ongoing process. We believe that the Innovator Generics model is revolutionary and is best suited to cater to the changing dynamics of the global pharmaceutical industry. Unleashing the power of the Hybrid Business Model, various synergies have been announced, both at the front and back end. The fundamental aim is to secure sustainable growth in mature
developed markets, while accelerating expansion in the high growth emerging markets. A start has already been made in this direction. Ranbaxy has introduced Daiichi Sankyo's innovator products in some markets, starting with India. This benefits both Companies. Ranbaxy gains as its product portfolio gets widened, while Daiichi Sankyo gets a launch pad in those markets where it is not present. In April 2009, Ranbaxy began marketing Daiichi Sankyo's flagship product, Olmesartan (Olvance), in India. Thereafter both Companies have announced partnerships in Romania, Mexico and Africa. It will be our constant endeavour to leverage each other's strengths, by identifying new synergies, so that we can maximise the strategic benefits of our innovative model. In 2009, Ranbaxy continued to show marked improvement on all financial parameters, surpassing the guidance given by the Company, both on revenue and profit. Although the global fiscal environment remained challenging, Ranbaxy, due to its vast global presence in developed and
emerging markets, was able to face up to the economic storm. In line with our commitment to spearhead the early introduction of affordable quality generic medicines, so that medication is accessible and made available to all, the Company launched three important First-To-File (FTF) products, viz Sumatriptan 100 mg, Valacyclovir Hydrochloride 500 mg and 1000 mg and Oxcarbazepine Suspension, in the US. I strongly believe that your Company is ready for the next level of growth, with the right business model. While there will be challenges, there are also plenty of opportunities that lie ahead. While growth rates in the global pharmaceutical market are expected to remain in low single digits, emerging markets, in contrast, are likely to witness strong growth. I am referring here to markets like Brazil, Russia, India, China, South Africa, among others. These markets are likely to sustain double digit growth momentum during the period 2010 through 2013. With Ranbaxy's strong presence in many of the high growth markets, the Company is well poised to capitalise on the growing generics opportunity.
04
Chairman's Message
During the year, we were also faced with some regulatory actions by the U.S. Food and Drug Administration (FDA). We continue to fully cooperate with the FDA and other authorities and have specially formed a task force that comprises people from Ranbaxy, Daiichi Sankyo and outside specialists. We are doing our utmost to resolve the regulatory issues at the earliest. US is a key market for Ranbaxy and we are committed in our efforts of being fully compliant with the US regulatory standards and to provide affordable quality generic medicines to customers and patients in the US. Your Company is constantly guided by the institutionalised framework of Corporate Governance and Code of Conduct, to strengthen decision making and compliance with ethical integrity and reliability. The Independent Directors on the Ranbaxy Board, who are well known professionals in their respective fields, guided the management throughout the year to take strategic decisions for achieving higher levels of efficiency and productivity. The Code of Conduct for employees, aimed at strengthening the
organisation through building a culture based on shared values was reviewed and updated during the year. It has been instrumental in promoting guidelines for employees to ensure ethical conduct and business integrity. We strongly believe the Code will continue to play a key role in building a culture that is critical for your Company's long term sustainable growth, profitability and business reputation. Ranbaxy also made sincere efforts to promote good health and social development through its social initiatives. The Company's apex CSR vehicle, Ranbaxy Community Healthcare Society (RCHS), launched several initiatives to achieve positive health for the underprivileged. The programs were based on the integrated approach of preventive, promotive and curative healthcare services, covering areas of maternal child health, family planning, reproductive and adolescent health, health education and AIDS awareness. The 13000 strong multi-cultural work force of Ranbaxy is one of its biggest strengths. I appreciate the efforts by Team Ranbaxy, that displayed
exemplary spirit and seized every possible opportunity for growth and overcame several challenges. The Management undertook several new initiatives to redefine the work culture and people management processes. This has positively impacted people practices, to foster a new culture, based on empowerment and transparency. The Management team at Ranbaxy is committed to guide your Company to emerge as a truly global entity. Ranbaxy will remain as a prestigious Company, listed on the Indian stock market, creating shareholder value. I would like to take this opportunity to thank you for supporting Ranbaxy in all these years and look forward to your continued support and encouragement. As the Chairman of the Board, I wish to contribute to establish Ranbaxy as an admirable and irreplaceable company in the global arena.
Dr. Tsutomu Une
Chairman
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Ranbaxy Laboratories Limited Annual Report 2009
06
CEO & Managing Director's Message
CEO & MANAGING DIRECTOR'S MESSAGE
ENVISIONING THE FUTURE
Atul Sobti
CEO & Managing Director
Dear Stakeholders, 2 009 has been a historic year for Ranbaxy. It was a year of great change, challenge, and opportunity. A year when we re-defined the scope and focus of our business. A year that provided a glimpse of the enormous potential that lies on our horizon – with the pioneering Hybrid Business Model alongside Daiichi Sankyo, and with the impending patent expiries in the US; as also with our broader new horizon of Bio-therapeutics. At an operational level, amidst the challenges of the global economic environment, change of ownership, foreign exchange impact, and compliance, Ranbaxians across the world have responded with strong character and resilience, and performance. Sales for 2009 were US $ 1.52 Bn (Rs. 7,344 crores); Profit Before Tax (PBT) was US $ 209 Mn (over Rs. 1,000 crores); Profit After Tax (PAT) was US $ 64 Mn (Rs. 311 crores). Ranbaxy had a change in ownership, in late 2008; and a change in the MD/CEO in May 2009. In 2008, the Company had incurred a loss of over Rs. 900 crores (over Rs. 9 Bn), in no small measure due to a
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Ranbaxy Laboratories Limited Annual Report 2009
foreign exchange impact. Our Paonta Sahib facility was put under the Application Integrity Policy (AIP) by the US FDA in Feb 2009; and the Gloversville facility in the US was issued a warning letter in December 2009. We of course continue to co-operate with the US FDA and the Department of Justice, for an effective resolution of all outstanding issues. During the year, Ranbaxy’s Toansa facility, CPU and CPP in India, and , the New Jersey facilities in the US, had successful FDA inspections; and all our facilities, including Dewas and Paonta Sahib in India, had successful inspections from many regulators across the world. To strengthen Ranbaxy’s manufacturing capacities, a new facility was set up at the Special Economic Zone in Mohali (Punjab). We expect to commence production in 2010, after receiving regulatory approvals. Despite the very high impact challenges, the Company has over-achieved on the guidance given at the start of 2009. We have improved quarter on quarter in 2009, culminating in an excellent 4th quarter, with the launch of Valacyclovir,
(a First-To-File product with “exclusivity” benefit), in the US. The exclusivity continues into 2010. We also commenced Phase III clinical trials for our anti-malaria combination drug. We harnessed the change to define some clear objectives and priorities, within a 3 year pathway. This has culminated in the development of our Mid Term Plan for 2010 to 2012. We also remained focused and committed in our investment for tomorrow, especially in the US and India – in manufacturing, and business operations. In the US, for 2009, we felt the full year impact of the import alert on products from Paonta Sahib and Dewas. However, we were able to launch three First-To-File (FTF) products successfully, from our US facilities; as also an Authorized Generic. The Company’s business in India continued to grow at a healthy pace. Eighteen of our brands featured amongst the Top-300 brands in the industry. Revital, a flagship brand, emerged as the 7th largest product in the Indian Pharmaceutical Market (IMS MAT Nov 2009). We have taken a bold step in ramping up for a big market share play in India,
through Project “VirAAt”. We will stay the course, with resources to back it. It has started well, under new leadership. “VirAAt” is a key initiative to strengthen the Company’s domestic leadership position. The initiative will augment new product flow, while increasing extra-urban/rural footprint, and customer and therapy coverage. Our wide business presence across the globe has always been a good source of business opportunity and de-risk. In 2009, despite the global slowdown, we did well in many countries. We also took the opportunity to re-model some of our country businesses, for best future value (eg. in the UK, China, Japan, and Vietnam). And we undertook a most comprehensive management of cost. In terms of alternative/new growth areas, we had identified the Biologics space as strategic, a couple of years ago, and invested in a company in India, Zenotech Labs. With an
08
CEO & Managing Director's Message
increasing focus on prevention of disease, we also strongly feel that Vaccines will be an important part of the future. Necessary steps have therefore been taken to provide an entry platform for the development and manufacture of Vaccines and Bio-therapeutics. All these initiatives are integral to our defined three year objectives/priorities. The Hybrid Business Model is progressing well. This unique and pro-active Model has the potential to provide an excellent mix of innovative and affordable quality medicine to people around the world. The Model represents a great opportunity for Synergy benefits to both Ranbaxy and Daiichi Sankyo. The scope is now wide and open – across geographies and functions. Some implementation has already taken place. The strategy for optimum utilisation of the Ranbaxy NDDR (Discovery R&D) resource has also been agreed on. Daiichi Sankyo has also just announced the formation of a new company, for business in the established pharmaceuticals/generic space in Japan. Globally, Japan is the second largest pharmaceutical market, and the generics penetration has just started to gain momentum. This offers decades of solid growth potential for Daiichi Sankyo and Ranbaxy. Finally, we do strongly believe it all comes down to the people – the Team. People do matter; and People do make the difference. Team Ranbaxy in 2009 has been exemplary – from the top management team that facilitated the smooth transition of key ownership in May – a change of great magnitude in operation, sensitivity, and impact; to the US team that has courageously and positively withstood some dark moments – and performed admirably again; and to the multiple Teams across countries and functions that have shown great fortitude in adversity, and performed. We also captured our current “voice of the employee’, through the 2009 Engagement Survey. We constantly work on ensuring effective cross functional team work – most imperative in our industry. We do believe that the culture today is one of transparency and empowerment. The priority of the top management team is to enable a professional work culture. I would also like to mention a special thank you to the Ranbaxy Board, for their solid support and guidance. With warm regards,
Atul Sobti
CEO & Managing Director
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Ranbaxy Laboratories Limited Annual Report 2009
GLOBAL PHARMACEUTICALS BUSINESS
HARNESSING
COMPETENCIES
Arun Sawhney
President Global Pharmaceuticals Business
T he year 2009 had its own set of challenges and opportunities for Ranbaxy. On the business front, the Company surpassed its guidance and delivered a healthy performance achieving Global sales of US $ 1519 Mn (Rs. 73,441 Mn). Emerging markets contributed 54% of sales, while developed markets accounted for 39%. It was a landmark year for Ranbaxy's global operations. The focus was on transforming the organisation to meet the global demands of the future, through a renewed thrust on customer service and quality. We were the first to launch several new products in India. In the domestic market,
Ranbaxy took a huge step forward by rolling out project “VirAAt”, with a strong commitment to achieve the top slot in the market. The groundwork to achieve this ambitious project has been done and the project is now being operationalised. Cost optimisation was another major focus area. In the US market, Ranbaxy launched three First-To-File (FTF) products during the year, viz. Sumatriptan, Valacyclovir and Oxcarbazepine Suspension. In Europe, we were among the first companies to launch 6 new products. This is a testimony of our commitment to Product Development, Regulatory, Manufacturing and Sales operations in Europe.
10 14
Global Pharmaceuticals Business
On the pharmaceuticals manufacturing front, a new Dosage Forms facility has been set up in the Special Economic Zone, at Mohali (Punjab, India). This facility will cater to the developed markets of the US and the EU. As a start, in 2009, the first ANDA was filed from the site, for the US market. Five more Marketing Authorisation Applications (MAAs) were filed in the EU, in 2009. The new commercial facility has a capacity of 2 Bn tablets and 500 Mn capsules per annum. We filed our first ANDA in 2009, from Batamandi (Himachal Pradesh, India), with the US FDA. We commenced a modernisation drive in South Africa. Altogether a new manufacturing facility is being set up for solid oral Dosage Forms that will become operational in first half of 2010. We are also investing in our manufacturing facilities at Ohm Laboratories Inc., USA, to significantly enhance manufacturing capacities in 2010. Investments will continue in 2010, to build our future business in the USA. In our efforts to rationalise global manufacturing operations, we discontinued in-country manufacturing in China and Vietnam, during the year. As a further measure of rationalisation, starting in 2010, we will aggressively look to outsource either products or manufacturing capacities for our business in other than the top 20 markets for Ranbaxy. Active Pharmaceutical Ingredients (API) The year saw a visible demonstration of good quality management systems as well as quality of the manufactured products. The year witnessed successful external audits of API manufacturing sites by various regulatory agencies and customers, including US FDA inspection of Toansa (Punjab, India) and EU inspection of Dewas (Madhya Pradesh, India) site. The effort in improving cost effectiveness was driven through numerous initiatives including improvement in solvent and catalyst recoveries, energy savings and better asset utilisation. Catering to the enhanced market demands, a number of capacity enhancement projects were undertaken and completed during the year. All API sites remained fully compliant with applicable Environment, Health and Safety (EHS) regulations. Dewas site went through a successful ISO 14001 Certification Audit and Toansa and Mohali ensured the continuation of ISO14001 Certification through 2nd Surveillance Audits by TUV NORD. Various initiatives were taken to strengthen the EHS systems and practices, thereby improving EHS performance of the division. These included FSRA (Fire Safety Risk Assessment) and HAC (Hazardous Area Classification) studies, conducted at Toansa through external experts and implementing the recommendations at all locations, engaging the services of an international agency for Industrial Hygiene (IH) aspects of EHS and inter-location EHS audits, to name a few. Other initiatives include ETP up-gradation and installation of MEE/ATFD for treatment of Hi-TDS stream at Dewas, capping of Solar Evaporation Ponds at Toansa. Extensive EHS training was imparted to employees and contractors during the year. Ranbaxy's API manufacturing operations will remain the bedrock of success in our Dosage Forms business. We commenced investment in expanding capacities at our Dewas site, in 2009. By Q3, 2010, this new manufacturing block will become operational. We will continue to strategically invest in our API facilities in 2010.
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Ranbaxy Laboratories Limited Annual Report 2009
As in our Dosage Forms manufacturing, we will be looking to partner with companies strategically for outsourcing of either products or manufacturing capacities even for APIs. Synergies with Daiichi Sankyo In India, Ranbaxy introduced Daiichi Sankyo's innovative anti-hypertensive product, Olmesartan Medoxomil under the brand name 'Olvance'. A dedicated marketing division within Ranbaxy's Mexico subsidiary has been established, which will soon introduce Daiichi Sankyo's products in this market. Ranbaxy will also leverage its network in Africa and will be launching Olmesartan Medoxomil in six African markets further strengthening the Company's position. Together with Daiichi Sankyo, Ranbaxy is exploring synergistic opportunities in the areas of R&D, Manufacturing, Global Supply Chain,
Service/Support and IT functions, among others to secure maximum value in the coming years. Recognitions and Awards During the year, Ranbaxy received approvals from various regulatory authorities. Medicines and Healthcare Products Regulatory Agency (MHRA), UK and the Therapeutic Goods Administration (TGA), Dept. of Health and Ageing of the Australian Government, issued Good Manufacturing Practice (GMP) certificates for Ranbaxy's manufacturing sites at Paonta Sahib, following a joint audit conducted in October 2008. The MHRA approval will cover product filings for the UK and the entire EU. The Batamandi facility at Paonta Sahib was approved by Pharmaceuticals and Medical Devices Agency (PMDA), Japan. The Paonta Sahib plant also received WHO approval during the year.
The Company also received ISO 14001 Certificate for Environment Management Systems. Ranbaxy's manufacturing facility in Dewas was felicitated by Govt. of Madhya Pradesh, India, for significant contributions in the field of pharmaceutical manufacturing and being one of the largest exporter in the State.
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Therapy Focus
THERAPY FOCUS
EXTENDING THE HEALING TOUCH
Dr. Arun K. Purohit
Vice President & Head Global Therapy Management
Anti-infectives
A nti-infectives remained the largest therapeutic segment for Ranbaxy during 2009. The highlight of the year was the successful launch of the Company's top selling product, Valacyclovir Hydrochloride, in the US, with marketing exclusivity of 180 days. Ranbaxy had earlier entered into an agreement with GlaxoSmithKline to settle the US patent litigation with regard to Valtrex® (Valacyclovir Hydrochloride tablets), in 2007. The product was also successfully launched on Day-1, in UK and France. During the year, the Therapeutic Goods Administration (TGA), Australia, granted an approval for registration of SEBIFIN® Terbinafine tablets, in Australia.
Cardiovasculars
Cardiovasculars was another strong therapeutic segment for Ranbaxy. Simvastatin became the second best-selling product for the Company. Ranbaxy took early steps at introducing Daiichi Sankyo's innovator products. The Company launched Olvance (Olmesartan Medoxomil) and its fixed dose combination with Amlodipine (Ol-Vamlo), in India. Further expanding its portfolio in Canada, Ranbaxy launched two important products, Ran-Simvastatin (Simvastatin) and Ran-Amlodipine (Amlodipine). In the US, tentative approval was received to manufacture and market Ramipril capsules
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Ranbaxy Laboratories Limited Annual Report 2009
Top 10 Products (2009) Valacyclovir Simvastatin Co-Amoxyclav Ciprofloxacin and Combinations Amoxycillin and Combinations Isotretinoin Ketorolac Tromethamine Loratadine and Combinations Ginseng+Vitamins Cephalexin Atorvastatin and Combinations
and a combination of Quinapril and Hydrochlorthiazide tablets. Covance (Losartan) was launched on Day-1, in Malaysia.
Musculoskeletal
In the Musculoskeletal segment, Ketorolac was the primary contributor to sales. In the US, Ranbaxy entered into an agreement with Validus Pharmaceuticals to market and distribute an Authorized Generic version of Rocaltrol (Calcitriol). The Company settled its litigation with Purdue Pharma, in the US, on Oxycodone Extended Release tablets, allowing the sale of the Authorized Generic version, for two months, in 2010. Leveraging synergies generated through the Hybrid Business Model, the Company launched Evista (Raloxifene), a product from Daiichi Sankyo, in Romania. Ranbaxy's flagship brand in this segment, Volini, attained leadership position in India, garnering more than 35 % market share. Volini was also featured amongst the Top 50 Indian brands. Central Nervous System The Central Nervous System segment recorded a healthy growth of 11%. The key products in this segment were
Gabapentin and Sertraline. The two major products that deserve specific mention under this segment are Oxcarbazepine Suspension and Sumatriptan tablets. The Company successfully launched these key First-To-File products, in the US, with 180-days marketing exclusivity. The Company also signed a license and supply agreement with Syntropharma for its Selegiline transdermal patch. Ranbaxy's product portfolio was further strengthened as approvals were received for marketing Topiramate tablets, in the US; Risperidone tablets, in Australia and Ropinirole tablets, in Canada.
Dermatologicals
The Dermatological franchise received a major thrust during the year through the acquisition of brands and marketing rights from Ochoa Laboratories in India for their entire range of Dermatological products. These products complement Ranbaxy's existing strong franchise of Derma products, in India. The Company entered into two key strategic in-licensing agreements for the Indian market. A New Chemical Entity (NCE), Lulifin (Luliconazole) was launched under license from Summit Pharmaceuticals, Japan, and an agreement was signed with Medy-Tox, South Korea, to import and market a cosmetic product, Neuronox (purified Botulinum Toxin Type-A).
Gastrointestinals
Ranbaxy registered a double-digit growth of 10% in the Gastrointestinals segment. The Company made a promising Day-1 launch of Pantoprazole, in the major markets of Europe. Final approval was received from the US FDA to manufacture and market Famotidine and Glycopyrrolate tablets. The approval of Acetaminophen Extended Release tablets underscored Ranbaxy's, Over-The-Counter (OTC) presence, in the US. Ondansetron tablets were launched in Canada.
14
Research & Development
RESEARCH & DEVELOPMENT
EXPANDING HORIZONS OF KNOWLEDGE
Dr. Sudershan K. Arora (L)
President Research & Development
Dr. Pradip Kumar Bhatnagar (R)
Senior Vice President New Drug Discovery Research
R anbaxy's commitment to offer affordable medicines is a key driver for the Company's Research and Development endeavors. Our committed team of scientists work constantly to build a healthy product pipeline and to develop costeffective medicines.
New Drug Discovery Research
During the year, the Company made significant progress on its Anti-Malarial molecule. Phase III studies (P .falciparum) with the combination product (Arterolane maleate + Piperaquine phosphate) were started in India and Thailand. The Company also plans to commence Phase II studies in pediatric patients in India, soon. Another Investigational New Drug (IND)
was filed with the Drugs Controller General of India (DCGI) to conduct Phase-II studies in patients of uncomplicated P .vivax malaria. An approval for grant of Rs 10 crore was received from the Department of Science and Technology (DST), India, for the clinical development of the combination treatment. During the year, the Company completed Phase-I, Rising Single and Multiple Dose studies, in India, on one of the candidate compounds, in the Respiratory Segment under the GlaxoSmithKline (GSK) collaborative research program. In lieu of this, the Company received related milestone payments from GSK.
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Ranbaxy Laboratories Limited Annual Report 2009
Approvals were received from the DCGI for conducting Age & Gender study in India and another approval was received from the National Medical Agency, Romania, for conduct of Phase-I (Food Effect) study, in Romania. In another project within the Respiratory segment, Ranbaxy received in-vivo, Proof of Concept related milestone payments. During the year, the Drug Discovery team filed 5 patent applications and the Herbal Research team filed 4 patent applications, in India.
In the European Union, 13 National Filings for 13 products [including 2 in-licensed products] in 8 EU Member States were filed and 4 products under De-Centralized Procedure were also filed in 24 EU Member States. In addition, Ranbaxy filed 6 products under the Mutual Recognition Procedure, in 20 EU Member States. In other key markets, the Company made 209 filings. These included 15 in Russia (including CIS Countries), 5 each in Australia, China and South Africa and 4 each, in Brazil and Canada (Please refer Table-1 for global filing status). During the year, the team filed 42 patents in India, including 12 patents in Novel Drug Delivery System.
development of novel (non-infringing/patentable) process know-how and the development of new polymorphic forms of APIs. Consequently, technology transfer was completed for 8 new APIs and scale-up studies were completed for 9 other New APIs. The Company also filed 179 Drug Master Files comprising 46 APIs, across various countries and 64 patents in India.
Pharmaceutical Research (Dosage Forms)
During the year, Ranbaxy launched 42 products including 7 First-to-Launch products for the domestic market, of which 15 were developed in-house, 22 were out-sourced and 5 were in-licensed. In USA, 5 ANDAs including 1 potential P-IV First-To-File (FTF), were submitted.
Chemical Research (Active Pharmaceutical Ingredients)
In the area of Chemical Research, the emphasis continued on the
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Research & Development
Table-2: International DMF Filings and Approvals - APIs (Jan - Dec 2009)* Markets Approvals (# of APIs) 01 (01) 144 (12) 02 (02) 04 (04) 19 (16) 170 (26) Filings (# of APIs) 05 (05) 120 (20) 02 (02) 04 (04) 06 (06) 42 (28) 179 (46)
USA Europe Brazil Russia (incl. Ukraine) China South Africa Other Markets Total
* Doesn't include re-registrations & outsourced APIs DMF: Drug Master File
Table-3: Patent Applications Filings and Acceptance/Grant (Jan-Dec 2009) Category Table-1:International Regulatory Filings and Approvals - Dosage Forms (Jan - Dec 2009) Markets Approvals Filings^ 5 23 13* 6** 4*** 5 4 4 5 15 5 171 237# USA 11 Europe 45 National 34^ MRP 7^^ DCP 4^^^ Other Key Markets Australia/ New Zealand 7 Brazil 2 Canada 5 China Japan 2 Russia/CIS 9 South Africa 10 Other markets 154 Total
*
Filings* Accepted / Granted Patents** India USA Total 64 30 12 5 4 3 2 120 2 7 9 2 7 9
APIs Dosage Forms NDDS NCEs Herbal Packaging Analytical Development Total
* These are 1st time (fresh) filings; not international or national filings of earlier applications filed in India ** These are unique patents - means any equivalent patents granted in other countries or published under PCT have not been counted.
245
9 products correspond to 11 filings and 2 in-licensed product filings ** 6 MRP filings in 20 CMS *** 4 DCP filings in 24 CMS ^ 13 products correspond to 23 approvals and 11 in-licensed product approvals ^^ 7 MRP approvals in 19 CMS ^^^ 4 DCP approvals in 26 CMS # includes 4 out-sourced products
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Ranbaxy Laboratories Limited Annual Report 2009
FINANCIAL REVIEW
INVESTING IN THE FUTURE
Omesh Sethi
President and Chief Financial Officer
2 009 was an eventful year for the Company that saw change in management structure coupled with challenges from a volatile world economy impacting many facets of business. Ranbaxy's performance in such challenging times improved with turnaround in profits in 2009. Consolidated Sales during the year stood at Rs. 73,441 Mn, which reflects a modest growth over 2008 sales of Rs. 72,555 Mn. There was a turnaround in the profitability of the Company with Earning before Interest Tax Depreciation and Amortisation (EBITDA) for the year at Rs. 11,991 Mn against a loss of Rs. 2,626 Mn for the previous year. Profit
before Tax (PBT) for the year was Rs. 10,098 Mn against a loss of Rs. 15,000 Mn in 2008. At the Profit after Tax (PAT) level, the current year profit was at Rs. 3,107 Mn against a loss of Rs. 9,349 Mn in the previous year. The effective tax rate is higher in 2009 due to accounting treatment of taxes on unrealised profits and partial impairment of deferred tax assets in accordance with Accounting Standard 22 of Indian GAAP Such tax . adjustments are non-cash in nature and are expected to be normalised over the coming quarters. Sales in the emerging markets of Asia Pacific, India, Africa and Latin America
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Financial Review
Sales & Earnings Performance
80,000 60,000 Sales Rs. Million 40,000 20,000 (20,000) (15,000) (9,349) 10,098 72,555 73,441
3,107
2008 Sales EBT
Year PAT
2009
(LATAM) were higher during the year. The regulated markets including North America and Europe were affected due to the economic slowdown. The contribution to sales of Developed markets was 39%, Emerging markets was 54%, and API was 7%. The second half of the year saw Developed markets fare better than the Emerging markets with the launch of two FirstTo-File (FTF) products in the USA, viz. Valacyclovir and Oxcarbazepine Suspension. Improved EBITDA and EBT for the year was aided by (a) FTF products sales in the USA, (b) Continued focus on cost optimisation and rationalisation of business models across countries and (c) Favorable forex movement. With respect to the currency volatility, the adverse impact on Ranbaxy's performance was significant in 2008 which continued through the first half of 2009. Since then, majority of the losses due to the Dollar movement have been reversed with the subsequent strengthening of the Indian Rupee in the second half of 2009. Despite improved profits in 2009, the Company still has carried
forward losses. In view of this, dividend has not been proposed for the year. Working capital and cash flows reflect overall improvement despite tight liquidity conditions in many markets that we operate in. In addition to the impact on Company's operations due to the economic slow down and the currency volatility, Ranbaxy faced adverse regulatory action in 2009, in regard to Application Integrity Policy, to Paonta Sahib (India) and warning letter to Gloversville (US). The Company is continuously making efforts for an early resolution of the issues and is cooperating with the concerned authorities. The Company is continuing to enhance the control and risk management environment across the organisation. Since the Company is a subsidiary of Daiichi Sankyo, it has initiated an exercise to be compliant with the Japanese Sox (J-Sox). Information technology continued to globalise and simplify information flow at Ranbaxy. Significant efforts helped successfully achieve J-Sox compliance and improve productivity at the same time.
Our enterprise SAP system was further expanded with the roll-out to additional subsidiaries. Broadening the scope of the single platform approach we have also implemented SAP's Governance Risk and Compliance modules, as well as, functionality to automate financial consolidation and enhance management reporting. This streamlines and automates much of the required reporting for J-Sox compliance. Our Global Data Center continues to be ISO 27001 compliant, one of the highest international IT security standards. This certification is in conjunction with our on-going efforts to secure protect intellectual property. To sum up, Ranbaxy is confident of its future with a strong pipeline, wide geographic presence and looks forward to capitalising on many new initiatives. These include our journey to enter the vaccine space with the acquisition of a manufacturing facility in Bangalore as well as enlarging the scope of synergies from the Hybrid Business Model with Daiichi Sankyo. These will help the Company improve its
19
Ranbaxy Laboratories Limited Annual Report 2009
GLOBAL HUMAN RESOURCES
ONE TEAM MANY OPPORTUNITIES
Bhagwat Yagnik
Head Global Human Resources
I n the knowledge driven, dynamic pharmaceutical industry, people are the most critical drivers of growth. The passion, commitment and steadfast performance focus of our over 13000 strong, diverse workforce is the foundation supporting and upholding Ranbaxy. As a Company, we constantly strive to adapt people management practices and invest in robust systems and processes that bind us across the globe, encouraging them to seek unity in purpose and vision. The year 2009 was characterised by change and management transition, with the landmark deal between Ranbaxy and Daiichi Sankyo resulting in the formation of a powerful Hybrid Business Model. The Ranbaxy Executive Leadership was
reconstituted and the organisation structure realigned, for building a more robust and integrated global business model. Along with facilitating this transition, HR has a renewed focus on increasing alignment with business and delivering organisational expectations. Further, to leverage Ranbaxy and Daiichi Sankyo's respective strengths, the Synergy initiative was commenced to identify potential growth opportunities. These changes are an endeavour to create an enabling global organisation structure, with higher responsiveness to external challenges. The Indian Pharmaceutical industry is on the threshold of exponential growth and it
20 14
Global Human Resources
is imperative for us to mobilize our resources to capitalise on the opportunities ahead. Identifying and developing potential talent in a short span of time to meet this demand was a great achievement for Ranbaxy's HR in 2009. Establishing dominant market supremacy in India is a key strategic priority for the Company and there will be a greater focus on building synergy, improving response time and ensuring talent pool availability in 2010. With the plethora of unprecedented growth opportunities, there needs to be a conscious effort by organisations to develop, nurture and retain talent. For Ranbaxy, talent management was a key focus area and in 2009 we continued to strengthen our management bandwidth by inducting professionals. Specific behavioural and Organisational Development interventions were targeted towards creating inter-departmental role clarity and coordination, to clarify internal customer concept and create better functional responsiveness. Building employee engagement and commitment, forms a cornerstone at Ranbaxy. Engagement initiatives have specifically targeted four key areasLearning and Development, Performance Management, Recognition and Career Development. To provide greater career opportunities to employees, an online internal job posting system, 'VECTOR', was
launched globally to facilitate internal movements and lateral career shifts. International development opportunities are encouraged to ensure greater people mobility across geographies. Sustained success for an organization presupposes an unwavering concentration on leadership development and strengthening the talent pipeline at all levels. At Ranbaxy, learning and development initiatives are directed towards enhancing the effectiveness of employees and we believe in building human capabilities by exposing our people to a wide variety of business complexities and providing them with greater empowerment and responsibility at all levels. Reward and recognition is yet another critical component in Ranbaxy's HR strategy. Our rewards philosophy was redefined towards making it more performance oriented and business driven, at the same time, acknowledging an employee's commitment to growth. We believe that a culture of appreciating all big and small achievements is crucial to developing a motivated, contributing workforce. Along with an increased focus on providing instantaneous recognition of special efforts, the “Global Appreciate Awards” held for the third year running in May 2009, remains an important platform to
felicitate outstanding employee achievements. The most important stepping stone to building an employee sensitive organization is consistent ongoing feedback from the employees. To this end, our Global Engagement Survey was rolled out in November 2009 to capture the voice of our people. This will be an invaluable tool to measure the effectiveness of our initiatives, take planned action and build a culture of transparency and trust, going forward. In a move to ensure compliance with the highest ethical standards that Ranbaxy strives for, the Code of Conduct for employees has been revised with guidelines for better compliance. The Code of Conduct will serve as an ethical roadmap in all our practices and is a joint commitment by the Company and all the employees for ensuring high business integrity. As we enter 2010 with renewed confidence, the Company will continue to strengthen people processes and follow best practices to nurture and empower people. We aim to harbour a strong culture of productivity, responsibility and learning. We are optimistic that the energy and enthusiasm of our people will continue to be a source of competitive strength for the Company and will play a critical role in its future growth.
21
Ranbaxy Laboratories Limited Annual Report 2009
CORPORATE SOCIAL RESPONSIBILITY AND ENVIRONMENT, HEALTH & SAFETY
FORMULATING A SUSTAINABLE FUTURE
Ramesh L. Adige
President - Corporate Affairs & Global Corporate Communications
C orporate Social Commitment and Public Service is deeply embedded into the cultural fabric of Ranbaxy. Over the years serious efforts have been directed towards making a meaningful contribution to uplifting and transforming the lives of the underprivileged. The Company is also extremely conscious of its duty and responsibility towards the environment. We continue to make sincere efforts to promote good health, social development and better environment, through various Company programs that contribute to sustainable, all round growth. Corporate Social Responsibility (CSR) In 1978, in the wake of the grim health scenario in India, Ranbaxy realised the
urgency to reach out to the underprivileged sections of society that had little or no access to basic healthcare. The Company took a conscious decision to contribute towards the national objective “Health For All”. Towards this end, the “Ranbaxy Rural Development Trust” was set up and the first well equipped mobile healthcare van was introduced, in certain underserved areas of Punjab. As the programme grew, the Ranbaxy Community Healthcare Society (RCHS), an independent body, was created, that is devoted to the health of the disadvantaged. Today, multiple well equipped mobile healthcare vans and an urban family welfare centre, run by
22 14
Corporate Social Responsibility and Environment, Health & Safety
Ranbaxy, benefit over 2 lakh people, in certain identified areas in the states of Punjab, Haryana, Himachal Pradesh, Madhya Pradesh and Delhi. The programme is based on an integrated approach of preventive, promotive and curative services, covering areas of maternal child health, family planning, reproductive health, adolescent health, health education including AIDS awareness. During 2009, maternal and infant mortality were the focus of particular attention and efforts in these areas were intensified in RCHS serviced areas. The results of these interventions have been most encouraging and the general health profile of the local community has shown further improvement in terms of coverage for immunisation, vitamin A deficiency and family planning. The problem of malnutrition has been addressed to a large extent and birth rates and infant mortality rates have declined substantially. Amongst women, the risk of mortality due to pregnancy or child birth has also been reduced when compared with the prevailing level of risk, in India and other developing countries. Ranbaxy has also dovetailed its CSR efforts in a manner that is synchronous with the larger health goals of the State and Central Government. RCHS continued to work actively on critical issues related to HIV/AIDS, tuberculosis, malaria, polio, noncommunicable chronic diseases and female foeticide. RCHS also continued its partnership with the Voluntary Health Association of Punjab for the project on Reproductive Child Health (RCH), in the districts of Nawanshahar and Fatehgarh Sahib, in Punjab and achieved the targets set under the RCH-II plan, of the Government of India.
Ranbaxy entered into a Public Private Partnership (PPP) with the Punjab State Government, to deliver healthcare services in identified districts of Punjab. The programme will be rolled out in a phased manner. In order to encourage scientific endeavour in the country, Ranbaxy presented Research Awards and Ranbaxy Science Scholar Awards to 12 outstanding Indian scientists and 9 brilliant young scholars. Symposia and Round Table Conferences were also organised on topics related to women's health, immunogenomics of infectious diseases and pandemic influenza. Environment, Health and Safety (EHS) Ranbaxy remains committed to excellence through the discipline of process and continual improvement in EHS performance aimed at minimising risks. While there is a great emphasis and considerable investment being
made in improving our EHS performance, we firmly believe that the nucleus of our excellence lies in the responsible behaviour of our employees. The involvement of management and staff in the collaborative development of solutions to improve EHS performance is a key strategy for excellence. EHS Management System (EHSMS) Ranbaxy's EHSMS is a global framework employed to standardise the EHS processes and practices. It is used for identification of EHS aspects and their impact, prioritise EHS objectives, engage all personnel in support of EHS objectives, and implement the improvement plans. The performance metrics were further strengthened through the introduction of an EHS Dashboard, a single window for all EHS related aspects, within the Company. Ranbaxy's 'N'Vizion' incident Tracking System was
23
Ranbaxy Laboratories Limited Annual Report 2009
extended to all operating locations, globally, to integrate the entire Company. The Corporate EHS Committee reviewed the performance of EHS during 2009. An EHS Functional Meet was organised to share achievements, experiences and learnings. It provided a platform for setting new goals, crosspollination of ideas and sharing best practices. The year saw the introduction of cross-locational EHS audits in manufacturing locations, within India. Environment All equipment and infrastructure for environmental management was in conformity with regulatory standards throughout the year. The Dewas site saw the up-gradation of the Effluent Treatment Plant, the installation of Multi Effect Evaporators and Agitated Thin Film Driers. A number of Innovative 'Green Technologies' like
the Heat Pump, the Refrigeration Chiller (with total Heat Recovery System), Variable Refrigerant Volume (VRV) System, were deployed in recent projects at our Baddi Dosage Form (DF) site, in Himachal Pradesh. These have also been instrumental in reducing the load on the Effluent Treatment Plant. Occupational Health and Safety Our inherent belief that all workplace illnesses and injuries are preventable has been the driving force in keeping our manufacturing sites, R&D and Corporate Office safe. Numerous positive initiatives were undertaken during the year to enhance workplace safety. Our Dewas site further added a road safety initiative to educate employees, contractors and the local community on positive road behaviour. Emergency preparedness at Ranbaxy was ensured through regular table top and mock drills exercises, at all manufacturing sites as well as at R&D.
Additionally, a safety audit by The National Safety Council was conducted during the year at our Mohali API manufacturing facility. Extensive safety training programs, both by internal as well as external specialists, were also conducted at all manufacturing sites including those of our business partners, engaged in contract manufacturing. Ranbaxy's abiding concern for society extends beyond its business. We remain committed to the communities we serve and amongst whom, we operate, with the desire to bring about long term well being.
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25
REPORT ON
CORPORATE GOVERNANCE
Ranbaxy Laboratories Limited
1. THE COMPANY'S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE In order to ensure sustainable returns to all stakeholders of the business, it is imperative, especially for large organizations, to adopt and follow certain policies, procedures and processes, which together constitute a "Code of Corporate Governance". It is important that such a Code is institutionalized, to ensure transparency, consistency and uniformity of decision making processes and actions. Ranbaxy has always believed in such a "Sound" Code of Corporate Governance, as a tool for highest standards of management and business integrity. 2. BOARD OF DIRECTORS The details of Directors on the Board of the Company as on December 31, 2009, is as under: Name of the Director Category Number of Directorships held in other Companies@ – – – – – 6 – Number of Number of Board Committee Chairmanship of memberships held Board Committees in other companies ^ held in other companies^ – – – – – 1 – – – – – – – –
Dr. Tsutomu Une, Chairman Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Atul Sobti, CEO & Managing Director
@
Non-ExecutiveNon-Independent -doNon-ExecutiveIndependent -do-do-doExecutive
Excludes private, foreign companies and companies registered under section 25 of the Companies Act, 1956. ^ Includes only the membership of Audit and Shareholders'/Investors' Grievance and Share Transfer Committees of public limited companies.
Notes: 1. Mr. Percy K. Shroff was appointed as the Director of the Company on March 27, 2009, in the casual vacancy caused by the resignation of Mr. Harpal Singh. 2. At the Board meeting held on May 24, 2009, Mr. Malvinder Mohan Singh stepped down as Chairman, CEO & Managing Director; and Mr. Balinder S. Dhillon, Independent Director, Mr. Sunil Godhwani, Non-executive- Non-Independent Director and Mr. Atul Sobti, the Chief Operating Officer and Whole-time Director, resigned from the Directorship of the Company with immediate effect. 3. At the subsequent Board meeting held on May 24, 2009, Dr. Tsutomu Une was elected as Chairman of the Board of Directors of the Company and Mr. Atul Sobti was appointed as a Director of the Company in the casual vacancy caused by the resignation of Mr. Vivek Mehra. The Board also appointed Mr. Sobti as the CEO & Managing Director of the Company effective May 24, 2009 for a period of 3 years which was approved by the Shareholders vide resolution passed by Postal Ballot with overwhelming majority. 4. None of the Directors are related inter-se. 3. BOARD MEETINGS Dates of Board meetings are fixed in advance for the financial year and agenda papers are circulated to Directors in advance. Meetings and Attendance During the year 2009, nine Board Meetings were held on January 22, March 16, March 27, April 24, May 24 (two meetings), May 29, July 24 and October 26, 2009.
26
Ranbaxy Laboratories Limited
Attendance of Directors at Board Meetings and at the Annual General Meeting (AGM) Name of the Director Dr. Tsutomu Une Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Atul Sobti Mr. Malvinder Mohan Singh Mr. Sunil Godhwani Mr. Balinder S. Dhillon 4. COMMITTEES OF THE BOARD (i) Audit Committee The Audit Committee has been constituted as per Section 292A of the Companies Act, 1956 and the guidelines set out in the Listing Agreements with the Stock Exchanges. The terms of reference include • Overseeing financial reporting processes. • Reviewing periodic financial results, financial statements and adequacy of internal control systems. • Approving internal audit plans and reviewing efficacy of the function. • Discussion and review of periodic audit reports. • Discussions with external auditors about the scope of audit including the observations of the auditors. • Recommend to the Board appointment of the statutory auditors and fixation of audit fees. • Reviewing with the management, the statement of uses / application of funds raised through an issue (public, rights, preferential issue of securities etc.) • Reviewing with the management the performance of statutory and internal auditors. Minutes of meetings of the Audit Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, five meetings of the Audit Committee were held on January 22, March 27, April 24, July 23 and October 25, 2009. The composition of the Committee and details of the meetings attended by the members during the year are as under: Name of the Member Mr. Akihiro Watanabe, Chairman Dr. Tsutomu Une Dr. Anthony H. Wild Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Sunil Godhwani Mr. Balinder S. Dhillon Permanent Invitees Mr. Malvinder Mohan Singh Mr. Atul Sobti Notes: 1. The Audit Committee of the Company was reconstituted on May 24, 2009 as per details : (i) Dr. Tsutomu Une was co-opted as a member of the Committee; (ii) Mr. Sunil Godhwani and Mr. Balinder S. Dhillon ceased to be members of the Committee; and (iii) Mr. Malvinder Mohan Singh ceased to be the permanent invitee of the Committee. No. of Meetings attended 3 5 2 2 5 2 3 3 5 No. of Board Meetings attended 9 8 6 7 6 8 9 5 4 5 Whether attended the AGM held on May 29, 2009 Yes Yes Yes Yes Yes Yes Yes N.A. N.A. N.A.
27
Ranbaxy Laboratories Limited
2. Dr. Tsutomu Une attended five meetings of the Committee during the year. Of these, three were in his capacity as a Permanent Invitee. 3. Dr. Anthony H. Wild and Mr. Percy K. Shroff were co-opted as members of the Committee on June 18, 2009. Members of the Audit Committee have requisite financial and management expertise and have held or hold senior positions in reputed organizations. The Statutory Auditors, Internal Auditor and the Chief Financial Officer of the Company are invited to attend and participate at meetings of the Committee. The Company Secretary acts as the Secretary to the Committee. (ii)Compensation Committee The Compensation Committee has been constituted as per the provisions set out in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The terms of reference include • Administration and superintendence of Employee Stock Option Schemes (ESOS). • Formulation of the detailed terms and conditions of the ESOS. • Grant of stock options. • Recommendation for fixation and periodic revision of compensation of the Managing Director and Executive Directors to the Board for approval and review and approve compensation policy (including performance bonus, incentives, perquisites and benefits) for senior management personnel. Minutes of meetings of the Compensation Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, three meetings of the Compensation Committee were held on January 21, March 27 and July 23, 2009. The composition of the Committee and details of the meetings attended by the members during the year are as under: Name of the Member Mr. Rajesh V. Shah, Chairman Dr. Tsutomu Une Mr. Percy K. Shroff Dr. Anthony H.Wild Mr. Balinder S. Dhillon Mr. Sunil Godhwani Permanent Invitees Mr. Malvinder Mohan Singh Mr. Atul Sobti No. of Meetings attended 2 3 1 1 2 2 1 –
Note: The Compensation Committee of the Company was reconstituted on May 24, 2009 as per details: i) Mr. Balinder S. Dhillon ceased to be the Chairman & Member of the Committee; ii) Mr. Sunil Godhwani and Mr. Malvinder Mohan Singh ceased to be the member & permanent invitee respectively of the Committee; iii) Mr. Rajesh V. Shah was appointed as Chairman of the Committee; and iv) Dr. Anthony H. Wild and Mr. Percy K. Shroff were co-opted as members and Mr. Atul Sobti as a permanent invitee of the Committee. Remuneration Policy The Remuneration Policy of the Company for managerial personnel is primarily based on the following criteria: – Performance of the Company, its divisions and units. – Track record, potential and performance of individual managers and – External competitive environment.
28
Ranbaxy Laboratories Limited
Remuneration of Directors Remuneration of Executive Directors is decided by the Board based on recommendations of the Compensation Committee as per the remuneration policy of the Company, within the ceiling fixed by the shareholders. The details of the remuneration of Executive Directors for the year ended December 31, 2009 are as under:
Name of the Director Salary & Allowances Commission Perquisites Retiral Benefits Stock Options Service Contract Tenure Notice Period & Severance Fee – 3 years – 6 months
—————————— Rs.Lacs ——————————— Mr. Malvinder Mohan Singh Mr. Atul Sobti 782.52 419.99 – 316.45 47.08 1.28 182.61 24.08 – 50,000 granted on 21.1.2009 at an exercise price of Rs. 216 per share
Notes: 1. Remuneration paid to Mr. Malvinder Mohan Singh is for the period from 1.1.2009 to 24.5.2009, the day he stepped down as Chairman, CEO & Managing Director of the Company. He was also paid Rs.661.88 lacs and Rs. 899.04 lacs towards leave encashment and gratuity respectively. 2. The remuneration paid to Mr. Atul Sobti comprises of remuneration paid to him as Chief Operating Officer and Whole-time Director upto May 23, 2009 and subsequently as CEO & Managing Director of the Company effective May 24, 2009. 3. Remuneration of Executive Directors consists of fixed component and commission which is linked with the profit of the Company. 4. Retiral benefits are exclusive of provision for future liabilities in respect of retirement benefits (which are based on actuarial valuation done on overall Company basis). 5. The market price of the share of the Company on January 20, 2009 was Rs. 215.15. Hence the aforesaid options were not granted at a discount. The options granted are exercisable till expiry of ten years from the date of grant. Vesting period will commence on the expiry of one year from the date of grant of options and the entitlement will be in the graduated scale over a period of five years as provided in the Employees Stock Option Scheme of the Company. 6. Mr. Malvinder Mohan Singh was paid Rs.4,813.83 lacs as compensation for loss of office pursuant to the Employment Agreement and Separation Agreement entered with him.
Remuneration to Non-Executive Directors Remuneration to Non-Executive Directors comprises commission and sitting fees. The shareholders of the Company at their Annual General Meeting held on May 29, 2009 approved the payment of commission to Non-Executive Directors not exceeding 1% of the net profits of the Company as computed under the relevant provisions of the Companies Act, 1956. The Board of Directors determines the commission payable to the Non-Executive Directors keeping in view the independent status, contribution at the Board and Committee meetings and responsibilities considering the extensive global operations of the Company. Details of remuneration paid to the Non-Executive Directors for the year ended December 31, 2009 are as under: Name of the Director Dr. Tsutomu Une Mr. Takashi Shoda Mr. Rajesh V. Shah Mr. Percy K. Shroff Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Balinder S. Dhillon Mr. Sunil Godhwani Commission (Rs.Lacs) 25 25 30 30 30 30 – – Sitting Fees (Rs. Lacs) 4.15 2.20 2.80 1.70 2.00 1.80 2.10 2.10
None of the present Non-Executive Directors holds any shares in the Company.
29
Ranbaxy Laboratories Limited
(iii)Science Committee Terms of Reference of Science Committee include • Approval of focus areas of research, especially New Drug Discovery Research (NDDR) and Novel Drug Delivery Systems (NDDS); and Monitoring progress of NDDR and NDDS.
Minutes of meetings of the Shareholders'/Investors' Grievance and Share Transfer Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, four meetings of the Committee were held on January 21, March 16, July 23 and November 30, 2009. Name of the Member Mr. Percy K. Shroff, Chairman Dr. Tsutomu Une Mr. Atul Sobti Mr. Malvinder Mohan Singh Mr. Balinder S. Dhillon Mr. Sunil Godhwani Note: The Shareholders'/Investors' Grievance and Share Transfer Committee of the Company was reconstituted on May 24, 2009, as per details : a) Mr. Sunil Godhwani ceased to be the Chairman and Member of the Committee; No. of Meetings attended 2 3 4 2 2 2
•
Minutes of meetings of the Science Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, one meeting of the Science Committee was held on April 23, 2009. The composition of the Committee and the attendance of the members at the said meeting is as under: Name of the Member Dr. Tsutomu Une, Chairman Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Atul Sobti Mr. Malvinder Mohan Singh Mr. Sunil Godhwani Permanent Invitees Head of R&D Division of the Company 1 No. of Meetings attended 1 1 1 1* 1 –
* Attended the meeting as a permanent invitee Mr. Malvinder Mohan Singh and Mr. Sunil Godhwani ceased to be members of the Committee w.e.f. May 24, 2009. Mr. Atul Sobti was co-opted as a member of the Committee w.e.f. July 24, 2009. (iv)Management Committee The Management Committee was dissolved by the Board of Directors effective July 24, 2009. (v) Shareholders'/Investors' Grievance and Share Transfer Committee The Shareholders'/Investors' Grievance and Share Transfer Committee has been constituted as per the provisions set out in the Listing Agreement. The terms of reference include • Approve transfers, transmissions, issue of duplicate certificates, transpositions, change of names etc. and to do all such acts, deeds, matters and things as connected therein. Review complaints of the shareholders and action taken by the Company.
b) Mr. Malvinder Mohan Singh and Mr. Balinder S. Dhillon ceased to be members of the Committee; and c) Mr. Percy K. Shroff was co-opted as a Member and appointed as Chairman of the Committee. The Company addresses all complaints, suggestions and grievances expeditiously and replies have been sent/issues resolved usually within 15 days except in case of dispute over facts or other legal constraints. The Company received 49 shareholders' complaints which inter-alia include non-receipt of dividend, annual report, split shares, non-receipt of share certificates etc. The complaints were duly attended to and the Company has furnished necessary documents/information to the shareholders. The Shareholders'/Investors' Grievance and Share Transfer Committee reviews complaints received and action taken by the Company in this regard. No requests for share transfers are pending except those that are disputed or sub-judice. Mr. S.K. Patawari, Company Secretary is the Compliance Officer of the Company.
•
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Ranbaxy Laboratories Limited
5. GENERAL BODY MEETINGS Details of the General Meetings held in the last three years: I. Annual General Meeting Year 2007 Date 31-5-2007 Day Thursday Time 11.00 A.M. Venue The National Institute of Pharmaceutical Education & Research, Sector 67, S.A.S. Nagar, Punjab The National Institute of Pharmaceutical Education & Research, Sector 67, S.A.S. Nagar, Punjab Special Resolutions Passed No Special Resolution passed
2008
30-5-2008
Friday
11.00 A.M.
- Appointment of Dr. Brian W. Tempest as an "Advisor" to Ranbaxy Europe Ltd., a wholly owned subsidiary of the Company for a period of three years effective January 1, 2008. - Approval for amendment in existing Employees Stock Option Scheme(s) of the Company to provide that Stock Options granted and outstanding in the hands of the employees who may be transferred to any entity affiliated to the Company would vest on the date of transfer of such employees provided one year has elapsed between the date of grant of stock options and date of such transfer.
2009
29-5-2009
Friday
11.00 A.M.
The National Institute of Pharmaceutical Education & Research, Sector 67, S.A.S. Nagar, Punjab
- Approval under Section 309(4) of the Companies Act, 1956 for payment of commission to the Non-executive Directors of the Company, not exceeding one percent of net profits of the Company in the aggregate for all the Non-executives Directors in a financial year, for a period of five years commencing from January 1, 2009.
II. Extra-ordinary General Meeting 2008 15-7-2008 Tuesday 9.00 A.M. Confederation of Indian Industry (CII), Block No. 3, Sector-31 A, Dakshin Marg, Chandigarh - Approval under Section 81(1A) of the Companies Act, 1956 for issue of Equity Shares and Warrants of the Company on preferential basis to Daiichi Sankyo Company, Limited, Japan. - Approval for amendment to the existing Employees Stock Option Scheme(s) of the Company to the effect that maximum number of stock options that may be granted to individual management employee in a year be increased from 40,000 to 3,00,000.
31
Ranbaxy Laboratories Limited
Postal Ballot During the year, the shareholders of the Company passed two ordinary resolutions through postal ballot. Detailed procedure followed by the Company is provided hereunder: 1. The Board of Directors of the Company (" Board") in its meeting held on July 24, 2009, sought the approval of the shareholders through postal ballot for the following two items as Ordinary resolutions: Item No. 1 Appointment of Mr. Malvinder Mohan Singh as Chairman, CEO & Managing Director for the period from December 19, 2008 to May 24, 2009 (the date he stepped down from the said positions) and payment of remuneration to him for the said period; Item No. 2 Appointment of Mr. Atul Sobti as Chief Executive Officer & Managing Director of the Company and payment of remuneration to him for a period of three years effective May 24, 2009. The Board appointed Mr. Sooraj Kapoor, a Practising Company Secretary and Ex-Registrar of Companies, as Scrutinizer for conducting the postal ballot process. 2. The Notice of the Postal Ballot dated July 31, 2009, Postal Ballot form and self-addressed pre-paid postage envelope were sent to the shareholders. The last date for receipt of the Postal Ballot form from the Shareholders was September 14, 2009. 3. Mr. Sooraj Kapoor submitted his report dated September 18, 2009 with the Company and based on the said report, results of Postal Ballot were declared on September 22, 2009 as under: Item No. No. of No. of Valid Invalid Ballots Ballots Received Received 5831 5686 Votes cast in favour Votes cast in against
Declaration as required under Clause 49 of the Listing Agreement All Directors and Senior Management personnel of the Company have affirmed compliance with the provisions of the Ranbaxy Code of Conduct for the financial year ended December 31, 2009. Atul Sobti CEO & Managing Director Gurgaon (Haryana) February 22, 2010 7. Certificate from CEO and CFO Certificate from CEO & CFO for the financial year ended December 31, 2009 has been provided elsewhere in the Annual Report. 8. DISCLOSURES A. Related Party Transactions The Company has not entered into any transaction of material nature with the promoters, the Directors or the management, their subsidiaries or relatives etc. that may have any potential conflict with the interests of the Company. B. Disclosure of Compliances by the Company During the last three years, no penalties or strictures have been imposed on the Company by the Stock Exchanges or SEBI or any other statutory authorities on matters related to capital markets. C. Disclosure of Accounting Treatment There has not been any significant changes in the accounting policies during the year. D. Risk Management The Company has a procedure to inform the Board about the risk assessment and minimisation procedures. The Board of Directors periodically reviews the risk management framework of the Company. E. The Company has complied with all the mandatory requirements and has adopted nonmandatory requirements as per details given below: (1) The Board The Company maintains the Office of the Chairman at its Corporate Office at Plot No. 90, Sector 32, Gurgaon-122 001 (Haryana) and also reimburses the expenses incurred in performance of his duties. There is no fixed tenure for Independent Directors.
1. 2.
324 274,337,559 453,472 (99.83%) (0.17%) 469 274,623,671 135,387 (99.95%) (0.05%)
The Resolutions were approved by the overwhelming majority of the shareholders. The results were also published in Financial Express and Punjabi Tribune and posted on the website of the Company. 6. CODE OF CONDUCT The Code of Conduct for the Directors and Employees of the Company is posted on the website of the Company.
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Ranbaxy Laboratories Limited
(2) Remuneration Committee The Company has constituted Compensation Committee as detailed in 4(ii) hereinabove. The Chair man of the Compensation Committee is an independent director and was present at the last Annual General Meeting. (3) Shareholders Rights The quarterly financial results are published in the newspapers as mentioned under the heading "Means of Communication" at Sl. No. 9 hereinbelow and also displayed on the website of the Company. The results are not separately circulated to the shareholders. (4) Audit qualifications There are no audit qualifications in the Company's financial statements for the year under reference. (5) Training of Board Members No specific training programme was arranged for Board members. However, at the Board/ Committee meetings detailed presentations are made by Professionals, Consultants as well as Senior Executives of the Company on the business related matters, risk assessment, strategy, effect of the regulatory changes etc. (6) Mechanism for evaluating NonExecutive Board Members The Company has not adopted any mechanism for evaluating individual performance of NonExecutive Directors. (7) Whistle Blower Policy The Company has laid down a Code of Conduct for all its employees across the organisation. The Code of Conduct of the Company lays down that the employees shall promptly report any concern or breach and suggests not to hesitate in reporting a violation or raising a policy concern to the Code Compliance Cell or concerned superior. The Code provides that the Company shall support and protect employees for doing so. The Company does not have a Whistle Blower Policy. 9. MEANS OF COMMUNICATION (a) The Company regularly intimates unaudited as well as audited financial results to the Stock Exchanges immediately after these are taken on record by the Board. These financial results are normally published in the Business Standard/ Financial Express, the Punjabi Tribune and are displayed on the website of the Company www.ranbaxy.com. Further in compliance of
Clause 52 of the Listing Agreement, the above information and other communication sent to Stock Exchanges have also been filed under Corporate Filing and Dissemination System (CFDS) and are available at website, www.corpfiling.co.in. The official news releases and the presentations made to the investors/analysts are also displayed on the Company's website. (b) Management Discussion and Analysis Report forms part of the Report of the Directors. 10. SHAREHOLDER INFORMATION Annual General Meeting Date : May 10, 2010 Time : 11.00 A.M. Venue : The National Institute of Pharmaceutical Education and Research (NIPER) Sector-67, S.A.S. Nagar (Mohali)- 160 062 (Punjab). No Special resolution is proposed to be passed by Postal Ballot at the aforesaid Annual General Meeting. Financial Calendar Adoption of Quarterly 3rd/4th week of Results for the quarter ending* – June 30, 2010 July 2010 – September 30, 2010 October 2010 – December 31, 2010 January 2011 – March 31, 2011 April 2011 * Subject to the amendment in the Listing Agreements. Book Closure Dates May 3, 2010 to May 10, 2010 (both days inclusive) LISTING ON STOCK EXCHANGES The Equity Shares of the Company as on December 31, 2009, were listed on the Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd. Global Depository Receipts (GDRs) are listed on the Stock Exchange at Luxembourg. Foreign Currency Convertible Bonds (FCCBs) have been listed with the Singapore Exchange Securities Trading Limited. The Company confirms that it has paid annual listing fees due to the Stock Exchanges for the year 2009-2010. STOCK CODE 1. The National Stock - Ranbaxy Exchange of India Ltd. 2. Bombay Stock Exchange Ltd. - 359 (Physical) 500359 (Demat)
33
Ranbaxy Laboratories Limited
REGISTRAR AND TRANSFER AGENTS M/s. Alankit Assignments Ltd. (Alankit), 2E/8, 1st Floor, Jhandewalan Extension, New Delhi-110 055 is the Registrar and Share Transfer Agent for physical shares of the Company. Alankit is also the depository interface of the Company with both National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL). However, keeping in view the convenience of shareholders, documents relating to shares will continue to be received by the Company at Corporate Office of the Company at Plot No. 90, Sector 32, Gurgaon-122001 (Haryana) Tel No. 91-124-4135000, Registered Office at A-11, Industrial Area Phase-III, Sahibzada Ajit Singh Nagar (Mohali)-160055, (Punjab) and Head Office at 12th Floor, Devika Tower, 6, Nehru Place, New Delhi-110019 Tel No. 91-1126237508; email address: [email protected]. Market Price Data (Rs.) Month Bombay Stock National Stock Exchange Exchange (BSE) (NSE) Low 161.15 159.65 133.15 160.00 167.60 242.70 236.00 257.00 312.10 362.05 374.00 454.00 High 257.70 244.00 168.85 202.00 286.45 312.30 298.60 346.00 418.60 419.50 461.80 538.45 Low 165.10 159.25 133.10 160.00 167.50 242.55 236.00 257.40 312.20 362.05 374.10 455.10
SHARE TRANSFER SYSTEM With a view to expedite the process of share transfers, the Board of Directors of the Company has delegated the power of share transfer to some of the Directors with appropriate individual limits. The delegated Director(s) attend(s) to the share transfer formalities once in a fortnight. The shares for transfers received in physical form are transferred expeditiously, provided the documents are complete and the shares under transfer are not under any dispute. The share certificates duly endorsed are returned immediately to shareholders. Confirmation in respect of the requests for dematerialisation of shares is sent to the respective depositories i.e. NSDL and CDSL expeditiously. DEMATERIALIZATION OF SHARES The shares of the Company are in compulsory demat segment and are available for trading in the depository systems of both NSDL and CDSL. As on December 31, 2009, 412,597,279 equity shares of the Company, forming 98.14% of the Share Capital of the Company, stand dematerialised. International Securities Identification Number - INE015A01028 (with NSDL and CDSL) Shareholding Pattern as on December 31, 2009
Category No. of Percentage of Shares held Shareholding (%)
High January 2009 257.70 February 2009 244.00 March 2009 169.00 April 2009 202.20 May 2009 286.40 June 2009 311.80 July 2009 289.95 August 2009 348.00 September 2009 417.80 October 2009 419.40 November 2009 460.75 December 2009 538.00
Promoters-Daiichi Sankyo Company, Ltd., Japan 268,711,323 Mutual Funds & UTI 12,389,298 Banks, Financial Institutions, Insurance Companies 37,344,241 FIIs 28,582,858 Private Corporate Bodies 14,791,602 Public Shareholding 53,096,851 GDRs 5,501,185 Grand Total 420,417,358
63.92 2.94
8.88 6.80 3.52 12.63 1.31 100.00
Stock Price Performance Ranbaxy vs. BSE Sensex Year 2009
34
Ranbaxy Laboratories Limited
Distribution of Shareholding as on December 31, 2009
From To 1 - 50 51 - 100 101 - 200 201 - 300 301 - 400 401 - 500 501 - 600 601 - 700 701 - 800 801 - 900 901 - 1000 1001 - 2000 2001 - 3000 3001 - 4000 4001 - 5000 5001 &above Total No. of Shareholders Number 104009 29819 17732 7784 5391 3606 2633 1936 1503 1134 1697 5872 2070 1052 542 1498 188278 % Total 55.23 15.84 9.42 4.13 2.86 1.92 1.40 1.03 0.80 0.60 0.90 3.12 1.10 0.56 0.29 0.80 100% No. of Shares Number % Total 2346147 2506213 2780601 1992293 1883531 1687147 1462535 1266531 1142600 970424 1650711 8399113 5072374 3616659 2455376 381185103 0.56 0.60 0.66 0.47 0.45 0.40 0.35 0.30 0.27 0.23 0.39 2.00 1.21 0.86 0.58 90.67
upto March 8, 2011 by the holders into fully paid Equity Shares of Rs.5 each of the Company, which may subject to certain conditions, be represented by Global Depository Shares (GDS) with each GDS representing one share at a conversion price of Rs.716.32 per share, which is subject to adjustment in certain circumstances. In case if the Bonds are not converted into shares, the Company will redeem each Bond at 126.765% of its principal amount on the maturity date i.e. March 18, 2011. 5,501,185 GDRs representing 5,501,185 Equity Shares of Rs.5 each constituting 1.31% of the issued, subscribed and paid-up share capital of the Company, were outstanding as on December 31, 2009. Plant Locations of the Company 1. A-8-11 Industrial Estate Phase- III Sahibzada Ajit Singh Nagar (Mohali) - 160 055 (Punjab) 2. Village Toansa, P.O. Railmajra Distt. Nawanshahar (Punjab) - 144 533 3. A-41, Industrial Area Phase VIII-A Sahibzada Ajit Singh Nagar (Mohali) - 160 071 (Punjab) 4. Industrial Area 3 A.B. Road, Dewas - 450 001 Madhya Pradesh 5. Village & PO Ganguwala Tehsil Paonta Sahib - 173 025 Distt. Sirmour (H.P.) 6. Village Batamandi Tehsil Paonta Sahib - 173 025 Distt. Sirmour (H.P.) 7. E-47/9, Okhla Industrial Area Phase-II, Okhla, New Delhi - 110 020 8. Plot No. B-2 Madkaim Industrial Estate, Ponda, Goa 9 K-5, 6,7, Ghirongi Malanpur, Distt. Bhind - 477 116 (M.P.) Address for Correspondence Shareholders are requested to contact Mr. S. K. Patawari Company Secretary Ranbaxy Laboratories Ltd. Plot No. 90, Sector 32, Gurgaon-122001 Haryana Tel.No. 91-124-4185888, 4135000 Fax No.91-124-4106490 Email address : [email protected]
420417358 100%
Liquidity of Shares The Equity Shares of the Company have been included in the Sensex of the leading Stock Exchanges. Outstanding Stock Options Number of Stock Options outstanding as on December 31, 2009 7,413,016 *
* Options granted upto October 3, 2002 are entitled for additional shares on a proportionate basis in view of issue of bonus shares by the Company in the proportion of 3 : 5 in October 2002. The Company had allotted 23,834,333 Warrants to Daiichi Sankyo Company, Limited, Japan on October 20, 2008. Each Warrant is exercisable at any time between six months to eighteen months from the date of allotment at the option of the holder of the warrant for one fully paid Equity Share of the Company of Rs. 5 each at a price of Rs. 737. Rs.73.70 has been paid in respect of each Warrant (being 10% of the exercise price) at the time of allotment and the balance amount of Rs.663.30 for each Warrant will be payable at the time of exercise of Warrant(s). These warrants are outstanding as on December 31, 2009. The Company had raised US$440,000,000 in the year 2006 through Zero Coupon Convertible Bonds. The Bonds are convertible any time on or after April 27, 2006
35
Ranbaxy Laboratories Limited
Certificate
To the Members of Ranbaxy Laboratories Limited We have examined the compliance of conditions of Corporate Governance by Ranbaxy Laboratories Limited ("the Company") for the year ended on December 31, 2009, as stipulated in Clause 49 of the Listing Agreement of the Company with the stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company, for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.
For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826
Place : Gurgaon Dated : 25 February, 2010
36
CERTIFICATE FROM
CEO AND CFO
Ranbaxy Laboratories Limited
To the Board of Directors of Ranbaxy Laboratories Ltd. We, Atul Sobti, Chief Executive Officer & Managing Director and Omesh Sethi, President and Chief Financial Officer certify that : (a) We have reviewed financial statements and the cash flow statement for the year ended December 31, 2009 and that to the best of our knowledge and belief : (i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;
(ii) these statements together present a true and fair view of the Company's affairs and are in compliance with existing Accounting Standards, applicable laws and regulations. (b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company's Code of Conduct. (c) We accept responsibility for establishing and maintaining internal controls for financial reporting and have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.
(d) We have indicated to the Auditors and the Audit Committee that (i) there has not been any significant changes in internal control over financial reporting during the year under reference;
(ii) there has not been any significant changes in accounting policies during the year requiring disclosure in the notes to the financial statements; and (iii) there has not been any instances during the year of significant fraud of which we had become aware and the involvement therein, if any, of the management or an employee having a significant role in the Company's internal control system over financial reporting.
Atul Sobti CEO & Managing Director Place : Gurgaon Date : February 25, 2010
Omesh Sethi President and Chief Financial Officer
37
BOARD OF
DIRECTORS
Ranbaxy Laboratories Limited
Dr. Tsutomu Une Chairman Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Atul Sobti CEO & Managing Director COMPANY SECRETARY Mr. S. K. Patawari
REGIONAL HEADQUARTERS Gurgaon [India], London [UK], Johannesburg [South Africa] New Jersey [USA], Rio de Janeiro [Brazil] MARKETING OFFICES Douala [Cameroon], Kiev [Ukraine], Moscow [Russia], Ho Chi Minh City [Vietnam], Kaunas [Lithuania], Nairobi [Kenya], Abidjan [Ivory Coast], Yangon [Myanmar], Almaty [Kazakhstan], Dubai [UAE], Harare [Zimbabwe], Casablanca [Morocco], Sofia [Bulgaria] STATUTORY AUDITORS BSR & Co., Building No. 10, 8th Floor, Tower-B, DLF Cyber City, Phase - II, Gurgaon - 122002 [India] BANKERS ABN AMRO Bank NV, Calyon Bank, Citibank NA, Deutsche Bank AG Hong Kong & Shanghai Banking Corporation, Punjab National Bank, Standard Chartered Bank REGISTERED OFFICE A-11, Industrial Area Phase-III, Sahibzada Ajit Singh Nagar [Mohali] - 160 055, Punjab [India] Ph : [91-172] 2271450. Fax : [91-172] 2226925 CORPORATE OFFICE Plot No. 90, Sector 32, Gurgaon - 122 001, Haryana [India] Ph : [91-124] 4135000. Fax : [91-124] 4135001 HEAD OFFICE 12th Floor, Devika Tower, 6, Nehru Place, New Delhi - 110 019 [India] Ph : [91-11] 26237508. Fax : [91-11] 26225987
38
REPORT OF THE
DIRECTORS
Ranbaxy Laboratories Limited
Your Directors have pleasure in presenting the 49th Annual Report and Audited Accounts for the year ended December 31, 2009. STANDALONE WORKING RESULTS (UNDER INDIAN GAAP) Rs. in Million Year ended Year ended December 31, December 31, 2009 2008 45,359.09 43,393.63 11,002.73 (5,713.32) 394.66 (1,493.13) 1,482.03 10,619.17 4,899.33 5,719.84 (8,265.83) 13.76 (2,532.23) 1,458.28 7,474.52 1,544.69 (16,190.81) (5,742.79) (10,448.02) 2,162.69 19.50 (8,265.83)
Net Sales Profit/(Loss) before Interest, Exchange (Gain)/ Loss (Net) on Loans, Depreciation, Amortization, Impairment and Tax Interest Exchange (Gain)/ Loss on Loans Depreciation, Amortization and Impairment Profit/(Loss) before Tax Tax charge/ (Benefit) Profit/(Loss) after Tax Balance as per last Balance Sheet Transfer from Foreign Projects Reserve Surplus/(Deficit) carried forward CONSOLIDATED WORKING RESULTS (UNDER INDIAN GAAP) Net Sales Profit/(Loss) before Interest, Exchange (Gain)/ Loss (Net) on Loans, Depreciation, Amortization, Impairment and Tax Interest Exchange (Gain)/ Loss on Loans Depreciation, Amortization and Impairment Profit/(Loss) before Tax Tax charge / (Benefit) Profit/(Loss) after Tax Share in (Loss)/Profit of Associates(Net) Minority Interest Profit/(Loss) for the year Balance as per last Balance Sheet Transfer from Foreign Projects Reserve Surplus /(Deficit) carried forward
73,441.32 11,991.04 710.43 (1,493.13) 2,676.12 10,097.62 6,990.87 3,106.75 (32.38) (109.45) 2,964.92 (4,009.92) 13.76 (1,031.24)
72,555.23 (2,626.26) 2,055.01 7,494.35 2,824.69 (15,000.31) (5,650.84) (9,349.47) (78.21) (84.37) (9,512.05) 5,482.63 19.50 (4,009.92)
CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements for the year ended December 31, 2009, under Indian GAAP form part of the Annual Report. OPERATIONS The Company recorded net consolidated sales of Rs. 73,441 Mn against Rs.72,555 Mn in the previous year. Profit before Tax stood at Rs.10,098 Mn against a loss of Rs. 15,000 Mn for the previous year. Profit after Tax for the year stood at Rs. 3,107 Mn against a loss of Rs. 9,349 Mn for the previous year. The turnaround in profits from operations was primarily on account of revenues from First to File products in the US market, cost optimization and higher gross margin due to changes in product mix. The strengthening of rupee versus dollar also contributed towards increased earnings. The Company continues to focus on cost optimization and efficient working capital management. The Company has started pursuing Hybrid Business Model with Daiichi Sankyo Company, Limited (DS), its Holding Company, to leverage the strengths of both the organizations. During the year the Company launched a DS branded
39
Ranbaxy Laboratories Limited
product in India and another Innovator product in Romania. The Company intends to launch such products in Africa as well in other countries. In addition, the Company and DS are working on various initiatives to leverage cost synergies arising from back-end functions such as IT and manufacturing. In regard to Application Integrity Policy, warning letters to its manufacturing facilities at Paonta Sahib (India) and Gloversville (USA) and import alert issued by USFDA, the Company is continuously making sincere efforts for early resolution of the issues raised by the USFDA and the Department of Justice and is fully co-operating with the said authorities. DIVIDEND In view of the carry forward losses, no dividend has been declared for the year. CHANGES IN CAPITAL STRUCTURE Allotment of shares on exercise of Employees' Stock Options During the year, the Company allotted Equity Shares (on pari-passu basis) pursuant to exercise of Stock Options by the eligible employees, as summarized below: Date of Allotment July 13, 2009 October 12, 2009 SUBSIDIARIES AND JOINT VENTURES Japan Japan, as the second largest Pharmaceutical market in the world, offers significant opportunity in the generic arena due to low generic penetration and the Ministry of Health, Labor and Welfare's target of 30% genericization in Japan by 2012. With a view to have a larger participation in growth in the generic filing opportunities in Japan, the Company set up a wholly-owned subsidiary in Japan under the name of Ranbaxy Japan K. K. and divested its stake in Nihon Pharmaceutical Industry Co. Limited, a joint venture in Japan with Nippon Chemiphar Co., Limited. China and Vietnam As a part of consolidating its operations, the Company has divested its stake in its subsidiaries in Vietnam and China, having manufacturing operations. However, the Company continues to have marketing presence in Vietnam and China as these are important pharmaceutical markets. A statement pursuant to Section 212 of the Companies Act, 1956 (“Act”), relating to subsidiary companies is attached to the accounts. In terms of the approval granted by the Central Government vide letter no. 47/708/2009-CL-III dated December 8, 2009, under Section 212(8) of the Act, the audited accounts and Reports of Board of Directors and Auditors of the Company's subsidiaries have not been annexed to this Annual Report. The consolidated financial statements prepared in accordance with Accounting Standard - 21 issued by the Institute of Chartered Accountants of India presented in this Annual Report include the financial information of the subsidiary companies. ACQUISITIONS The Company has acquired: (a) Marketing rights for dermatological and lifestyle products from Ochoa Laboratories Limited, to complement the Company's existing derma portfolio; and No. of Shares 2,160 45,445
(b) Business and manufacturing facility in Bangalore from Biovel Life Sciences Private Limited. This will provide a platform to the Company to manufacture vaccines as well as bio-therapeutics. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report, as required under the Listing Agreements with the Stock Exchanges, is enclosed at Annexure 'A'. EMPLOYEES' STOCK OPTION SCHEME Information regarding the Employees' Stock Option Scheme is enclosed at Annexure 'B'.
40
Ranbaxy Laboratories Limited
LISTING AT STOCK EXCHANGES The Equity Shares of the Company continue to be listed on Bombay Stock Exchange Ltd. and The National Stock Exchange of India Ltd. Global Depository Shares are listed on the Stock Exchange at Luxembourg and Foreign Currency Convertible Bonds are listed on the Singapore Exchange Securities Trading Ltd. The annual listing fees for the year 2009-2010 have been paid to these Exchanges. DISCLOSURE OF PARTICULARS As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant information and data is given at Annexure 'C'. FIXED DEPOSITS The Company has not invited / received any fixed deposits during the year. DIRECTORS' RESPONSIBILITY STATEMENT In terms of provisions of Section 217(2AA) of the Companies Act, 1956, (“Act”), your Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, wherever applicable.
(ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company, as at the end of the accounting year and of the profit of the Company for the year. (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) The Directors have prepared the annual accounts on a going concern basis. DIRECTORS On May 24, 2009, Mr. Malvinder Mohan Singh stepped down as Chairman, CEO & Managing Director, Dr. Tsutomu Une was elected as the non - executive Chairman of the Board of Directors and Mr. Atul Sobti was appointed as the CEO & Managing Director of the Company. The shareholders of the Company vide their resolution dated September 22, 2009, passed through postal ballot, approved the appointment of Mr. Sobti as CEO & Managing Director of the Company for a period of 3 years. Mr. Sunil Godhwani and Mr. Balinder Singh Dhillon resigned from the Directorship of the Company effective May 24, 2009. The Directors place on record their appreciation for valuable contributions made by the outgoing Directors. Dr. Tsutomu Une and Mr. Atul Sobti who were appointed as Directors of the Company in the casual vacancies caused by resignations of Mr. V.K. Kaul and Mr. Vivek Mehra respectively, hold office upto the date of this Annual General Meeting. The Company has received Notice(s) along with requisite deposit from member(s) under Section 257 of the Companies Act, 1956, proposing the candidature of Dr. Tsutomu Une and Mr. Atul Sobti as Directors of the Company. Mr. Atul Sobti being the Managing Director will not be liable to retire by rotation in terms of the Articles of Association of the Company. Mr. Percy Shroff was appointed as a Director of the Company on March 27, 2009 against the casual vacancy caused by resignation of Mr. Harpal Singh. CORPORATE GOVERNANCE Report on Corporate Governance along with the Certificate of the Auditors, M/s. BSR & Co. Chartered Accountants, confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the stock exchanges forms part of the Annual Report. COST AUDIT The reports of M/s. R.J. Goel & Co., Cost Accountants, in respect of audit of the cost accounts relating to formulations and bulk drugs for the year ended December 31, 2009, will be submitted to the Central Government in due course.
41
Ranbaxy Laboratories Limited
AUDITORS M/s. BSR & Co., Chartered Accountants, retire as Auditors of the Company at the conclusion of ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office of the Auditors, if re-appointed. STATEMENT OF EMPLOYEES Statement of particulars of employees as required under Section 217(2A) of the Companies Act, 1956 ("Act") and Rules framed thereunder forms part of this Report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Act, this Report and Accounts are being sent to all the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the statement may write to the Company Secretary at the Corporate Office of the Company. ACKNOWLEDGEMENTS The Directors wish to place on record their appreciation of the significant contribution made by each and every employee of the Company. The Directors also thank all other stakeholders for their support and encouragement. Your Directors look forward to your continued support in the years to come.
On behalf of the Board of Directors
Gurgaon March 25, 2010
Dr. Tsutomu Une Chairman
42
Ranbaxy Laboratories Limited
ANNEXURE A
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
INDUSTRY STRUCTURE & DEVELOPMENTS The global pharmaceuticals market sales grew by approximately 5.7% (at constant exchange rate), to reach US$ 727 Bn in 2009. North America, Europe and Japan remained the key markets accounting for about 86% of the worldwide pharmaceutical sales in 2009. Developed Markets (US, Japan, UK, Spain, Germany, France, Italy and Canada) grew by 4% during the year. The 'Pharmerging' markets (Brazil, Russia, India, China, Turkey, Mexico and South Korea) continued to strengthen their position in the global landscape and grew by 17% in 2009. Global pharmaceutical market is projected to grow at a cumulative average growth rate (CAGR) of 4-7% for the 2008-2013 period. Forecasted CAGR for the Developed Market ranges between 2-5%, while the Pharmerging markets are expected to have a CAGR between 13-16%, for the same period1. Significant factors that have resulted in a slowdown in the pharmaceutical market are (a) lower consumer spend due to the economic downturn, (b) increased volume for generic drugs leading to a decrease in the total value for the industry, and (c) lesser number of new patent protected products in the market. Pharmaceutical sales in North America, the world's largest market, were US$ 316 Bn, a growth of 4.0%, constituting 43% of the global sales in 2009; of these sales in the United States accounted for US$ 298 Bn and grew by 3.9%. Europe clocked sales of US$ 226 Bn, a growth of 4.7%, and contributed 31% to the global pharmaceutical industry. Sales in Latin America, led by key markets of Brazil and Mexico, grew by 11.9%, to reach US$ 33 Bn. Asia, Africa and Australia combined, grew by 9.6%, to US$ 152 Bn; Japan, the world's second largest market, recorded sales of US$ 80 Bn, and grew by 6.1%. The industry, especially in the generics market, has become highly competitive. This, coupled with the drying up of pipelines of innovator companies is leading to consolidation in the generics and innovator industry, as a consequence, new hybrid models between innovator and generic companies are evolving. Thus, the pharmaceutical industry is witnessing adoption of new business models, where innovator and generic companies work together to leverage each other's strengths. The new business model will help innovator companies get access to emerging markets, lower manufacturing and R&D cost base; while generics companies will gain from higher R&D capabilities of innovators and access to innovator drugs. Generics2 The global generics market grew by 7.7% in 2009 to US$ 83 Bn, with the top eight markets (US, Germany, UK, Canada, France, Spain, Italy and Japan) contributing 76%. Growth in the generics segment in top eight markets was 8%, surpassing the 3% growth witnessed in the branded segment in the same countries. In Japan, while generics accounted for only 14% of the market by volume, growth during the year was a promising 12%. Ranbaxy's collaboration with Daiichi Sankyo Co. Ltd. (DS) gives the Company opportunity to tap the large genericizing Japanese market. Growth in emerging markets is driven by increasing domestic consumption due to strengthening of healthcare infrastructure, greater awareness and improving economic conditions. Generics segment in emerging markets is predominantly branded, which further improves attractiveness. With over US$ 80 Bn of drugs going off patent in the next two years, and a higher generic penetration across developed and emerging markets, the generics market will continue to provide attractive growth opportunities. Ranbaxy, with its diversified geographic reach across developed and emerging markets, is well positioned to capitalise on opportunities in both segments of the market.
1 2
Source: IMS 31st Edition, January 2010 Based on IMS MAT Nov 2009
43
Ranbaxy Laboratories Limited
The collaborative business model, as mentioned earlier, will also leverage lower R&D cost and reach of the generics companies, especially in emerging markets, for the innovator companies. With competitive advantages in R&D, manufacturing and marketing, Indian companies today stand at the forefront to partner with innovator pharmaceutical organizations. The prevailing market environment in these geographies is discussed below: USA: Generics market grew by 7% to US$ 34 Bn in 2009. Generics continued to play an increasingly prominent role in the US healthcare market and accounted for 72% of total US pharmaceutical market volume, reaching an all time high in 2009. A major growth driver for generics is the upcoming patent expiries for many blockbuster pharmaceutical products, which will become open to generic competition. According to the baseline forecast by IMS Health, the US generics market is expected to deliver a CAGR in excess of 14% in value terms, over the period 2005 to 2010. Europe: Generics market in Europe grew by 6.2% in value terms, up from 4.7% growth reported in the last year, and accounted for 37.4% of the market in volume terms, up from 36.4% in previous year. The key markets in Western Europe were under pressure from price erosion. While the volumes remained at a peak during the year, lower prices affected growth. Generics market in Germany grew by 8%, in France and Spain by 7%, while in the UK, growth was 5% during 2009. Romania, a key market in Central Europe, was impacted due to healthcare reforms, and the market was also under pressure from unprecedented currency fluctuation. Central, Eastern & Southern Europe, continued to experience buoyant growth, led by a higher per capita pharmaceutical expenditure, and an increasing utilization of generic drugs, driven by the government's efforts to reduce healthcare spend. India: The Indian pharmaceutical market grew at a robust 16.9% in 2009 to Rs. 401 Bn (ORG IMS MAT Dec 2009). Acute therapy dominated the market with a value contribution of 71%. The acute segment grew 16.3% during the year as against 18.7% growth witnessed in the chronic segment. Of the overall market growth, existing products contributed 10.3%, New products (launched in the last two years) contributed 5.7%, while price changes contributed 0.9%. The Indian pharmaceutical sector continues to demonstrate strong growth despite the global economic slowdown, due to inherent strength of the Indian domestic market, economic growth, healthcare infrastructure expansion, rising incidence of chronic diseases and increase in healthcare access in the extra urban and rural markets. The potential of the Indian pharmaceutical market is recognized by most of the major players, which is manifested in diverse strategies being adopted by various organizations. Such strategies include sales force and geographical expansion and new products launches, etc. In order to gain market penetration, companies are increasing their reach into the extra-urban and rural markets as well. At present, USA, Europe and India are the three largest markets for Ranbaxy. OUTLOOK ON OPPORTUNITIES Outlook for the global generics industry continued to be positive and the segment is expected to witness significant growth based on (a) opportunities arising from the US$ 80 Bn drugs going off patent in the next two years, (b) increasing healthcare burden in developed economies, leading to higher genericization, (c) room for more genericization in some major markets such as Japan, Australia and France, and (d) increasing healthcare costs in developing economies, where generic pharmaceuticals generally have an edge over the innovator companies, due to lower price structure and better reach. Ranbaxy, with ground operations in 46 countries, and presence in 125, is among the top 10 generics pharmaceutical companies globally. With its exclusive First-to-File (FTF) marketing opportunities in the United States, including some of the world's highest selling drugs (e.g. Atorvastatin and Esomeprazole), Ranbaxy has a balanced revenue-mix, with high growth emerging markets contributing 56% to sales, and developed markets contributing 44%, including revenue from the Active Pharmaceutical Ingredients (API) business. Collaborating with DS, our Holding Company, Ranbaxy, has adopted a unique Hybrid Business model. During the year, Ranbaxy began to leverage its global marketing presence to market DS's innovator products. In this context, Ranbaxy launched Olmesartan, an innovative product of DS in India. Raloxifene, another DS innovation, was launched
44
Ranbaxy Laboratories Limited
in Romania by Ranbaxy's subsidiary, Terapia Ranbaxy. The Company plans to launch such products in Africa as well as some other countries. A new business division was established within Ranbaxy's subsidiary in Mexico, to market DS's innovator products. Ranbaxy and DS aim to harness synergies in other diverse areas such as R&D, manufacturing, distribution, IT, etc., as we continue to engage together. In order to consolidate its operations, optimize cost and improve efficiency Ranbaxy undertook a change in the business model of its global manufacturing operations, divesting its manufacturing facilities in China and Vietnam. It also restructured its business operations in Europe. USA: USA remains a key market for the Company, and will be the catalyst of future revenue growth, on the back of a strong product pipeline. As on December 31, 2009, the Company had 204 ANDAs filed with the USFDA, of which 138 have been approved. Market size of pipeline of the Company's pending ANDAs, at innovator prices, is about US$ 45 Bn. Of these, the Company believes that it has a Paragraph-IV / FTF status on 13 applications, with sales of close to US$ 24 Bn, at current innovator prices. The Company launched three products with exclusivity during the year, viz., Sumatriptan in February, Valacyclovir in November, and Oxcarbazepine suspension in December. Europe: Business in Europe remained under pressure during the year. Competition among generic companies continued to increase, putting pressure on prices. Romania, the Company's largest market in Europe, is witnessing a liquidity crunch in the distribution channel, and also expected to undergo multiple healthcare reforms, which is adversely affecting the market growth. Despite the many challenges, Ranbaxy has maintained its leadership position in generics+OTC segment in this market. The Company is variablizing its cost structure in Europe to counter the difficult market conditions. India: The Indian pharmaceutical market is expected to grow at 11-12% per annum to reach US$ 20 Bn by 2015 and US$ 30Bn by 2020, which will place it among the world's 10 largest pharmaceutical markets. The key catalysts for this will be strong economic growth, increasing health awareness, healthcare infrastructure expansion, rising incidence of chronic disease, and increase in healthcare access in the extra urban & rural markets. The emergence of an organized pharmaceutical retail segment and the fast growing area of medical insurance are likely to be other important factors that would positively impact the sector in the coming years. OUTLOOK ON THREATS, RISKS AND CONCERNS The global generics business has risks associated with patent litigation, regulatory issues and product liability, particularly in developed markets. Innovator pharmaceutical companies also continuously develop ways to enhance lifecycle of their patented drugs, to delay entry of alternate generics. Further, emerging markets are becoming more competitive, with entry of new players. Ranbaxy, as a global generic Company, faces all such regulatory, compliance, and market risks. Manufacturing of pharmaceutical products heavily regulated and controlled by regulatory and government authorities across the world. Failure to fully comply with such regulations, could lead to stringent actions from the authorities/ government, revocation of drug approvals, failure or delay in obtaining approvals for new products, product recalls of existing drugs sold in the market, prohibition on the sale or import of non-complying products, and criminal proceedings against non-complying manufacturers. Regulators across the world, including the USFDA, have become stricter with the pharmaceutical industry. Regulatory requirements and consequences for non-compliance are also getting more severe. The USFDA invoked its Application Integrity Policy (AIP) against Ranbaxy's Poanta Sahib manufacturing facility in February 2009. Further, in December 2009, the Company received a warning letter from the USFDA for its liquid manufacturing facility located in Gloversville, New York, USA, for certain cGMP violations. The Company continues to co-operate fully with the concerned authorities, towards a speedy resolution of the USFDA and Department of Justice related issues. As regards the warning letter, the Company has retained the services of a global consulting firm to provide expertise and advice on issues cited by the USFDA. The above-mentioned issues may have a negative impact on Company.
45
Ranbaxy Laboratories Limited
In the Indian pharmaceutical market, pricing for certain pharmaceutical products is governed by the Drug Pricing Policy, through the Drug Price Control Order, 1995 (DPCO). Ranbaxy has some pending legal cases, and may face negative consequences on this account. Further, adverse changes in DPCO / Drug Policy may affect the Company's performance. Overseas business contributes 77% of Ranbaxy's total turnover. Sharp movement in foreign exchange rates can, therefore, have significant impact on the Company's financial results. SEGMENT-WISE PERFORMANCE Ranbaxy recorded global consolidated sales of US$ 1,519 Mn in 2009, with emerging and developed markets contributing 54% and 38% respectively, to sales. Dosage form sales constituted 92% of global sales during the year, balance being the API business. Overseas markets constituted 77% of the total dosage form sales of the Company. INTERNAL CONTROL SYSTEMS AND ADEQUACY With the objective of safeguarding the Company's assets and ensuring financial compliance, there are documented and well established operating procedures in the Company and its subsidiaries, in India and overseas. The Internal Audit function at Ranbaxy reports directly to the CEO & MD and the Audit Committee. The Internal Audit function is headed by a Vice President, and the team comprises of well qualified, experienced professionals who conduct regular audits across the Company's global operations. The matters brought up by the Internal Audit team are periodically communicated to the CEO & MD and the Audit Committee, in the form of Internal Audit reports / comments. On the financial operations, the Finance function of the Company is adequately staffed with professionally qualified and experienced personnel. FINANCIAL PERFORMANCE During the year, the Company recorded consolidated Global sales of Rs. 73,441 Mn (US$ 1,519 Mn). Operating margins improved significantly primarily due to the launch of Valacyclovir (FTF) in USA, favourable forex movement, and close management of costs during the year. Earnings before tax were at Rs. 10,098 Mn (US$ 209 Mn), and Earnings after tax were at Rs. 3,107 Mn (US$ 64 Mn), representing 4% margin to sales. HUMAN RESOURCES Human resources are the most valuable asset for the Company, and Ranbaxy continues to seek, retain and enrich the best available talent. The Company provides an environment which encourages initiative, innovative thinking, and rewards performance. The Company ensures training and development of its personnel through succession planning, job rotation, on-the-job training, and various training programs and workshops. The total number of employees of the Company and its subsidiaries as on December 31, 2009 stood at 12,995. CAUTIONARY STATEMENT: Statements in the "Management Discussion and Analysis" describing the Company's objectives, estimates, expectations or projections may be "forward looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations, include Government regulations, patent laws, tax regimes, economic developments within India and countries in which the Company conducts business, litigation and other allied factors. Note: Market size and growth rate for 2009 are based on IMS MAT Sep 2009 data unless otherwise indicated.
46
Ranbaxy Laboratories Limited
ANNEXURE B
Information regarding the Employees' Stock Option Scheme (As on December 31, 2009) S. No. Details 1. 2. 3. 4. 5. Total No. of Options in force at the beginning of the year Options granted in the year 2009 No. of Options vested during the year No. of Options exercised during the year No. of shares arising as a result of exercise of options during the year (including additional shares allotted on account of bonus shares as explained in Note 2 below) No. of Options lapsed and forfeited during the year Variance in terms of options Money realized by exercise of options during the year Total No. of Options in force at the end of the year Nos. 7,272,849 1,472,725 1,257,680 36,825
47,605 1,295,733 N.A. Rs. 11,490,128 7,413,016
6. 7. 8. 9. Notes : 1.
The Grant/ Exercise and number of Stock Options outstanding as on June 30, 2005, have been proportionately adjusted in view of the sub-division of equity shares of the Company from the face value of Rs. 10 each into 2 equity shares of Rs. 5 each. Options granted upto October 3, 2002, are entitled for additional shares on account of bonus shares in the ratio of 3 for 5.
2.
Pricing formula: Closing price of the Equity Shares of the Company prior to the date of meeting of the Compensation Committee (CC) in which stock options are granted on the stock exchange on which the shares of the Company are listed. The closing price of the shares of the Company at the National Stock Exchange of India Limited on January 20, 2009 was Rs. 215.15 per share. Accordingly, exercise price of the options granted by the CC at the meeting held on January 21, 2009 was fixed at Rs. 216 per share of Rs. 5 each. (i) Options granted in the year 2009 to senior managerial personnel*: Name Mr. Atul Sobti Mr. Arun Sawhney Mr. Omesh Sethi Dr. Sudershan K. Arora Mr. Dipak Chattraj Mr. Ramesh L. Adige Dr. Pradip Kumar Bhatnagar Mr. Sanjeev I. Dani Mr. Satish Kumar Chawla Mr. Ranjan Chakravarti Dr. T.G. Chandrashekhar Mr. K. Venkatachalam Mr. Debashish Dasgupta * Designation (Present) No. of Options granted 50,000 15,000 10,000 17,500 10,000 15,000 12,500 12,500 10,000 7,500 10,000 15,000 5,000
CEO & Managing Director President - Global Pharmaceuticals Business President & Chief Financial Officer President - Research & Development President - Corporate Development President - Corporate Affairs & Global Corporate Communications Senior Vice President - New Drug Discovery Research Senior Vice President & Regional Director - Asia, CIS & Africa Vice President - Global Internal Audit Vice President - Global Therapy and Alliance Management Vice President -Quality Senior Vice President & Regional Director - North America & LATAM Vice President & Regional Director - Europe
Excludes the Senior Managerial personnel who ceased to be in employment with the Company. : : Nil Nil
(ii) Employees who have been granted 5% of more of the options granted during the year (iii) Employees who have been granted options during any one year equal to or exceeding 1% of the issued capital of the Company at the time of grant
47
Ranbaxy Laboratories Limited
(iv) Diluted earnings per share (EPS) (v) (a) Method of calculation of employee compensation cost Difference between the employee compensation cost so computed at (a) above and the employee compensation cost that shall have been recognized if it had used the fair value of the options The impact of this difference on profits and on EPS of the Company
: :
Rs. 10.74 The Company has calculated the employee compensation cost using the Intrinsic value of the stock options. Rs. 105.99 Mn
(b)
:
(c)
:
Profit/(Loss) after tax : Rs. 5,719.84 Less: additional employee compensation cost based on fair value : Rs. 105.99 Adjusted PAT : Rs. 5,613.85 Adjusted EPS (diluted) : Rs. 10.51
Mn
Mn Mn
(vi) Weighted-average exercise price and fair value of Stock Options granted : (Post split adjusted price) Stock Options granted on 12.01.2001 03.12.2001 01.04.2002 07.02.2003 22.01.2004 17.01.2005 17.01.2006 17.01.2007 16.01.2008 11.06.2008 19.12.2008 21.01.2009 (vii) Description of the method and significant assumptions used during the year to estimate the fair value of the options, including the following weighted average information Weighted average exercise price (in Rs.) 336.50 297.50 372.50 283.50 496.00 538.50 392.00 430.00 391.00 561.00 219.00 216.00 Weighted average Fair value (in Rs.) 145.00 188.50 226.00 132.50 212.50 215.68 194.07 232.57 107.06 172.89 63.31 92.97 Closing market price at NSE on the date of grant (in Rs.) 324.15 369.48 449.48 317.45 503.10 534.33 391.15 429.65 390.75 560.75 218.60 215.15
: The Black Scholes option pricing model was developed for estimating fair value of traded options that have no vesting restrictions and are fully transferable. Since Option pricing models require use of substantive assumptions, changes therein can materially affect fair value of Options. The option pricing models do not necessarily provide a reliable measure of fair value of options.
The main assumptions used in the Black-Scholes option pricing model during the year were as follows : Particulars Options granted on 21.01.2009 1.49 % 6.5 years 6.22 % 38.60 %
Dividend yield Expected life of options from the date(s) of grant Risk free interest rate Expected volatility
48
Ranbaxy Laboratories Limited
ANNEXURE C
Information pursuant to Companies (Disclosure of Particulars in Report of Board of Directors) Rules, 1988 forming part of the Report of the Directors 1. CONSERVATION OF ENERGY AND ITS IMPACT Measures for Conservation of Energy Impact resulting into saving (in Rs. Million) 19.80 0.02 7.70 6.60 4.84 3.62 3.60 2.91 2.50 2.10 2.00 1.26 1.11 1.0 0.66 0.64 0.41 0.30 0.10
Power Factor maintained UNITY & Load Factor maintained above 50% concession for Load Factor received Reduction of steam high pressure header from 8.2 to 7.4 Kg / CM2 KGK chiller's replaced by trane chiller and Brine facility modified from central generation to user areas Combining the Cooling tower Pump Discharge lines for Utilities & 3X60KL Fermentation Plant thereby Running only one 110 KW pump instead of 2 Nos. being run separately for 2 different streams 55KW Nitrogen Plant Air compressor is stopped by looping the Instrument Air compressor supply to inlet of Nitrogen plant resulting in substantial saving as well as optimum utilization of Instrument Air Compressor Re-engineering of Brine system in old utility. Re-engineering has improved flow rate resulting in efficiency improvement. This has resulted in stoppage of one compressor Rebate in power tariff by maintaining unity power factor through automatic and manual controls. Air flow optimization in Air Washers and VAHUs. Two nos. inefficient AHUs and Air Washer replaced in MP-01 500 KVA Diesel Generation installed and running during weekly off days and Peak load restriction hours instead of running of 1500KVA Generator earlier Chilled Water facility modifications from central generation to users areas, energy saving of 90KW 5 KW (35CFM) Air compressor is installed and running for purified water plant during 2nd and 3rd shifts instead of 97 KW Air compressors Integration of two cooling water & Chilled water headers of Mohali-3 & Mohali-2 Power saving by auto switching (Motion Sensor). Running time of light fixtures reduced from 24 hours to 10 hours. Replacement of steam traps and recovery of Hot condensate back to boiler house Looped the raw water header with the process water line thereby using Bore well pressure for Process water circulation , this stopped 7.5 KW pump operation for process water, this also has led to substantial energy saving Optimization of pump head in New Utility Cooling tower. Replacement of Fan Type cooling towers with Jet type cooling towers Increase in condensate recovery from 20% to 40% from 7011 Tons of steam production. The additional automatic condensate recovery systems installed in two plants Replacement of old lamp type indicators (Each 5 watt) with LED type indicators(0.8 watt) total number 550
2. RESEARCH & DEVELOPMENT a) Specific areas in which R&D is carried out – Develop technology for Active Pharmaceutical Ingredients (APIs), conventional & value added innovative dosage forms - complying with international quality & regulatory norms – Develop "Platform Technologies" and "Products" in the area of Novel Drug Delivery Systems – Discovery and Development of new drug molecules in select areas: Infectious Diseases, Metabolic Diseases, Inflammatory/Respiratory Diseases and Oncology – GLP/cGCP complying Bioavailability/Bioequivalence, Toxicology and Clinical Studies (Phase - I, II & III) – Innovation in packaging for improved patient convenience & compliance – Up-gradation of existing technologies / products on ongoing basis b) Benefits derived as result of R&D activities – Technology to manufacture APIs and Dosage Forms – Oral Controlled Release Dosage Forms leading to better patient convenience and compliance – Improved productivity / process efficiencies – Internationally competitive prices and product quality
49
Ranbaxy Laboratories Limited
– Safe and environment friendly processes – Generation of Intellectual wealth for the Company in key potential markets – Grant of process patents for Active Pharmaceutical Ingredients (APIs) as well as dosage forms (both conventional & novel drug delivery systems) – Product patents in the areas of drug discovery research – Self reliance and import substitution for conservation of Foreign Exchange – Foreign exchange earnings / savings – Speed to marketplace – Enhanced business through Licensing arrangements and strategic alliances – Enhanced Global presence / visibility c) Future plan of action – Continue augmenting R&D capabilities & productivity through technological innovations, use of modern scientific and technological techniques, training and development, benchmarking and global networking – Greater thrust in the areas of Novel Drug Delivery Systems – Continue developing innovative, commercially viable process know-how for both Active Pharmaceutical Ingredients (APIs) and dosage forms – Continue strengthening the Clinical Research infrastructure and capabilities complying international GLP/ cGCP norms – Continue improvements in packaging for pharmaceuticals to ensure shelf-life/stability, quality and, better patient convenience and compliance – Enhance national and international research networking and strategic alliances d) Expenditure on R&D Rs. Million Year ended Year ended December 31, December 31, 2009 2008 – Capital 221.98 558.28 – Revenue 4,721.84 4,155.46 – Total 4,943.82 4,713.74 – % to turnover 10.90% 10.86% 3. TECHNOLOGY, ABSORPTION, ADAPTATION AND INNOVATION a) Efforts in brief, made towards technology absorption and innovation – As per 2(a) above b) Benefit derived as a result of the above efforts, e.g. product improvement, cost reduction, product development. – As per 2(b) above Future course of action a) To continue developing innovative and commercially viable process know-how for APIs and Dosage Forms (Conventional and Noval Drug Delivery System) b) Information in case of imported technology (imports during the last five years) – Not applicable 4. FOREIGN EXCHANGE EARNINGS AND OUTGO Activities relating to exports, initiatives taken to increase exports; development of new export markets of products and export plans – Overseas sales (excluding sales to Nepal) were Rs 28,258.24 Mn for the financial year December 31, 2009. – Drug Master Files (DMFs) for API were filed with the regulatory authorities in several markets. – Continued to receive income by way of royalty, technical and management service fee and dividend from overseas subsidiaries / affiliates. – Initiatives were taken for development of new export markets. These include setting up a new division to co-market Daiichi Sankyo’s innovator products. – Also launched differentiated branded products of Originator in Romania through Terapia Ranbaxy – Japan export market was also tapped for API. – In the year under review the Company launched Dosage Formulations of Valacyclovir,Oxycodone & Sumatreptan in the International markets. – Ranbaxy plans to further leverage its association with Daiichi Sankyo (DS), its Holding Company, to launch DS’s products in other export markets including 6 African countries for which plans are already underway. Rs. Million Year ended Year ended December 31, December 31, 2009 2008 Earnings 31,364.51 28,537.83 Outgo 13,100.41 14,403.56
50
FORM - A
Ranbaxy Laboratories Limited
Form for disclosure of particulars with respect to conservation of energy Current Year 2009 A. Electricity and Fuel Consumption 1. Electricity (a) Purchased Units (KWH) Total Amount (Rs. Million) Rate/Unit (Rs.) (b) Own Generation i) Through Diesel Generator Unit (KWH) Unit per Ltr. of Diesel Oil Cost/Unit ii) Through Steam Turbine/Generator 2 3 Coal (Specify quality and where used) Furnace Oil Qty. (K. Ltrs.) Total Amount (Rs Million) Average Rate (Rs. per Ltr.) 4 Others/internal generation Units Electricity Active Pharmaceutical Ingredients (kwh per kg) Dosage Forms (kwh per 1000 packs) Standards (if any) No specific standards consumption per unit depends on product mix B. Consumption per unit of production Current Year Previous Year 12,308,322 3.48 Rs. 8.29 Not Applicable Not Applicable 16,364 378.90 Rs. 23.15 Not Applicable 8,070,600 3.61 Rs. 8.94 Not Applicable Not Applicable 16,188 476.62 Rs. 29.44 Not Applicable 132,372,169 561.87 Rs. 4.24 127,981,552 521.70 Rs. 4.08 Previous Year 2008
91.36 105.78
70.55 91.73
Furnace Oil Active Pharmaceutical Ingredients (Ltrs per Kg) Dosage Forms K.Ltrs per 1000 packs) Coal Others
11.05 0.01 Not Applicable Not Applicable
8.95 0.01 Not Applicable Not Applicable
51
TEN YEARS
AT A GLANCE
2000 Results for the year Sales Index Exports Index Gross Profit Index Profit before Tax Index Profit after Tax Index Equity Dividend Index Equity Dividend (%) Earning per share (Rs.) Year-end Position Gross Block+ Index Net Block Index Net Current Assets Index Net Worth Index Share Capital Reserve & Surplus Book value per share (Rs.) No. of Employees 9241.5 1.0 6443.7 1.0 8257.7 1.0 15826.5 1.0 1158.9 14667.6 136.56 5784 9278.2 1.0 6130.5 1.0 7454.5 0.9 16069.7 1.0 1158.9 14910.8 138.66 6424 10448.8 1.1 6753.9 1.0 9564.4 1.2 18828.1 1.2 1854.5 16973.6 17366.6 1.0 8019.6 1.0 3177.1 1.0 1945.4 1.0 1824.4 1.0 869.2 1.0 75 15.74 20545.4 1.2 10290.8 1.3 3924.1 1.2 2777.7 1.4 2519.6 1.4 1158.9 1.3 100 21.86 28197.9 1.6 18502.9 2.3 7304.8 2.3 7133.8 3.7 6235.8 3.4 2001 2002
Ranbaxy Laboratories Limited
Rs. Million 2003 2004 2005 2006 2007 2008 2009
35334.9 2.0 24674.6 3.1 10061.4 3.2 9563.7 4.9 7947.8 4.4 3156.3 3.6 170 42.61
36143.4 2.1 24562.4 3.1 7211.7 2.3 6283.4 3.2 5284.7 2.9 3162.6 3.6 170 28.26
35366.5 2.0 23371.1 2.9 3178.8 1.0 2013.6 1.0 2237.0 1.2 3166.7 3.6 170 5.68 ^
40587.1 2.3 27175.7 3.4 6081.7 1.9 4429.8 2.3 3805.4 2.1 3168.9 3.6 170 9.87 ^
41844.9 2.4 26411.2 3.3 9865.6 3.1 7744.1 4.0 6177.2 3.4 3171.5 3.6 170 11.31
43083.6 2.5 28109.8 3.5 (5713.3) (1.8) (16190.8) (8.3) (10448.0) (5.7) 0.0 0.0 0 -27.29
45211.8 2.6 28377.5 3.5 11002.7 3.5 10619.2 5.5 5719.8 3.1 0 0 0 10.74
2434.0 $ 2.8 150 28.86
12470.6 1.3 8017.9 1.2 13302.9 1.6 23217.8 1.5 1855.4 21362.3 125.13 6797
16669.4 1.8 11417.4 1.8 9466.8 1.1 25095.1 1.6 1858.9 23236.2 135.00 7195
22321.6 2.4 16328.1 2.5 11281.0 1.4 23773.0 1.5 1862.2 21910.8 63.84 ^ 7174
24354.5 2.6 17359.1 2.7 12630.0 1.5 23500.1 1.5 1863.4 21636.7 63.05 ^ 8020
25889.0 2.8 17969.4 2.8 12588.2 1.5 25383.9 1.6 1865.4 23518.6 68.04 8141
28155.1 3.0 18854.4 2.9 8493.6 1.0 37167.7 2.3 2101.9 35065.8 88.42 8536
30358.36 3.3 20083.2 3.1 12210.7 1.5 41346.1 2.6 2102.09 39243.96 98.35 9655
101.52 $$ 6297
Index : No. of times + Includes Capital Work-in-Progress * * * After 1:1 Bonus Issue and conversion of outstanding warrants. $ Includes Interim Dividend Rs 5 per share, prior to issue of bonus shares and Final Dividend of Rs 10 per share $$ Post issue of Bonus shares in the ratio of 3 for 5 in October, 2002. ^ After Share split Sales are stated net of excise duty recovered from 2002 onwards Earning per share are stated on fully diluted basis from 2002 onwards Sales are stated net of excise duty and discount from 2008 onwards
52
AUDITORS’
REPORT
Ranbaxy Laboratories Limited
To the Members of Ranbaxy Laboratories Limited a) We have audited the attached Balance Sheet of Ranbaxy Laboratories Limited ("the Company") as at 31 December 2009 and also the Profit and Loss Account and the Cash Flow Statement (together known as 'financial statements') of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. b) We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. c) As required by the Companies (Auditor's Report) Order, 2003 ('the Order') issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, ("the Act"), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. d) Further to our comments in the Annexure referred to above, we report that: (i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act, to the extent applicable; (v) on the basis of written representations received from the directors of the Company as at 31 December 2009, and taken on record by the Board of directors, we report that none of the directors is disqualified as at 31 December 2009 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act; e) Without qualifying our opinion, we draw attention to note 2 on schedule 23 to the financial statements. Consequent to the Food and Drug Administration (FDA) of United States of America import alerts and the FDA letter dated 25 February 2009 imposing the Application Integrity Policy, the Company had recorded a provision of Rs. 2,631.11 million during the year ended 31 December 2008 towards loss of inventory in hand, expected higher sales returns and expected reversal of export benefits. The basis and assumptions used by the management in calculating these provisions were based on significant judgment and estimates due to involvement of uncertainty and actual result could have been different from management's estimate. During the year, the Company carried out a reassessment and determined that the related provision of Rs. 937.81 million is no longer required and accordingly the same has been written back in the Profit and Loss Account. f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Act, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of the affairs of the Company as at 31 December 2009; ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826
Place : Gurgaon Dated : 25 February 2010
53
Ranbaxy Laboratories Limited
Annexure to the Auditors’ Report
(Referred to in our report of even date) (i) (a) (b) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification. Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption. The inventory, except goods-in-transit, has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.
(c) (ii) (a) (b) (c) (iii) (iv)
The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories and fixed assets and with regard to the sale of goods and services. In our opinion and according to the information and explanations given to us, we have not observed any major weakness in the internal control system during the course of the audit. In our opinion and according to the information and explanations given to us, there are no contracts ad arrangements, the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956. The Company has not accepted any deposits from the public.
(v)
(vi)
(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, in respect of its 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 records. (ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted / accrued in the books of account in respect of undisputed statutory dues including Provident fund, Investor education and protection fund, Employees' state insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities. There were no dues on account of cess under section 441A of the Companies Act, 1956, since the date from which the aforesaid section comes into force has not yet been notified by the Central Government. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Investor education and protection fund, Employees' state insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and other material statutory dues were in arrears as at 31 December 2009 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues of Income tax, Wealth tax and Customs duty which have not been deposited with the appropriate authorities on account of any dispute. According to the information and explanations given to us, the following dues of Sales tax, Service tax and Excise duty have not been deposited by the Company on account of disputes:
54
Ranbaxy Laboratories Limited
Name of the statute Central Excise Act, 1944
Nature of dues Central Excise (Cenvat, Interest and Penalty) Service Tax (Penalty)
Amount (Rs. in Million) 44.42
Period to which the amount relates 2001-2006
Forum where dispute is pending/Remarks Delhi high court/ CESTAT/ Commissioner/ Joint Secretary Commissioner, Indore Sales Tax Tribunal
The Finance Act, 1994/2003 (Service Tax)
3.07
2006-2007
Punjab General Purchase Tax Sales Tax Act, 1948. (Interest and Penalty) U.P Sales Tax Act, 1948. Sales Tax
2.25
1989-90 and 1990-91 2008-09
3.67
Sales tax tribunal Additional Commissioner
In our opinion, the Company's accumulated losses at the end of the financial year are less than fifty percent of its net worth. Further, the Company has not incurred cash losses during the financial year. However, the Company had incurred cash loss during the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or debenture holders. There were no dues to financial institutions. (xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund / society. (xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. (xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. (xvi) In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on short-term basis have not been used for long-term investment. (xviii)The Company has not made any preferential allotment of shares during the year to Companies / firms/ parties covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company issued non-convertible debentures during the year which were redeemed before the year end. According to the information and explanations given to us, security was not created in respect of these debentures as they were redeemed before expiry of the time limit for creation of security as stipulated in the letter of allotment. (xx) The Company has not raised any money by public issues during the year. (xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
(x)
55
Ranbaxy Laboratories Limited
Balance Sheet as at 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
Schedule SOURCES OF FUNDS Shareholders’ funds Share capital Equity share warrants Share application money pending allotment Reserves and surplus Loan funds Secured loans Unsecured loans
As at 31 December 2009
As at 31 December 2008
1 23(3)(b) 2
2,102.09 1,756.59 1.95 37,485.42 41,346.05 1,758.27 31,725.53 33,483.80 74,829.85
2,101.85 1,756.59 – 33,309.22 37,167.66 2,422.72 34,565.27 36,987.99 74,155.65
3 4
APPLICATION OF FUNDS Fixed assets 5 Gross block Less :Accumulated depreciation, amortisation and impairment Net block Capital work-in-progress (including capital advances) 23(5) Investments Deferred tax assets (net) Current assets, loans and advances Inventories Sundry debtors Cash and bank balances Loans and advances Other current assets Less: Current liabilities and provisions Current liabilities Provisions Net current assets Significant accounting policies 22 Notes to the financial statements 23 The schedules referred to above form an integral part of the Balance Sheet 6 7 8 9 10 11 12
26,209.20 10,275.15 15,934.05 4,149.16 20,083.21 38,336.90 4,199.08 12,304.82 15,346.48 7,541.24 9,648.16 1,558.74 46,399.44 26,558.44 7,630.34 34,188.78 12,210.66 74,829.85
23,867.45 9,300.67 14,566.78 4,287.66 18,854.44 36,180.28 10,627.38 11,985.19 10,245.35 19,349.39 6,745.27 1,345.54 49,670.74 35,679.74 5,497.45 41,177.19 8,493.55 74,155.65
13 14
As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
56
Ranbaxy Laboratories Limited
Profit and Loss Account for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
For the year ended 31 December Schedule 2009 INCOME Operating income Less : Excise duty Other income Net foreign exchange gain (other than on loans) EXPENDITURE Materials consumed Personnel expenses Operating and other expenses Net foreign exchange loss (other than on loans) 15 47,974.89 147.29 47,827.60 2,763.87 1,790.40 52,381.87 20,480.28 7,284.04 13,614.82 – 41,379.14 11,002.73
For the year ended 31 December 2008 45,031.48 310.01 44,721.47 2,086.64 – 46,808.11 20,453.61 6,087.86 15,715.50 10,264.46 52,521.43 (5,713.32)
16 23(11)
17 18 19 23(11)
Profit/ (loss) before interest, exchange (gain)/ loss (net) on loans, depreciation, amortisation, impairment and tax charge/(benefit) Interest 23(6) Exchange (gain)/ loss (net) on loans Profit/ (loss) before depreciation, amortisation, impairment and tax charge/(benefit) Depreciation, amortisation and impairment 5 Profit/ (loss) before tax Tax charge / (benefit) 20 Profit/ (loss) after tax Balance brought forward Transfer from foreign projects reserve Deficit carried forward to Schedule 2 Earnings/ (loss) per share (Rs.) 21 Basic - Par value of Rs. 5 per share Diluted - Par value of Rs. 5 per share Significant accounting policies 22 Notes to the financial statements 23
394.66 (1,493.13) 12,101.20 1,482.03 10,619.17 4,899.33 5,719.84 (8,265.83) 13.76 (2,532.23) 13.61 10.74
1,458.28 7,474.52 (14,646.12) 1,544.69 (16,190.81) (5,742.79) (10,448.02) 2,162.69 19.50 (8,265.83) (27.29) (27.29)
The schedules referred to above form an integral part of the Profit and Loss Account
As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
57
Ranbaxy Laboratories Limited
Cash flow statement for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
A. CASH FLOW FROM OPERATING ACTIVITIES Net profit/ (loss) before taxes Adjustments for : Depreciation, amortisation and impairment Fixed assets written off Deferred employees compensation charge / (reversal) Unrealised foreign exchange loss/ (gain) Fair valuation (gain)/ loss on derivatives Dividend income Profit on disposal of investments Unclaimed balances/ excess provision written back Profit on sale of assets (net) Reversal of provision for diminution in value of long term investments Provision for diminution in value of current investment Interest expense Interest income Investment written off Provision / write-off of doubtful debts, advances and other current assets Operating loss before working capital changes Adjustments for : Increase in inventories Increase in sundry debtors (Increase) / decrease in loans and advances Increase in trade / other payables Increase in other current assets Cash generated from/(used in) operating activities before taxes Direct taxes paid (net of refunds) Net Cash used in operating activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Proceeds from sale of fixed assets Sale of other investments Investment in subsidiaries Decrease / (increase) in fixed deposit with a maturity more than 90 days Sale proceeds of investments (net of expenses) Decrease / (increase) in loans / advances to subsidiaries (Increase) / decrease in secured loans to employees Interest received Dividend received Net cash (used in) / generated from investing activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of capital (including premium) Proceeds from equity share warrants Decrease in short term bank borrowings (net) Decrease in long term borrowings Increase in other borrowings (net) Short term borrowings from non convertible debentures Re-payment of short term borrowings of non convertible debentures Interest paid Issue expenses of equity share capital and warrants Dividend paid Tax on dividend Net cash (used in) / generated from financing activities INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Effect of exchange (gain) / loss on cash and cash equivalents Cash and cash equivalents at the end of the year Notes : Cash and cash equivalents include : Cash, cheques in hand and remittances in transit With banks in : Current accounts Deposit accounts Cash and cash equivalents at the end of the year Add: Fixed deposit pledged (restricted cash) Fixed deposit with original maturity of more than 90 days Unclaimed dividend Cash and bank balances at the end of the year For the year ended 31 December 2009 10,619.17 1,482.03 12.00 (8.17) (1,818.26) (8,932.47) (9.54) (420.33) (1,116.76) (237.34) – 53.92 394.66 (945.47) – 48.71 (11,497.02) (877.85) (319.64) (5,410.08) (112.09) 2,453.38 (14.42) (3,402.85) (4,280.70) (2,373.64) (6,654.34) (2,747.61) 358.56 – (2,404.49) 3,865.19 614.28 324.42 (8.02) 849.34 9.54 861.21 13.44 – (1,737.94) – 15.17 2,000.00 (2,000.00) (432.09) – – – (2,141.42) (7,934.55) 8,622.07 1.79 689.31 68.05 121.26 500.00 689.31 0.79 6,784.81 66.33 7,541.24 For the year ended 31 December 2008 (16,190.81) 1,544.69 50.28 3.75 5,454.50 7,702.14 (11.01) (42.83) (177.19) (943.98) (9.86) – 1,458.28 (866.76) 93.42 166.38 14,421.81 (1,769.00) (2,224.48) (788.34) 905.12 920.56 (204.55) (1,391.69) (3,160.69) (736.11) (3,896.80) (2,683.08) 1,147.05 (4,349.96) (2,551.24) (10,650.00) 3,055.72 (1,825.18) 1.26 740.16 11.01 (17,104.26) 34,389.19 1,756.59 (3,517.67) (498.53) 33.40 16,870.00 (16,870.00) (1,435.31) (201.40) (2,239.42) (380.59) 27,906.26 6,905.20 1,721.37 (4.50) 8,622.07 222.48 199.59 8,200.00 8,622.07 0.75 10,650.00 76.57 19,349.39
As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place Dated : Gurgaon : 25 February 2010
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place Dated : Gurgaon : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
58
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 1 Share Capital Authorised 598,000,000 (Previous year 598,000,000) Equity shares of Rs. 5 each 100,000 (Previous year 100,000 ) Cumulative preference shares of Rs 100 each Issued, subscribed and paid up 420,417,358 (Previous year 420,369,753) Equity shares of Rs. 5 each fully paid
As at 31 December 2009
As at 31 December 2008
2,990.00 10.00 3,000.00 2,102.09
2,990.00 10.00 3,000.00 2,101.85
2,102.09 2,101.85 Notes: 1. Issued, subscribed and paid up capital includes: 293,698,988 (previous year 293,698,988) equity shares of Rs. 5 each allotted as fully paid bonus shares by capitalisation out of share premium and reserves. [ii] 6,562,308 (previous year 6,562,308) equity shares of Rs. 5 each allotted as fully paid up pursuant to a contract without payment being received in cash. [iii] 5,501,185 Global Depository Shares (GDSs) (previous year 7,227,121) representing 5,501,185 (previous year 7,227,121) equity shares of Rs. 5 each constituting 1.31% (previous year 1.72%) of the issued subscribed and paid-up share capital of the Company. 2. 268,711,323 (previous year 268,711,323) equity shares of Rs. 5 each are held by Daiichi Sankyo Company Limited, Japan, the holding company, also being the ultimate holding company. Also refer to note 3 on schedule 23. SCHEDULE - 2 Reserves and surplus (a) Capital reserve (b) Amalgamation reserve (c) Share premium account Balance at the beginning of the year Add : Received during the year Add : Transferred from employees stock option outstanding Less : Utilised for preferential allotment issue expenses Less : Premium payable on redemption of Zero Coupon Foreign Currency Convertible Bonds (FCCBs) Less : Tax (benefit)/reversal for premium payable on redemption of FCCBs Also refer to note on schedule 7 (d) Foreign projects reserve Balance at the beginning of the year Less: Transfer to Profit and Loss account (e) Hedging reserve (net of tax) Balance at the beginning of the year Utilised / (additions) during the year
5.41 43.75 37,862.17 11.26 1.89 37,875.32 – 1,083.41 1,227.17 35,564.74
5.41 43.75 5,010.50 34,164.47 31.45 39,206.42 201.40 1,731.33 (588.48) 37,862.17
18.35 13.76 4.59 (792.58) 763.85 (28.73)
37.85 19.50 18.35 – (792.58) (792.58)
59
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
As at 31 December 2009 (f) Employees stock option outstanding Balance at the beginning of the year Add: Amortisation/ (reversal) of deferred employee compensation Less: Transferred to share premium on exercise of stock option Also refer to note 4 on schedule 23 (g) General reserve Balance at the beginning of the year Less: Transitional loss recognised pursuant to early adoption of Accounting Standard - 30 “Financial Instruments: Recognition and Measurement” (h) Deficit brought forward from Profit and Loss Account SCHEDULE - 3 Secured loans Loans from banks Note: The above is secured against inventories, sundry debtors and moveable assets, both present and future. SCHEDULE - 4 Unsecured loans Short term loans from banks Other loans Zero coupon foreign currency convertible bonds (FCCB)* From Banks# From Others# Notes : * The Company has outstanding FCCBs aggregating to US $ 440 million. The bondholders have an option to convert FCCBs into equity shares of the Company at a price of Rs. 716.32 per share (subject to adjustment, if any) with a fixed exchange rate of Rs. 44.15 per US $ at any time on or after 27 April 2006 but before 9 March 2011. Further, these FCCBs may be redeemed, in whole, at the option of the Company at any time on or after 18 March 2009, but on or before 6 February 2011, subject to the satisfaction of certain conditions. These FCCBs are redeemable on 18 March 2011, at a premium of 26.765 percent (net of withholding tax) of their principal amount unless previously converted, redeemed, purchased or cancelled. # Other loans due for repayment within one year From banks From others 67.67 (8.17) 59.50 1.89 57.61
As at 31 December 2008 95.75 3.37 99.12 31.45 67.67
4,370.28
16,151.24
– 4,370.28 (2,532.23) 37,485.42
11,780.96 4,370.28 (8,265.83) 33,309.22
1,758.27 1,758.27
2,422.72 2,422.72
4,676.95 20,475.40 6,395.71 177.47 31,725.53
6,257.78 21,379.60 6,765.59 162.30 34,565.27
1,112.19 19.78
– 14.83
60
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 5
Gross block Additions* Deletions/ adjustments As at 31 December 2009** As at 1 January 2009 Net block As at 31 December 2009** As at 31 December 2008
Fixed assets
Description
As at 1 January 2009
Accumulated depreciation, amortisation and impairment For the Deletions/ As at year $ adjustments 31 December 2009**
173.69 259.49 3,064.45 16,858.48 1,001.69 405.09 – 280.16 159.34 – 2,982.52 1,669.60 416.95 23,867.45 7,919.59 0.03 – 640.77 912.86 211.00 26,209.20 426.44 200.70 9,300.67 107.78 10.30 1,482.03 1,544.69 – 260.13 361.74 798.30 361.74 666.38 – 44.11 – 260.13 0.01 – 507.55 163.61
– – 628.44 1,768.80 65.08 80.70
– – 0.72 241.04 19.82 119.03
173.69 259.49 3,692.17 18,386.24 1,046.95 366.76
– – 517.75 6,756.37 272.58 98.71
– – 85.80 1,137.43 60.01 36.60
– – 0.30 200.08 8.23 38.80
– – 603.25 7,693.72 324.36 96.51 361.74 450.36 534.21 211.00 10,275.15 9,300.67
173.69 259.49 3,088.92 10,692.52 722.59 270.25 – 347.94 378.65 – 15,934.05 14,566.78
173.69 259.49 2,546.70 10,102.11 729.11 306.38 – 111.89 327.11 10.30 14,566.78
Tangible assets Land – Freehold # – Leasehold Buildings Plant and machinery Furniture and fixtures Vehicles Intangible assets Product development @ Patent, trade marks, designs and licences @@ Software @@ Non compete Total
361.74 778.27
Ranbaxy Laboratories Limited
61
Gross block 1.23 48.39 85.03 85.03 11.63 – Accumulated depreciation Net block 1.23 36.76 – Remaining useful lives 1-5 years 1-6 years
753.55 211.00 23,867.45
Previous Year
22,614.80
Notes : * Additions to fixed assets include Rs. 221.98 (previous year Rs. 558.28) towards assets used for research and development. ** The above includes the following assets held for disposal, which are being carried at the lower of their net block and net realisable value:
Description
Land
Building
Plant and machinery
There were no assets which were held for disposal as at 31 December 2008
# @
$
@@
Freehold land includes land valued at Rs. 25.48 (previous year Rs. 25.48) pending registration in the name of the Company. The Company during the year provided for an impairment loss of Rs. nil (previous year Rs. 331.32 ) on certain product development rights. The impairment loss was determined owing to the prevailing market conditions of the underlying molecules for which the product development rights were acquired. During the current year, consequent to a change in the probability for extension of lease term for a leased property, the Company has recorded accelerated depreciation on assets constructed on that leased property amounting to Rs. 141.70 (previous year Rs. nil). Remaining useful lives of intangible assets as at 31 December 2009 is as under:
Description
Patent, trade marks, designs and licences Software
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
Schedule - 6
Investments CURRENT Class of shares Trade : Quoted Krebs Biochemicals & Industries Limited Face value per share Number of shares 2009 2008
As at 31 December 2009 2008
Equity shares
Rs. 10
1,050,000
–
35.33 35.33
– –
LONG TERM Investments in shares of companies (fully paid-up) Trade : Quoted Zenotech Laboratories Limited Equity shares Krebs Biochemicals & Industries Limited Equity shares Unquoted Shimal Research Laboratories Limited Shivalik Solid Waste Management Limited Biotech Consortium India Limited Nimbua Greenfield (Punjab) Limited Non trade : Quoted Fortis Healthcare Limited The Great Eastern Shipping Company Limited Subsidiary companies: Domestic Vidyut Investments Limited Ranbaxy Drugs Limited Ranbaxy Drugs and Chemicals Company Solus Pharmaceuticals Limited Rexcel Pharmaceuticals Limited Gufic Pharma Limited Ranbaxy Life Sciences Research Limited Ranbaxy SEZ Limited Overseas Ranbaxy (Netherlands)BV., The Netherlands # Ranbaxy (Hongkong) Ltd., Hongkong Ranbaxy Pharmacie Generiques SAS, France Ranbaxy (Guangzhou China) Ltd., China Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy (Nigeria) Ltd.,Nigeria Ranbaxy Unichem Co. Ltd., Thailand
Rs. 10 Rs. 10
16,127,293 –
16,127,293 1,050,000
2,463.53 – 2,463.53 934.00 0.20 0.50 2.50 937.20
2,463.53 89.25 2,552.78 934.00 0.20 0.50 2.50 937.20
Equity shares Equity shares Equity shares Equity shares
Rs. 10 Rs. 10 Rs. 10 Rs. 10
9,340,000 20,000 50,000 250,000
9,340,000 20,000 50,000 250,000
Equity shares Equity shares
Rs. 10 Rs. 10
14,097,660 500
14,097,660 500
140.98 0.03 141.01
140.98 0.03 141.01
Equity shares Equity shares 10% NCRP ** Equity shares Equity shares Equity shares Equity shares Equity shares Preference Share Equity shares Ordinary shares Equity shares Equity shares Capital contribution Ordinary shares Ordinary shares Ordinary shares
Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 100 Re. 1 Rs. 1,000 Rs. 10 EUR 100 HK $ 1 9 US $ 5,900,000 RM 1 Naira 1 Bahts 100
25,008,400 3,100,020 250 3,100,000 14,900,700 12,500,000 4,900 24,500,000 2,000,000 50,000 3,939,716 2,400,000 800,000 3,189,248 13,070,648 206,670
25,008,400 3,100,020 250 3,100,000 14,900,700 12,500,000 4,900 24,500,000 2,000,000 50,000
250.08 31.00 * 17.25 783.01 735.00 535.22 24.50 200.00 0.50
250.08 31.00 * 17.25 783.01 735.00 535.22 24.50 200.00 0.50 26,543.26 9.84 3,400.02 193.95 36.56 7.40 21.20 32,788.79 36,419.78 (239.50) 36,180.28 2,693.79 2,679.33 33,486.49
3,939,716 28,947.75 2,400,000 9.84 800,000 3,400.02 – 3,189,248 36.56 13,070,648 7.40 206,670 21.20 34,999.33 38,576.40
Less: Provision for diminution in value of long term investments Aggregate book value of quoted investments Market value of quoted investments Aggregate book value of unquoted investments (net of provision for dimunition) Investments (bank certificates of deposit) purchased and sold during the year – ABN Amro Bank – Corporation Bank – Federal Bank – IDBI Bank – Punjab National Bank – State Bank of India Notes * Rounded off to Rs. Nil. ** NCRP denotes Non convertible redeemable preference shares. # include Rs. 7,028.59 (previous year Rs. 4,624.10) paid as share premium reserve.
(239.50) 38,336.90 2,639.88 3,807.18 35,697.02
– – – – – –
479.32 246.22 147.34 728.61 883.26 480.03
62
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 7 Deferred tax assets (net) Deferred tax asset arising on account of : Provision for doubtful debts and advances Provision for employee benefits FCCB loan revaluation Revlauation of External commercial borrowings (ECBs) FCCB redemption premium charged to share premium account Tax losses carried forward Others Less: Deferred tax liability arising on account of : Depreciation, amortisation and impairment Others Less: Deferred tax asset not carried forward Deferred tax assets (net)
As at 31 December 2009 134.06 80.91 – 237.59 – 7,960.24 56.73 8,469.53 2,807.68 165.94 2,973.62 1,296.83 4,199.08
As at 31 December 2008 117.96 83.24 413.77 – 1,227.17 11,655.67 116.65 13,614.46 2,821.14 165.94 2,987.08 – 10,627.38
Note: On the basis of profit from operations made subsequent to year end, profit on sale of materials relating to a First to File (FTF) product in the United States of America, milestone payment from an exclusivity settlement and certain other factors, the Company believes that there is virtual certainty in respect of the carrying amount of net deferred tax asset. Consequently, an amount of Rs. 1,296.83, representing excess over the amount arrived at on the basis of test of virtual certainty, has not been recognized as deferred tax asset. Further, due to a similar assessment as mentioned above, the deferred tax asset of Rs.1,227.17 relating to premium payable on redemption of FCCBs has not been carried forward with corresponding adjustment through Share Premium Account. SCHEDULE - 8 Inventories Stores and spares Raw materials Packaging materials Finished goods – Own manufactured – Others Work-in-progress SCHEDULE - 9 Sundry debtors* (Considered good except where provided for) Debts outstanding for a period exceeding six months Secured Unsecured – Considered good – Considered doubtful Other debts – Secured – Unsecured considered good Less : Provision for doubtful debts
74.15 4,720.32 398.64 3,147.26 698.07 3,266.38 12,304.82
92.31 4,707.81 412.93 3,256.88 719.42 2,795.84 11,985.19
0.65 2,167.05 294.75 2,462.45 330.71 12,848.07 13,178.78 15,641.23 294.75 15,346.48
0.01 2,086.71 252.74 2,339.46 296.40 7,862.23 8,158.63 10,498.09 252.74 10,245.35
* Refer to note 15 of schedule 23 for dues from parties parties under the same management as defined under Section 370(IB) of the Companies Act, 1956.
63
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 10 Cash and bank balances Cash in hand Cheques in hand Remittances in transit Balances with scheduled banks in: – Current accounts – Deposit accounts # – Unclaimed dividend accounts Balances with non-scheduled banks in: – Current accounts *
As at 31 December 2009 4.75 3.35 59.95 53.16 7,285.60 66.33 68.10 7,541.24
As at 31 December 2008 4.98 – 217.50 122.28 18,850.75 76.57 77.31 19,349.39
# Includes deposit receipts of Rs. 0.79 (Previous year Rs 0.75) pledged with Government Authorities. * Closing and maximum balance outstanding at any time during the year on current accounts with non scheduled banks is given hereunder: Balance Maximum balance during the year ended
1 2 3
4 5 6 7 8 9 10 11 12 13 14 15 16
AB Vilnius Bankas, Kaunas, Lithuania ABN AMRO Bank, Moscow, Russia Banque Internationale Pour Le Commerce Et L'industrie du Cameroun, Douala, Cameroon Barclays Bank of Kenya Ltd, Nairobi Kenya Bank Handlowy W Warszawie SA, Warsaw, Poland Calyon Corporate, Ho Chi Minh City, Vietnam Calyon Corporate, Kiev, Ukraine Citi Bank, Almaty, Kazakhstan Citi Bank, Sofia, Bulgaria Credit Du Maroc, Boulevard Mohammed V. Casablanca, Morocco. Myanmar Investment and Commercial Bank Yangon, Myanmar Societe Generale De Banques Au Cameroun Douala, Cameroon The HongKong & Shanghai Banking Corporation, Singapore Standbic Bank, Nairobi, Kenya Standbic Bank Zimbabwe Limited Causeway Zimbabwe, Harare The Hongkong & Shanghai Banking Corporation, Dubai, UAE
As at As at 31 December 31 December 31 December 31 December 2009 2008 2009 2008 10.85 6.94 17.73 18.28 10.21 8.43 93.14 158.13 4.41 0.63 7.56 4.43
– 0.54 2.71 19.17 0.02 1.82 0.49 2.17 5.13 – 5.86 1.77 2.95 68.10
1.44 16.24 2.86 23.21 4.92 0.80 0.50 1.94 4.50 0.56 0.50 0.82 3.02 77.31
1.44 16.24 3.49 63.83 21.36 5.10 0.90 6.67 9.52 0.60 7.47 3.67 6.73
1.44 16.57 2.93 61.86 10.17 2.64 1.16 4.90 8.11 7.50 6.35 2.53 12.18
64
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 11 Loans and advances (Considered good, except where provided for) Secured loans to employees * Unsecured loans and advances: Loans to employees Advances recoverable in cash or in kind or for value to be received – Considered good – Doubtful Balances with central excise and customs Loans and advances to subsidiaries# Minimum alternative tax (MAT) credit entitlement Advance income-tax (net of provision for tax Rs. 1,814.50 as at 31 December 2008) Less : Provision for doubtful advances
As at 31 December 2009 52.35 93.30 1,285.43 73.83 1,962.65 1,533.78 4,720.65 – 9,721.99 73.83 9,648.16
As at 31 December 2008 44.33 85.07 1,274.24 70.33 1,873.14 1,858.20 1,219.00 391.29 6,815.60 70.33 6,745.27
* Includes amount due from an officer of the Company of Rs. 4.02 (previous year 0.34). The maximum balance at any time during the year was Rs. 4.02 (previous year Rs. 0.43). # Refer to note 18 of schedule 23 for loans and advances to parties under the same management as defined under Section 370(IB) of the Companies Act, 1956. SCHEDULE - 12 Other current assets (Unsecured, considered good except where provided for) Export incentives accrued Exchange gain accrued on forward contracts Insurance claims receivable Interest accrued but not due Others – Considered good – Doubtful Less : Provision for doubtful other current assets SCHEDULE - 13 Current liabilities Sundry creditors^ – Dues to micro and small enterprises@ – Others # Book overdraft Interest accrued but not due on loans Unpaid dividend Payable towards unrealised loss on currency options Advance from customers Other liabilities $ ^ # $ @
664.09 559.63 12.41 236.86 85.75 25.84 1,584.58 25.84 1,558.74
654.69 458.80 8.42 140.74 82.89 23.97 1,369.51 23.97 1,345.54
Includes due to subsidiary companies / entities. Includes payable to employees such as salary, bonus etc. Includes statutory dues payable in respect of employees benefits such as provident fund, ESI etc. The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Based on the information available with the management, there are no overdues outstanding to micro and small enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006. Further, the Company has not received any claim for interest from any supplier under the said Act.
21.69 9,053.41 49.78 36.67 66.33 16,669.65 317.97 342.94 26,558.44 371.62 140.52 7.54
19.38 8,096.00 265.72 74.10 76.57 26,760.86 69.05 318.06 35,679.74 2,120.72 129.96 0.59
65
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
As at 31 December 2009 SCHEDULE - 14 Provisions Employee retirement benefits # Income-tax (net of advance tax Rs. 2,760.20 as at 31 December 2009) Premium payable on redemption of FCCB # Also refer to note 9 on schedule 23 Year ended 31 December 2009
As at 31 December 2008
2,108.31 828.24 4,693.79 7,630.34
1,887.07 – 3,610.38 5,497.45 Year ended 31 December 2008
SCHEDULE - 15 Operating income Sales Domestic Export Royalty, technical know-how and product development Export incentives Income from settlement agreements Others
16,981.62 28,377.47 45,359.09 476.68 546.73 1,441.15 151.24 2,615.80 47,974.89
15,454.78 27,938.85 43,393.63 439.34 870.73 172.69 155.09 1,637.85 45,031.48
SCHEDULE - 16 Other income Interest* [gross of tax deducted at source Rs.179.58 (previous year Rs. 194.35)] Dividend from overseas subsidiaries [gross of tax deducted at source Rs. 0.43 (previous year Rs. 0.43)] Profit on sale of assets [net of loss Rs. 26.54 (previous year Rs. 19.45)] Profit on sale of current investments Profit on sale of investment in subsidiary Unclaimed balances / excess provision written back (Also refer to note 2 on schedule 23) Reversal of deferred employees compensation Reversal of provision for diminution in the value of long term investments Miscellaneous Notes : * Interest includes: Current investments - non trade Income-tax refunds Loans and deposits: – Short term deposits with banks – Long term deposits – Subsidiary companies – Employees loans – Others
945.47 9.54 237.34 – 420.33 1,116.76 8.17 – 26.26 2,763.87
866.76 11.01 943.98 42.83 – 177.19 – 9.86 35.01 2,086.64
– 2.35 936.35 – 0.36 5.51 0.90 945.47
0.12 2.36 569.44 8.33 281.75 4.03 0.73 866.76
66
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 17 Materials consumed Raw materials consumed* Stores and spares consumed Packaging materials consumed Finished goods purchased Increase in work in progress and finished goods Opening stock Work-in-progress Finished goods – Own manufactured – Others Less : Closing stock Work-in-progress Finished goods – Own manufactured – Others Net increase Increase in excise duty *Includes site variation cost amounting to Rs. 412.60 (previous year Rs. nil) paid to subsidiaries. SCHEDULE - 18 Personnel expenses Salaries, wages and bonus Contribution to provident and other funds Workmen and staff welfare Amortisation of deferred employees compensation SCHEDULE - 19 Operating and other expenses Freight, clearing and forwarding Advertising and sales promotion Travel and conveyance Legal and professional (Refer to note 7 of Schedule 23) Market research Commission Communication Insurance Rent (refer to note 8 of schedule 23) Claims paid Rates and taxes Regulatory filing fee Printing and stationery Analytical charges Processing charges Excise duty Power and fuel Running and maintenance of vehicles
Year ended 31 December 2009 13,460.05 1,027.31 1,533.43 4,812.06
Year ended 31 December 2008 14,565.21 995.43 1,924.22 4,211.64
2,795.84 3,256.88 719.42 6,772.14
2,190.53 3,029.95 395.77 5,616.25
3,266.38 3,147.26 698.07 7,111.71 (339.57) (13.00) 20,480.28
2,795.84 3,256.88 719.42 6,772.14 (1,155.89) (87.00) 20,453.61
6,478.80 477.85 327.39 – 7,284.04
5,375.60 430.18 278.33 3.75 6,087.86
1,046.52 2,098.36 1,055.64 2,340.90 661.39 503.75 222.87 298.02 482.99 100.27 182.03 264.23 84.22 81.01 804.81 24.74 1,367.98 129.24
1,588.79 1,956.52 1,054.03 1,794.24 903.71 648.94 207.25 248.59 458.73 1,907.22 156.41 58.62 85.85 63.53 866.66 18.69 1,406.76 112.20
67
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
Year ended 31 December 2009 Repairs and maintenance – Buildings – Plant and machinery – Others Cash discounts Conferences and meetings Clinical trials Recruitment and training Fixed assets written off Investment written off Provision / write-off of doubtful debts, advances and other current assets Provision for diminution in value of current investment Miscellaneous expenses SCHEDULE - 20 Tax charge / (benefit) Current income-tax Minimum alternative tax credit entitlement Deferred tax charge/ (credit) Fringe benefit tax Tax - earlier years # # Net of credit adjusted of Rs. 6.50 (previous year Rs. 27.01) 35.92 138.90 339.74 54.46 77.11 454.89 124.26 12.00 – 48.71 53.92 525.94 13,614.82
Year ended 31 December 2008 43.29 116.03 336.97 55.04 110.79 509.52 118.53 50.28 93.42 166.46 – 578.43 15,715.50
3,546.90 (3,501.65) 4,807.81 35.50 10.77 4,899.33
225.80 (40.00) (6,083.41) 155.20 (0.38) (5,742.79)
Schedule - 21 Earnings per share Net profit/(loss) attributable to equity shareholders Net profit/(loss) available for equity shareholders Less: Exchange gain on FCCBs Number of weighted average equity shares Basic Effect of dilutive equity shares on account of * – Employees stock options outstanding – Foreign Currency Convertible Bonds Diluted Nominal value of equity share (Rs.) Earning/ (loss) per share (Rs.) Basic Diluted * Following are the potential equity shares considered to be anti dilutive in nature, hence these have not been adjusted to arrive at the dilutive earnings per share. – – – Employees stock options outstanding Foreign Currency Convertible Bonds Equity share warrants
5,719.84 (904.20) 4,815.64 420,380,856 819,480 27,119,165 448,319,501 5.00 13.61 10.74
(10,448.02) – (10,448.02) 382,846,324 – – 382,846,324 5.00 (27.29) (27.29)
– – 23,834,333
300,486 27,119,165 23,834,333
68
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standards as specified in the Companies (Accounting Standards) Rules, 2006, other pronouncements of the Institute of Chartered Accountants of India (ICAI), and the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India, to the extent applicable. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenses for the year. Examples of such estimates include provisions of future obligation under employee retirement benefit plans, the useful lives of fixed assets and intangible assets, etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future periods. Fixed assets and depreciation Fixed assets are stated at the cost of acquisition or construction, less accumulated depreciation and impairment losses. Cost comprises the purchase price and any attributable costs of bringing the assets to their working condition for intended use. Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily take a substantial period of time to be ready for their intended use, are capitalized. Depreciation on fixed assets, except leasehold improvements, is provided using the straight-line method and at the rates specified in Schedule XIV to the Companies Act, 1956, which are reflective of the estimated useful lives of the fixed assets. Leasehold improvements are depreciated over their estimated useful life, or the remaining period of lease from the date of capitalization, whichever is shorter. Depreciation is calculated on a pro-rata basis from the date of installation till the date the assets are sold or disposed off. Assets costing individually Rs. 5,000 or less are fully depreciated in the year of purchase. Intangible assets and amortization Intangible assets comprise patents, trademarks, designs and licenses, computer software, non-compete fee and product development rights, and are stated at cost less accumulated amortization and impairment losses, if any. These are amortized over their estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The management estimates the useful lives for the various intangible assets as follows: Years Patents, Trademarks, Designs and Licenses 5 Computer Software 6 Non-Compete Fee Term of the respective agreements ranging from 1 to 10 years Product Development 5 Impairment of assets The carrying values of assets are reviewed at each reporting date to determine if there is indication of any impairment. If any indication exists, the asset’s recoverable amount is estimated. For assets that are not yet available for use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount and is recognised in the Profit and Loss Account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised. Revenue recognition Revenue from sale of goods is recognized on transfer of significant risks and rewards of ownership to the customer. Revenue includes excise duty and is shown net of sales tax, value added tax and applicable discounts and allowances. Allowances for sales returns are estimated and provided for in the year of sales.
69
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Service income is recognised as per the terms of contracts with customers when the related services are rendered, or the agreed milestones are achieved. Income from royalty, technical know-how arrangements, exclusivity and patents settlement, licensing arrangements is recognized on an accrual basis in accordance with the terms of the relevant agreement. Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Dividend income is recognised when the right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on the time proportion method. Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at the lower of cost or fair value, determined on an individual investment basis. Long-term investments are carried at cost less any other-than-temporary diminution in value, determined, separately in respect of each category of investment. Inventories Raw material, packaging material and stores and spare parts are carried at cost. Cost includes purchase price, those subsequently recoverable by the enterprise from the concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used. The carrying cost of raw materials, packaging materials and stores and spare parts are appropriately written down when there is a decline in replacement cost of such materials and finished products in which they will be incorporated are expected to sold below cost. Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. The comparison of cost and net realisable value is made on an item by item basis. Cost of work in progress and manufactured finished goods is determined on weighted average basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on weighted average basis. Excise duty liability is included in the valuation of closing inventory of finished goods. Research and development costs Revenue expenditure on research and development is expensed out under the respective heads of account in the year in which it is incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the Profit and Loss account as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Fixed assets used for research and development are depreciated in accordance with the Company’s policy. Materials identified for use in research and development process are carried as inventories and charged to Profit and Loss Account on issuance of such materials for research and development activities. Employee stock option based compensation The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of the options given to employees under the employee stock option schemes of the Company, is recognised on a straight line basis and amortised over the vesting period on a straight line basis.
70
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Foreign currency transactions Transactions in foreign currency are recorded at the exchange rate prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Profit and Loss Account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date, not covered by forward exchange contracts, are translated at year end rates. The resultant exchange differences are recognised in the Profit and Loss Account. Non-monetary assets are recorded at the rates prevailing on the date of the transaction. Profit and Loss items at representative offices located outside India are translated at the respective monthly average rates. Monetary Balance sheet items at representative offices at the balance sheet date are translated using the year-end rates. Non-monetary Balance Sheet items are recorded at the rates prevailing on the date of the transaction. Forward contracts are entered into to hedge the foreign currency risk of the underlying outstanding at the balance sheet date. The premium or discount on such contracts is amortized as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognized as an income or expense for the period. The exchange difference on such a forward exchange contract is calculated as the difference between (a) the foreign currency amount of the contract translated at the exchange rate at the Balance Sheet date, or the settlement date where the transaction is settled during the reporting period, and (b) the same foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognized in the Profit and Loss Account in the reporting period in which the exchange rates change. Derivative instruments and hedge accounting The Company uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. Forward and option contracts are fair valued at each Balance Sheet date. The resultant gain or loss (except relating to effective hedges) from these transactions are recognised in the Profit and Loss Account. The gain or loss on effective hedges is recorded in the Hedging Reserve (reported under Reserves and Surplus) until the transactions are complete. On completion, the gain or loss is transferred to the Profit and Loss account of that period. To designate a forward or options contract as an effective hedge, the management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. In the absence of being designated as an effective hedge, a gain or loss is recognised in the Profit and Loss Account. Employee benefits Short – term employee benefits All employee benefits payable / available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the Profit and Loss Account in the period in which the employee renders the related service. Defined benefit plans Defined benefit plans of the Company comprise gratuity, provident fund and pension plans. Gratuity: The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee’s salary and the tenure of employment. Vesting occurs upon completion of five years of service. The Company makes annual contributions to gratuity fund established as trust. Provident fund In respect of employees, the Company makes specified monthly contribution towards the employees’ provident fund to the provident fund trust administered by the Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on respective investments of the trust and the notified interest rate.
71
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Pension The Company has an obligation towards pension, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee’s salary and the tenure of employment. Vesting occurs upon completion of 20 years of service. Actuarial valuation The liability in respect of defined benefit plans, other than provident fund schemes, is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary primarily using the Projected Unit Credit Method, which recognizes each year of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. The contributions made to provident fund trust are charged to Profit and Loss Account as and when they become payable. In addition, the Company recognizes liability for shortfall in the plan assets vis-à-vis the fund obligation, if any. The Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standard Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, the Company’s actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly, the Company is unable to exhibit the related information. Defined contribution plans Under the superannuation scheme, a defined contribution plan, the Company pays fixed contributions and has no obligation to pay further amounts. Such fixed contributions are recognized in the Profit and Loss Account on accrual basis. Other long term employee benefits Compensated absences As per the Company’s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. The value of benefits is determined based on the seniority and the employee’s salary. Long service award As per the Company’s policy, employees of the Company are eligible for an award after completion of specified number of years of service with the Company. Actuarial valuation The Company accounts for the liability for compensated absences payable in future and long service awards based on an independent actuarial valuation using the projected unit credit method as at the year end. Actuarial gains and losses are recognized immediately in the Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Taxes on income Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Incometax law) and deferred tax charge or credit. Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a
72
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and are written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. Provision for Fringe Benefit tax for the year has been determined in accordance with the provisions of section 115WC of the Income Tax Act, 1961. Minimum alternative tax payable under the provisions of the Income Tax Act 1961 is recognized as an assets in the year in which credit become eligible and is set off to the extent allowed in the year in which the Company becomes liable to pay income taxes at the enacted tax rates. Provisions, contingent liabilities and contingent assets A provision is created when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. The Company does not recognise assets which are of contingent nature until there is virtual certainty of realisability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognised in the financial statements of the period in which the change occurs. Leases Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as an operating lease. Lease payments under operating lease are recognized as an expense in the Profit and Loss Account on a straight-line basis over the lease period. Earnings per share Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period are adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.
73
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 1. Background Ranbaxy Laboratories Limited ('the Company') together with its subsidiaries, joint venture and associates, operates as an integrated international pharmaceuticals organisation with businesses encompassing the entire value chain in the marketing, production and distribution of pharmaceuticals products. The Company’s shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India. Its Global Depository Shares (representing equity shares of the Company) are listed on the Luxembourg Stock Exchange and Foreign Currency Convertible Bonds ( FCCBs) are listed on the Singapore Stock Exchange. Food and Drug Administration ('FDA') investigation On 16 September 2008, the Company received two warning letters and an Import Alert from the United States of America (USA) FDA, covering 30 generic drugs being manufactured at its Paonta Sahib and Dewas manufacturing facilities in India. The issue raised in the warning letters relate to “Current Good Manufacturing Practice” being followed at the said plants and does not in any way raises questions on product’s quality, safety or effectiveness. In 2008, consequent to Import Alert, the Company was not able to sell the products covered under Import Alert, and accordingly, it had recorded a provision of Rs. 2,631.11 million in that year, towards inventory, expected sales return and related exports benefits. On 25 February 2009, the Company received a letter from the US FDA indicating that the Agency had invoked its Application Integrity Policy ('AIP') against the Paonta Sahib facility (the “facility”). The management of the Company believes that there was no falsification of data generated at the facility and also believes that there is no indication of a pattern and practice of submitting untrue statements of material facts and there was no other improper conduct. Accordingly, the Company, based on opinion from its legal council, believes that there is no incremental present obligation existing at the balance sheet date on account of these notices. The company continues to fully cooperate with the concerned authorities for their final clearance, pending which there would be delays for new product approvals and sale of existing products in the United States of America. During the current year, the Company has performed a re-assessment of the amount of provisions created in 2008 and reversed a provision of Rs. 937.81 million which is included in unclaimed balances/ excess provisions written back, which in view of the Company is no longer required now. In the year 2008, the department of Justice (DOJ), USA had filed certain charges against the Company citing possible issues with the data submitted by the Company, in support of product filing. The Company continues to work diligently with the concerned authorities towards resolution of the issue. On 28 October 2008, Daiichi Sankyo Company Limited, Japan (Daiichi Sankyo) acquired majority stake in the Company. The Company issued the following shares/ warrants to Daiichi Sankyo. a) 46,258,063 equity shares of Rs. 5 each allotted as fully paid up on a preferential basis. b) 23,834,333 warrants issued on 20 October 2008. Each warrant is convertible into one equity share of Rs. 5 each at a premium of Rs. 732 per share at any time between six months to eighteen months from the date of allotment of warrants (Rs. 73.70 per warrant being 10% of the exercise price received). Share-based compensation The Company’s Employee Stock Option Schemes (“ESOSs”) provide for the grant of stock options to eligible management employees and Directors of the Company and subsidiaries. The ESOSs are administered by the Compensation Committee of the Board of Directors of the Company (“Committee”). Options are granted on the basis of performance and the grade of the employee. Presently there are three ESOSs (“ESOS I”, “ESOS II” and “ESOS 2005”). Options are granted at the discretion of the committee to select employees depending upon certain criterion. The ESOSs limits the maximum grant of options to an employee at 25,000 for ESOS I and 40,000 each for ESOS II and ESOS 2005 in any given year. ESOS I and II provide that the grant price of options is to be determined at the average of the daily closing price of the Company’s equity shares on the NSE during a period
2.
3.
4.
74
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements of 26 weeks preceding the date of the grant. ESOS 2005 provides that the grant price of options will be the latest available closing price on the stock exchange on which the shares of the Company are listed, prior to the date of the meeting of the Committee in which the options are granted. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered. The options vests evenly over a period of five years from the date of grant. Options lapse if they are not exercised prior to the expiry date, which is ten years from the date of the grant. The Shareholders' Committee from time to time have approved issuance of options under the Employees Stock Options Scheme(s) as per details given below: Date of approval No. of options 29 June 2002 2,500,000 25 June 2003 4,000,000 30 June 2005 4,000,000 The stock options outstanding as on 30 June 2005 are proportionately adjusted in view of the sub-division of equity shares of the Company from the face value of Rs.10 each into 2 equity shares of Rs. 5 each Options granted upto 3 October 2002 are entitled for additional bonus shares in the ratio of 3:5. The movement of the options (post split) for the year ended 31 December 2009 is given below: WeightedWeightedaverage average exercise remaining prices contractual life (Rs.) (years) 439.59 216.00 310.84 312.03 471.97 401.68 455.98 6.73 9.05 – – – 6.30 4.88
Stock options (numbers) Outstanding, beginning of the year Granted during the year Forfeited during the year Allotted during the year Lapsed during the year Outstanding, end of the year* Exercisable at the end of the year* 7,272,849 1,472,725 (530,760) (36,825) (764,973) 7,413,016 3,906,091
Range of exercise prices (Rs.) 219.00-561.00 216.00-216.00 216.00-538.50 216.00-372.50 283.50-538.50 216.00-561.00 216.00-561.00
*Includes options exercised, pending allotment as at 31 December 2009 The movement of the options (post split) for the year ended 31 December 2008 is given below: Weightedaverage exercise prices (Rs.) 446.52 373.05 436.56 350.65 473.41 439.59 457.31 Weightedaverage exercise prices (years) 6.87 9.15 – – – 6.73 5.50
Stock options (numbers) Outstanding, beginning of the year Granted during the year Forfeited during the year Exercised during the year Lapsed during the year Outstanding, end of the year Exercisable at the end of the year 7,168,956 1,774,825 (456,910) (880,605) (333,417) 7,272,849 3,450,209
Range of exercise prices (Rs.) 283.50-538.50 219.00-561.00 283.50-538.50 283.50-538.50 283.50-538.50 219.00-561.00 283.50-538.50
75
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 5. Capital work-in-progress (including capital advances) Capital advances to vendors amounting to Rs.164.44 (previous year Rs. 59.33). [ii] Project related expenses (directly allocable) amounting to Rs. 277.68 (previous year Rs. 356.86) as under : As at 31 December Particulars 2009 2008 Opening balance 356.86 208.68 Add :Addition during the year Salaries, wages and bonus 39.35 63.94 Contributions to provident and other funds 4.97 6.05 Workmen and staff welfare 1.18 2.33 Raw materials 4.54 26.66 Power and fuel 3.67 28.45 Insurance 0.14 2.39 Others 15.76 27.62 426.47 366.12 Less : Capitalised during the year 148.79 9.26 Balance as at year end 277.68 356.86 Interest on fixed loans and debentures Interest includes interest paid on fixed period loans amounting to Rs. 148.04 (previous year Rs. 867.73) Payment to auditors (exclusive of service tax) For the year ended 31 December a] Statutory auditors 2009 2008 Statutory audit fee 9.50 6.30 Tax audit fee 3.25 # 2.75 Limited review fee 4.50 ^ 1.60 Other matters 6.02 @ 2.01 Out of pocket expenses 1.07 $ 1.56 24.34 14.22 # # Paid to previous statutory auditors ^ Includes Rs. 0.50 paid to previous statutory auditors @ Includes Rs. 2.22 paid to previous statutory auditors $ Includes Rs. 0.37 paid to previous statutory auditors b] Cost auditors Audit fee 0.66 0.76 Certification 0.29 0.29 Out of pocket expenses 0.08 0.11 1.03 1.16 Leases The Company has leased facilities under cancellable and non-cancellable operating leases arrangements with a lease term ranging from 3 to 17 years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expense recognised during the year amounts to Rs. 482.99 (previous year Rs. 458.73). The future minimum lease payments in respect of non-cancellable operating leases as at 31 December 2009 and 31 December 2008 are: As at 31 December 2009 2008 a] not later than one year 135.05 129.94 b] later than one year but not later than five years 311.32 384.40 c] later than five years 107.37 169.33 683.67 553.74
6. 7.
8.
76
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 9. Employee benefits The Company primarily provides the following retirement benefits to its employees: (a) Pension (b) Gratuity (c) Compensated absences During the year, the Company has recognised an expense of Rs. 257.09 (Previous year Rs. 223.36) pertaining to employers' contribution to provident fund schemes and superannuation fund which is included in "personnel cost" in schedule 18. The following tables sets out the disclosures relating to pension and gratuity benefits as required by Accounting Standard - 15 'Employee Benefits': Pension Gratuity (Unfunded) (Funded) Change in the present value of obligation : Present value of obligation as at 1 January 2009 1,571.19 482.17 1,205.49 378.88 Add: Interest cost 117.84 40.03 99.45 30.74 Add: Current service cost 93.20 36.40 106.91 39.09 Less: Benefits paid 54.56 130.15 32.59 48.80 Add: Actuarial (gain)/loss on obligations 28.83 96.62 191.92 82.25 Present value of obligation as at 31 December 2009 1,756.50 525.07 1,571.18 482.16 Gratuity (Funded) Change in the Fair value of Plan Assets : Fair value of plan assets as of 1 January 2009 439.19 354.53 Add: Actual return on plan assets 35.89 29.62 Add: Contributions 94.36 103.84 Less: Benefits paid 130.15 48.80 Fair value of plan assets as of 31 December 2009 439.29 439.19
77
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements Gratuity (Funded) Reconciliation of present value of defined benefit obligation and the fair value of assets Present value of funded obligation as of 31 December 2009 Less: Fair value of plan assets as at the end of the period funded status Present value of unfunded obligation as of 31 December 2009 Unfunded net liability recognised in Balance Sheet Pension (Unfunded) Expenses recognised in the Profit and Loss Account Current service cost Add: Interest cost Add: Expected return on plan assets Less: Settlement credit Add: Net actuarial (gain)/loss recognised Total expenses recognised in the Profit & Loss account 93.20 106.91 117.84 99.45 – – 2.51 15.34 28.83 191.92 237.36 382.94
525.07 482.16 439.29 439.19 85.78 42.97 85.78 42.97 Gratuity (Funded) 36.40 39.09 40.03 30.74 (38.57) (30.31) 2.11 2.80 99.30 82.94 135.05 119.66
Note- Figures in italics are for the year ended 31 December 2008 The major categories of plan assets as a percentage of total plan assets are as under: Particulars Gratuity Central Government securities 18% 15% State Government securities 11% 12% Bonds and securities of public sector / Financial Institutions 60% 62% Deposit with Reserve Bank of India 11% 11%
78
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements The following table sets out the assumptions used in actuarial valuation of leave encashment, pension and gratuity: Leave Particulars Encashment Pension Gratuity (Unfunded) (Unfunded) (Funded) Discount rate 7.50% 7.50% 7.50% 8.25% 8.25% 8.25% Rate of increase in compensation levels # 10.0% 10.0% 10.0% 5.5% 5.5% 5.5% Rate of return of plan assets N.A. N.A. 8% N.A. N.A. 8% Expected average remaining working lives of 20.55 - 24.08 20.58 20.58-24.08 employees (years) 21.14-24.50 21.20 21.20-24.50 The liability for leave encashment, pension and gratuity as at 31 December 2009 was Rs. 266.03 (Previous year Rs. 272.90), 1,756.50 (previous year Rs. 1,571.19) and Rs. 85.78 (previous year Rs. 42.97) respectively. # 10% for the first three years and 5% thereafter. Figures in italics are for the year ended 31 December 2008 10. Hedging and Derivatives The Company uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. The following are the outstanding forward exchange contracts and currency options entered into by the Company: As at 31 December 2009 Category Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) As at 31 December 2008 Category Forward contracts Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) Currency USD EUR GBP USD JPY JPY Cross Currency INR USD USD INR USD Amount (in millions) USD 218.40 USD 35.30 USD 0.17 USD 1403.00 JPY 10,350.00 JPY 11,800.00 Buy/ Sell Sell Sell Sell Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging Hedging Currency USD EUR USD JPY JPY Cross Currency INR USD INR USD Amount (in millions) USD 20.00 USD 1.44 USD 1038.5 JPY 10,350.00 JPY 11,800.00 Buy/ Sell Sell Sell Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging
79
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements The outstanding forward contracts, which are classified as cash flow hedges and effective as at 31 December 2009 are as follows: Currency USD Cross Currency INR Amount (in millions) USD 20.00 Loss, net of tax (28.73)
The Company’s unhedged foreign currency exposures on account of payables/ receivables not hedged are as follows: As at 31 December 2009 As at 31 December 2008 (in original (in original currency) (in Rupees) currency) (in Rupees) Receivables* – EURO 22.05 1,469.99 1.63 110.58 – BRL 24.98 666.21 – – – ZAR 102.30 640.96 103.53 531.18 – RUB 410.90 267.24 5.18 8.57 – GBP 2.73 205.53 3.34 237.21 – AUD 2.04 85.18 2.22 76.20 – SEK 10.62 68.99 13.88 86.34 – NZD 1.10 37.18 2.10 59.69 – MYR 2.73 37.05 0.98 13.72 – CNY 2.99 20.40 – – – JPY 36.22 18.31 23.99 12.86 – AED 0.65 8.28 5.95 78.68 – VND – – 231.38 0.64 – MMK – – 0.18 1.36 * USD - INR currency exposure for receivable balances is hedged fully, however USD to above currency is unhedged to the extent stated above. Payables – USD 51.73 2,406.05 9.38 455.77 – EURO 4.27 284.68 0.77 52.31 – CAD 2.61 115.30 0.01 0.40 – GBP 0.44 33.08 0.02 1.42 – JPY 24.22 12.24 41.11 24.20 – DKK – – 2.23 20.35 Others# 5.36 15.33 Bank balances – USD 0.62 28.84 0.71 34.50 – LTL 0.56 10.81 0.35 6.89 – CFR 94.04 9.55 49.29 5.20 – RUB 5.90 3.83 2.10 3.47 – PLN 0.03 0.49 1.00 16.22 – UAH 0.53 3.04 0.72 4.48 Others# 5.92 5.60 Loans – USD 666.86 31,016.74 637.30 30,966.14 – JPY – – 1,800.00 965.15 # Exposures in other currencies which are not significant has been aggregated for this disclosure. For derivates refer note above.
80
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 11. Foreign exchange (gain)/ loss other than loans Foreign exchange loss / (gain) Fair valuation (gain) / loss on derivatives For the year ended 31 December 2009 2008 1,423.48 (725.96) (3,213.88) 10,990.42 (1,790.40) 10,264.46 For the year ended 31 December 2009 2008 186.44 229.08 20.67 44.40 1.99 2.46 52.00 – 4.84 1.34 265.94 277.28
12. a]
Directors' remuneration* Salaries and allowances Contribution to provident and other funds* Directors' fee Commission Perquisites
* Does not include the following: a) Liabilities in respect of gratuity, pension and leave encashment (for one of the directors) as the same is determined on an actuarial basis for the company as a whole. b) Amortisation of deferred employee compensation on grant of stock options. c) Compensation cost of Rs. 481.38 for the loss of office to a director (previous year Rs. nil). d) Pension paid/ payable to non-executive directors for the services rendered in earlier years as a whole time director/ employees Rs. nil (previous year Rs. 2.29). During the year, the Company has received requisite approvals for managerial remuneration paid to its director in the previous year, which was in excess of the limit under the Companies Act, 1956 b] Determination of net profits in accordance with the provisions of section 349 of the Companies Act, 1956 and commission payable to directors: For the year ended 31 December 2009 Profit before tax as per Profit and Loss account 10,619.17 Less: Profit on sale of assets (net) 237.34 Profit on sale of investments 420.33 657.67 Add: Directors' remuneration (including commission) 265.94 Fixed assets written off 12.00 277.94 Net profit 10,239.44 Maximum remuneration which can be paid to Whole-time Directors as per Companies Act, 1956 1023.94 Maximum commission which can be paid to other Directors as per Companies Act, 1956 102.39 Commission to directors : (As determined by the Board of Directors) Whole-time 35.00 Others 17.00 52.00 In view of losses in the year ended 31 December 2008, net profit under section 349 of the Companies Act, 1956 was not determined.
81
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 13. Commitments and Contingent liabilities As at 31 December i) Claims against the Company not acknowledged as debts, under dispute: 2009 2008 (a) DPCO * 1,703.30 1,504.10 (b) Excise matters 75.42 68.57 (c) Octroi tax matters ** 171.00 171.00 (d) Sales tax matters 12.76 7.96 (e) Other matters *** 190.71 179.59 (f) Service tax matters 3.07 – * The Company has received demand for payment to the credit of the Drug Prices Equalisation Account under Drugs (Price Control) Order, 1995 (DPCO) which is being contested by the Company in respect of its various products. Further, the Company has deposited Rs. 319.59 (previous year Rs. 297.91) under protest. ** The Company has been contesting a case with Municipal Corporation of Mohali (MCM) under which MCM is contesting that Octroi has to be paid by the Company at 1% as against 0.5% being paid by the Company. The amounts represents the differential. *** These represent cases pending at various forums on account of employee/ worker related cases, State electricity board, Punjab Land Preservation Act etc. The Company believes that the probability of any liability on account of any cases pending (including those pending with DOJ) is remote. ii) Estimated amount of contracts remaining to be executed on capital 773.85 597.28 account and not provided for (net of advances) 14. The aggregate amount of revenue expenditure incurred on research and development is shown in the respective heads of account. The break-up of the amount is as under: For the year ended 31 December 2009 2008 Salaries, wages and bonus 1,309.08 1,225.26 Contribution to provident and other funds 81.57 76.52 Workmen and staff welfare 68.37 55.84 Raw materials consumed 1,135.09 665.60 Stores and spares consumed 531.99 537.86 Power and fuel 272.27 244.86 Clinical trials 451.55 507.78 Rent 213.09 198.36 Printing and stationery 16.61 20.77 Insurance 38.06 30.92 Communication 56.37 48.49 Legal and professional charges 53.95 29.36 Travel and conveyance 85.50 103.73 Running and maintenance of vehicles 34.34 26.51 Analytical and processing charges 49.32 63.89 Repairs and maintenance – Buildings 6.44 10.07 – Plant and machinery 44.34 35.85 – Others 94.54 87.69 13.43 10.17 Recruitment and training Others 165.93 175.93 4,721.84 4,155.46
82
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) 15. Related party disclosures a] Relationship : i) Holding company (also being the ultimate holding company) 1 Daiichi Sankyo Co., Ltd. , Japan (from 20 October 2008) ii) Subsidiaries (domestic): 1 Ranbaxy Drugs and Chemicals Company 2 Solus Pharmaceuticals Limited 3 Ranbaxy SEZ Limited 4 Rexcel Pharmaceuticals Limited 5 Gufic Pharma Limited 6 Ranbaxy Life Sciences Research Limited 7 Ranbaxy Drugs Limited 8 Vidyut Investments Limited 9 Solrex Pharmaceuticals Company (a Partnership firm) iii) Subsidiaries including step down subsidiaries (overseas): 1 Ranbaxy (Netherlands) BV, The Netherlands 2 Ranbaxy (Hong Kong) Limited, Hong Kong 3 Ranbaxy Inc., USA 4 Ranbaxy Egypt (L.L.C.), Egypt 5 Ranbaxy (Guangzhou China) Ltd., China (upto 29 December 2009) 6 Ranbaxy Farmaceutica Ltda, Brazil 7 Ranbaxy Signature, LLC. USA 8 Ranbaxy PRP(Peru) SAC 9 Ranbaxy Australia Pty Ltd., Australia 10 Lapharma GmbH, Germany 11 Ranbaxy Unichem Co. Ltd., Thailand 12 Ranbaxy USA, Inc., USA 13 Ranbaxy Italia S.p.A, Italy 14 Ranbaxy (Malaysia) Sdn. Bhd., Malaysia 15 Be-Tabs Investments (Proprietary) Ltd., South Africa 16 Ranbaxy Japan KK (from 09 November 2009) 17 Ranbaxy NANV, The Netherlands 18 Ranbaxy (Poland) S. P. Zoo, Poland 19 Ranbaxy (Nigeria) Limited, Nigeria 20 Ranbaxy Europe Limited, U.K. 21 Ranbaxy (UK) Limited, U.K 22 Basics GmbH , Germany. 23 ZAO Ranbaxy, Russia 24 Terapia S.A., Romania 25 Ranbaxy Pharmaceuticals Inc., USA 26 Ranbaxy Laboratories Inc., USA 27 Ohm Laboratories Inc., USA 28 Ranbaxy Hungary Kft, Hungary (upto 22 May 2009)
83
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) 29 Terapia Distributie S.R.L., Romania 30 Ranbaxy Pharma AB, Sweden 31 Office Pharmaceutique Industriel et Hospitalier SARL, France 32 Ranbaxy Ireland Limited, Ireland 33 Ranbaxy (S.A.) Proprietary Limited, South Africa 34 Ranbaxy Holdings (UK) Ltd., U.K 35 Ranbaxy Do Brazil Ltda, Brazil 36 Laboratorios Ranbaxy, S.L., Spain 37 Ranbaxy Vietnam Company Ltd., Vietnam (upto 05 October 2009) 38 Ranbaxy Pharmacie Generiques SAS, France 39 Ranbaxy Pharmaceuticals Canada Inc., Canada 40 Sonke Pharmaceuticals (Pty) Ltd., South Africa 41 Ranbaxy Mexico S.A.de C.V. (from 13 November 2009) 42 Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda, Portugal 43 Ranbaxy Belgium N.V., Belgium 44 Be-Tabs Pharmaceuticals (Proprietary) Ltd. 45 Rexcel Egypt (L.L.C.), Egypt iv) Joint Venture (Overseas) 1 Nihon Pharmaceutical Industry Co. Ltd., Japan (Investment made by Ranbaxy (Netherlands) BV, The Netherlands) (upto 8 December 2009) v) Associates (domestic) 1 Zenotech Laboratories Limited 2 Shimal Research Laboratories Limited vi) Key management personnel 1 Mr. Malvinder Mohan Singh, Chairman, CEO & Managing Director (upto 24 May 2009) 2 Mr. Atul Sobti, CEO and Managing Director 3 Mr. Ramesh L Adige (Upto 19 December 2008) vii) Relatives of Key management personnel with whom transactions during the year and / or previous year 1 Mrs. Nimmi Singh, mother of Mr. Malvinder Mohan Singh (upto 24 May 2009) viii) Entities over which significant influence is exercised by Mr. Malvinder Mohan Singh with whom transactions were carried out in the current year and / or previous year 1 Fortis Healthcare Limited (Including its subsidiaries) 2 Religare Securities Limited 3 Ran Air Services Limited 4 Religare Travels (India) Limited 5 Religare Capital Markets Limited 6 Super Religare Laboratories Limited 7 Fortis Clinical Research Limited 8 Religare Enterprises Limited 9 Escorts Heart Institute and Research Centre Limited 10 Religare Technova IT Services Limited (formerly Fortis Financial Services Limited) 11 Oscar Investments Limited
84
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) b] Transactions with the related parties
Holding Company Subsidiaries, Key Joint Ventures management and Associates personnel Entities over which significant influence is exercised Total
Transactions
Sales Royalty, technical know-how and product development Dividend from overseas subsidiaries Sale of Intellectual property rights (fixed assets) Unclaimed balances/ excess provision written back Interest received Rent received Other income Finished goods purchased Market research expenses Procurement cost of exhibit batches Regulatory filing expenses Advisory services Analytical and processing charges Clinical Trials Product quality claim Business support expenses
– – – – – – – – – – – – – – – – 0.23 – 1.46 – – – – – – – – – – – – – –
17,199.19 (15,418.91) 195.06 (78.22) 9.54 (11.01) 166.89 – 928.42 – 0.36 (281.75) 1.04 – 2.40 (9.26) 1,199.32 (1,259.54) 656.86 (898.40) 412.35 (127.10) 193.24 – – 153.58 (164.10) 61.02 (55.39) 57.14 (1,668.45) 1.30 (2.51)
– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
– (18.03) – – – – – – – – – – – – 13.73 (32.33) – – – – – – – – – (201.40) – – – – – – – –
17,199.19 (15,436.94) 195.06 (78.22) 9.54 (11.01) 166.89 – 928.42 – 0.36 (281.75) 1.04 – 16.13 (41.59) 1,199.55 (1,259.54) 658.32 (898.40) 412.35 (127.10) 193.24 – – (201.40) 153.58 (164.10) 61.02 (55.39) 57.14 (1,668.45) 1.30 (2.51)
85
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Transactions Holding Company Subsidiaries, Key Joint Ventures management and Associates personnel Entities over which significant influence is exercised Total
Travel and conveyance Royalty paid Freight, clearing and forwarding Commission Personnel expenses Technical services availed Amount written off Investments made Loans and advances given Loan and advance received back Purchase of fixed assets Sale of investment Sale of fixed assets Equity capital contribution (including premium) Equity share warrants money received
2.20 – 0.36 – – – – – – – – – – – – – – – – – – – – – – – – (34,092.19) – (1,756.59)
– – 1.18 (1.66) 0.68 (0.56) 0.35 (0.23) – – – – – (112.05) 2,404.49 (3,936.45) 5.50 (10,488.50) 330.05 (8,159.82) – – – – 38.05 – – – – –
– – – – – – – – 250.64 (279.30) – – – – – – – – – – – – – – – – – – – –
– – – – – – – – – – 98.03 (403.36) – – – – – – – – 97.57 (434.34) – (44.00) – – – – – –
2.20 – 1.54 (1.66) 0.68 (0.56) 0.35 (0.23) 250.64 (279.30) 98.03 (403.36) – (112.05) 2,404.49 (3,936.45) 5.50 (10,488.50) 330.05 (8,159.82) 97.57 (434.34) – (44.00) 38.05 – – (34,092.19) – (1,756.59)
Note: Figures in brackets are for previous year
86
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) c] Transaction in excess of 10% of the total related party transactions
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
1
Sales Ranbaxy Pharmaceuticals, Inc. USA ZAO Ranbaxy, Russia Subsidiary Company Subsidiary Company 8,557.05 1,318.95 6,674.58 1,875.18
2
Royalty, Technical know-how and product development Ohm Laboratories, Inc, USA Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy (Guangzhou China) Limited, China Ranbaxy Nigeria Limited, Nigeria Ranbaxy Pharmaceuticals, Inc. USA Ranbaxy Unichem Company Ltd., Thailand Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company 65.86 50.68 45.76 – – 18.46 5.22 2.17 2.15 166.89 850.93 0.36 – – 1.04 – 19.13 – 23.45 19.99 10.19 6.68 1.96 2.37 – – – 140.52 140.35 –
3
Dividend from overseas subsidiaries Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy Unichem Company Ltd., Thailand Ranbaxy Nigeria Limited, Nigeria
4 5 6
Sale of Intellectual property rights (fixed assets) Basics GmbH, Germany. Unclaimed balances/ excess provision written back Ranbaxy Pharmaceuticals, Inc. USA Interest received Ranbaxy Drugs and Chemicals Company, India Rexcel Pharmaceuticals Ltd, India Solus Pharmaceuticals Ltd, India
7
Rent Received Solrex Pharmaceuticals Company, India (A Partnership firm)
8
Other Income Solrex Pharmaceuticals Company, India (A Partnership firm) Zenotech Laboratories Limited, India Ranbaxy Unichem Company Ltd., Thailand Subsidiary Company Associates 1.71 0.69 – – 9.26 Subsidiary Company Subsidiary Company 1,003.26 144.19 1,172.77 0.77
9
Finished goods purchased Solrex Pharmaceuticals Company, India (A Partnership firm) Ranbaxy (Malaysia) Sdn. Bhd., Malaysia
87
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
10
Market research expenses Ranbaxy Inc., USA Ranbaxy Europe Limited, U.K. Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Holding company Holding company Subsidiary Company Subsidiary Company Subsidiary Company 339.11 268.19 412.35 – 45.16 22.47 24.95 30.96 19.85 34.06 96.15 23.37 61.02 34.55 13.10 5.97 – – 1.30 2.20 0.36 0.24 0.94 0.68 315.79 582.61 102.28 24.82 – – – – – 48.64 107.98 7.48 55.39 – – 8.65 1,270.98 266.84 2.51 – – 0.24 1.42 0.56
11
Procurement cost of exhibit batches Ohm Laboratories, Inc, USA Terapia S.A., Romania
12
Regulatory filing fee Basics GmbH, Germany. Laboratorios Ranbaxy, S.L., Spain Ranbaxy Italia S.p.A, Italy Ranbaxy Pharmacie Generiques SAS, France Ranbaxy Beligium N.V., Belgium
13
Analytical and processing charges Solrex Pharmaceuticals Company, India (A Partnership firm) Ranbaxy Ireland Limited, Ireland, India Terapia S.A., Romania
14 15
Clinical trials Terapia S.A., Romania Product quality claim Ranbaxy Farmaceutica Ltda, Brazil Ranbaxy Pharmacie Generiques SAS, France ZAO Ranbaxy, Russia Ranbaxy Pharmaceuticals, Inc. USA Ohm Laboratories, Inc, USA
16 17 18
Business support expenses Ranbaxy Inc., USA Travel and conveyance Daiichi Sankyo Co., Limited, Japan Royalty paid Daiichi Sankyo Co., Limited , Japan Gufic Pharma Limited Terapia S.A., Romania
19
Freight, clearing and forwarding Ranbaxy Ireland Limited, Ireland
88
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
20 21
Commission paid Ranbaxy Drugs and Chemicals Company, India Personnel Cost (Also refer to note 12) Mr. Malvinder Mohan Singh ( Upto 24th May 2009) Mr. Atul Sobti Services availed Fortis Clinical Research Limited, India
Subsidiary Company Key Management Personnel Key Management Personnel Entities over which significant influence is exercised Entities over which significant influence is exercised Subsidiary Company Subsidiary Company Associate Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Entities over which significant influence is exercised Entities over which significant influence is exercised Entities over which significant influence is exercised
0.35 167.41 79.54
0.23 237.18 29.08
22
48.54
233.50
Religare Technova IT Services Limited, India
33.38 – 2,404.50 – – – 5.50 – – 164.99 165.00 97.57
65.13 112.05 1,248.74 1,385.21 525.00 553.00 – 4,992.50 4,992.50 4,082.29 4,065.50 145.84
23 24
25
26
27
Amount written off Ranbaxy Nigeria Limited, Nigeria Investments made Ranbaxy (Netherlands) BV, The Netherlands Zenotech Laboratories Limited Rexcel Pharmaceuticals Limited Solus Pharmaceuticals Limited Loans and advances given Ranbaxy Drugs and Chemicals Company, India Rexcel Pharmaceuticals Limited, India Solus Pharmaceuticals Limited, India Loan and advances received back Rexcel Pharmaceuticals Ltd, India Solus Pharmaceuticals Ltd, India Purchase of fixed assets Religare Technova IT Services Limited, India
Fortis Clinical Research Limited, India
–
288.50
28
Sale of Investment Religare Enterprises Limited
–
44.00
89
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
29 30 31
Sale of Fixed Assets ZAO Ranbaxy, Russia Equity capital contribution (including premium) Daiichi Sankyo Co., Ltd., Japan Equity share warrants money received Daiichi Sankyo Co., Ltd., Japan Holding Company – 1,756.59 Holding Company – 34,092.19 Subsidiary Company 38.05 –
d]
Balances due from/to the related parties
Holding Subsidiaries* Joint Key Company Ventures and management Associates personnel Total
Sr. Transactions No.
1 (i) (ii) (iii) (iv) (v) (vi)
Debtors Ranbaxy (Hong Kong) Limited, Hong Kong Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy (UK) Limited, U.K ZAO Ranbaxy, Russia Ranbaxy Nigeria Limited, Nigeria Ranbaxy Ireland Limited, Ireland – – – – – – – – – – – – – – – – – – – – – – – – 101.34 (111.93) 122.98 (32.50) 114.13 (230.25) 629.11 (1,672.54) 58.75 (242.14) 329.36 (390.08) 150.19 (213.22) 602.92 (531.08) 38.15 0.84 (29.14) 686.74 (898.63) 140.13 (79.70) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 101.34 (111.93) 122.98 (32.50) 114.13 (230.25) 629.11 (1,672.54) 58.75 (242.14) 329.36 (390.08) 150.19 (213.22) 602.92 (531.08) 38.15 – 0.84 (29.14) 686.74 (898.63) 140.13 (79.70)
(vii) Ranbaxy PRP(Peru) SAC (viii) Ranbaxy (S.A.) Proprietary Limited, South Africa (ix) (x) (xi) Be-Tabs Investments (Proprietary) Ltd., South Africa Ranbaxy Egypt (L.L.C.), Egypt Ranbaxy Farmaceutica Ltda, Brazil
(xii) Ranbaxy Australia Pty Ltd., Australia
90
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Holding Subsidiaries* Joint Key Company Ventures and management Associates personnel Total
(xiii) Ranbaxy Italia S.p.A, Italy (xiv) Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda, Portugal (xv) Ranbaxy Pharmacie Generiques SAS, France (xvi) Ranbaxy Pharma AB, Sweden (xvii) Ranbaxy Beligium N.V., Belgium (xviii)Ranbaxy Pharmaceuticals, Inc. USA (xix) Basics GmbH , Germany. (xx) Ranbaxy Vietnam Company Ltd., Vietnam (xxi) Laboratorios Ranbaxy, S.L., Spain 2. 3. 4 Creditors Loans and advances to subsidiaries Payable to directors (commission)
– – – –
182.21 (95.81) 5.89 (14.86)
– – – –
– –
182.21 (95.81) 5.89 (14.86)
– – – – – – – – – – – – – – 0.96 – – – – –
53.49 (130.96) 80.16 (151.43) 46.97 (82.84) 7,104.67 – – (23.77) – (3.08) – (105.27) 371.62 (2,120.72) 1,533.78 (1,858.20) – –
– – – – – – – – – – – – – – 4.11 (3.30) – – – – 35.00 –
53.49 (130.96) 80.16 (151.43) 46.97 (82.84) 7,104.67 – – (23.77) – (3.08) – (105.27) 376.69 (2,124.02) 1,533.78 (1,858.20) – –
Note: figures in brackets are for previous year * Dues from parties parties under the same management as defined under Section 370(IB) of the Companies Act, 1956. 16. Segment Information In accordance with AS-17 “Segment Reporting”, segment information has been given in the consolidated financial statements of Ranbaxy Laboratories Limited, and therefore, no separate disclosure on segment information is given in these financial statements.
91
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) 17. Additional information pursuant to paragraphs 3 & 4 of part II of schedule VI to the Companies Act,1956 (As certified by the management and accepted by the auditors) a] Particulars of installed capacities and actual production Unit of measure Installed Actual capacity production as at for the 31 December year ended 2009 31 December 2009 9,601.60 2,862.00 43.80 48.00 35.00 – – 4,056.81 1,218.33 23.79 83.06 41.81 561.60 38.78 Actual Installed production capacity for the as at year ended 31 December 31 December 2008 2008 9,424.00 2,992.00 43.80 48.00 39.00 – – 5,665.98 1,632.25 32.85 108.11 45.75 742.47 32.88
Dosage forms Tablets Capsules Dry syrups/Powders Ampoules Vials Liquids $ Drops $ Nos in million Nos in million Bottles in million Nos in million Nos in million Kilolitres Kilolitres
Active pharmaceuticals ingredients and drugs intermediates Tonnes Ointments Tonnes
1,917.89 *
1,060.09 # 504.95
2,001.57 *
1,322.57# 497.59
* In different denominations than actual production. # Inclusive of production used for captive consumption. $ Installed capacity is not given as the same is manufactured by loan licensees. Notes : 1. In terms of press Note no 4 (1994 series) dated October 25, 1994 issued by the department of Industrial Development, Ministry of Industry, Government of India and Notification no. S.O. 137 (E) dated March 01, 1999 issued by the Department of industrial Policy and Promotion, Ministry of Industry, Government of India, Industrial licencing has been abolished in respect of bulk drugs and formulations. Hence there are no registered/ Licenced capacities for these bulk drugs and formulations. Installed capacity being effective operational capacity has been calculated on a double shift basis for dosage forms facilities and on a continuous basis for active pharmaceuticals ingredients and drug intermediates, it may vary according to the production mix. Actual production includes production at loan licensee locations.
2
3
92
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements b] Particulars of Production, Purchases, Sales and Stock of finished goods
Class of Goods Tablets Capsules Dry syrups/ Powders Ampoules Vials Liquids Drops Active pharmaceuticals ingredients and drugs intermediates Ointments Others Unit of measure Nos./Million Nos./Million Bottles /Million Nos./Million Nos./Million Kilolitres Kilolitres Opening Stock Production Purchases Sales Closing Stock Quantity Value Quantity Quantity Value Quantity@ Value Quantity Value 836.33 1,057.82 4,056.81 669.87 820.53 5,665.98 205.72 212.06 8.27 5.42 21.83 16.24 8.63 12.30 594.06 587.53 8.94 5.82 336.17 1,218.33 293.77 1,632.25 101.93 77.14 67.31 74.80 250.27 197.11 110.28 92.71 7.46 5.46 23.79 32.85 83.06 108.11 41.81 45.75 561.60 742.47 38.78 32.88 2,025.19 1,376.06 1,811.14 1,068.07 359.27 384.08 73.62 20.85 3.17 2.07 53.92 53.88 2,312.30 2,885.58 8.14 9.38 492.87 533.21 139.40 347.15 24.92 12.18 530.97 482.87 358.54 349.17 11.60 15.17 6,131.67 17,087.42 7,310.66 20,622.81 1,605.90 5,135.74 2,022.67 6,062.95 97.82 1,462.41 50.86 2,661.50 96.64 104.59 971.85 788.40 786.66 1,079.98 836.33 1,057.82 177.42 205.72 7.86 8.26 11.42 21.83 8.81 8.63 331.57 594.06 4.84 8.95 289.95 336.17 91.20 101.93 65.26 67.31 261.12 250.27 59.80 110.28 3.01 7.46
95.55 2,879.71 103.30 2,810.46 3,136.39 3,621.52 51.02 39.13 959.75 970.45 78.73 76.95
Tonnes Tonnes
127.32 1,866.17 1,060.09 130.00 1,778.30 1,322.57 219.14 128.10 119.22 74.31 59.67 11.59 3,976.30 3,425.72 504.95 497.59
171.54 1,177.90 1,247.70 # 14,323.39 206.15 814.17 1,531.40 # 6,934.45 862.16 950.95 463.44 297.27 236.36 292.38 4,812.06 4,211.64 1,414.66 1,676.82 1,357.50 1,504.88 635.98 650.75 45,211.80 43,083.60
111.25 1,808.94 127.32 1,866.17 171.59 219.14 108.71 119.22 77.36 59.67 3,845.33 3,976.30
Notes: @ Inclusive of physician samples. # Excludes 446.70 (previous year 865.60) tonnes used for captive consumption. Figures in italics are for 2008. Sales are exclusive of excise duty and trade discount.
c] Consumption of raw materials (quantity in metric tonnes) Raw material For the year ended 31 December 2009 Quantity Amount 92.21 1,035.69 121.60 334.02 39.81 325.74 123.94 295.69 192.10 251.40 11,217.51 13,460.05 For the year ended 31 December 2008 Quantity Amount 85.36 1,317.23 299.60 687.05 33.89 311.91 133.38 355.23 269.94 503.09 11,390.70 14,565.21
3 - CI - 7 - ACCA Erythromycin 'A'95 Cefuroxime Axetil Crystalline 7 ADCA 6APA Others
93
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements d] Consumption of raw materials, components and spares
For the year ended For the year ended 31 December 2009 31 December 2008 Raw Components, Raw Components, materials Spares & materials Spares & Packaging Packaging materials * materials *
Indigenous Imported
Rs. Million As % of total Rs. Million As % of total
4,604.26 34.21% 8,855.79 65.79%
2,218.21 86.62% 342.53 13.38%
7,054.60 48.43% 7,510.61 51.57%
2,403.07 82.31% 516.57 17.69%
* Inclusive of components and spares used for maintenance of plant and machinery For the year ended 31 December 2009 2008 e] Imports on C. I. F. basis: Raw materials Components and spares Capital goods f] Expenditure in foreign currencies Interest Royalty paid Legal and professional charges Others * * Other includes overseas personnel expenses, advertisement and sales promotion, regulatory filling fee, commission, market research expenses rent and travel and conveyance etc. g] Dividend paid to non-resident shareholders Final dividend Number of shareholders Number of shares held Dividend remitted Year to which it relates h] Earnings in foreign exchange F.O.B. value of exports (excluding Nepal) Royalty/Technical know-how and product development Dividend Others (freight, insurance etc.) 6,076.74 151.53 312.75 6,541.02 314.00 3.46 1,778.17 4,463.76 6,559.39 6,148.99 70.11 503.90 6,723.00 499.88 2.34 1,370.20 5,807.87 7,680.29
– – – – 27,728.90 265.90 9.54 3,360.17 31,364.51
27 45,902 0.28 2007 26,817.32 182.25 11.00 1,527.26 28,537.83
94
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 18. Information pursuant to clause 32 of the listing agreements with stock exchanges Loans and advances in the nature of loans to wholly-owned subsidiary companies are as under: Balance As at 31 December 2009 2008 Interest free with no specified payment schedule: a) Ranbaxy Drugs Limited b) Rexel Pharmaceuticals Limited c) Solus Pharmaceuticals Limited d) Ranbaxy Netherlands B.V., The Netherland Interest bearing with no specified payment schedule: a) Ranbaxy Drugs & Chemicals Company Limited 3.16 753.22 771.90 – 1,528.28 3.10 918.20 936.90 – 1,858.20 Maximum balance during the year ended 31 December 2009 2008 3.16 918.20 936.90 – 1,858.26 3.10 2,948.47 2,369.89 12.44 5,333.90
5.50 – 5.50 – 5.50 – 5.50 – 1,533.78 1,858.20 1,863.76 5,333.90 The above parties are also companies under the same management as defined under Section 370(IB) of the Companies Act, 1956. 19. Previous year figures have been regrouped/ reclassified, wherever necessary to conform to current year’s classification. Previous year figures have been audited by another firm of chartered accountants. For and on behalf of the Board of Directors
Dr. Tsutomu Une Chairman Sushil K. Patawari Company Secretary Place : Gurgaon Dated : 25 February 2010
Atul Sobti CEO & Managing Director
Omesh Sethi President and CFO
95
Ranbaxy Laboratories Limited
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
I. Registration Details : Registration No. Balance Sheet Date : 0 3 0 1 3 7 1 4 2 7 2 0 Year 0 9 State Code : 1 6
Date
Month
II. Capital Raised during the year (Amount in Rs. Thousands) Public Issue : Employees Stock Options : Bonus Issue : N I L N I L 2 4 1 Rights Issue : Preferential Allotment : Private Placement : N N N I I I L L L
III. Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands) Total Liabilities : Source of Funds Paid-up-Capital : Equity share warrant money Share application money pending allotment Secured Loans : Deferred tax liability : Application of Funds Net Fixed Assets : Net Current Assets : Accumulated Losses : 2 1 0 2 0 2 N 8 1 I 3 0 L 2 6 0 5 7 6 Investments : Deferred Tax Asset : Misc. Expenditure : 3 8 4 3 1 N 3 9 I 6 9 L 9 0 0 8 0 0 1 7 N 5 I 2 1 1 7 0 5 2 6 1 8 L 0 5 9 2 9 9 5 7 0 0 0 0 Unsecured Loans : 3 1 7 2 5 5 2 6 Reserves & Surplus : 3 7 4 8 5 4 1 7 1 0 9 0 1 8 6 3 7 Total Assets : 1 0 9 0 1 8 6 3 7
IV. Performance of Company (Amount in Rs. Thousands) Turnover : Profit / Loss Before Tax : Earning Per Share in Rs. V. 4 5 0 3 6 5 1 1 9 9 3 0 1 . 9 7 6 0 4 1 Total Expenditure : Profit / Loss After tax : Dividend Rate % : 4 1 5 7 7 6 1 N 2 9 I 7 8 L 0 4 4 4
+ -
1
+ -
Generic Names of Three Principal Products of the Company Item Code No. Product Description Item Code No. Product Description Item Code No. Product Description 2 9 4 F 4 1 9 0 L O R 0 L 0 I L L I N E X I N
C E 2 9
A C 2 0
C E 2 9
P H A 4 1 1
A M O X Y C
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
96
Ranbaxy Laboratories Limited
Statement Regarding Subsidiary Companies Pursuant to Section 212(3) of the Companies Act, 1956
Net aggregate amount of subsidiary company’s profits after deducting its losses or vice-versa, so far as it concerns members of Holding Company which are not dealt within the Company’s account For the current financial year {Profit / (Loss)} Rs. Million For the previous financial years {Profit / (Loss)} Rs. Million Net aggregate amount of Subsidiary Company’s profit after deducting its losses or vice-versa, dealt within the Company’s account For the current financial year Rs. Million For the previous financial years Rs. Million
Name of Subsidiary Company
Financial year to which accounts relates
Holding Company’s interest as at close of financial year of subsidiary company Shareholding %age
Domestic : Gufic Pharma Limited Ranbaxy Drugs Limited Ranbaxy Drugs and Chemicals Company (A public company with unlimited liability) Ranbaxy Life Sciences Research Ltd. Ranbaxy SEZ Limited Rexcel Pharmaceuticals Limited Solus Pharmaceuticals Limited Vidyut Investments Limited Overseas : Ranbaxy Australia Pty. Ltd. Australia Ranbaxy Belgium N.V. Belgium Ranbaxy Farmaceutica Ltda. Brazil Ranbaxy Do Brazil Ltda Brazil Ranbaxy Pharmaceuticals Canada Inc. Canada Ranbaxy Egypt (L.L.C.) Egypt Rexcel Egypt (L.L.C.) Egypt Ranbaxy Pharmacie Generiques SAS France Office Pharmaceutique Industriel Et Hospitalier SARL (“OPIH SARL”) France Basics GmbH Germany Lapharma GmbH Germany Ranbaxy (Hong Kong) Limited Hong Kong Ranbaxy Hungary Gyogyszereszeti Kft # Hungary 2009 2009 2009 2009 2009 100.00 100.00 100.00 100.00 100.00 (115.16) 28.06 206.46 (0.65) 160.43 (372.97) (45.07) (386.84) (12.32) 309.83 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 2009 2009 2009 98.00 100.00 100.00 0.25 (0.06) 0.05 2.02 (0.42) 6.23 Nil Nil Nil Nil Nil Nil
2009 2009 2009 2009 2009
80.07 100.00 100.00 100.00 100.00
10.06 (0.04) (4.87) (1.64) 0.63
9.86 (0.03) 30.05 (6.62) (233.82)
Nil Nil Nil Nil Nil
Nil Nil Nil Nil 78.45
2009 2009 2009
100.00 100.00 100.00
25.43 (8.43) 0.17
(23.23) (14.94) (187.25)
Nil Nil Nil
Nil Nil Nil
2009
100.00
(4.69)
(43.40)
Nil
Nil
2009 2009 2009 2009
100.00 100.00 100.00 100.00
13.84 (0.26) 83.98 –
239.30 (0.15) (9.89) (0.28)
Nil Nil Nil Nil
Nil Nil Nil Nil
97
Ranbaxy Laboratories Limited
Name of Subsidiary Company
Financial year to which accounts relates
Holding Company’s interest as at close of financial year of subsidiary company Shareholding %age
Net aggregate amount of subsidiary company’s profits after deducting its losses or vice-versa, so far as it concerns members of Holding Company which are not dealt within the Company’s account For the current financial year {Profit / (Loss)} Rs. Million 692.43 (355.49) 113.42 (50.94) 124.56 (6.65) (1.97) (94.67) For the previous financial years {Profit / (Loss)} Rs. Million 1,159.10 (390.27) 372.12 (200.15) 333.15 (9.76) 28.67 (123.91)
Net aggregate amount of Subsidiary Company’s profit after deducting its losses or vice-versa, dealt within the Company’s account For the current financial year Rs. Million For the previous financial years Rs. Million
Ranbaxy Ireland Ltd. Ireland Ranbaxy Italia S.p.A Italy Ranbaxy Malaysia Sdn. Bhd. Malaysia Ranbaxy Mexico S.A. de C.V. Mexico Ranbaxy Nigeria Ltd. Nigeria Ranbaxy-PRP (Peru) S.A.C. Peru Ranbaxy Poland S.P. Z.o.o. Poland Ranbaxy Portugal Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda Portugal Ranbaxy (Guangzhou China) Limited $ Republic of China Terapia S.A. Romania Terapia Distributie SRL Romania ZAO Ranbaxy Russia Ranbaxy (S.A.) (Proprietary) Ltd. South Africa Be-Tabs Pharmaceuticals (Proprietary) Ltd. South Africa Be-Tabs Investments (Proprietary) Ltd. South Africa Sonke Pharmaceuticals (Pty) Ltd South Africa Laboratorios Ranbaxy, S.L. Spain Ranbaxy Pharma AB Sweden Ranbaxy (Netherlands) B.V. (“RNBV”) The Netherlands Ranbaxy N.A.N.V. Antilles, The Netherlands Ranbaxy Unichem Company Ltd. Thailand
2009 2009 2009 2009 2009 2009 2009 2009
100.00 100.00 68.09 100.00 85.31 100.00 100.00 100.00
Nil Nil 5.22 Nil 2.16 Nil Nil Nil
Nil Nil 32.77 Nil 18.39 Nil Nil Nil
2009
83.00
78.08
(247.49)
Nil
Nil
2009 2009 2009 2009 2009
96.70 96.70 100.00 100.00 100.00
675.36 (267.37) 287.91 51.21 112.54
3,009.75 50.12 (32.35) 204.63 800.40
Nil Nil Nil Nil Nil
Nil Nil Nil Nil Nil
2009
100.00
0.72
58.52
Nil
Nil
2009 2009 2009 2009
68.40 100.00 100.00 100.00
10.26 0.05 86.34 504.71
(54.82) (801.11) (88.35) (70.18)
Nil Nil Nil Nil
Nil Nil Nil Nil
2009 2009
100.00 88.56
(0.31) 29.44
(12.48) 151.41
Nil 2.17
Nil 6.49
98
Ranbaxy Laboratories Limited
Name of Subsidiary Company
Financial year to which accounts relates
Holding Company’s interest as at close of financial year of subsidiary company Shareholding %age
Net aggregate amount of subsidiary company’s profits after deducting its losses or vice-versa, so far as it concerns members of Holding Company which are not dealt within the Company’s account For the current financial year {Profit / (Loss)} Rs. Million 73.26 (0.25) 14.04 (507.80) 957.94 42.08 111.87 241.52 21.28 35.82 For the previous financial years {Profit / (Loss)} Rs. Million (1,223.23) 12.70 26.94 1,191.22 1,621.18 174.32 1,922.91 (146.31) (392.95) (52.67)
Net aggregate amount of Subsidiary Company’s profit after deducting its losses or vice-versa, dealt within the Company’s account For the current financial year Rs. Million For the previous financial years Rs. Million
Ranbaxy (U.K.) Ltd. United Kingdom Ranbaxy Holdings (U.K.) Ltd. United Kingdom Ranbaxy Europe Ltd. United Kingdom Ranbaxy, Inc. USA Ranbaxy Pharmaceutical, Inc. USA Ranbaxy USA, Inc. USA Ohm Laboratories, Inc. USA Ranbaxy Laboratories, Inc. USA Ranbaxy Signature LLC, USA USA Ranbaxy Vietnam Company Ltd., $ Vietnam Exchange rate conversion at year end
2009 2009 2009 2009 2009 2009 2009 2009 2009 2009
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 67.50 100.00
Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Note: (i) In terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956, the annual accounts of the subsidiary companies and the related detailed information will be made available upon request by the investors of the Company and of its subsidiary companies. These documents will also be available for inspection by any investor at the Head Office of the Company at 12th Floor, Devika Tower, 6, Nehru Place, New Delhi - 110019, and that of the subsidiary companies concerned. (ii) The Board of Directors at its meeting held on October 26, 2009, approved for seeking exemption from the Government under Section 212(8) of the Companies Act, 1956, in respect of the subsidiary Companies. (iii) Ranbaxy Japan KK, Japan and Ranbaxy Maxico Servicios S.A. de C.V., Maxico, step down whollyowned subsidiaries were incorporated on November 9, 2009 and November 13, 2009 respectively. Audited accounts of these two subsidiary companies not yet became due. $ Divested/liquidated during the year: Ranbaxy (Guangzhou China) Limited, Republic of China Ranbaxy Hungary Gyogyszereszeti Kft, Hungary Ranbaxy Vietnam Company Ltd., Vietnam
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Place : Gurgaon Dated : 25 February 2010 Omesh Sethi President and CFO Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
99
CONSOLIDATED FINANCIAL STATEMENTS –
INDIAN GAAP
Ranbaxy Laboratories Limited
Auditors' report to the Board of Directors of Ranbaxy Laboratories Limited on the consolidated financial statements of Ranbaxy Laboratories Limited and its subsidiaries, associates and joint ventures 1 We have audited the attached consolidated Balance Sheet of Ranbaxy Laboratories Limited, ('the Company') its subsidiaries, associates and joint ventures (collectively known as 'the Group') as at 31 December 2009, and also the consolidated Profit and Loss Account and the Consolidated Cash Flow Statement (together known as 'consolidated financial statements') for the year ended on that date, annexed thereto. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 2 We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3 We did not audit the financial statements and other financial information of certain subsidiaries and of certain joint ventures and associates (interests in which have been incorporated in these consolidated financial statements). These subsidiaries, joint ventures and associates account for 23% of total assets and 39% of total revenues and other income, as shown in these consolidated financial statements. Of the above: (a) The financial statements and other financial information of some of the subsidiaries incorporated outside India as drawn up in accordance with the generally accepted accounting principles of the respective countries ('the local GAAP') have been audited by other auditors duly qualified to act as auditors in those countries. These subsidiaries account for 21% of total assets and 36% of total revenue and other income as shown in these consolidated financial statements. For purposes of preparation of consolidated financial statements, the aforesaid local GAAP financial statements have been restated by the management of the said entities so that they conform to the generally accepted accounting principles in India. This has been done on the basis of a reporting package prepared by the Company which covers accounting and disclosure requirements applicable to consolidated financial statements under the generally accepted accounting principles in India. The reporting packages made for this purpose have been audited by the other auditors and reports of those other auditors have been furnished to us. Our opinion on the consolidated financial statements, insofar as it relates to these entities, is based on the aforesaid audit reports of these other auditors. (b) The financial statements and other financial information of the remaining subsidiaries, joint ventures and associates have not been subjected to audit either by us or by other auditors, and therefore, unaudited financial statements for the year ended 31 December 2009 of these entities have been furnished to us by the management. These subsidiaries, joint ventures and associates account for only 2% of total assets and 3% of total revenues and other income as shown in these consolidated financial statements, and therefore are not material to the consolidated financial statements, either individually or in the aggregate. 4 We report that the consolidated financial statements have been prepared by the Company's management in accordance with the requirements of Accounting Standards 21, Consolidated Financial Statements, Accounting Standard 23, Accounting for Investments in Associates in consolidated Financial Statements, and Accounting Standard 27, Financial Reporting of interests in Joint Ventures prescribed by the Companies (Accounting Standards) Rules, 2006. 5 Without qualifying our opinion, we draw attention to note 2 on schedule 23 to the consolidated financial statements. Consequent to the Food and Drug Administration (FDA) of United States of America' import alerts and the FDA letter dated 25 February 2009 imposing the Application Integrity Policy, the Group had recorded a provision of Rs. 2,631.11 million during the year ended 31 December 2008 towards loss of inventory in hand, expected higher sales returns and expected reversal of export benefits. The basis and assumptions used by the management in calculating these provisions were based on significant judgment and estimates due to involvement of uncertainty and actual result could have been different from management's estimate. During the year, the Group carried out a reassessment and determined that the related provision of Rs. 937.81 million is no longer required and accordingly the same has been written back in the Consolidated Profit and Loss Account. 6 Based on our audit and to the best of our information and according to the explanations given to us and on consideration of reports of other auditors on separate financial statements and on the consideration of the unaudited financial statements and on other relevant financial information of the components, in our opinion the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India, in the case of: (a) the Consolidated Balance Sheet, of the state of affairs of the Group as at 31 December 2009; (b) the Consolidated Profit and Loss Account, of the profit of the Group for the year ended on that date; and (c) the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date. For B S R & Co. Chartered Accountants Place : Gurgaon Dated : 25 February 2010 Vikram Aggarwal Partner Membership No. 089826
100
Ranbaxy Laboratories Limited
Consolidated Balance Sheet as at 31 December 2009
(Rupees in millions, except share data and if otherwise stated)
As at 31 December Schedule 2009
As at 31 December 2008
SOURCES OF FUNDS Shareholders' funds Share capital Equity share warrants Share application money pending allotment Reserves and surplus Minority interest Loan funds Secured loans Unsecured loans Deferred tax liability (net) APPLICATION OF FUNDS Fixed assets Gross block Less : Accumulated depreciation, amortisation and impairment Net block Capital work-in-progress (including capital advances) Investments Deferred tax asset (net) Current assets, loans and advances Inventories Sundry debtors Cash and bank balances Loans and advances Other current assets Less: Current liabilities and provisions Current liabilities Provisions Net current assets
1 23(5)(b) 2
2,102.09 1,756.59 1.95 39,573.29 43,433.92 533.22 2,186.62 34,108.60 36,295.22 160.54 80,422.90
2,101.85 1,756.59 – 39,104.03 42,962.47 674.61 2,911.35 39,937.32 42,848.67 246.63 86,732.38
3 4 5
6 62,785.54 17,880.49 44,905.05 6,230.66 51,135.71 5,407.40 4,906.19 18,406.99 18,399.47 12,416.34 9,065.26 1,797.90 60,085.96 32,510.83 8,601.53 41,112.36 18,973.60 80,422.90 61,941.64 17,041.97 44,899.67 4,707.37 49,607.04 5,431.50 12,476.01 19,643.14 13,310.08 23,956.38 6,436.24 1,755.19 65,101.03 39,800.36 6,082.84 45,883.20 19,217.83 86,732.38
23(7) 7 5 8 9 10 11 12
13 14
Significant accounting policies 22 Notes to the consolidated financial statements 23 The schedules referred to above form an integral part of the Consolidated Balance Sheet As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010 For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
101
Ranbaxy Laboratories Limited
Consolidated Profit and Loss Account for the year ended 31 December 2009
(Rupees in millions, except share data and if otherwise stated) For the year ended 31 December 2009 76,117.65 147.29 75,970.36 2,935.45 1,931.23 80,837.04 32,079.98 14,174.73 22,591.29 – 68,846.00 For the year ended 31 December 2008 74,449.96 310.01 74,139.95 2,599.46 – 76,739.41 31,831.49 12,626.47 23,843.68 11,064.03 79,365.67
Schedule INCOME Operating income Less : Excise duty Other income Net foreign exchange gain (other than on loans) EXPENDITURE Materials consumed Personnel expenses Operating and other expenses Net foreign exchange loss (other than on loans) 15
16 23(10)
17 18 19 23(10)
Profit/ (loss) before interest, exchange (gain)/loss (net) on loans, depreciation, amortisation, impairment, tax charge / (benefit), share in loss of associates and minority interest 11,991.04 Interest 23(8) 710.43 Exchange (gain) / loss on loans (1,493.13) Profit/ (loss) before depreciation, amortisation, impairment, tax charge / (benefit), share in loss of associates and minority interest 12,773.74 Depreciation, amortisation and impairment 6 2,676.12 Profit/ (loss) before tax charge / (benefit), share in loss of associates and minority interest 10,097.62 Tax charge / (benefit) 20 6,990.87 Profit/ (loss) after tax charge / (benefit) and before share in loss of associates and minority interest 3,106.75 Less: Share in loss of associates (net) 23(20) 32.38 Less: Minority interest 23(19) 109.45 Profit/ (loss) for the year 2,964.92 Balance brought forward (4,009.92) Transfer from foreign projects reserve 13.76 Deficit carried forward to Schedule 2 (1,031.24) Earnings/ (loss) per share (Rs.) 21 Basic - Par value of Rs. 5 per share 7.05 Diluted - Par value of Rs. 5 per share 4.60 Significant accounting policies 22 Notes to the consolidated financial statements 23 The schedules referred to above form an integral part of the Consolidated Profit and Loss Account
(2,626.26) 2,055.01 7,494.35
(12,175.62) 2,824.69
(15,000.31) (5,650.84)
(9,349.47) 78.21 84.37 (9,512.05) 5,482.63 19.50 (4,009.92) (24.85) (24.85)
As per our report attached
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
102
Ranbaxy Laboratories Limited
Consolidated Cash Flow Statement For The Year Ended 31 December 2009
(Rupees in millions, except share data and if otherwise stated)
A. CASH FLOW FROM OPERATING ACTIVITIES Net profit/ (loss) before taxes Adjustments for: Depreciation, amortisation and impairment Fixed assets written off Deferred employees compensation charge Deferred employees compensation reversal Unrealised foreign exchange (gain) / loss (net) Foreign exchange loss/(gain) on integral operations Fair valuation (gain)/ loss on derivatives Dividend income Profit on sale of long term investments Unclaimed balances/ excess provision written back (Also refer to note 2 of schedule 23) Profit on sale of assets (net) Provision for diminution in value of long term investment Loss on valuation of current investments Interest expense Interest income Investment written off Provisions/ write off for doubtful debts, advances and other current assets Operating profit before working capital changes Adjustments for: Decrease/ (increase) in inventories (Increase)/ decrease in sundry debtors Decrease in loans and advances Decrease/ (increase) in other current assets Increase/ (decrease) in trade / other payables Cash generated/ (used in) from operating activity before taxes Direct taxes paid (net of refunds) Net cash used in operating activity B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Proceed from sale of fixed assets Purchase of investments Investment in associates Cash paid for acquisition of minority interest Sale proceeds of investments (net of cash transferred) Decrease/ (increase) in fixed deposit with original maturity of more than 90 days Interest received Dividend received Net cash generated from/ (used in) investing activity C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of capital (including premium) Proceeds from equity share warrants Decrease in short term bank borrowings (net) Decrease in long term borrowings (net) Increase in other borrowings (net) Short term borrowings from non convertible debentures Re-payment of short term borrowings of non convertible debentures Issue expenses of share capital and warrants Interest paid Dividend paid to minority shareholders of subsidiaries Dividend paid Tax on dividend Net cash (used in)/ generated from financing activities INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Effect of exchange loss/ (gain) on cash and cash equivalents Cash and cash equivalents at the end of the year Notes : Cash and cash equivalents include: Cash and cheques in hand and remittances in transit With banks in: Current accounts Deposit accounts Cash and cash equivalents at the end of the year Add: Fixed deposit pledged (restricted cash) Unclaimed dividend Fixed deposit with original maturity of more than 90 days Cash and bank balances at the end of the year As per our report attached
For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place Dated : Gurgaon : 25 February 2010 For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place Dated : Gurgaon : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary For the year ended 31 December 2009 For the year ended 31 December 2008
10,097.62 2,676.12 7.97 – (8.17) (2,013.55) 160.53 (8,932.47) (9.78) (533.22) (858.40) (137.67) – 127.78 710.43 (1,106.21) – 353.44 (9,563.20) 534.42 865.11 (5,774.95) 1,166.21 90.59 3,923.68 270.64 805.06 (2,426.31) (1,621.25) (5,220.51) 316.14 (237.46) – (739.54) 1,499.61 4,008.56 1,015.01 9.78 651.59 13.44 – (2,830.91) (1,644.52) 15.17 2,000.00 (2,000.00) – (769.59) (6.28) – – (5,222.69) (6,192.35) 11,782.77 114.32 5,476.10 75.79 3,319.44 2,081.01 5,476.24 5,476.24 0.79 66.33 6,872.98 12,416.34
(15,000.31) 2,824.69 – 3.75 – 5,909.84 (204.73) 7,702.14 (29.38) (42.83) 177.38 (933.20) 433.72 – 2,055.01 (1,053.26) 93.42 273.61 17,210.16 2,209.85 (3,359.10) 1,880.04 970.60 (639.43) (1,222.23) (2,370.12) (160.27) (1,359.94) (1,520.21) (5,748.80) 1,410.98 (5,212.01) (1,391.53) (21.32) 3,055.72 (10,881.54) 913.51 29.38 (17,845.61) 34,389.19 1,756.59 (2,805.07) (1,725.25) 33.40 16,870.00 (16,870.00) (201.40) (2,055.01) (7.53) (2,239.42) (380.59) 26,764.91 7,399.09 4,295.80 (87.82) 11,782.71 388.60 2,609.94 8,784.23 11,782.77 11,782.77 1,215.50 76.57 10,881.54 23,956.38
103
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 1 Share Capital Authorised 598,000,000 (previous year 598,000,000) equity shares of Rs. 5 each 100,000 (previous year 100,000) cumulative preference shares of Rs. 100 each Issued, subscribed and paid up 420,417,758 (previous year 420,369,753) equity shares of Rs. 5 each fully paid
As at 31 December 2009 2,990.00 10.00 3,000.00
As at 31 December 2008 2,990.00 10.00 3,000.00
2,102.09 2,102.09
2,101.85 2,101.85
Notes: 1. Issued, subscribed and paid up capital includes: 293,698,988 (previous year 293,698,988) equity shares of Rs. 5 each allotted as fully paid bonus shares by capitalisation out of share premium and reserves. [ii] 6,562,308 (previous year 6,562,308) equity shares of Rs. 5 each allotted as fully paid up pursuant to contract without payment being received in cash. [iii] 5,501,185 Global Depository Share (GDSs) (previous year 7,227,121) representing 5,501,185 (previous year 7,227,121) equity shares of Rs. 5 each constitute 1.31% of the issued subscribed and paid-up share capital of the Company, are outstanding. 2. 268,711,323 (previous year 268,711,323) equity shares of Rs. 5 each are held by Daiichi Sankyo Company Limited, Japan, the holding company, also being the ultimate holding company. Also refer to note 5 on schedule 23 SCHEDULE - 2 Reserves and surplus (a) Capital reserve (b) Amalgamation reserve (c) Revaluation reserve Balance at the beginning of the year Less: Utilised during the year Also refer schedule 6 (d) Share premium account Balance at the beginning of the year Add: Received during the year Add: Transfered from employees stock option outstanding Less: Utilised for preferential allotment issue expenses Less: Premium payable on redemption of Zero Coupon Foreign Currency Convertible Bonds (FCCBs) Less : Tax reversal / (benefit) for premium payable on redemption of FCCBs Also refer schedule 5 (e) Foreign projects reserve Balance at the beginning of the year Less: Transfer to Consolidated Profit and Loss Account (f) Hedging reserve (net of tax) Balance at the beginning of the year Add: Utilised / (addition) during the year
71.77 43.75 185.11 (113.95) 71.16
71.77 43.75 187.31 (2.20) 185.11
37,862.18 11.26 1.89 37,875.33 – 1,083.41 1,227.17 35,564.75
5,010.51 34,164.47 31.45 39,206.43 201.40 1,731.33 (588.48) 37,862.18
18.35 13.76 4.59 (792.58) 763.85 (28.73)
37.85 19.50 18.35 – (792.58) (792.58)
104
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
As at 31 December 2009 (g) Employee stock options outstanding Balance at the beginning of the year Add: (Reversal) / amortisation of deferred employees compensation Less: Transferred to share premium on exercise of stock option Also refer to note 6 on schedule 23 (h) General reserve Balance at the beginning of the year Less: Transitional loss recognised pursuant to early adoption of Accounting Standard - 30 "Financial Instruments: Recognition and Measurement" (i) Foreign currency translation reserve Balance at the beginning of the year Add: (Deduction) / addition during the year (j) Deficit brought forward from Consolidated Profit and Loss Account SCHEDULE - 3 Secured loans Loan from banks ^ Finance lease liability** 67.67 (8.17) 59.50 1.89 57.61
As at 31 December 2008 95.75 3.37 99.12 31.45 67.67
4,370.28
16,151.24
– 4,370.28 1,287.42 (838.07) 449.35 (1,031.24) 39,573.29
11,780.96 4,370.28 (922.79) 2,210.21 1,287.42 (4,009.92) 39,104.03
1,807.60 379.02 2,186.62
2,474.47 436.88 2,911.35
Notes: ^ Secured against certain assets, property, equipment and other immovable property, inventories and sundry debtors of Ranbaxy Laboratories Limited and Ranbaxy (U.K.) Ltd. ** Secured against assets taken on finance lease by Ranbaxy Phamaceuticals Inc., United States of America. (Also refer to note 9(a) on schedule 23) SCHEDULE - 4 Unsecured loans Short term loans from banks Other loans # Zero coupon foreign currency convertible bonds (FCCBs)* From banks From others
5,684.54 20,475.40 7,771.19 177.47 34,108.60
8,407.79 21,379.60 9,987.63 162.30 39,937.32
Notes: * The Parent Company has outstanding FCCBs aggregating to US $ 440 million. The bondholders have the option to convert FCCBs into equity shares of Ranbaxy Laboratories Limited at a price of Rs. 716.32 per share (subject to adjustment, if any) with a fixed exchange rate of Rs. 44.15 per US $, at any time on or after 27 April 2006 but before 9 March 2011. Further, these FCCBs may be redeemed, in whole, at the option of Ranbaxy Laboratories Limited at any time on or after 18 March 2009, but before 6 February 2011, subject to the satisfaction of certain conditions. These FCCBs are redeemable on 18 March 2011, at a premium of 26.765 percent (net of withholding tax) of their principal amount unless previously converted, redeemed, purchased or cancelled. # Other loans due for repayment within one year From banks 2,487.67 1,738.97 From others 19.78 14.83
105
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
As at 31 December 2009 SCHEDULE - 5 Deferred tax asset / liability (net) Deferred tax asset arising on account of: Provision for doubtful debts and advances Employee benefits FCCB loan revaluation FCCB redemption premium charged to share premium account Tax losses carried forward Others Less: Deferred tax liability arising on account of: Depreciation, amortisation and impairment Others Deferred tax asset (net) Aggregate of net deferred tax assets jurisdictions Aggregate of net deferred tax liabilities jurisdictions Deferred tax asset (net)
As at 31 December 2008
22.54 23.56 – – 7,222.49 648.22 7,916.81 3,005.22 165.94 3,171.16 4,745.65 4,906.19 160.54 4,745.65
131.83 152.51 413.77 1,227.17 12,748.92 815.97 15,490.17 3,094.85 165.94 3,260.79 12,229.38 12,476.01 246.63 12,229.38
In respect of Ranbaxy Laboratories Limited, on the basis of profit from operations made subsequent to year end, profit on sale of materials relating to First to File (FTF) product in the United States of America, milestone payment from an exclusivity settlement and certain other factors, the Group believes that there is virtual certainty in respect of the carrying amount of net deferred tax asset. Consequently, deferred tax asset of Rs. 1,296.83 has been written off. Further, due to a similar assessment as mentioned above, the deferred tax asset of Rs.1,227.17 relating to premium payable on redemption of FCCBs has not been carried forward with corresponding adjustment through share premium account. In respect of other countries, where there is carry forward tax losses as at year end, deferred tax asset amounting to Rs. 917.30 has not been recognised.
106
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
Gross block Additions* Deletions/ adjustments Translation As at 31 December 2009** As at 1 January 2009
SCHEDULE - 6
Accumulated depreciation, amortisation and impairment Net block For the Deletions/ Translation As at As at As at year $ adjustments 31 December 31 December 31 December 2009** 2009** 2008
Fixed assets
Description
As at 1 January 2009
918.80 262.66 6,919.86 22,546.31 1,877.35 855.09 – 2.97 – – 2.08 78.88 – 282.95 1.75 – 1,569.05 572.14 541.26 – 397.69 207.98 – 4,158.79 4,628.06 302.07 3.55 – 2,636.11 793.58 (132.05) (5.88) – (678.78) 2,416.90 4,985.45 1,031.33 211.00 62,785.54 61,941.64 2,735.86 497.72 200.70 17,041.97 13,645.14 440.77 114.68 10.30 2,676.12 2,824.69 551.96 – (61.89) – 21,446.32 361.75 613.54 361.75 – – – – 4.83 (25.60) (0.23) 0.21 579.96 3.95 3.86 246.47 0.08 4.91 51.13 0.27 0.23 (9.94) (0.02) 0.10 (13.96) – (70.25) (3.37) – (268.55) 1,144.28
0.46 6.75 644.98 2,094.57 155.32 106.81
50.72 ## – 348.63 ## 1,114.15 148.19 112.01
(37.71) (0.41) (232.58) (152.28) (12.95) (17.41)
830.83 269.00 6,983.63 23,374.45 1,871.53 832.48
– – 1,076.48 10,126.23 777.61 400.62
– 1.19 208.29 1,580.59 157.07 111.60
– – 115.85 914.12 103.46 69.96
– (0.01) (31.62) (115.29) (9.96) (14.23)
– 1.18 1,137.30 10,677.41 821.26 428.03 287.66 0.33 3.16 520.70 361.75 2,823.43 607.28 211.00 17,880.49 17,041.97
830.83 267.82 5,846.33 12,697.04 1,050.27 404.45 292.30 3.62 0.70 20,925.62 – 2,162.02 424.05 – 44,905.05 44,899.67
918.80 262.66 5,843.38 12,420.08 1,099.74 454.47 359.09 1.13 3.57 20,905.37 – 2,286.02 335.06 10.30 44,899.67
605.56 1.21 8.48
21,518.91 361.75
Ranbaxy Laboratories Limited
107
Gross block Accumulated depreciation Net block 204.22 (202.99) 48.39 (–) 85.03 (–) – (–) 11.63 (–) 85.03 (–) 204.22 (202.99) 36.76 (–) – (–)
Tangible assets Land – Freehold # – Leasehold Buildings^ Plant and machinery Furniture and fixtures Vehicles Assets taken on lease – Building – Plant and machinery – Vehicles Intangible assets Goodwill Product development @ Patent, trade marks, designs and licences@@ Software@@ Non compete fee Total Previous year
5,021.88 832.78 211.00 61,941.64 55,690.25
Notes : * Additions to fixed assets during the year include Rs. 221.98 (previous year Rs. 558.28) towards assets used for research and development. ** The above includes the following assets held for disposal, which are being carried at the lower of their net block and net realisable value
Description
Land
Building
Plant and machinery
# @
$
@@
Figures in brackets are for previous year Freehold land includes Rs. 25.48 (previous year Rs. 25.48) pending registration in the name of Ranbaxy Laboratories Limited. During the year, Ranbaxy Laboratories Limited provided for an impairment loss of Rs. nil (previous year Rs. 331.32) on certain product development rights. The impairment loss was determined owing to the prevailing market conditions of the underlying molecules for which the product development rights were acquired. During the current year, consequent to a change in the probability for extension of lease term for a leased property, Ranbaxy Laboratories Limited has recorded accelerated depreciation on assets constructed on that leased property amounting to Rs. 141.70 (previous year Rs. nil). Remaining useful lives of intangible assets as at 31 December 2009 is in the range of 1-10 years: Description Remaining useful lives Patents, trade marks, designs and licences 1-10 years Software 1-6 years
##
Includes adjustment of Rs. 184.99 (accumulated depreciation of Rs. 71.04) on account of revaluation carried out by Ranbaxy Ireland Limited.
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
As at 31 Dec. 2009 As at 31 Dec. 2008
Schedule - 7
Investments
Nature of investment CURRENT Trade: Quoted Krebs Biochemicals & Industries Limited Non trade: Quoted Orchid Chemicals and Pharmaceuticals Limited Trust securities Non trade - unquoted Zero % NABARD-2019 Zero % NABARD-2019 Zero % NABARD-2019 6.85% IIFCL Face value Numbers 2009 2008
Equity shares
Rs. 10
1,050,000
–
35.33
–
Equity shares
Rs. 10
9,169,977
–
1,684.98
–
Bonds Bonds Bonds Bonds
Rs. 10,000 Rs. 10,000 Rs. 10,000 Rs. 100
9,245 2,650 2,650 1,000,000
– – – –
86.97 24.92 24.92 100.65 237.46 1,957.77
– – – – – –
LONG TERM Investments in shares/ warrants of companies (fully paid) Trade: Quoted Krebs Biochemicals & Industries Limited Equity shares Sawai Pharmaceutical Co.,Ltd # Equity shares Unquoted Nimbua Greenfield (Punjab) Limited Equity shares Shivalik Solid Waste Management Limited Equity shares Biotech Consortium India Limited Equity shares Tomita Pharmaceutical Co.,Ltd # Equity shares Sidmak Laboratories (India) Limited Equity shares Non trade : Quoted The Great Eastern Shipping Company Limited Fortis Healthcare Limited Orchid Chemicals and Pharmaceuticals Limited Autobacs Seven Co.,Ltd # Unquoted Kapasa B.V Associates (trade) Quoted Zenotech Laboratories Limited Unquoted Shimal Research Laboratories Limited
Rs. 10 – Rs. 10 Rs. 10 Rs. 10 – Rs. 10
– – 250,000 20,000 50,000 – 167,330
1,050,000 1,500 250,000 20,000 50,000 2,500 167,330
– – 2.50 0.20 0.50 – 10.54 13.74
89.25 2.76 2.50 0.20 0.50 1.89 10.54 107.64
Equity shares Equity shares Equity shares Equity shares
Rs. 10 Rs. 10 Rs. 10 –
500 14,097,660 – –
500 14,097,660 9,669,977 871
0.03 140.98 – – – 141.01
0.03 140.98 1,854.75 0.84 485.90 2,482.50
Equity shares Equity shares
Rs. 10 Rs. 10
16,127,293 9,340,000
16,127,293 9,340,000
2,313.63 * 981.75 ** 3,295.38 5,407.90 0.50 5,407.40 2,313.63 1,841.74 141.01 1,930.12 981.75 13.24 – – – – – –
2,361.82 * 965.94 ** 3,327.76 5,917.90 486.40 5,431.50 2,361.82 1,728.85 2,088.62 1,841.28 965.94 15.63 479.32 246.22 147.34 728.61 883.26 480.03
Less: Provision for diminution in value of long term investments Aggregate book value of quoted investments of associates Market value of quoted investments of associates Aggregate book value of long term quoted investments of others Market value of long term quoted investments of others Book value of long term unquoted investments in associates Book value of long term unquoted investments in others Investment (bank certificates of deposit) purchased and sold during the year – ABN Amro Bank – Corporation Bank – Federal Bank – IDBI Bank – Punjab National Bank – State Bank of India Notes: # Held by Nihon Pharmaceuticals Industry Co. Ltd., Japan * Includes goodwill Rs. 1,900.18 (previous year Rs. 1,900.18) ** Includes goodwill Rs. 681.67 (previous year Rs. 681.67)
108
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 8 Inventories Stores and spares Raw materials Packaging materials Finished goods Work-in-progress SCHEDULE - 9 Sundry debtors (Considered good except where provided for) Debts outstanding for a period exceeding six months Secured Unsecured – Considered good – Considered doubtful Other debts – Secured – Unsecured considered good
As at 31 December 2009 140.64 6,683.91 715.55 6,979.84 3,887.05 18,406.99
As at 31 December 2008 181.49 6,689.18 795.20 8,788.35 3,188.92 19,643.14
0.65 2,757.28 575.90 3,333.83 1,525.24 14,116.30 15,641.54 18,975.37 575.90 18,399.47
0.01 2,889.11 565.52 3,454.64 1,237.49 9,183.47 10,420.96 13,875.60 565.52 13,310.08
Less : Provision for doubtful debts SCHEDULE - 10 Cash and bank balances Cash in hand Cheques in hand Remittances in transit Balances with banks: – Current accounts – Deposit accounts # – Unclaimed dividend account Include deposit receipts pledged with: – Government authorities – Banks Schedule - 11 Loans and advances (Considered good, except where provided for) Secured loans to employees Unsecured loans and advances: Advances recoverable in cash or in kind or for value to be received – Considered good – Doubtful Minimum alternate tax (MAT) credit entitlement Advance income tax (net of provision for tax of respective tax jurisdiction) Less : Provision for doubtful advances #
12.49 3.35 59.95 3,319.44 8,954.78 66.33 12,416.34 0.79 –
15.39 – 373.21 2,609.94 20,881.27 76.57 23,956.38 0.75 1,214.75
55.32
49.37
4,102.58 77.42 4,720.65 186.71 9,142.68 77.42 9,065.26
4,318.61 85.19 1,219.00 849.26 6,521.43 85.19 6,436.24
109
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 12 Other current assets (Unsecured, considered good except where provided for) Export incentives accrued Exchange gain accrued on forward contracts Insurance claims Interest accrued but not due Others – Considered good – Doubtful Less : Provision for doubtful other current assets SCHEDULE - 13 Current liabilities Sundry creditors * Book overdraft Interest accrued but not due on loans Acceptances Unpaid dividend Payables towards unrealised loss on currency options Other liabilities * Including advance from customers SCHEDULE - 14 Provisions Employee benefits# Income-tax (net of advance income tax paid in respective jurisdiction) Premium payable on redemption of FCCB Provision for contingency # Also refer to note 12 on schedule 23
As at 31 December 2009 664.26 559.63 12.41 241.38 320.22 25.84 1,823.74 25.84 1,797.90 14,393.92 49.78 36.37 1.75 66.33 16,669.65 1,293.03 32,510.83
As at 31 December 2008 654.69 562.75 8.63 154.08 375.04 24.17 1,779.36 24.17 1,755.19 11,039.44 265.72 74.10 120.73 76.57 26,760.86 1,462.94 39,800.36
2,342.51 1,501.96 4,693.79 63.27 8,601.53 Year Ended 31 December 2009 73,441.32 73,441.32 546.80 505.92 1,441.15 182.46 2,676.33 76,117.65 1,106.21 533.22 137.67 – 858.40 8.17 9.78 282.00 2,935.45
2,194.44 232.48 3,610.38 45.54 6,082.84 Year Ended 31 December 2008 72,555.23 72,555.23 870.77 589.14 172.69 262.13 1,894.73 74,449.96 1,053.26 – 940.39 42.83 177.38 – 29.38 356.22 2,599.46
SCHEDULE - 15 Operating income Sales Export incentives Royalty, technical know-how and product development Income from settlement agreements Other service income SCHEDULE - 16 Other income Interest Profit on sale of long term investments (Also refer to note 3 on schedule 23) Profit on sale of assets [net of loss Rs. 26.54 (previous year Rs. 25.88)] Profit on sale of current investments Unclaimed balances / excess provisions written back (Also refer to note 2 on schedule 23) Reversal of deferred employees compensation Dividend Miscellaneous
110
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 17 Materials consumed Raw materials consumed* Stores and spares consumed Packaging materials consumed Finished goods purchased Decrease/(increase) in work-in-progress and finished goods Opening stock Work-in-progress Finished goods Less : Closing stock Work-in-progress Finished goods Decrease / (increase), net (Increase) in excise duty * Includes site variation cost amounting to Rs. 423 (previous year Rs. nil) SCHEDULE - 18 Personnel expenses Salaries,wages and bonus Contribution to provident and other funds Workmen and staff welfare Amortisation of deferred employees compensation
Year ended 31 December 2009
Year ended 31 December 2008
19,968.77 1,380.63 2,613.08 7,020.12
20,254.10 1,285.78 3,236.92 8,887.73
3,188.92 8,788.35 11,977.27
2,745.57 7,485.66 10,231.23
3,887.05 6,979.84 10,866.89 1,110.38 (13.00) 32,079.98
3,188.92 8,788.35 11,977.27 (1,746.04) (87.00) 31,831.49
12,197.98 1,108.23 868.52 – 14,174.73
10,810.78 1,088.39 723.55 3.75 12,626.47
SCHEDULE - 19 Operating and other expenses Freight, clearing and forwarding Advertising and sales promotion Travel and conveyance Legal and professional Market research Commission Communication Insurance Rent (refer to note 9 (b) of schedule 23) Rates and taxes Regulatory filing fee Printing and stationery Analytical charges Processing charges Excise duty Power and fuel Running and maintenance of vehicles
1,868.36 4,238.28 1,268.54 3,115.02 661.39 1,346.12 433.20 471.41 840.25 450.42 571.47 163.39 152.45 1,125.32 24.74 1,657.75 397.69
2,441.19 3,672.43 1,370.89 2,602.15 903.71 1,330.19 405.37 428.90 817.51 327.84 699.10 157.20 168.43 1,412.23 18.69 1,586.45 395.58
111
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
Repairs and maintenance – Buildings – Plant and machinery – Others Cash discounts Conferences and meetings Clinical trials Recruitment and training Fixed assets written off Provisions/write off for doubtful debts, advances and other current assets Investments written off Loss on valuation of current investments Provision for diminution in the value of long-term investment Royalty Miscellaneous SCHEDULE - 20 Tax charge / (benefit) Current income-tax Minimum alternate tax credit entitlement Deferred tax charge / (credit) Fringe benefit tax Tax - earlier years # # Net of credit adjusted of Rs. 6.50 (previous year Rs. 27.01) SCHEDULE - 21 Earnings per share Net profit / (loss) attributable to equity shareholders Profit / (loss) after tax Less: Exchange gain on Foreign Currency Convertible Bonds Number of weighted average equity shares Basic Effect of dilutive equity shares on account of * – Employees stock options outstanding – Foreign Currency Convertible Bonds Diluted Nominal value of equity share (Rs.) Earning / (loss) per share (Rs.) Basic Diluted * Following are the potential equity shares considered to be anti dilutive in nature, hence these have not been adjusted to arrive at the dilutive earnings per share: – Employees stock options outstanding – Foreign Currency Convertible Bonds – Equity share warrants
Year ended 31 December 2009 67.15 253.52 449.86 273.22 172.18 454.89 210.31 7.97 353.44 – 127.78 – 22.17 1,413.00 22,591.29
Year ended 31 December 2008 90.88 171.78 585.59 376.01 211.18 527.08 205.57 – 273.61 93.42 – 433.72 – 2,136.98 23,843.68
4,558.31 (3,501.65) 5,888.49 35.50 10.22 6,990.87
745.13 (40.02) (6,510.25) 155.57 (1.27) (5,650.84)
2,964.92 (904.20) 2,060.72 420,380,856 819,480 27,119,165 448,319,501 5.00 7.05 4.60
(9,512.05) – (9,512.05) 382,846,324 – – 382,846,324 5.00 (24.85) (24.85)
– – 23,834,333
300,486 27,119,165 23,834,333
112
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The consolidated financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standards as specified in the Companies (Accounting Standards) Rules, 2006, other pronouncements of the Institute of Chartered Accountants of India (ICAI) and the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India, to the extent applicable. Principles of consolidation The consolidated financial statements include the financial statements of Ranbaxy Laboratories Limited, ("Parent Company"), its subsidiaries, joint ventures and associates (collectively known as "the Group"). Name of subsidiaries/joint venture/associates Country of Effective group incorporation shareholding (%) Subsidiaries Ranbaxy Australia Pty Ltd. Australia 100.00 Ranbaxy Belgium N.V. Belgium 100.00 Ranbaxy Farmaceutica Ltda. Brazil 100.00 Ranbaxy Do Brazil Ltda. Brazil 100.00 Ranbaxy Pharmaceuticals Canada Inc. Canada 100.00 Ranbaxy Egypt (L.L.C.) Egypt 100.00 Rexcel Egypt (L.L.C.) Egypt 100.00 Ranbaxy Pharmacie Generiques SAS France 100.00 Office Pharmaceutique Industriel Et Hospitalier SARL ("OPIH SARL") France 100.00 Basics GmbH Germany 100.00 Lapharma GmbH Germany 100.00 Ranbaxy (Hong Kong) Limited Hong Kong 100.00 Ranbaxy Hungary Kft (upto 22 May 2009) Hungary 100.00 Ranbaxy Drugs and Chemicals Company India 100.00 Ranbaxy Drugs Limited India 100.00 Rexcel Pharmaceuticals Limited India 100.00 Solus Pharmaceuticals Limited India 100.00 Solrex Pharmaceuticals Company# India 100.00 Vidyut Investments Limited India 100.00 Ranbaxy SEZ Limited India 100.00 Gufic Pharma Limited India 98.00 Ranbaxy Life Sciences Research Limited India 80.07 Ranbaxy Ireland Limited Ireland 100.00 Ranbaxy Italia S.p.A Italy 100.00 Ranbaxy Japan KK (from 9 November 2009) Japan 100.00 Ranbaxy (Malaysia) Sdn. Bhd. Malaysia 68.09 Ranbaxy Mexico S.A.de C.V. Mexico 100.00 Ranbaxy Mexico Servicios S.A.de C.V. (from 13 November 2009) Mexico 100.00 Ranbaxy Nigeria Limited. Nigeria 85.31 Ranbaxy PRP (Peru) SAC. Peru 100.00 Ranbaxy Poland S.P. Zoo Poland 100.00
113
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Name of subsidiaries/joint venture/associates Country of incorporation Effective group shareholding (%) 100.00 83.00 96.70 96.70 100.00 100.00 100.00 100.00 68.40 100.00 100.00 100.00 100.00 88.56 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 67.50 100.00
Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda Portugal Ranbaxy (Guangzhou China) Limited (upto 29 December 2009) Republic of China Terapia S.A. Romania Terapia Distributie S.R.L. Romania ZAO Ranbaxy Russia Ranbaxy (S.A.) Proprietary Limited South Africa Be-Tabs Pharmaceuticals (Proprietary) Ltd.* South Africa Be-Tabs Investments (Proprietary) Ltd.* South Africa Sonke Pharmaceuticals (Pty) Ltd South Africa Laboratorios Ranbaxy, S.L. Spain Ranbaxy Pharma AB Sweden Ranbaxy (Netherlands) BV The Netherlands Ranbaxy NANV The Netherlands Ranbaxy Unichem Company Ltd. Thailand Ranbaxy (UK) Ltd. United Kingdom Ranbaxy Holdings (UK) Ltd. United Kingdom Ranbaxy Europe Ltd. United Kingdom Ranbaxy Inc. United States of America Ranbaxy Pharmaceuticals, Inc. United States of America Ranbaxy USA, Inc. United States of America Ohm Laboratories, Inc. United States of America Ranbaxy Laboratories Inc. United States of America Ranbaxy Signature LLC United States of America Ranbaxy Vietnam Company Ltd. (upto 5 October 2009) Vietnam Joint Venture Nihon Pharmaceutical Industry Co., Ltd (upto 8 December 2009) Japan Associates Zenotech Laboratories Limited India Shimal Research Laboratories Limited India # A partnership firm, in which two subsidiaries of the Parent Company are partners. * 75% till 12 June 2009
50.00 46.99 24.91
The consolidated financial statements have been combined on a line-by-line basis by adding the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances/transactions and unrealised profits in full. The amounts shown in respect of reserves comprise the amount of the relevant reserves as per the Balance Sheet of the Parent Company and its share in the post-acquisition increase/decrease in the reserves of the consolidated entities. Proportionate share of interest in joint venture has been accounted for by the proportionate consolidation method in accordance with Accounting Standard - 27 "Financial reporting of Interest in Joint Ventures".
114
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES An investment in an associate has been accounted for by the equity method of consolidation from the date on which it falls within the definition of associates in accordance with Accounting Standard-23 "Accounting for investments in Associates in Consolidated Financial Statements". The excess/deficit of cost to the Parent Company of its investment over its portion of net worth in the consolidated entities at the respective dates on which investment in such entities was made is recognised in the consolidated financial statements as goodwill/capital reserve. The Parent Company's portion of net worth in such entities is determined on the basis of book values of assets and liabilities as per the financial statements of the entities as on the date of investment and if not available, the financial statements for the immediately preceding period adjusted for the effects of significant changes. Entities acquired/ sold during the year have been consolidated from/ upto the respective date of their acquisition/ disposal. The consolidated financial statements are presented, to the extent possible, in the same format as that adopted by the Parent Company for its separate financial statements. Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenses for the year. Examples of such estimates include provisions of future obligation under employee retirement benefit plans, the useful lives of fixed assets and intangible assets, etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods. Fixed assets and depreciation Fixed assets are stated at the cost of acquisition or construction, less accumulated depreciation and impairment losses. Cost comprises the purchase price and any attributable costs of bringing the assets to their working condition for intended use. Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily take a substantial period of time to be ready for their intended use, are capitalised. Depreciation on fixed assets, except leasehold improvements, is provided using the straight-line method and at the rates reflective of estimate useful lives of fixed assets, unless minimum rates subscribed by respective local laws. Leasehold improvements are depreciated over their estimated useful life, or the remaining period of lease from the date of capitalisation, whichever is shorter. The management's estimate of the useful lives for various categories of fixed assets are given below Years Building Plant and machinery Furniture and fixtures Vehicles 29 - 61 3 - 33 3 - 17 4 - 10
Depreciation is calculated on a pro-rata basis from the date of installation till the date the assets are sold or disposed. Assets costing individually Rs. 5,000 or less are depreciated fully in the year of purchase. Intangible assets and amortisation Intangible assets comprise goodwill, patents, trademarks, designs and licenses, software, non-compete fee and product development rights, and are stated at cost less accumulated amortisation and impairment losses, if any.
115
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES These are amortised over their estimated useful lives on a straight-line basis, commencing from the date the asset is available to the entities for its use. The management estimates the useful lives for the various intangible assets as follows: Years Patents, trademarks, designs and licenses Software Non-compete fee Product development 5 - 10 6 Term of the respective agreements ranging from 1 to 10 years 5
Goodwill reflects the excess of cost of acquisition over the book value of net assets acquired on the date of the acquisition. Goodwill is tested for impairment on an annual basis. Impairment of assets The carrying values of assets other than goodwill are reviewed at each reporting date to determine if there is indication of any impairment. Goodwill is tested for impairment at least once in year. If any indication exists, the asset's recoverable amount is estimated. For assets that are not yet available for use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount and is recognised in the Consolidated Profit and Loss Account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised. Revenue recognition Revenue from sale of goods is recognised on transfer of significant risks and rewards of ownership to the customer. Revenue includes excise duty and is shown net of sales tax, value added tax and applicable discounts and allowances. Allowances for sales returns are estimated and provided for in the year of sales. Service income is recognised as per the terms of contracts with customers when the related services are rendered, or the agreed milestones are achieved. Income from royalty, technical know-how arrangements, exclusivity and patents settlement, licensing arrangements is recognised on accrual basis in accordance with the terms of the relevant agreement. Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Dividend income is recognised when the right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on the time proportionate method. In the United States of America, large customers are major wholesalers who resell products to third party customers like managed care organisations, drug store chains and pharmacies. A significant part of gross revenues from such wholesalers are subject to various forms of rebates and allowances (referred to as "Chargebacks"), which are recorded as reductions from the gross revenues. The computation of the estimate for expected chargebacks is complex and involves significant judgment based on historical experience and estimated wholesaler inventory levels, as well as expected sell-through levels by the wholesalers to indirect customers. The primary factors considered in developing and evaluating provision for chargeback includes the average historical chargeback credits and an estimate of the inventory held by such wholesalers, based on internal analysis of wholesaler's historical purchases and contract sales.
116
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at the lower of cost and fair value, determined on an individual investment basis. Long-term investments are carried at cost less any other-than-temporary diminution in value, determined separately in respect of each category of investment. Inventories Raw material, packaging material and stores and spare parts are carried at cost. Cost includes purchase price, other than those subsequently recoverable by the enterprise from the concerned revenue authorities, freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used. The carrying cost of raw materials, packaging materials and stores and spare parts are appropriately written down when there is a decline in replacement cost of such materials and finished products in which they will be incorporated are expected to sold below cost. Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. The comparison of cost and net realisable value is made on an item by item basis. Cost of work in progress and manufactured finished goods is determined on weighted average basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on weighted average basis. Excise duty liability is included in the valuation of inventory of finished goods. Research and development costs Revenue expenditure on research and development is expensed out under the respective heads of account in the year in which it is incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the entity has sufficient resources to complete the development and to use and sell the asset. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the Consolidated Profit and Loss Account as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Fixed assets used for research and development are depreciated in accordance with the Group's policy. Materials identified for use in research and development process are carried as inventories and charged to Consolidated Profit and Loss Account on issuance of such materials for research and development activities. Employee stock option based compensation The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of the options given to employees under the employee stock option schemes of the Company, is recognised on a straight line basis and amortised over the vesting period on a straight line basis. Foreign currency transactions The reporting currency of the Group is the Indian Rupee. However, the local currencies of non-integral overseas subsidiaries and joint venture are different from the reporting currency of the Group.
117
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Transactions in foreign currency and forward contracts Transactions in foreign currency are recorded by the reporting entities at the exchange rate prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Consolidated Profit and Loss Account. Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date, not covered by forward exchange contracts, are translated at year end rates. The resultant exchange differences are recognised in the Consolidated Profit and Loss Account. Non-monetary assets are recorded at the rates prevailing on the date of the transaction. Forward contracts are entered into to hedge the foreign currency risk of the underlying outstanding at the Balance Sheet date. The premium or discount on such contracts is amortized as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or expense for the period. The exchange difference on such a forward exchange contract is calculated as the difference between (a) the foreign currency amount of the contract translated at the exchange rate at the Balance Sheet, or the settlement date where the transaction is settled during the reporting period, and (b) the same foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last Balance Sheet. Such exchange differences are recognised in the Consolidated Profit and Loss Account in the reporting period in which the exchange rates change. Integral and non-integral operations The consolidated financial statements of the foreign integral subsidiaries and representative offices (collectively referred to as the 'foreign integral operations') are translated into Indian Rupees as follows:• Profit and Loss items, except opening and closing inventories and depreciation, are translated at the respective monthly average rates. Opening and closing inventories are translated at the rates prevalent at the commencement and close respectively of the accounting period. Depreciation is translated at the rates used for the translation of the values of the assets on which depreciation is calculated. Non-monetary Balance Sheet items, other than inventories, are translated using the exchange rate at the date of transaction i.e., the date when they were acquired. Monetary Balance Sheet items and inventory are translated using year-end rates. The net exchange difference resulting from the translation of items in the financial statements of foreign integral operations is recognised as income or expense for the year. Contingent liabilities are translated at the closing rate.
• • • •
The financial statements of the foreign non integral subsidiaries and joint venture (collectively referred to as the 'foreign non integral operations') are translated into Indian Rupees as follows:• • • • • All assets and liabilities, both monetary and non-monetary, (excluding share capital, opening reserves and surplus) are translated using the year-end rates. Share capital and opening reserves and surplus are carried at historical cost. Profit and Loss items are translated at the respective monthly average rates. The resulting net exchange difference is credited or debited to the foreign currency translation reserve. Contingent liabilities are translated at the closing rate.
A reclassification from foreign integral operations to foreign non-integral operations or vice versa is made consequent to change in the way operations of entities are financed and operates. The translated amounts for non-monetary items of reclassified entities on the date of such reclassification are treated as the historical cost for those items in the period of change and subsequent periods. Exchange differences which have been deferred in foreign currency translation reserve are not recognised as income or expenses until the disposal of that entity.
118
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Derivative instruments and hedge accounting The Group uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. Forward and options contracts are fair valued at each Balance Sheet and the resultant gain or loss (except relating to effective hedges) from these transactions are recognised in the Consolidated Profit and Loss Account. The gain or loss on effective hedges is recorded in the Hedging Reserve (reported under Reserves and Surplus) until the transactions are complete. On completion, the gain or loss is transferred to the Consolidated Profit and Loss Account of that period. To designate a forward or options contract as an effective hedge, the management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. In the absence of a designation as effective hedge, a gain or loss is recognised in the Consolidated Profit and Loss Account. Employee benefits Short - term employee benefits All employee benefits payable / available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the Consolidated Profit and Loss Account in the period in which the employee renders the related service. Defined benefit plans Gratuity Indian entities of the Group have an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee's salary and the tenure of employment. Vesting occurs upon completion of five years of service. These entities make annual contributions to gratuity fund established as trust. Provident fund In respect of employees, Indian entities of the Group makes specified monthly contribution towards the employees' provident fund to the provident fund trust administered by the Parent Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. These Indian entities have an obligation to make good the shortfall, if any, between the return on receptive investments of the trust and the notified interest rate. Pension The Indian entities have an obligation towards pension, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee's salary and the tenure of employment. Vesting occurs upon completion of 20 years of service. Retirement pension payment plan Ranbaxy Pharmacie Generiques SAS and one its subsidiary company in France also has a retirement pension payments plan as per collective agreement. The payment is made at the time of retirement. Valuation The liability in respect of defined benefit plans, other than provident fund schemes, is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary primarily using the Projected Unit Credit Method, which recognizes each year of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined
119
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Consolidated Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. The contributions made to provident fund trust are charged to Consolidated Profit and Loss Account as and when they become payable. In addition, the Indian entities recognizes liability for shortfall in the plan assets vis-à-vis the fund obligation, if any. The Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standard Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, actuary of these entities have expressed an inability to reliably measure provident fund liabilities. Accordingly, the Group is unable to exhibit the related information. Defined contribution plans Under certain retirement benefits plans of entities in the Group, there are a defined contribution plans such as superannuation, social security schemes etc. These entities pays fixed contributions and have no obligation to pay further amounts. Such fixed contributions are recognised in the Consolidated Profit and Loss Account on accrual basis. Other long term employee benefits Compensated absences In respect of certain entities of the Group, as per that entity's policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. The value of benefits is determined based on the seniority and the employee's salary. Valuation These entities account for the liability for compensated absences payable in future and long service awards based on an independent actuarial valuation using the Projected Unit Credit Method as at the year end. Actuarial gains and losses are recognised immediately in the Consolidated Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Long service award As per the Parent Company's policy, employees of the Parent Company are eligible for an award after completion of specified number of years of service with the Parent Company. Taxes on income Income tax expense comprises current and deferred tax. Income tax expense in Consolidated Profit and Loss Account is the aggregate of the amounts of tax expense appearing in the separate financial statements of the Parent Company, its subsidiaries and joint ventures. The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to each entity using tax rates enacted or substantially enacted at the Balance Sheet. Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period of each entity in the Group. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and are written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. The break-up of the major components of the deferred tax assets and liabilities as at
120
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Balance Sheet date has been arrived at after setting off deferred tax assets and liabilities where the entity has a legally enforceable right to set-off assets against liabilities and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws. Provision for Fringe Benefit Tax for Indian entities for the year has been determined in accordance with the provisions of section 115WC of the Income-tax Act, 1961. Minimum alternate tax payable under the provisions of the Income-tax Act 1961 is recognised as an assets in the year in which credit become eligible and is set off to the extent allowed in the year in which the Indian entity becomes liable to pay income tax at the enacted tax rates. Provisions, contingent liabilities and contingent assets A provision is created when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. The Group does not recognise assets which are of contingent nature until there is virtual certainty of realisability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognised in the financial statements of the period in which the change occurs. Leases Operating leases Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as an operating lease. Lease payments under operating lease are recognised as an expense in the Consolidated Profit and Loss Account on a straight-line basis over the lease period. Finance leases Assets taken on a finance lease are capitalised at an amount equal to the fair value of the leased assets or the present value of minimum lease payments at the inception of the lease, whichever is lower. Such leased assets are depreciated over the lease tenure or the useful life, whichever is shorter. The lease payment is apportioned between the finance charges and reduction of outstanding liability. The finance charge is allocated to the periods over the lease tenure to produce a constant periodic rate of interest on the remaining liability. Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year are adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.
121
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 1. Background Ranbaxy Laboratories Limited ("the Parent Company") together with its subsidiaries, joint venture and associates operates as an integrated international pharmaceuticals organisation with businesses encompassing the entire value chain in the marketing, production and distribution of pharmaceuticals products. The Group presently has manufacturing facilities in eight countries, namely India, the United States of America, Brazil, Ireland, Malaysia, Nigeria, Romania and South Africa. The Group's major markets include the United States of America, India, Europe, Russia/CIS and South Africa. The research and development activities of the Group are principally carried out at its facilities in Gurgaon, near New Delhi, India. The Parent Company’s shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India and its Global Depository Share (representing equity shares of the Parent Company) are listed on the Luxembourg Stock Exchange and Foreign Currency Convertible Bonds (FCCBs) are listed on the Singapore Stock Exchange. Food And Drug Administration (“FDA”) Investigation On 16 September 2008, the Parent Company received 2 warning letters and an Import Alert from the US FDA, covering 30 generic drugs being manufactured at its Paonta Sahib and Dewas manufacturing facilities in India. The issue raised in the warning letters relate to “Current Good Manufacturing Practice” being followed at the said plants and does not in any way raises questions on product’s quality, safety or effectiveness. In 2008, consequent to Import Alert the Group was not able to sell the products covered under Import Alert and accordingly, it had recorded a provision of Rs. 2,631.11 towards inventory in that year, expected sales return and related exports benefits. On 25 February 2009, the Parent Company received a letter from the US FDA indicating that the Agency had invoked its Application Integrity Policy (“AIP”) against the Paonta Sahib facility (the “facility”). The management of the Parent Company believes that there was no falsification of data generated at the facility and also believes that there is no indication of a pattern and practice of submitting untrue statements of material fact and there was no other improper conduct. Accordingly, the Group, based on opinion from its legal counsel believe that there is no incremental present obligation existing at the Balance Sheet date on account of these notices. The Group continues to fully cooperate with the concerned authorities for their final clearance, pending which there would be delays for new product approvals and sale of existing products in the United States of America (USA). During the current year, the Group has performed re-assessment of carrying amount of related provision created in 2008 and reversed a provision of Rs. 937.81 which is included in the unclaimed balances/ excess provisions written back and materials consumed, which in the view of the Group is no longer required. [ii] In the year 2008, the Department of Justice (DOJ), USA has filed certain charges against the Parent Company citing possible issues with the data submitted by the Parent Company, in support of product filing. The Group continuous to work diligently with the concerned authorities towards resolution of the issue. Joint venture / sale of subsidiary The Group has 50:50 joint venture with Nihon Pharmaceuticals Industry Co. Ltd., Japan.The following are the Group's share of assets, liabilities, income and results of the joint venture, which are included in the Consolidated Balance Sheet and Consolidated Profit and Loss Account respectively: As at 31 December Particulars 2009 2008 Balance sheet Reserve and surplus – 518.88 Loan fund – 148.12 Fixed assets (net) – 280.4 Investments – 5.50 Current assets (net) – 393.33 Deferred tax assets (net) – 30.66
2.
3.
122
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements For the year ended 31 December 2009 2008 Profit and Loss Income Expenditure Interest Depreciation Tax expense Profit after tax [ii] 829.92 670.84 1.98 32.70 49.29 75.11 684.74 577.65 0.41 16.55 31.62 58.51
The Group disposed off its entire holding in Nihon Pharmaceutical Industry Co., Ltd. for an agreed consideration of Rs. 847.03 and recognized loss on disposal of Joint venture amounting to Rs. 123.65 which is included in "Profit on sale of long term investments". The transaction was effective from 8 December 2009. The Group disposed off its entire holding in Ranbaxy (Guangzhou China) Limited for an agreed consideration of Rs. 646.30 and recognised gain on disposal of subsidiary amounting to Rs. 536.31 which is included in "Profit on sale of long term investments". The transaction was effective from 29 December 2009.
4.
Investments in subsidiaries During the current year, the Group exercised the available call option and acquired entire shareholding of minority shareholders (25%) in Be-Tabs Pharmaceuticals (Proprietory) Limited and Be-Tabs Investments (Proprietory) Limited in South Africa for an agreed consideration of Rs. 739.54 and recognized goodwill of Rs. 541.26 representing excess of consideration over carrying amount of minority on the date of purchase. Consequently, Be-Tabs Pharmaceuticals (Proprietory) Limited and Be-Tabs Investments (Proprietory) Limited has become a 100% subsidiary of the Group with effect from 12 June 2009.
5.
On 28 October 2008 Daiichi Sankyo Co., Ltd., Japan (Daiichi Sankyo) acquired majority stake in the Company. The Company issued the following shares/ warrants to Daiichi Sankyo: (a) (b) 46,258,063 equity shares of Rs. 5 each allotted as fully paid up on a preferential basis. 23,834,333 warrants issued on 20 October 2008. Each warrant is convertible into one equity share of Rs. 5 each at a premium of Rs. 732 per share at any time between six months to eighteen months from the date of allotment of warrants (Rs. 73.70 per warrant being 10% of the exercise price received).
6.
Share-based compensation The Parent Company’s Employee Stock Option Schemes (“ESOSs”) provide for the grant of stock options to eligible management employees and Directors of the Parent Company and its subsidiaries. The ESOSs are administered by the Compensation Committee of the Board of Directors of the parent Company (“Committee”). Options are granted on the basis of performance and the grade of the employee. Presently there are three ESOSs (“ESOS I”, “ESOS II” and “ESOS 2005”). Options are granted at the discretion of the committee to select employees depending upon certain criterion. The ESOSs limits the maximum grant of options to an employee at 25,000 for ESOS I and 40,000 each for ESOS II and ESOS 2005 in any given year. ESOS I and II provide that the grant price of options is to be determined at the average of the daily closing price of the Company’s equity shares on the NSE during a period of 26 weeks preceding the date of the grant. ESOS 2005 provides that the grant price of options will be the latest available closing price on the stock exchange on which the shares of the Parent Company are listed, prior to the date of the meeting of the Committee in which the options are granted. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.
123
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements The options vests evenly over a period of five years from the date of grant. Options lapse if they are not exercised prior to the expiry date, which is ten years from the date of the grant. The Shareholders' Committee of the Parent Company from time to time have approved issuance of options under the Employees Stock Options Scheme(s) as per details given below: Date of approval 29 June 2002 25 June 2003 30 June 2005 No. of options 2,500,000 4,000,000 4,000,000
The stock options outstanding as on 30 June 2005 are proportionately adjusted in view of the sub-division of equity shares of the Parent Company from the face value of Rs.10 each into 2 equity shares of Rs. 5 each. Options granted upto 3 October 2002 are entitled for additional bonus shares in the ratio of 3:5. The movement of the options (post split) for the year ended 31 December 2009 is given below:
WeightedWeightedaverage Range of average remaining Stock options exercise prices exercise prices contractual life (numbers) (Rs.) (Rs.) (years)
Outstanding, beginning of the year Granted during the year Forfeited during the year Allotted during the year Lapsed during the year Outstanding, end of the year* Exercisable at the end of the year*
7,272,849 1,472,725 (530,760) (36,825) (764,973)
219.00-561.00 216.00-216.00 216.00-538.50 216.00-372.50 283.50-538.50
439.59 216.00 310.84 312.03 471.97 401.68 455.98
6.73 9.05 – – – 6.30 4.88
7,413,016 216.00-561.00 3,906,091 216.00-561.00
*Includes options exercised, pending allotment as at 31 December 2009 The movement of the options (post split) for the year ended 31 December 2008 is given below:
Weightedaverage exercise prices (Rs.) Weightedaverage remaining contractual life (years)
Stock options (numbers)
Range of exercise prices (Rs.)
Outstanding, beginning of the year Granted during the year Forfeited during the year Exercised during the year Lapsed during the year Outstanding, end of the year Exercisable at the end of the year
7,168,956 1,774,825 (456,910) (880,605) (333,417) 7,272,849 3,450,209
283.50-538.50 219.00-561.00 283.50-538.50 283.50-538.50 283.50-538.50 219.00-561.00 283.50-538.50
446.52 373.05 436.56 350.65 473.41 439.59 457.31
6.87 9.15 – – – 6.73 5.50
124
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 7. Capital work-in progress (including capital advances) includes: Capital advances to vendors amounting to Rs. 235.30 (previous year Rs. 109.50). [ii] Project related expenses (directly allocable) amounting to Rs. 299.28 (previous year Rs. 356.86) as under: As at 31 December Particulars 2009 2008 Opening balance 356.86 208.68 Add: Addition during the year Salaries, wages and bonus 40.49 63.94 Contributions to provident and other funds 26.62 6.05 Workmen and staff welfare 1.18 2.33 Raw materials 4.54 26.66 Power and fuel 4.40 28.45 Insurance 0.14 2.39 Others 19.78 31.14 454.01 369.64 Less : Capitalised during the year 154.73 12.78 Balance as at year end 299.28 356.86 Interest on fixed loans and debentures Interest includes interest paid on fixed period loans and debentures amounting to Rs. 288.96 (previous year Rs. 1,212.80). Leases Finance lease a] The Group has acquired assets under finance lease comprising mainly of building, plant and machinery and vehicles. The future minimum lease rentals and the present value of future minimum lease payments as at 31 December 2009 and 31 December 2008 are as under: Minimum lease Present value of minimum payments lease payments As at 31 December As at 31 December 2009 2008 2009 2008 i) not later than one year 84.45 84.49 55.89 50.74 ii) later than one year but not later than five years 350.45 348.44 287.97 262.31 ii) later than five years 36.03 131.61 35.16 123.83 Total 470.93 564.54 379.02 436.88 Operating lease b] The Group has leased facilities under cancellable and non-cancellable operating leases arrangements with a lease term ranging from 3 to 17 years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expense recognised during the year amounts to Rs. 840.25 (previous year Rs. 817.51). The future minimum lease payments in respect of non-cancellable operating leases as at 31 December 2009 and 31 December 2008 are: As at 31 December 2009 2008 i] not later than one year 248.28 217.88 ii] later than one year but not later than five years 537.65 639.42 iii] later than five years 120.99 169.33 Total 906.92 1,026.63
8. 9.
125
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 10. Foreign exchange (gain)/loss other than on loans As at 31 December 2009 2008 1,282.65 73.61 (3,213.88) 10,990.42 (1,931.23) 11,064.03 For the year ended 31 December 2009 2008 186.44 229.08 20.67 44.40 1.99 2.46 52.00 – 4.84 1.34 265.94 277.28
Foreign exchange loss Fair valuation (gain)/loss on derivatives 11. Directors' remuneration * (covered by section 198 of the Companies Act, 1956) Salaries and allowances Contribution to provident and other funds * Directors' fee Commission Perquisites
* Does not include the following: a) Liabilities in respect of gratuity, pension, compensated absences determined (for one of the director) as the same is determined on an actuarial basis for company as a whole. b) Amortisation of deferred employee compensation on grant of stock options. c) Compensation cost Rs. 481.38 for loss of office to a director (previous year Rs. nil). d) Pension paid/ payable to non-executive directors for the services rendered in earlier years as a whole time director/ employees Rs. nil (previous year Rs. 2.29). 12. Employee benefits The following tables set out the disclosures relating to pension, gratuity and retirement pension payment plan as required by Accounting Standard - 15 "Employee Benefits":
Pension Retirement pension payment plan Gratuity
Change in the present value of obligation: Present value of obligation as at 1 January 2009 Add: Interest cost Add: Current service cost Less: Benefits paid Add: Actuarial (gain)/loss on obligations Translation adjustments Present value of obligation as at 31 December 2009
1,571.19 1,205.49 117.84 99.45 93.20 106.91 (54.56) (32.59) 28.83 191.92 – – 1,756.50 1,571.19
66.05 49.51 2.76 2.49 5.11 4.33 (2.42) – 0.21 0.32 (1.30) 9.40 70.41 66.05
486.74 383.00 40.37 31.07 36.91 39.57 (130.61) (48.80) 96.78 81.90 – – 530.19 486.74
126
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements Change in the fair value of plan assets: Fair value of plan assets as of 1 January 2009 Add: Actual return on plan assets Add: Contributions Less: Benefits paid Fair value of plan assets as of 31 December 2009 Reconciliation of present value of defined benefit obligation and the fair value of assets Present value of funded obligation as of 31 December 2009 Less: Fair value of plan assets as at the end of the period funded status Present value of unfunded obligation as of 31 December 2009 Unfunded net liability recognised in the Consolidated Balance Sheet Expense recognised in the Consolidated Profit and Loss Account
Pension Retirement pension payment plan Gratuity
Gratuity 439.19 354.52 36.28 29.62 98.99 103.85 (130.15) (48.80) 444.31 439.19 Gratuity 530.19 486.74 (444.31) (439.19) 85.88 47.55 85.88 47.55
Current service cost Add: Interest cost Add: Expected return on plan assets Less: Settlement cost/ credit Add: Net actuarial (gain)/loss recognised in the year Total expenses recognised in the Consolidated Profit and Loss Account
93.20 106.92 117.84 99.45 – – (2.51) (15.34) 28.83 191.92 237.36 382.95
5.11 4.33 2.76 2.49 – – (2.42) – 0.21 0.32 5.66 7.14
36.91 39.57 40.37 31.07 (38.95) (30.31) (2.14) (2.79) 99.47 82.59 135.66 120.12
The major categories of plan assets as a percentage of total plan assets are as under: Particulars Gratuity Central Government securities 19% 15% State Government securities 11% 12% Bonds and securities of public sector / Financial Institutions 59% 62% Deposit with Reserve Bank of India 11% 11%
127
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements The following table sets out the assumptions used in actuarial valuation of compensated absences, pension and gratuity: Particulars Compensated Pension Retirement Gratuity absences pension payment plan Discount rate 7.50% 7.50% 4.65% 7.50% 8%-8.25% 8.25% 4.25% 8%-8.25% Rate of increase in compensation levels # 5%-10% 5%-10% 2%-3% 5%-10% 5.5% 5.5% 2%-3% 5.5% Rate of return of plan assets Nil Nil Nil 8%-9% Nil Nil Nil 8% Expected average remaining working 20.55-26.57 20.58 – 20.58-26.57 lives of employees (years) 21.14-27.90 21.20 – 21.20-27.09 The liability for compensated absences, pension, gratuity, and retirement pension payment plan as at 31 December 2009 was Rs. 349.24 (previous year Rs. 396.90), Rs. 1,756.50 (previous year Rs. 1,571.19), Rs. 85.88 (previous year Rs. 47.55) and Rs. 70.41 (previous year Rs. 66.05) respectively. # 10% for the first three years and 5% thereafter Figures in italics are for the year ended 31 December 2008 Other plans a) The Parent Company and certain Group companies also have defined contribution plans, which are largely governed by local statutory laws of the respective countries and cover the eligible employees of the specific entity. These plans are funded both by the members and by the company contributions, primarily based on a specified percentage of the employees’ salary. The total contributions to these schemes during the year ended 31 December 2009 is Rs. 622.13 (previous year Rs. 594.35). b) Further, USA based subsidiaries participates in a savings plan under Section 401(k) of the Internal Revenue Code (“Code”) covering substantially all eligible employees. The plan allows for employees to defer up to 15% of their annual earnings within limitations specified under respective law on a pre-tax basis through voluntary contributions to the plan. The plan provides these USA based subsidiaries can make optional contributions in an amount up to the maximum allowable by respective law. Employees achieve a 25 percent vested status after one year of service and fully vested status after three years of service. During the year ended 31December 2009 the contributions to the plan is Rs. 47.13 (previous year Rs. 39.90).
128
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 13. Hedging and derivatives The Group uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. The following are the outstanding forward exchange contracts and currency options entered into by the Parent Company: As at 31 December 2009 Category Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) As at 31 December 2008 Category Forward contracts Forward contracts Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) Currency USD EUR GBP USD USD JPY JPY Cross currency INR USD USD BRL INR USD Amount (in millions) USD 218.40 USD 35.30 USD 0.17 USD 5.25 USD 1403.00 JPY 10,350.00 JPY 11800.00 Buy/ Sell Sell Sell Sell Buy Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging Hedging Hedging Currency USD EUR USD JPY JPY Cross currency INR USD INR USD Amount (in millions) USD 20.00 USD 1.44 USD 1038.50 JPY 10,350.00 JPY 11,800.00 Buy/ Sell Sell Sell Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging
The outstanding forward exchange contracts, which are classified as cash flow hedges and effective as at 31 December 2009 are as follows: Currency USD Cross currency INR Amount (in millions) USD 20.00 Gain / (loss) net of tax (28.73)
14. The Group's foreign currency exposure (balance denominated in currency other than currency of respective group entity) not hedged is as follows*: As at As at 31 December 2009 31 December 2008 (in original (in Rupees) (in original (in Rupees) currency) currency) Receivables # – JPY 16.26 8.22 23.99 12.86 – EURO 11.09 739.33 14.68 997.20 – NZD 1.10 37.09 2.10 59.56 – AUD 0.45 18.79 2.16 74.26 – AED 0.65 8.24 5.95 78.72 Others ## 0.21 12.03 # USD-INR currency exposure for receivable balance is hedged fully, however USD to above currencies is unhedged to the extent stated above
129
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements As at As at 31 December 2009 31 December 2008 (in original (in Rupees) (in original (in Rupees) currency) currency) Payables – USD 18.16 844.65 8.79 427.11 – EURO 2.40 160.01 0.75 50.95 – JPY 24.22 12.24 39.85 21.37 – KES 4.40 2.70 – – – DKK – – 2.23 20.35 Others ## 3.19 8.75 Bank balances – USD 0.62 28.84 0.71 34.50 – LTL 0.56 10.81 0.35 6.89 – CFR 94.04 9.55 49.29 5.20 – RUB 5.90 3.83 2.10 3.47 – PLN 0.03 0.49 1.00 16.22 – UAH 0.53 3.04 0.72 4.48 Others ## 5.92 5.60 ## Exposure to other currencies which are not significant has been aggregated for this disclosure Loans – USD 666.86 31,016.74 652.30 31,695.26 – JPY – – 1,800.00 965.15 – EURO 6.67 444.68 10.00 679.29 For derivatives refer note above 15. Commitments, contingent liabilities and provisions As at 31 December 2009 2008 i) ii) Guarantees issued by subsidiaries Claims against the Group not acknowledged as debts, under dispute: (a) (b) (c) (d) (e) (f) (g) * DPCO * Excise matters Octroi tax matters ** Sales tax matters Other matters *** Income tax matter Service tax matters 1,703.30 75.42 171.00 12.76 590.22 170.02 3.07 1,504.10 68.57 171.00 7.96 182.59 – – 48.07 1,236.61
The Parent Company has received demand for payment to the credit of the Drug Prices Equalisation Account under Drugs (Price Control) Order, 1995 which is being contested by the Company in respect of its various products. The Company has deposited Rs. 319.59 (previous year Rs.297.91) under protest.
130
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements ** The Company has been contesting a case with Municipal Corporation of Mohali (MCM) under which MCM is contesting that octroi has to be paid by the Company at 1% as against 0.5% being paid by the Company. The amounts represents the differential. These represents cases pending at various forums on account of employee / worker related cases (India and overseas), State electricity board, Punjab Land Preservation Act, property disputes etc.
***
The Group believes that the probability of any liability on account of any of the above mentioned cases is remote. The Group is also involved in other lawsuits, claims, investigations and proceedings, including patent and commercial matters, which arise in the ordinary course of business. However, there are no such matters pending that the Group expects to be material in relation to its business. iii) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances). 902.94 1,311.71
Certain entities of the Group have created provision towards claims made against these entities in relation to commercial, employee related and leased property matters. The movement in provision is as follows: As at 31 December 2009 Balance as at the beginning of the year Add: Provision made during the year Less: Payment made during the year Translation adjustments Balance as at the end of the year 45.54 39.37 (27.79) 6.16 63.28 2008 30.29 11.05 – 4.20 45.54
16. The aggregate amount of revenue expenditure incurred on research and development is shown in the respective heads of account. The break-up of the amount is as under: For the year ended 31 December Salaries, wages and bonus Contribution to provident and other funds Workmen and staff welfare Materials and consumables Power and fuel Clinical trials Rent Printing and stationery Insurance Communication Legal and professional charges Travel and conveyance Analytical testing and processing charges Repairs and maintenance Recruitment and training Others 2009 1,352.21 93.47 70.21 1,696.77 275.38 455.01 213.12 16.61 38.50 57.77 71.12 87.34 64.52 186.14 13.83 183.21 4,875.21 2008 1,272.37 89.41 57.85 1,217.59 247.56 527.08 200.22 26.95 31.52 49.78 47.11 107.24 80.83 138.92 10.66 208.81 4,313.90
131
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 17. Related party disclosures a] Relationship : i] Holding company (also being the ultimate holding company) 1 Daiichi Sankyo Co., Ltd. , Japan (from 20 October 2008) ii] Fellow subsidiary (overseas) with whom transactions have taken place during the year or previous year 1 Daiichi Sankyo Europe GmbH iii] Joint venture (overseas) 1 Nihon Pharmaceutical Industry Co. Ltd., Japan (Investment made by Ranbaxy (Netherlands) BV, the Netherlands) (upto 8 December 2009) iv] Associates (domestic) with whom transactions have taken place during the year or previous year 1 Zenotech Laboratories Limited 2 Shimal Research Laboratories Limited v] Key managerial personnel 1 Mr. Malvinder Mohan Singh, Chairman, CEO and Managing Director (upto 24 May 2009) 2 Mr. Atul Sobti, CEO and Managing Director 3 Mr. Ramesh L Adige (Upto 19 December 2008) vi] Relatives of Key managerial personnel with whom transactions have taken place during the year or previous year (upto 24 May 2009) 1 Mrs. Nimmi Singh, mother of Mr. Malvinder Mohan Singh vii] Entities over which significant influence is exercised by Mr. Malvinder Mohan Singh with whom transactions have taken place during the year or previous year (upto 24 May 2009) 1 Fortis Healthcare Limited (including its subsidiaries) 2 Religare Securities Limited 3 Ran Air Services Limited 4 Religare Travels (India) Limited 5 Religare Capital Markets Limited 6 Super Religare Laboratories Limited 7 Fortis Clinical Research Limited 8 Religare Enterprises Limited 9 Escorts Heart Institute and Research Centre Limited 10 Religare Technova IT Services Limited (formerly Fortis Financial Services Limited) 11 Oscar Investments Limited
132
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements b] Transactions with the related parties Transactions Holding company Fellow subsidiaries Joint Key Entities ventures management over which and personnel significant associates influence is exercised 25.34 (215.54) 0.69 – 7.49 – – – – – – – – – – – – – – – – – – – – – – – 32.30 (48.35) – – 0.96 – – – – – – – – – – – – – (1,385.21) – – – – – – – – – – – – – 250.64 (279.30) – – – – – – – – – – – – – – – – – – – – – – 98.03 (638.47) 97.57 (434.34) – (44.00) – – – – – – – (18.03) 13.73 (32.33) Total
Sales Other income Finished goods purchased Market research expenses Product quality claim Travel and conveyance Royalty paid Personnel cost Technical services availed Purchase of fixed assets Sale of investment – Investment made Equity capital contribution (including premium) Equity share warrants money received
– – 40.06 – 0.23 – 1.46 – – – 2.20 – 0.36 – – – – – – – – – – – – (34,092.19) – (1,756.59)
25.34 (233.57) 54.48 (32.33) 40.02 (48.35) 1.46 – 0.96 – 2.20 – 0.36 – 250.64 (279.30) 98.03 (638.47) 97.57 (434.34) – (44.00) – (1,385.21) – (34,092.19) – (1,756.59)
Figures in brackets are for previous year
133
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements c] Transaction in excess of 10% of the total related party transactions Sr. Transactions No. 1. Sales Nihon Pharmaceuticals Industry Co. Ltd, Japan Other income Daiichi Sankyo Co., Ltd., Japan Oscar Investments Limited, India Related party relationship Joint Venture Year ended Year ended 31 Dec. 31 Dec. 2009 2008 25.34 215.54
2.
Fortis Clinical Research Limited
Holding Company Entities over which significant influence is exercised Entities over which significant influence is exercised Associates Fellow subsidiary Holding company Joint venture
40.06 6.87
– 15.70
6.86
16.63
3.
Finished goods purchased Zenotech Laboratories Limited, India Daiichi Sankyo Europe GMBH Market research expenses Daiichi Sankyo Co., Ltd., Japan Product quality claim Nihon Pharmaceuticals Industry Co. Ltd., Japan Travel and conveyance Daiichi Sankyo Co., Ltd., Japan Royalty paid Daiichi Sankyo Co., Ltd., Japan Personnel cost (Also refer to note 11 on schedule 23) Mr. Malvinder Mohan Singh Mr. Atul Sobti Technical services availed Fortis Clinical Research Limited, India
32.30 7.49 1.46 0.96
48.35 – – –
4. 5.
6. 7. 8.
Holding company Holding company
2.20 0.36
– –
Key management personnel Key management personnel
167.41 79.54 48.54
237.18 29.08 233.50
9.
Entities over which significant influence is exercised Religare Capital Markets Limited, Entities over which India significant influence is exercised Religare Technova IT Services Entities over which Limited, India significant influence is exercised
–
235.11
33.38
65.13
134
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements Sr. Transactions No. 10. Purchase of fixed assets Religare Technova IT Services Limited, India Fortis Clinical Research Limited, India 11. Sale of investment Religare Enterprises Limited, India Investments made Zenotech Laboratories Limited, India Equity capital contribution (including premium) Daiichi Sankyo Co., Ltd., Japan Equity share warrants money received Daiichi Sankyo Co., Ltd., Japan Related party relationship Year ended Year ended 31 Dec. 31 Dec. 2009 2008 97.57 145.84
Entities over which significant influence is exercised Entities over which significant influence is exercised Entities over which significant influence is exercised Associates
–
288.50
–
44.00
12.
–
1,385.21
13.
Holding company
–
34,092.19
14.
Holding company Joint Key ventures management and personnel associates – – 4.11 (3.29) – – 35.00 –
– Entities over which significant influence is exercised – (12.84) – (38.35)
1,756.59 Total
d]
Balances due from/to the related parties Transactions Holding Fellow company subsidiaries
Debtors Creditors
16.39 – 0.96 –
– – 7.40 –
16.39 (12.84) 47.47 (41.64)
Figures in brackets are for previous year 18. Segment information Business segments For management purposes, the Group reviews the performance on the basis of business units identified as Pharmaceuticals and other business, which are reportable segments. Pharmaceuticals segment comprises manufacture and trading of Formulations, Active Pharmaceuticals Ingredients (API) and Intermediate, Generics, Drug discovery and Consumer Health Care products. Other business comprises rendering of financial services.
135
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements Geographic Segments The Group's business is organized into key geographic segments. Revenues are attributable to individual geographic segments based upon the location of the customers. Assets and liabilities are attributable to individual geographic segments based upon the location of the respective assets / liabilities. Other Information All segment revenue, expenses, assets and liabilities are directly attributable to the segments and disclosed accordingly. The accounting policies consistently used in the preparation of the consolidated financial statements are also applied to revenues and expenditure of individual segments. Segment information disclosures as required under accounting standard on "Segment Reporting" as specified in the Companies (Accounting Standards) Rules, 2006. Primary segment information Pharmaceuticals 2009 2008 External revenue Total revenue Profit / (loss) before tax Tax charge / (benefit) Profit / (loss) before tax Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation, amortisation and impairment Non cash expenses other than depreciation, amortisation and impairment b] 75,969.46 75,969.46 10,096.87 74,139.35 74,139.35 (15,004.07) Others 2009 2008 0.90 0.90 0.75 0.60 0.60 3.82 Segment total 2009 2008
a]
111,704.58
118,051.83
17.13
76,438.63
89,170.75
0.21
5,682.08 2,676.11
5,761.54 2,824.68
– 0.01
75,970.36 74,139.95 75,970.36 74,139.95 10,097.62 (15,000.25) 6,990.87 (5,650.84) 3,106.75 (9,349.41) 19.48 111,721.71 118,071.31 9,813.55 14,544.27 121,535.26 132,615.58 3.20 76,438.84 89,173.95 1,662.50 479.11 78,101.34 89,653.06 – 5,682.08 5,761.54 0.01 2,676.12 2,824.69
489.19
985.50
– North America
(3.62) Asia Pacific 6,937.96 (5,714.68) 3,202.75 (2,970.37) 73.34 (201.06)
489.19
981.88
Secondary segment information - Geographical India Europe 19,400.42 (15,827.99) Segment assets 63,759.22 (68,213.73) Capital expenditure 2,938.13 (4,274.68) Figures in brackets are for previous year Segment revenue
Others
Total
15,896.74 19,574.98 (18,196.67) (19,749.15) 28,542.63 15,650.02 (41,452.74) (13,003.00) 758.76 1,349.60 (469.81) (282.63)
14,160.26 75,970.36 (14,651.46) (74,139.95) 10,380.64 121,535.26 (6,975.74) (132,615.58) 562.25 5,682.08 (533.36) (5,761.54)
136
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements (Continued) 19. The share of minority shareholders in profit / (loss) of respective entity is as under: Name of entity For the year ended 31 December 2009 2008 53.81 23.17 19.15 24.02 16.74 5.55 14.08 15.35 3.84 6.23 2.00 1.97 0.01 0.01 (0.13) 7.02 (0.05) 1.05 109.45 20. The Group share in profit / (loss) of associates is as under: Name of entity 84.37
Ranbaxy (Malaysia) Sdn. Bhd. Ranbaxy Nigeria Limited Ranbaxy (Guangzhou China) Limited Terapia S.A Ranbaxy Unichem Company Ltd Ranbaxy Life Sciences Research Limited Gufic Pharma Limited Be-Tabs Pharmaceuticals (Proprietary) Ltd Be-Tabs Investments (Proprietary) Ltd
Zenotech Laboratories Limited Shimal Research Laboratories Limited
For the year ended 31 December 2009 2008 (48.19) (110.14) 15.81 31.93 (32.38) (78.21)
21. Previous year figures have been regrouped/ reclassified, wherever necessary to conform to current year’s classification. Previous year figures have been audited by another firm of Chartered Accountants.
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary Place : Gurgaon Dated : 25 February 2010
137
FINANCIAL DETAILS OF THE
SUBSIDIARY COMPANIES
FOR THE YEAR ENDED DECEMBER 31, 2009
Rs. in Million
Name of the Subsidiary Closing exchange rate against Indian Rupee as on December 31, 2009 Capital Reserves Total assets Total liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Provision before for tax tax Profit after tax Proposed dividend
Ranbaxy Laboratories Limited
Domestic: Gufic Pharma Limited Ranbaxy Drugs Limited Ranbaxy Drugs and Chemicals Company (A public company with unlimited liability) Ranbaxy Life Sciences Research Limited Ranbaxy SEZ Limited Rexcel Pharmaceuticals Limited Solus Pharmaceuticals Limited Vidyut Investments Limited Overseas : Ranbaxy Australia Pty. Ltd. Australia Ranbaxy Belgium N.V. Belgium Ranbaxy Farmaceutica Ltda. Brazil Ranbaxy Do Brazil Ltda Brazil Ranbaxy Pharmaceuticals Canada Inc. Canada Ranbaxy Egypt (L.L.C.) Egypt Rexcel Egypt (L.L.C.) Egypt Ranbaxy Pharmacie Generiques SAS France Office Pharmaceutique Industriel Et Hospitalier SARL (“OPIH SARL”) France Basics GmbH Germany Lapharma GmbH Germany Ranbaxy (Hong Kong) Limited Hong Kong Ranbaxy Hungary Gyogyszereszeti Kft Hungary # Ranbaxy Ireland Ltd. Ireland 41.8410 66.6667 26.6667 175.73 37.46 463.12 (488.13) 39.85 (180.38) 98.73 227.49 411.13 150.18 – – 148.25 (115.16) 358.78 47.86 361.41 – (115.16) 19.80 154.94 28.06 206.46 – – – 1.0000 1.0000 1.0000 0.50 31.00 62.00 2.32 (0.48) 6.29 3.05 33.73 76.17 0.23 3.21 7.88 – – 34.30 0.24 – 0.35 0.30 (0.06) 0.14 0.04 – 0.09 0.26 (0.06) 0.05 – – –
1.0000 1.0000 1.0000 1.0000 1.0000
50.60 0.50 125.00 149.01 250.08
199.92 (0.07) 635.18 625.74 (233.18)
260.54 0.46 1,547.70 1,547.20 17.14
10.02 0.03 787.52 772.45 0.24
– – 1,542.05 1,542.05 –
– – – – –
13.96 (0.04) (0.30) (1.19) 0.77
3.90 – 4.57 0.45 0.12
10.06 (0.04) (4.87) (1.64) 0.65
– – – – –
1,404.89 1,122.15
– 2,502.84
26.6667 44.2478
15.83 99.56
(12.97) 470.26
6.91
4.05
–
1.88
(0.99) 238.11
(0.34) 77.68
(0.65) 160.43
– –
1,684.82 1,115.00
– 3,228.33
8.4818 8.4818 66.6667
41.15 2.04 496.56
3.25 (21.34) 204.57
105.49 21.16
61.09 40.46
– –
233.64 48.46
36.75 3.67 0.46
11.32 12.10 0.29
25.43 (8.43) 0.17
– – –
1,979.64 1,278.51
– 2,760.65
66.6667
88.67
(59.11)
169.64
140.08
–
–
(5.52)
(0.82)
(4.69)
–
66.6667 66.6667 6.0024
325.00 1.67 14.41
419.81 (0.41) 74.09
1,071.78 1.33 257.29
326.97 0.07 168.79
– 1,496.60 – – – 650.23
28.46 (0.25) 83.98
14.62 0.01 –
13.84 (0.26) 83.98
– – –
0.2448
0.28
(0.28)
–
–
–
–
–
–
–
–
66.6667
474.10
520.93
1,468.42
473.39
– 1,743.12
73.50
14.41
59.09
–
138
Ranbaxy Laboratories Limited
Rs. in Million
Name of the Subsidiary Closing exchange rate against Indian Rupee as on December 31, 2009 Capital Reserves Total assets Total liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Provision before for tax tax Profit after tax Proposed dividend
Ranbaxy Italia S.p.A Italy Ranbaxy Malaysia Sdn. Bhd. Malaysia Ranbaxy Mexico S.A. de C.V. Mexico Ranbaxy Nigeria Ltd. Nigeria Ranbaxy-PRP (Peru) S.A.C. Peru Ranbaxy Poland S.P. Z.o.o. Poland Ranbaxy Portugal Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda Portugal Ranbaxy (Guangzhou China) Limited Republic of China # Terapia S.A. Romania Terapia Distributie S.R.L. Romania ZAO Ranbaxy Russia Ranbaxy (S.A.) (Proprietory) Ltd. South Africa Be-Tabs Pharmaceuticals (Proprietary) Ltd. South Africa Be-Tabs Investments (Proprietary) Ltd. South Africa Sonke Pharmaceuticals (Pty.) Ltd. South Africa Laboratorios Ranbaxy, S.L. Spain Ranbaxy Pharma AB Sweden Ranbaxy (Netherlands) B.V. (“RNBV”) The Netherlands Ranbaxy N.A.N.V. Antilles, Netherlands Ranbaxy Unichem Company Ltd. Thailand
66.6667 13.5870
840.00 108.70
(745.76) 686.74
1,147.57 1,053.33 1,320.81 525.37
–
721.85 (279.14) 216.27
76.35 (355.49) 46.61 169.66
– –
– 1,465.03
3.5613
239.12
(251.73)
150.25
162.86
–
289.56
(51.61)
(0.67)
(50.94)
–
0.3142 16.1031
12.57 66.51
463.67 (16.41)
714.35 228.32
238.11 178.22
– –
916.12 316.25
188.45 1.91
63.89 8.56
124.56 (6.65)
– –
16.2075 66.6667
69.55 258.67
26.70 (218.59)
144.93 93.81
48.68 53.73
– –
393.85 118.57
4.13 (93.55)
5.87 1.13
(1.74) (94.67)
– –
6.8166
444.79
(204.12)
501.42
260.75
–
884.02
95.84
1.77
94.07
–
15.7233 15.7233 1.5382 6.2657
393.42 6,021.88 0.47 4.61 2.27 0.09 256.71 350.76
8,102.01 1,686.71 861.41 860.85
– 4,096.80 – 1,071.38 – 2,474.88 – 1,760.14
770.52 (46.12) 297.06 71.60
160.30 (0.23) 9.15 20.40
610.22 (46.35) 287.91 51.20
– – – –
1,691.59 1,430.27 1,042.38 689.35
6.2657
$
687.86
1,867.86 1,180.00
– 1,298.38 (126.23)
(13.69) (112.54)
–
6.2657
$
66.11
622.23
556.12
–
–
(10.35)
(9.63)
(0.72)
–
6.2657
$
(32.03)
322.95
354.98
–
623.28
14.40
4.14
10.26
–
66.6667 6.4977
333.33 7.15
(801.06) (2.01)
300.14 146.83
767.87 141.69 24.63
– – –
354.26 323.19 223.16
0.05 117.16 175.74
– 30.81 11.91
0.05 86.34 163.70
– – –
46.5350 23,267.64 7,647.46 30,939.73
46.5350
1.40
(12.79)
0.31
11.70
–
0.01
(0.31)
–
(0.31)
–
1.3941
139.41
199.57
344.19
5.21
–
533.69
48.56
15.32
33.24
–
139
Ranbaxy Laboratories Limited
Rs. in Million
Name of the Subsidiary Closing exchange rate against Indian Rupee as on December 31, 2009 Capital Reserves Total assets Total liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Provision before for tax tax Profit after tax Proposed dividend
Ranbaxy (U.K.) Ltd. United Kingdom Ranbaxy Holdings (U.K.) Ltd. United Kingdom Ranbaxy Europe Ltd. United Kingdom Ranbaxy Inc., USA Ranbaxy Pharmaceuticals, Inc., USA Ranbaxy USA, Inc. USA Ohm Laboratories, Inc., USA Ranbaxy Laboratories, Inc., USA Ranbaxy Signature LLC USA Ranbaxy Vietnam Company Ltd., Vietnam # # Rounded off to nil
*Detail of Investments Name of the subsidiary
75.1880 1,635.34 (1,149.97) 75.1880 2,297.46 12.45
875.20 2,312.07
389.83 2.16
– 1,558.65 – –
101.69 (0.25)
28.43 –
73.26 (0.25)
– –
75.1880 46.5350 46.5350 46.5350 46.5350 46.5350 46.5350 0.0025
0.75
40.98
228.96
187.23
– –
437.93 –
21.01 (23.26)
6.97
14.04
– – – – – – – –
604.96 2,626.12 $ 2,961.51 $ 216.40
6,207.86 2,976.78 9,711.78 6,750.27 823.25 606.85
484.60 (507.86) 253.56 (27.46) 203.98 964.66 42.08 111.86 241.52 31.52 35.82
– 11,508.15 1,218.22 – – 14.62 315.84
11.10 2,749.49 14,033.84 11,273.25 – 1,491.26 – 32.97 (548.30) (16.84) 8,021.56 6,530.30 2.50 19.31 550.80 3.18
– 10,056.96
– 2,095.36 (232.49) (474.01) – – 99.85 3.83 31.52 35.82 – –
Particulars
Nature of investments Capital Contribution Capital Contribution Equity shares
Face value Numbers
Amount (Rs. Million) 1,542.05 1,542.05
Solus Pharmaceuticals Ltd. Rexcel Pharmaceuticals Ltd.
Solrex Pharmaceuticals Company (A partnership firm) Solrex Pharmaceuticals Company (A partnership firm)
Ranbaxy Drugs and Chemicals Company Sidmak Laboratories (India) Limited (A public company with unlimited liability)
Rs. 10
167,330
34.30
Notes: (i) In terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956, the annual accounts of the subsidiary companies and the related detailed information will be made available upon request by the investors of the Company and of its subsidiary companies. These documents will also be available for inspection by any investor at the Head Office of the Company at 12th Floor, Devika Tower, 6, Nehru Place, New Delhi - 110019, and that of the subsidiary companies concerned.
(ii) The Board of Directors at its meeting held on October 26, 2009, approved for seeking exemption from the Government under Section 212(8) of the Companies Act, 1956, in respect of the subsidiary Companies. (iii) The Company has consolidated the financial statements of its subsidiaries as per Accounting Standard (AS) - 21 “Consolidated Financial Statements”, issued by The Institute of Chartered Accountants of India.
(iv) Ranbaxy Japan KK, Japan and Ranbaxy Maxico Servicios S.A. de C.V., Maxico, step down whollyowned subsidiaries were incorporated on November 9, 2009 and November 13, 2009 respectively. Audited accounts of these two subsidiary companies not yet became due. $ Divested/liquidated during the year: Ranbaxy (Guangzhou China) Limited, Republic of China Ranbaxy Hungary Gyogyszereszeti Kft, Hungary Ranbaxy Vietnam Company Ltd., Vietnam
140
Published by Ranbaxy Global Corporate Communications | Design by United Advertising | Photography by Aditya Arya | Printed at Thomson Press
doc_485698153.pdf
The report for the financial year 2009 - 2010 of ranbaxy.
New Boundaries. New Horizons.
Annual Report 2009
The true hallmark of leadership is the ability to overcome challenge and emerge stronger from the experience. The year gone by has been difficult for global economies. But rather than deter us, it has inspired us to look within and seek beyond; to discover ways of making our Hybrid Business Model more robust and generate synergies across the value chain. We have set in motion synergies, aimed at tapping opportunities beyond new boundaries. The scope is now wide - across geographies and functions. From being arguably India's most global company, we are now amongst the world's top 20 pharmaceutical players, globally. Already, there is visible progress in our thrust markets. A key priority now is strengthening our leadership position in the domestic market. Due emphasis is being given to effective cross-functional teamwork, with a view to inculcate a vibrant, enabling and empowering work culture, so vital for continued growth. The accruing benefits of synergized expertise are beginning to appear, both at the front and back ends; and this is just the start… an apt entry point for achieving our ambitious 3-year strategy plan.
CONTENTS
Chairman's Message.............................................3 CEO & Managing Director's Message ..................7 Global Pharmaceuticals Business .......................10 Therapy Focus ..................................................13 Research & Development ...............................15 Financial Review...............................................18 Global Human Resources ..................................20 Corporate Social Responsibility and...................22 Environment, Health & Safety Corporate Governance.......................................26 Certificate from CEO and CFO .........................37 Board of Directors .............................................38 Report of the Directors ......................................39 Ten Years at a Glance.........................................52 Auditors’ Report ................................................53 Financial Statements of Ranbaxy Standalone .........................................................56 Consolidated Indian GAAP .............................100
Ranbaxy Laboratories Limited Annual Report 2009
02
Chairman's Message
CHAIRMAN'S MESSAGE
READY FOR THE NEXT LEVEL
Dr. Tsutomu Une
Chairman
Dear Shareholders, O n behalf of the Ranbaxy family, may I extend our best wishes to all of you. As the Chairman of the Board of Ranbaxy, I feel it is an honour and privilege to be associated with one of the top global generic pharmaceutical companies which has leadership position in India. The year 2009 was very significant for your Company, as it witnessed many important and strategic changes. The most significant was the change in Management, that is leading to the institutionalisation of a transformed culture, with a strong orientation on quality, professionalism, organisational values and stakeholder relationships. In May 2009, the executive leadership of Ranbaxy was reconstituted. I was elected as the Chairman of the Board and Mr. Atul Sobti took over as CEO and Managing Director. This was done with a view to accelerate the realisation of the Hybrid Business Model of Ranbaxy and Daiichi Sankyo. In recognition of the rapid changes in the business environment evident in both developed and emerging countries, the integration of the respective strengths of both Companies has already been set in motion. In the past year, I along with other Board members have been working ceaselessly to integrate the best functionalities of both Companies, in a corporate culture that is
03
Ranbaxy Laboratories Limited Annual Report 2009
responsive and focused on realising the immense value inherent in this unique transformation. We fully support the leadership of Mr. Sobti, who has abundant corporate experience in successfully handling similar leadership roles. Under his guidance, I am confident Ranbaxy will achieve excellence in providing future strategy & stability, operational execution, transparency and reliability. The Board has taken some strategic decisions that are aimed at securing the future growth of Ranbaxy. In doing so, we have revisited operations in some specific countries, to consolidate our presence and create value through further efficiencies and cost synergies. One of the key focus areas has been cost containment. This will be an ongoing process. We believe that the Innovator Generics model is revolutionary and is best suited to cater to the changing dynamics of the global pharmaceutical industry. Unleashing the power of the Hybrid Business Model, various synergies have been announced, both at the front and back end. The fundamental aim is to secure sustainable growth in mature
developed markets, while accelerating expansion in the high growth emerging markets. A start has already been made in this direction. Ranbaxy has introduced Daiichi Sankyo's innovator products in some markets, starting with India. This benefits both Companies. Ranbaxy gains as its product portfolio gets widened, while Daiichi Sankyo gets a launch pad in those markets where it is not present. In April 2009, Ranbaxy began marketing Daiichi Sankyo's flagship product, Olmesartan (Olvance), in India. Thereafter both Companies have announced partnerships in Romania, Mexico and Africa. It will be our constant endeavour to leverage each other's strengths, by identifying new synergies, so that we can maximise the strategic benefits of our innovative model. In 2009, Ranbaxy continued to show marked improvement on all financial parameters, surpassing the guidance given by the Company, both on revenue and profit. Although the global fiscal environment remained challenging, Ranbaxy, due to its vast global presence in developed and
emerging markets, was able to face up to the economic storm. In line with our commitment to spearhead the early introduction of affordable quality generic medicines, so that medication is accessible and made available to all, the Company launched three important First-To-File (FTF) products, viz Sumatriptan 100 mg, Valacyclovir Hydrochloride 500 mg and 1000 mg and Oxcarbazepine Suspension, in the US. I strongly believe that your Company is ready for the next level of growth, with the right business model. While there will be challenges, there are also plenty of opportunities that lie ahead. While growth rates in the global pharmaceutical market are expected to remain in low single digits, emerging markets, in contrast, are likely to witness strong growth. I am referring here to markets like Brazil, Russia, India, China, South Africa, among others. These markets are likely to sustain double digit growth momentum during the period 2010 through 2013. With Ranbaxy's strong presence in many of the high growth markets, the Company is well poised to capitalise on the growing generics opportunity.
04
Chairman's Message
During the year, we were also faced with some regulatory actions by the U.S. Food and Drug Administration (FDA). We continue to fully cooperate with the FDA and other authorities and have specially formed a task force that comprises people from Ranbaxy, Daiichi Sankyo and outside specialists. We are doing our utmost to resolve the regulatory issues at the earliest. US is a key market for Ranbaxy and we are committed in our efforts of being fully compliant with the US regulatory standards and to provide affordable quality generic medicines to customers and patients in the US. Your Company is constantly guided by the institutionalised framework of Corporate Governance and Code of Conduct, to strengthen decision making and compliance with ethical integrity and reliability. The Independent Directors on the Ranbaxy Board, who are well known professionals in their respective fields, guided the management throughout the year to take strategic decisions for achieving higher levels of efficiency and productivity. The Code of Conduct for employees, aimed at strengthening the
organisation through building a culture based on shared values was reviewed and updated during the year. It has been instrumental in promoting guidelines for employees to ensure ethical conduct and business integrity. We strongly believe the Code will continue to play a key role in building a culture that is critical for your Company's long term sustainable growth, profitability and business reputation. Ranbaxy also made sincere efforts to promote good health and social development through its social initiatives. The Company's apex CSR vehicle, Ranbaxy Community Healthcare Society (RCHS), launched several initiatives to achieve positive health for the underprivileged. The programs were based on the integrated approach of preventive, promotive and curative healthcare services, covering areas of maternal child health, family planning, reproductive and adolescent health, health education and AIDS awareness. The 13000 strong multi-cultural work force of Ranbaxy is one of its biggest strengths. I appreciate the efforts by Team Ranbaxy, that displayed
exemplary spirit and seized every possible opportunity for growth and overcame several challenges. The Management undertook several new initiatives to redefine the work culture and people management processes. This has positively impacted people practices, to foster a new culture, based on empowerment and transparency. The Management team at Ranbaxy is committed to guide your Company to emerge as a truly global entity. Ranbaxy will remain as a prestigious Company, listed on the Indian stock market, creating shareholder value. I would like to take this opportunity to thank you for supporting Ranbaxy in all these years and look forward to your continued support and encouragement. As the Chairman of the Board, I wish to contribute to establish Ranbaxy as an admirable and irreplaceable company in the global arena.
Dr. Tsutomu Une
Chairman
05
Ranbaxy Laboratories Limited Annual Report 2009
06
CEO & Managing Director's Message
CEO & MANAGING DIRECTOR'S MESSAGE
ENVISIONING THE FUTURE
Atul Sobti
CEO & Managing Director
Dear Stakeholders, 2 009 has been a historic year for Ranbaxy. It was a year of great change, challenge, and opportunity. A year when we re-defined the scope and focus of our business. A year that provided a glimpse of the enormous potential that lies on our horizon – with the pioneering Hybrid Business Model alongside Daiichi Sankyo, and with the impending patent expiries in the US; as also with our broader new horizon of Bio-therapeutics. At an operational level, amidst the challenges of the global economic environment, change of ownership, foreign exchange impact, and compliance, Ranbaxians across the world have responded with strong character and resilience, and performance. Sales for 2009 were US $ 1.52 Bn (Rs. 7,344 crores); Profit Before Tax (PBT) was US $ 209 Mn (over Rs. 1,000 crores); Profit After Tax (PAT) was US $ 64 Mn (Rs. 311 crores). Ranbaxy had a change in ownership, in late 2008; and a change in the MD/CEO in May 2009. In 2008, the Company had incurred a loss of over Rs. 900 crores (over Rs. 9 Bn), in no small measure due to a
07
Ranbaxy Laboratories Limited Annual Report 2009
foreign exchange impact. Our Paonta Sahib facility was put under the Application Integrity Policy (AIP) by the US FDA in Feb 2009; and the Gloversville facility in the US was issued a warning letter in December 2009. We of course continue to co-operate with the US FDA and the Department of Justice, for an effective resolution of all outstanding issues. During the year, Ranbaxy’s Toansa facility, CPU and CPP in India, and , the New Jersey facilities in the US, had successful FDA inspections; and all our facilities, including Dewas and Paonta Sahib in India, had successful inspections from many regulators across the world. To strengthen Ranbaxy’s manufacturing capacities, a new facility was set up at the Special Economic Zone in Mohali (Punjab). We expect to commence production in 2010, after receiving regulatory approvals. Despite the very high impact challenges, the Company has over-achieved on the guidance given at the start of 2009. We have improved quarter on quarter in 2009, culminating in an excellent 4th quarter, with the launch of Valacyclovir,
(a First-To-File product with “exclusivity” benefit), in the US. The exclusivity continues into 2010. We also commenced Phase III clinical trials for our anti-malaria combination drug. We harnessed the change to define some clear objectives and priorities, within a 3 year pathway. This has culminated in the development of our Mid Term Plan for 2010 to 2012. We also remained focused and committed in our investment for tomorrow, especially in the US and India – in manufacturing, and business operations. In the US, for 2009, we felt the full year impact of the import alert on products from Paonta Sahib and Dewas. However, we were able to launch three First-To-File (FTF) products successfully, from our US facilities; as also an Authorized Generic. The Company’s business in India continued to grow at a healthy pace. Eighteen of our brands featured amongst the Top-300 brands in the industry. Revital, a flagship brand, emerged as the 7th largest product in the Indian Pharmaceutical Market (IMS MAT Nov 2009). We have taken a bold step in ramping up for a big market share play in India,
through Project “VirAAt”. We will stay the course, with resources to back it. It has started well, under new leadership. “VirAAt” is a key initiative to strengthen the Company’s domestic leadership position. The initiative will augment new product flow, while increasing extra-urban/rural footprint, and customer and therapy coverage. Our wide business presence across the globe has always been a good source of business opportunity and de-risk. In 2009, despite the global slowdown, we did well in many countries. We also took the opportunity to re-model some of our country businesses, for best future value (eg. in the UK, China, Japan, and Vietnam). And we undertook a most comprehensive management of cost. In terms of alternative/new growth areas, we had identified the Biologics space as strategic, a couple of years ago, and invested in a company in India, Zenotech Labs. With an
08
CEO & Managing Director's Message
increasing focus on prevention of disease, we also strongly feel that Vaccines will be an important part of the future. Necessary steps have therefore been taken to provide an entry platform for the development and manufacture of Vaccines and Bio-therapeutics. All these initiatives are integral to our defined three year objectives/priorities. The Hybrid Business Model is progressing well. This unique and pro-active Model has the potential to provide an excellent mix of innovative and affordable quality medicine to people around the world. The Model represents a great opportunity for Synergy benefits to both Ranbaxy and Daiichi Sankyo. The scope is now wide and open – across geographies and functions. Some implementation has already taken place. The strategy for optimum utilisation of the Ranbaxy NDDR (Discovery R&D) resource has also been agreed on. Daiichi Sankyo has also just announced the formation of a new company, for business in the established pharmaceuticals/generic space in Japan. Globally, Japan is the second largest pharmaceutical market, and the generics penetration has just started to gain momentum. This offers decades of solid growth potential for Daiichi Sankyo and Ranbaxy. Finally, we do strongly believe it all comes down to the people – the Team. People do matter; and People do make the difference. Team Ranbaxy in 2009 has been exemplary – from the top management team that facilitated the smooth transition of key ownership in May – a change of great magnitude in operation, sensitivity, and impact; to the US team that has courageously and positively withstood some dark moments – and performed admirably again; and to the multiple Teams across countries and functions that have shown great fortitude in adversity, and performed. We also captured our current “voice of the employee’, through the 2009 Engagement Survey. We constantly work on ensuring effective cross functional team work – most imperative in our industry. We do believe that the culture today is one of transparency and empowerment. The priority of the top management team is to enable a professional work culture. I would also like to mention a special thank you to the Ranbaxy Board, for their solid support and guidance. With warm regards,
Atul Sobti
CEO & Managing Director
09
Ranbaxy Laboratories Limited Annual Report 2009
GLOBAL PHARMACEUTICALS BUSINESS
HARNESSING
COMPETENCIES
Arun Sawhney
President Global Pharmaceuticals Business
T he year 2009 had its own set of challenges and opportunities for Ranbaxy. On the business front, the Company surpassed its guidance and delivered a healthy performance achieving Global sales of US $ 1519 Mn (Rs. 73,441 Mn). Emerging markets contributed 54% of sales, while developed markets accounted for 39%. It was a landmark year for Ranbaxy's global operations. The focus was on transforming the organisation to meet the global demands of the future, through a renewed thrust on customer service and quality. We were the first to launch several new products in India. In the domestic market,
Ranbaxy took a huge step forward by rolling out project “VirAAt”, with a strong commitment to achieve the top slot in the market. The groundwork to achieve this ambitious project has been done and the project is now being operationalised. Cost optimisation was another major focus area. In the US market, Ranbaxy launched three First-To-File (FTF) products during the year, viz. Sumatriptan, Valacyclovir and Oxcarbazepine Suspension. In Europe, we were among the first companies to launch 6 new products. This is a testimony of our commitment to Product Development, Regulatory, Manufacturing and Sales operations in Europe.
10 14
Global Pharmaceuticals Business
On the pharmaceuticals manufacturing front, a new Dosage Forms facility has been set up in the Special Economic Zone, at Mohali (Punjab, India). This facility will cater to the developed markets of the US and the EU. As a start, in 2009, the first ANDA was filed from the site, for the US market. Five more Marketing Authorisation Applications (MAAs) were filed in the EU, in 2009. The new commercial facility has a capacity of 2 Bn tablets and 500 Mn capsules per annum. We filed our first ANDA in 2009, from Batamandi (Himachal Pradesh, India), with the US FDA. We commenced a modernisation drive in South Africa. Altogether a new manufacturing facility is being set up for solid oral Dosage Forms that will become operational in first half of 2010. We are also investing in our manufacturing facilities at Ohm Laboratories Inc., USA, to significantly enhance manufacturing capacities in 2010. Investments will continue in 2010, to build our future business in the USA. In our efforts to rationalise global manufacturing operations, we discontinued in-country manufacturing in China and Vietnam, during the year. As a further measure of rationalisation, starting in 2010, we will aggressively look to outsource either products or manufacturing capacities for our business in other than the top 20 markets for Ranbaxy. Active Pharmaceutical Ingredients (API) The year saw a visible demonstration of good quality management systems as well as quality of the manufactured products. The year witnessed successful external audits of API manufacturing sites by various regulatory agencies and customers, including US FDA inspection of Toansa (Punjab, India) and EU inspection of Dewas (Madhya Pradesh, India) site. The effort in improving cost effectiveness was driven through numerous initiatives including improvement in solvent and catalyst recoveries, energy savings and better asset utilisation. Catering to the enhanced market demands, a number of capacity enhancement projects were undertaken and completed during the year. All API sites remained fully compliant with applicable Environment, Health and Safety (EHS) regulations. Dewas site went through a successful ISO 14001 Certification Audit and Toansa and Mohali ensured the continuation of ISO14001 Certification through 2nd Surveillance Audits by TUV NORD. Various initiatives were taken to strengthen the EHS systems and practices, thereby improving EHS performance of the division. These included FSRA (Fire Safety Risk Assessment) and HAC (Hazardous Area Classification) studies, conducted at Toansa through external experts and implementing the recommendations at all locations, engaging the services of an international agency for Industrial Hygiene (IH) aspects of EHS and inter-location EHS audits, to name a few. Other initiatives include ETP up-gradation and installation of MEE/ATFD for treatment of Hi-TDS stream at Dewas, capping of Solar Evaporation Ponds at Toansa. Extensive EHS training was imparted to employees and contractors during the year. Ranbaxy's API manufacturing operations will remain the bedrock of success in our Dosage Forms business. We commenced investment in expanding capacities at our Dewas site, in 2009. By Q3, 2010, this new manufacturing block will become operational. We will continue to strategically invest in our API facilities in 2010.
11
Ranbaxy Laboratories Limited Annual Report 2009
As in our Dosage Forms manufacturing, we will be looking to partner with companies strategically for outsourcing of either products or manufacturing capacities even for APIs. Synergies with Daiichi Sankyo In India, Ranbaxy introduced Daiichi Sankyo's innovative anti-hypertensive product, Olmesartan Medoxomil under the brand name 'Olvance'. A dedicated marketing division within Ranbaxy's Mexico subsidiary has been established, which will soon introduce Daiichi Sankyo's products in this market. Ranbaxy will also leverage its network in Africa and will be launching Olmesartan Medoxomil in six African markets further strengthening the Company's position. Together with Daiichi Sankyo, Ranbaxy is exploring synergistic opportunities in the areas of R&D, Manufacturing, Global Supply Chain,
Service/Support and IT functions, among others to secure maximum value in the coming years. Recognitions and Awards During the year, Ranbaxy received approvals from various regulatory authorities. Medicines and Healthcare Products Regulatory Agency (MHRA), UK and the Therapeutic Goods Administration (TGA), Dept. of Health and Ageing of the Australian Government, issued Good Manufacturing Practice (GMP) certificates for Ranbaxy's manufacturing sites at Paonta Sahib, following a joint audit conducted in October 2008. The MHRA approval will cover product filings for the UK and the entire EU. The Batamandi facility at Paonta Sahib was approved by Pharmaceuticals and Medical Devices Agency (PMDA), Japan. The Paonta Sahib plant also received WHO approval during the year.
The Company also received ISO 14001 Certificate for Environment Management Systems. Ranbaxy's manufacturing facility in Dewas was felicitated by Govt. of Madhya Pradesh, India, for significant contributions in the field of pharmaceutical manufacturing and being one of the largest exporter in the State.
12
Therapy Focus
THERAPY FOCUS
EXTENDING THE HEALING TOUCH
Dr. Arun K. Purohit
Vice President & Head Global Therapy Management
Anti-infectives
A nti-infectives remained the largest therapeutic segment for Ranbaxy during 2009. The highlight of the year was the successful launch of the Company's top selling product, Valacyclovir Hydrochloride, in the US, with marketing exclusivity of 180 days. Ranbaxy had earlier entered into an agreement with GlaxoSmithKline to settle the US patent litigation with regard to Valtrex® (Valacyclovir Hydrochloride tablets), in 2007. The product was also successfully launched on Day-1, in UK and France. During the year, the Therapeutic Goods Administration (TGA), Australia, granted an approval for registration of SEBIFIN® Terbinafine tablets, in Australia.
Cardiovasculars
Cardiovasculars was another strong therapeutic segment for Ranbaxy. Simvastatin became the second best-selling product for the Company. Ranbaxy took early steps at introducing Daiichi Sankyo's innovator products. The Company launched Olvance (Olmesartan Medoxomil) and its fixed dose combination with Amlodipine (Ol-Vamlo), in India. Further expanding its portfolio in Canada, Ranbaxy launched two important products, Ran-Simvastatin (Simvastatin) and Ran-Amlodipine (Amlodipine). In the US, tentative approval was received to manufacture and market Ramipril capsules
13
Ranbaxy Laboratories Limited Annual Report 2009
Top 10 Products (2009) Valacyclovir Simvastatin Co-Amoxyclav Ciprofloxacin and Combinations Amoxycillin and Combinations Isotretinoin Ketorolac Tromethamine Loratadine and Combinations Ginseng+Vitamins Cephalexin Atorvastatin and Combinations
and a combination of Quinapril and Hydrochlorthiazide tablets. Covance (Losartan) was launched on Day-1, in Malaysia.
Musculoskeletal
In the Musculoskeletal segment, Ketorolac was the primary contributor to sales. In the US, Ranbaxy entered into an agreement with Validus Pharmaceuticals to market and distribute an Authorized Generic version of Rocaltrol (Calcitriol). The Company settled its litigation with Purdue Pharma, in the US, on Oxycodone Extended Release tablets, allowing the sale of the Authorized Generic version, for two months, in 2010. Leveraging synergies generated through the Hybrid Business Model, the Company launched Evista (Raloxifene), a product from Daiichi Sankyo, in Romania. Ranbaxy's flagship brand in this segment, Volini, attained leadership position in India, garnering more than 35 % market share. Volini was also featured amongst the Top 50 Indian brands. Central Nervous System The Central Nervous System segment recorded a healthy growth of 11%. The key products in this segment were
Gabapentin and Sertraline. The two major products that deserve specific mention under this segment are Oxcarbazepine Suspension and Sumatriptan tablets. The Company successfully launched these key First-To-File products, in the US, with 180-days marketing exclusivity. The Company also signed a license and supply agreement with Syntropharma for its Selegiline transdermal patch. Ranbaxy's product portfolio was further strengthened as approvals were received for marketing Topiramate tablets, in the US; Risperidone tablets, in Australia and Ropinirole tablets, in Canada.
Dermatologicals
The Dermatological franchise received a major thrust during the year through the acquisition of brands and marketing rights from Ochoa Laboratories in India for their entire range of Dermatological products. These products complement Ranbaxy's existing strong franchise of Derma products, in India. The Company entered into two key strategic in-licensing agreements for the Indian market. A New Chemical Entity (NCE), Lulifin (Luliconazole) was launched under license from Summit Pharmaceuticals, Japan, and an agreement was signed with Medy-Tox, South Korea, to import and market a cosmetic product, Neuronox (purified Botulinum Toxin Type-A).
Gastrointestinals
Ranbaxy registered a double-digit growth of 10% in the Gastrointestinals segment. The Company made a promising Day-1 launch of Pantoprazole, in the major markets of Europe. Final approval was received from the US FDA to manufacture and market Famotidine and Glycopyrrolate tablets. The approval of Acetaminophen Extended Release tablets underscored Ranbaxy's, Over-The-Counter (OTC) presence, in the US. Ondansetron tablets were launched in Canada.
14
Research & Development
RESEARCH & DEVELOPMENT
EXPANDING HORIZONS OF KNOWLEDGE
Dr. Sudershan K. Arora (L)
President Research & Development
Dr. Pradip Kumar Bhatnagar (R)
Senior Vice President New Drug Discovery Research
R anbaxy's commitment to offer affordable medicines is a key driver for the Company's Research and Development endeavors. Our committed team of scientists work constantly to build a healthy product pipeline and to develop costeffective medicines.
New Drug Discovery Research
During the year, the Company made significant progress on its Anti-Malarial molecule. Phase III studies (P .falciparum) with the combination product (Arterolane maleate + Piperaquine phosphate) were started in India and Thailand. The Company also plans to commence Phase II studies in pediatric patients in India, soon. Another Investigational New Drug (IND)
was filed with the Drugs Controller General of India (DCGI) to conduct Phase-II studies in patients of uncomplicated P .vivax malaria. An approval for grant of Rs 10 crore was received from the Department of Science and Technology (DST), India, for the clinical development of the combination treatment. During the year, the Company completed Phase-I, Rising Single and Multiple Dose studies, in India, on one of the candidate compounds, in the Respiratory Segment under the GlaxoSmithKline (GSK) collaborative research program. In lieu of this, the Company received related milestone payments from GSK.
15
Ranbaxy Laboratories Limited Annual Report 2009
Approvals were received from the DCGI for conducting Age & Gender study in India and another approval was received from the National Medical Agency, Romania, for conduct of Phase-I (Food Effect) study, in Romania. In another project within the Respiratory segment, Ranbaxy received in-vivo, Proof of Concept related milestone payments. During the year, the Drug Discovery team filed 5 patent applications and the Herbal Research team filed 4 patent applications, in India.
In the European Union, 13 National Filings for 13 products [including 2 in-licensed products] in 8 EU Member States were filed and 4 products under De-Centralized Procedure were also filed in 24 EU Member States. In addition, Ranbaxy filed 6 products under the Mutual Recognition Procedure, in 20 EU Member States. In other key markets, the Company made 209 filings. These included 15 in Russia (including CIS Countries), 5 each in Australia, China and South Africa and 4 each, in Brazil and Canada (Please refer Table-1 for global filing status). During the year, the team filed 42 patents in India, including 12 patents in Novel Drug Delivery System.
development of novel (non-infringing/patentable) process know-how and the development of new polymorphic forms of APIs. Consequently, technology transfer was completed for 8 new APIs and scale-up studies were completed for 9 other New APIs. The Company also filed 179 Drug Master Files comprising 46 APIs, across various countries and 64 patents in India.
Pharmaceutical Research (Dosage Forms)
During the year, Ranbaxy launched 42 products including 7 First-to-Launch products for the domestic market, of which 15 were developed in-house, 22 were out-sourced and 5 were in-licensed. In USA, 5 ANDAs including 1 potential P-IV First-To-File (FTF), were submitted.
Chemical Research (Active Pharmaceutical Ingredients)
In the area of Chemical Research, the emphasis continued on the
16
Research & Development
Table-2: International DMF Filings and Approvals - APIs (Jan - Dec 2009)* Markets Approvals (# of APIs) 01 (01) 144 (12) 02 (02) 04 (04) 19 (16) 170 (26) Filings (# of APIs) 05 (05) 120 (20) 02 (02) 04 (04) 06 (06) 42 (28) 179 (46)
USA Europe Brazil Russia (incl. Ukraine) China South Africa Other Markets Total
* Doesn't include re-registrations & outsourced APIs DMF: Drug Master File
Table-3: Patent Applications Filings and Acceptance/Grant (Jan-Dec 2009) Category Table-1:International Regulatory Filings and Approvals - Dosage Forms (Jan - Dec 2009) Markets Approvals Filings^ 5 23 13* 6** 4*** 5 4 4 5 15 5 171 237# USA 11 Europe 45 National 34^ MRP 7^^ DCP 4^^^ Other Key Markets Australia/ New Zealand 7 Brazil 2 Canada 5 China Japan 2 Russia/CIS 9 South Africa 10 Other markets 154 Total
*
Filings* Accepted / Granted Patents** India USA Total 64 30 12 5 4 3 2 120 2 7 9 2 7 9
APIs Dosage Forms NDDS NCEs Herbal Packaging Analytical Development Total
* These are 1st time (fresh) filings; not international or national filings of earlier applications filed in India ** These are unique patents - means any equivalent patents granted in other countries or published under PCT have not been counted.
245
9 products correspond to 11 filings and 2 in-licensed product filings ** 6 MRP filings in 20 CMS *** 4 DCP filings in 24 CMS ^ 13 products correspond to 23 approvals and 11 in-licensed product approvals ^^ 7 MRP approvals in 19 CMS ^^^ 4 DCP approvals in 26 CMS # includes 4 out-sourced products
17
Ranbaxy Laboratories Limited Annual Report 2009
FINANCIAL REVIEW
INVESTING IN THE FUTURE
Omesh Sethi
President and Chief Financial Officer
2 009 was an eventful year for the Company that saw change in management structure coupled with challenges from a volatile world economy impacting many facets of business. Ranbaxy's performance in such challenging times improved with turnaround in profits in 2009. Consolidated Sales during the year stood at Rs. 73,441 Mn, which reflects a modest growth over 2008 sales of Rs. 72,555 Mn. There was a turnaround in the profitability of the Company with Earning before Interest Tax Depreciation and Amortisation (EBITDA) for the year at Rs. 11,991 Mn against a loss of Rs. 2,626 Mn for the previous year. Profit
before Tax (PBT) for the year was Rs. 10,098 Mn against a loss of Rs. 15,000 Mn in 2008. At the Profit after Tax (PAT) level, the current year profit was at Rs. 3,107 Mn against a loss of Rs. 9,349 Mn in the previous year. The effective tax rate is higher in 2009 due to accounting treatment of taxes on unrealised profits and partial impairment of deferred tax assets in accordance with Accounting Standard 22 of Indian GAAP Such tax . adjustments are non-cash in nature and are expected to be normalised over the coming quarters. Sales in the emerging markets of Asia Pacific, India, Africa and Latin America
18 14
Financial Review
Sales & Earnings Performance
80,000 60,000 Sales Rs. Million 40,000 20,000 (20,000) (15,000) (9,349) 10,098 72,555 73,441
3,107
2008 Sales EBT
Year PAT
2009
(LATAM) were higher during the year. The regulated markets including North America and Europe were affected due to the economic slowdown. The contribution to sales of Developed markets was 39%, Emerging markets was 54%, and API was 7%. The second half of the year saw Developed markets fare better than the Emerging markets with the launch of two FirstTo-File (FTF) products in the USA, viz. Valacyclovir and Oxcarbazepine Suspension. Improved EBITDA and EBT for the year was aided by (a) FTF products sales in the USA, (b) Continued focus on cost optimisation and rationalisation of business models across countries and (c) Favorable forex movement. With respect to the currency volatility, the adverse impact on Ranbaxy's performance was significant in 2008 which continued through the first half of 2009. Since then, majority of the losses due to the Dollar movement have been reversed with the subsequent strengthening of the Indian Rupee in the second half of 2009. Despite improved profits in 2009, the Company still has carried
forward losses. In view of this, dividend has not been proposed for the year. Working capital and cash flows reflect overall improvement despite tight liquidity conditions in many markets that we operate in. In addition to the impact on Company's operations due to the economic slow down and the currency volatility, Ranbaxy faced adverse regulatory action in 2009, in regard to Application Integrity Policy, to Paonta Sahib (India) and warning letter to Gloversville (US). The Company is continuously making efforts for an early resolution of the issues and is cooperating with the concerned authorities. The Company is continuing to enhance the control and risk management environment across the organisation. Since the Company is a subsidiary of Daiichi Sankyo, it has initiated an exercise to be compliant with the Japanese Sox (J-Sox). Information technology continued to globalise and simplify information flow at Ranbaxy. Significant efforts helped successfully achieve J-Sox compliance and improve productivity at the same time.
Our enterprise SAP system was further expanded with the roll-out to additional subsidiaries. Broadening the scope of the single platform approach we have also implemented SAP's Governance Risk and Compliance modules, as well as, functionality to automate financial consolidation and enhance management reporting. This streamlines and automates much of the required reporting for J-Sox compliance. Our Global Data Center continues to be ISO 27001 compliant, one of the highest international IT security standards. This certification is in conjunction with our on-going efforts to secure protect intellectual property. To sum up, Ranbaxy is confident of its future with a strong pipeline, wide geographic presence and looks forward to capitalising on many new initiatives. These include our journey to enter the vaccine space with the acquisition of a manufacturing facility in Bangalore as well as enlarging the scope of synergies from the Hybrid Business Model with Daiichi Sankyo. These will help the Company improve its
19
Ranbaxy Laboratories Limited Annual Report 2009
GLOBAL HUMAN RESOURCES
ONE TEAM MANY OPPORTUNITIES
Bhagwat Yagnik
Head Global Human Resources
I n the knowledge driven, dynamic pharmaceutical industry, people are the most critical drivers of growth. The passion, commitment and steadfast performance focus of our over 13000 strong, diverse workforce is the foundation supporting and upholding Ranbaxy. As a Company, we constantly strive to adapt people management practices and invest in robust systems and processes that bind us across the globe, encouraging them to seek unity in purpose and vision. The year 2009 was characterised by change and management transition, with the landmark deal between Ranbaxy and Daiichi Sankyo resulting in the formation of a powerful Hybrid Business Model. The Ranbaxy Executive Leadership was
reconstituted and the organisation structure realigned, for building a more robust and integrated global business model. Along with facilitating this transition, HR has a renewed focus on increasing alignment with business and delivering organisational expectations. Further, to leverage Ranbaxy and Daiichi Sankyo's respective strengths, the Synergy initiative was commenced to identify potential growth opportunities. These changes are an endeavour to create an enabling global organisation structure, with higher responsiveness to external challenges. The Indian Pharmaceutical industry is on the threshold of exponential growth and it
20 14
Global Human Resources
is imperative for us to mobilize our resources to capitalise on the opportunities ahead. Identifying and developing potential talent in a short span of time to meet this demand was a great achievement for Ranbaxy's HR in 2009. Establishing dominant market supremacy in India is a key strategic priority for the Company and there will be a greater focus on building synergy, improving response time and ensuring talent pool availability in 2010. With the plethora of unprecedented growth opportunities, there needs to be a conscious effort by organisations to develop, nurture and retain talent. For Ranbaxy, talent management was a key focus area and in 2009 we continued to strengthen our management bandwidth by inducting professionals. Specific behavioural and Organisational Development interventions were targeted towards creating inter-departmental role clarity and coordination, to clarify internal customer concept and create better functional responsiveness. Building employee engagement and commitment, forms a cornerstone at Ranbaxy. Engagement initiatives have specifically targeted four key areasLearning and Development, Performance Management, Recognition and Career Development. To provide greater career opportunities to employees, an online internal job posting system, 'VECTOR', was
launched globally to facilitate internal movements and lateral career shifts. International development opportunities are encouraged to ensure greater people mobility across geographies. Sustained success for an organization presupposes an unwavering concentration on leadership development and strengthening the talent pipeline at all levels. At Ranbaxy, learning and development initiatives are directed towards enhancing the effectiveness of employees and we believe in building human capabilities by exposing our people to a wide variety of business complexities and providing them with greater empowerment and responsibility at all levels. Reward and recognition is yet another critical component in Ranbaxy's HR strategy. Our rewards philosophy was redefined towards making it more performance oriented and business driven, at the same time, acknowledging an employee's commitment to growth. We believe that a culture of appreciating all big and small achievements is crucial to developing a motivated, contributing workforce. Along with an increased focus on providing instantaneous recognition of special efforts, the “Global Appreciate Awards” held for the third year running in May 2009, remains an important platform to
felicitate outstanding employee achievements. The most important stepping stone to building an employee sensitive organization is consistent ongoing feedback from the employees. To this end, our Global Engagement Survey was rolled out in November 2009 to capture the voice of our people. This will be an invaluable tool to measure the effectiveness of our initiatives, take planned action and build a culture of transparency and trust, going forward. In a move to ensure compliance with the highest ethical standards that Ranbaxy strives for, the Code of Conduct for employees has been revised with guidelines for better compliance. The Code of Conduct will serve as an ethical roadmap in all our practices and is a joint commitment by the Company and all the employees for ensuring high business integrity. As we enter 2010 with renewed confidence, the Company will continue to strengthen people processes and follow best practices to nurture and empower people. We aim to harbour a strong culture of productivity, responsibility and learning. We are optimistic that the energy and enthusiasm of our people will continue to be a source of competitive strength for the Company and will play a critical role in its future growth.
21
Ranbaxy Laboratories Limited Annual Report 2009
CORPORATE SOCIAL RESPONSIBILITY AND ENVIRONMENT, HEALTH & SAFETY
FORMULATING A SUSTAINABLE FUTURE
Ramesh L. Adige
President - Corporate Affairs & Global Corporate Communications
C orporate Social Commitment and Public Service is deeply embedded into the cultural fabric of Ranbaxy. Over the years serious efforts have been directed towards making a meaningful contribution to uplifting and transforming the lives of the underprivileged. The Company is also extremely conscious of its duty and responsibility towards the environment. We continue to make sincere efforts to promote good health, social development and better environment, through various Company programs that contribute to sustainable, all round growth. Corporate Social Responsibility (CSR) In 1978, in the wake of the grim health scenario in India, Ranbaxy realised the
urgency to reach out to the underprivileged sections of society that had little or no access to basic healthcare. The Company took a conscious decision to contribute towards the national objective “Health For All”. Towards this end, the “Ranbaxy Rural Development Trust” was set up and the first well equipped mobile healthcare van was introduced, in certain underserved areas of Punjab. As the programme grew, the Ranbaxy Community Healthcare Society (RCHS), an independent body, was created, that is devoted to the health of the disadvantaged. Today, multiple well equipped mobile healthcare vans and an urban family welfare centre, run by
22 14
Corporate Social Responsibility and Environment, Health & Safety
Ranbaxy, benefit over 2 lakh people, in certain identified areas in the states of Punjab, Haryana, Himachal Pradesh, Madhya Pradesh and Delhi. The programme is based on an integrated approach of preventive, promotive and curative services, covering areas of maternal child health, family planning, reproductive health, adolescent health, health education including AIDS awareness. During 2009, maternal and infant mortality were the focus of particular attention and efforts in these areas were intensified in RCHS serviced areas. The results of these interventions have been most encouraging and the general health profile of the local community has shown further improvement in terms of coverage for immunisation, vitamin A deficiency and family planning. The problem of malnutrition has been addressed to a large extent and birth rates and infant mortality rates have declined substantially. Amongst women, the risk of mortality due to pregnancy or child birth has also been reduced when compared with the prevailing level of risk, in India and other developing countries. Ranbaxy has also dovetailed its CSR efforts in a manner that is synchronous with the larger health goals of the State and Central Government. RCHS continued to work actively on critical issues related to HIV/AIDS, tuberculosis, malaria, polio, noncommunicable chronic diseases and female foeticide. RCHS also continued its partnership with the Voluntary Health Association of Punjab for the project on Reproductive Child Health (RCH), in the districts of Nawanshahar and Fatehgarh Sahib, in Punjab and achieved the targets set under the RCH-II plan, of the Government of India.
Ranbaxy entered into a Public Private Partnership (PPP) with the Punjab State Government, to deliver healthcare services in identified districts of Punjab. The programme will be rolled out in a phased manner. In order to encourage scientific endeavour in the country, Ranbaxy presented Research Awards and Ranbaxy Science Scholar Awards to 12 outstanding Indian scientists and 9 brilliant young scholars. Symposia and Round Table Conferences were also organised on topics related to women's health, immunogenomics of infectious diseases and pandemic influenza. Environment, Health and Safety (EHS) Ranbaxy remains committed to excellence through the discipline of process and continual improvement in EHS performance aimed at minimising risks. While there is a great emphasis and considerable investment being
made in improving our EHS performance, we firmly believe that the nucleus of our excellence lies in the responsible behaviour of our employees. The involvement of management and staff in the collaborative development of solutions to improve EHS performance is a key strategy for excellence. EHS Management System (EHSMS) Ranbaxy's EHSMS is a global framework employed to standardise the EHS processes and practices. It is used for identification of EHS aspects and their impact, prioritise EHS objectives, engage all personnel in support of EHS objectives, and implement the improvement plans. The performance metrics were further strengthened through the introduction of an EHS Dashboard, a single window for all EHS related aspects, within the Company. Ranbaxy's 'N'Vizion' incident Tracking System was
23
Ranbaxy Laboratories Limited Annual Report 2009
extended to all operating locations, globally, to integrate the entire Company. The Corporate EHS Committee reviewed the performance of EHS during 2009. An EHS Functional Meet was organised to share achievements, experiences and learnings. It provided a platform for setting new goals, crosspollination of ideas and sharing best practices. The year saw the introduction of cross-locational EHS audits in manufacturing locations, within India. Environment All equipment and infrastructure for environmental management was in conformity with regulatory standards throughout the year. The Dewas site saw the up-gradation of the Effluent Treatment Plant, the installation of Multi Effect Evaporators and Agitated Thin Film Driers. A number of Innovative 'Green Technologies' like
the Heat Pump, the Refrigeration Chiller (with total Heat Recovery System), Variable Refrigerant Volume (VRV) System, were deployed in recent projects at our Baddi Dosage Form (DF) site, in Himachal Pradesh. These have also been instrumental in reducing the load on the Effluent Treatment Plant. Occupational Health and Safety Our inherent belief that all workplace illnesses and injuries are preventable has been the driving force in keeping our manufacturing sites, R&D and Corporate Office safe. Numerous positive initiatives were undertaken during the year to enhance workplace safety. Our Dewas site further added a road safety initiative to educate employees, contractors and the local community on positive road behaviour. Emergency preparedness at Ranbaxy was ensured through regular table top and mock drills exercises, at all manufacturing sites as well as at R&D.
Additionally, a safety audit by The National Safety Council was conducted during the year at our Mohali API manufacturing facility. Extensive safety training programs, both by internal as well as external specialists, were also conducted at all manufacturing sites including those of our business partners, engaged in contract manufacturing. Ranbaxy's abiding concern for society extends beyond its business. We remain committed to the communities we serve and amongst whom, we operate, with the desire to bring about long term well being.
24 14
25
REPORT ON
CORPORATE GOVERNANCE
Ranbaxy Laboratories Limited
1. THE COMPANY'S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE In order to ensure sustainable returns to all stakeholders of the business, it is imperative, especially for large organizations, to adopt and follow certain policies, procedures and processes, which together constitute a "Code of Corporate Governance". It is important that such a Code is institutionalized, to ensure transparency, consistency and uniformity of decision making processes and actions. Ranbaxy has always believed in such a "Sound" Code of Corporate Governance, as a tool for highest standards of management and business integrity. 2. BOARD OF DIRECTORS The details of Directors on the Board of the Company as on December 31, 2009, is as under: Name of the Director Category Number of Directorships held in other Companies@ – – – – – 6 – Number of Number of Board Committee Chairmanship of memberships held Board Committees in other companies ^ held in other companies^ – – – – – 1 – – – – – – – –
Dr. Tsutomu Une, Chairman Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Atul Sobti, CEO & Managing Director
@
Non-ExecutiveNon-Independent -doNon-ExecutiveIndependent -do-do-doExecutive
Excludes private, foreign companies and companies registered under section 25 of the Companies Act, 1956. ^ Includes only the membership of Audit and Shareholders'/Investors' Grievance and Share Transfer Committees of public limited companies.
Notes: 1. Mr. Percy K. Shroff was appointed as the Director of the Company on March 27, 2009, in the casual vacancy caused by the resignation of Mr. Harpal Singh. 2. At the Board meeting held on May 24, 2009, Mr. Malvinder Mohan Singh stepped down as Chairman, CEO & Managing Director; and Mr. Balinder S. Dhillon, Independent Director, Mr. Sunil Godhwani, Non-executive- Non-Independent Director and Mr. Atul Sobti, the Chief Operating Officer and Whole-time Director, resigned from the Directorship of the Company with immediate effect. 3. At the subsequent Board meeting held on May 24, 2009, Dr. Tsutomu Une was elected as Chairman of the Board of Directors of the Company and Mr. Atul Sobti was appointed as a Director of the Company in the casual vacancy caused by the resignation of Mr. Vivek Mehra. The Board also appointed Mr. Sobti as the CEO & Managing Director of the Company effective May 24, 2009 for a period of 3 years which was approved by the Shareholders vide resolution passed by Postal Ballot with overwhelming majority. 4. None of the Directors are related inter-se. 3. BOARD MEETINGS Dates of Board meetings are fixed in advance for the financial year and agenda papers are circulated to Directors in advance. Meetings and Attendance During the year 2009, nine Board Meetings were held on January 22, March 16, March 27, April 24, May 24 (two meetings), May 29, July 24 and October 26, 2009.
26
Ranbaxy Laboratories Limited
Attendance of Directors at Board Meetings and at the Annual General Meeting (AGM) Name of the Director Dr. Tsutomu Une Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Atul Sobti Mr. Malvinder Mohan Singh Mr. Sunil Godhwani Mr. Balinder S. Dhillon 4. COMMITTEES OF THE BOARD (i) Audit Committee The Audit Committee has been constituted as per Section 292A of the Companies Act, 1956 and the guidelines set out in the Listing Agreements with the Stock Exchanges. The terms of reference include • Overseeing financial reporting processes. • Reviewing periodic financial results, financial statements and adequacy of internal control systems. • Approving internal audit plans and reviewing efficacy of the function. • Discussion and review of periodic audit reports. • Discussions with external auditors about the scope of audit including the observations of the auditors. • Recommend to the Board appointment of the statutory auditors and fixation of audit fees. • Reviewing with the management, the statement of uses / application of funds raised through an issue (public, rights, preferential issue of securities etc.) • Reviewing with the management the performance of statutory and internal auditors. Minutes of meetings of the Audit Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, five meetings of the Audit Committee were held on January 22, March 27, April 24, July 23 and October 25, 2009. The composition of the Committee and details of the meetings attended by the members during the year are as under: Name of the Member Mr. Akihiro Watanabe, Chairman Dr. Tsutomu Une Dr. Anthony H. Wild Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Sunil Godhwani Mr. Balinder S. Dhillon Permanent Invitees Mr. Malvinder Mohan Singh Mr. Atul Sobti Notes: 1. The Audit Committee of the Company was reconstituted on May 24, 2009 as per details : (i) Dr. Tsutomu Une was co-opted as a member of the Committee; (ii) Mr. Sunil Godhwani and Mr. Balinder S. Dhillon ceased to be members of the Committee; and (iii) Mr. Malvinder Mohan Singh ceased to be the permanent invitee of the Committee. No. of Meetings attended 3 5 2 2 5 2 3 3 5 No. of Board Meetings attended 9 8 6 7 6 8 9 5 4 5 Whether attended the AGM held on May 29, 2009 Yes Yes Yes Yes Yes Yes Yes N.A. N.A. N.A.
27
Ranbaxy Laboratories Limited
2. Dr. Tsutomu Une attended five meetings of the Committee during the year. Of these, three were in his capacity as a Permanent Invitee. 3. Dr. Anthony H. Wild and Mr. Percy K. Shroff were co-opted as members of the Committee on June 18, 2009. Members of the Audit Committee have requisite financial and management expertise and have held or hold senior positions in reputed organizations. The Statutory Auditors, Internal Auditor and the Chief Financial Officer of the Company are invited to attend and participate at meetings of the Committee. The Company Secretary acts as the Secretary to the Committee. (ii)Compensation Committee The Compensation Committee has been constituted as per the provisions set out in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The terms of reference include • Administration and superintendence of Employee Stock Option Schemes (ESOS). • Formulation of the detailed terms and conditions of the ESOS. • Grant of stock options. • Recommendation for fixation and periodic revision of compensation of the Managing Director and Executive Directors to the Board for approval and review and approve compensation policy (including performance bonus, incentives, perquisites and benefits) for senior management personnel. Minutes of meetings of the Compensation Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, three meetings of the Compensation Committee were held on January 21, March 27 and July 23, 2009. The composition of the Committee and details of the meetings attended by the members during the year are as under: Name of the Member Mr. Rajesh V. Shah, Chairman Dr. Tsutomu Une Mr. Percy K. Shroff Dr. Anthony H.Wild Mr. Balinder S. Dhillon Mr. Sunil Godhwani Permanent Invitees Mr. Malvinder Mohan Singh Mr. Atul Sobti No. of Meetings attended 2 3 1 1 2 2 1 –
Note: The Compensation Committee of the Company was reconstituted on May 24, 2009 as per details: i) Mr. Balinder S. Dhillon ceased to be the Chairman & Member of the Committee; ii) Mr. Sunil Godhwani and Mr. Malvinder Mohan Singh ceased to be the member & permanent invitee respectively of the Committee; iii) Mr. Rajesh V. Shah was appointed as Chairman of the Committee; and iv) Dr. Anthony H. Wild and Mr. Percy K. Shroff were co-opted as members and Mr. Atul Sobti as a permanent invitee of the Committee. Remuneration Policy The Remuneration Policy of the Company for managerial personnel is primarily based on the following criteria: – Performance of the Company, its divisions and units. – Track record, potential and performance of individual managers and – External competitive environment.
28
Ranbaxy Laboratories Limited
Remuneration of Directors Remuneration of Executive Directors is decided by the Board based on recommendations of the Compensation Committee as per the remuneration policy of the Company, within the ceiling fixed by the shareholders. The details of the remuneration of Executive Directors for the year ended December 31, 2009 are as under:
Name of the Director Salary & Allowances Commission Perquisites Retiral Benefits Stock Options Service Contract Tenure Notice Period & Severance Fee – 3 years – 6 months
—————————— Rs.Lacs ——————————— Mr. Malvinder Mohan Singh Mr. Atul Sobti 782.52 419.99 – 316.45 47.08 1.28 182.61 24.08 – 50,000 granted on 21.1.2009 at an exercise price of Rs. 216 per share
Notes: 1. Remuneration paid to Mr. Malvinder Mohan Singh is for the period from 1.1.2009 to 24.5.2009, the day he stepped down as Chairman, CEO & Managing Director of the Company. He was also paid Rs.661.88 lacs and Rs. 899.04 lacs towards leave encashment and gratuity respectively. 2. The remuneration paid to Mr. Atul Sobti comprises of remuneration paid to him as Chief Operating Officer and Whole-time Director upto May 23, 2009 and subsequently as CEO & Managing Director of the Company effective May 24, 2009. 3. Remuneration of Executive Directors consists of fixed component and commission which is linked with the profit of the Company. 4. Retiral benefits are exclusive of provision for future liabilities in respect of retirement benefits (which are based on actuarial valuation done on overall Company basis). 5. The market price of the share of the Company on January 20, 2009 was Rs. 215.15. Hence the aforesaid options were not granted at a discount. The options granted are exercisable till expiry of ten years from the date of grant. Vesting period will commence on the expiry of one year from the date of grant of options and the entitlement will be in the graduated scale over a period of five years as provided in the Employees Stock Option Scheme of the Company. 6. Mr. Malvinder Mohan Singh was paid Rs.4,813.83 lacs as compensation for loss of office pursuant to the Employment Agreement and Separation Agreement entered with him.
Remuneration to Non-Executive Directors Remuneration to Non-Executive Directors comprises commission and sitting fees. The shareholders of the Company at their Annual General Meeting held on May 29, 2009 approved the payment of commission to Non-Executive Directors not exceeding 1% of the net profits of the Company as computed under the relevant provisions of the Companies Act, 1956. The Board of Directors determines the commission payable to the Non-Executive Directors keeping in view the independent status, contribution at the Board and Committee meetings and responsibilities considering the extensive global operations of the Company. Details of remuneration paid to the Non-Executive Directors for the year ended December 31, 2009 are as under: Name of the Director Dr. Tsutomu Une Mr. Takashi Shoda Mr. Rajesh V. Shah Mr. Percy K. Shroff Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Balinder S. Dhillon Mr. Sunil Godhwani Commission (Rs.Lacs) 25 25 30 30 30 30 – – Sitting Fees (Rs. Lacs) 4.15 2.20 2.80 1.70 2.00 1.80 2.10 2.10
None of the present Non-Executive Directors holds any shares in the Company.
29
Ranbaxy Laboratories Limited
(iii)Science Committee Terms of Reference of Science Committee include • Approval of focus areas of research, especially New Drug Discovery Research (NDDR) and Novel Drug Delivery Systems (NDDS); and Monitoring progress of NDDR and NDDS.
Minutes of meetings of the Shareholders'/Investors' Grievance and Share Transfer Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, four meetings of the Committee were held on January 21, March 16, July 23 and November 30, 2009. Name of the Member Mr. Percy K. Shroff, Chairman Dr. Tsutomu Une Mr. Atul Sobti Mr. Malvinder Mohan Singh Mr. Balinder S. Dhillon Mr. Sunil Godhwani Note: The Shareholders'/Investors' Grievance and Share Transfer Committee of the Company was reconstituted on May 24, 2009, as per details : a) Mr. Sunil Godhwani ceased to be the Chairman and Member of the Committee; No. of Meetings attended 2 3 4 2 2 2
•
Minutes of meetings of the Science Committee are circulated to members of the Committee and the Board. Composition and Attendance During the year 2009, one meeting of the Science Committee was held on April 23, 2009. The composition of the Committee and the attendance of the members at the said meeting is as under: Name of the Member Dr. Tsutomu Une, Chairman Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Atul Sobti Mr. Malvinder Mohan Singh Mr. Sunil Godhwani Permanent Invitees Head of R&D Division of the Company 1 No. of Meetings attended 1 1 1 1* 1 –
* Attended the meeting as a permanent invitee Mr. Malvinder Mohan Singh and Mr. Sunil Godhwani ceased to be members of the Committee w.e.f. May 24, 2009. Mr. Atul Sobti was co-opted as a member of the Committee w.e.f. July 24, 2009. (iv)Management Committee The Management Committee was dissolved by the Board of Directors effective July 24, 2009. (v) Shareholders'/Investors' Grievance and Share Transfer Committee The Shareholders'/Investors' Grievance and Share Transfer Committee has been constituted as per the provisions set out in the Listing Agreement. The terms of reference include • Approve transfers, transmissions, issue of duplicate certificates, transpositions, change of names etc. and to do all such acts, deeds, matters and things as connected therein. Review complaints of the shareholders and action taken by the Company.
b) Mr. Malvinder Mohan Singh and Mr. Balinder S. Dhillon ceased to be members of the Committee; and c) Mr. Percy K. Shroff was co-opted as a Member and appointed as Chairman of the Committee. The Company addresses all complaints, suggestions and grievances expeditiously and replies have been sent/issues resolved usually within 15 days except in case of dispute over facts or other legal constraints. The Company received 49 shareholders' complaints which inter-alia include non-receipt of dividend, annual report, split shares, non-receipt of share certificates etc. The complaints were duly attended to and the Company has furnished necessary documents/information to the shareholders. The Shareholders'/Investors' Grievance and Share Transfer Committee reviews complaints received and action taken by the Company in this regard. No requests for share transfers are pending except those that are disputed or sub-judice. Mr. S.K. Patawari, Company Secretary is the Compliance Officer of the Company.
•
30
Ranbaxy Laboratories Limited
5. GENERAL BODY MEETINGS Details of the General Meetings held in the last three years: I. Annual General Meeting Year 2007 Date 31-5-2007 Day Thursday Time 11.00 A.M. Venue The National Institute of Pharmaceutical Education & Research, Sector 67, S.A.S. Nagar, Punjab The National Institute of Pharmaceutical Education & Research, Sector 67, S.A.S. Nagar, Punjab Special Resolutions Passed No Special Resolution passed
2008
30-5-2008
Friday
11.00 A.M.
- Appointment of Dr. Brian W. Tempest as an "Advisor" to Ranbaxy Europe Ltd., a wholly owned subsidiary of the Company for a period of three years effective January 1, 2008. - Approval for amendment in existing Employees Stock Option Scheme(s) of the Company to provide that Stock Options granted and outstanding in the hands of the employees who may be transferred to any entity affiliated to the Company would vest on the date of transfer of such employees provided one year has elapsed between the date of grant of stock options and date of such transfer.
2009
29-5-2009
Friday
11.00 A.M.
The National Institute of Pharmaceutical Education & Research, Sector 67, S.A.S. Nagar, Punjab
- Approval under Section 309(4) of the Companies Act, 1956 for payment of commission to the Non-executive Directors of the Company, not exceeding one percent of net profits of the Company in the aggregate for all the Non-executives Directors in a financial year, for a period of five years commencing from January 1, 2009.
II. Extra-ordinary General Meeting 2008 15-7-2008 Tuesday 9.00 A.M. Confederation of Indian Industry (CII), Block No. 3, Sector-31 A, Dakshin Marg, Chandigarh - Approval under Section 81(1A) of the Companies Act, 1956 for issue of Equity Shares and Warrants of the Company on preferential basis to Daiichi Sankyo Company, Limited, Japan. - Approval for amendment to the existing Employees Stock Option Scheme(s) of the Company to the effect that maximum number of stock options that may be granted to individual management employee in a year be increased from 40,000 to 3,00,000.
31
Ranbaxy Laboratories Limited
Postal Ballot During the year, the shareholders of the Company passed two ordinary resolutions through postal ballot. Detailed procedure followed by the Company is provided hereunder: 1. The Board of Directors of the Company (" Board") in its meeting held on July 24, 2009, sought the approval of the shareholders through postal ballot for the following two items as Ordinary resolutions: Item No. 1 Appointment of Mr. Malvinder Mohan Singh as Chairman, CEO & Managing Director for the period from December 19, 2008 to May 24, 2009 (the date he stepped down from the said positions) and payment of remuneration to him for the said period; Item No. 2 Appointment of Mr. Atul Sobti as Chief Executive Officer & Managing Director of the Company and payment of remuneration to him for a period of three years effective May 24, 2009. The Board appointed Mr. Sooraj Kapoor, a Practising Company Secretary and Ex-Registrar of Companies, as Scrutinizer for conducting the postal ballot process. 2. The Notice of the Postal Ballot dated July 31, 2009, Postal Ballot form and self-addressed pre-paid postage envelope were sent to the shareholders. The last date for receipt of the Postal Ballot form from the Shareholders was September 14, 2009. 3. Mr. Sooraj Kapoor submitted his report dated September 18, 2009 with the Company and based on the said report, results of Postal Ballot were declared on September 22, 2009 as under: Item No. No. of No. of Valid Invalid Ballots Ballots Received Received 5831 5686 Votes cast in favour Votes cast in against
Declaration as required under Clause 49 of the Listing Agreement All Directors and Senior Management personnel of the Company have affirmed compliance with the provisions of the Ranbaxy Code of Conduct for the financial year ended December 31, 2009. Atul Sobti CEO & Managing Director Gurgaon (Haryana) February 22, 2010 7. Certificate from CEO and CFO Certificate from CEO & CFO for the financial year ended December 31, 2009 has been provided elsewhere in the Annual Report. 8. DISCLOSURES A. Related Party Transactions The Company has not entered into any transaction of material nature with the promoters, the Directors or the management, their subsidiaries or relatives etc. that may have any potential conflict with the interests of the Company. B. Disclosure of Compliances by the Company During the last three years, no penalties or strictures have been imposed on the Company by the Stock Exchanges or SEBI or any other statutory authorities on matters related to capital markets. C. Disclosure of Accounting Treatment There has not been any significant changes in the accounting policies during the year. D. Risk Management The Company has a procedure to inform the Board about the risk assessment and minimisation procedures. The Board of Directors periodically reviews the risk management framework of the Company. E. The Company has complied with all the mandatory requirements and has adopted nonmandatory requirements as per details given below: (1) The Board The Company maintains the Office of the Chairman at its Corporate Office at Plot No. 90, Sector 32, Gurgaon-122 001 (Haryana) and also reimburses the expenses incurred in performance of his duties. There is no fixed tenure for Independent Directors.
1. 2.
324 274,337,559 453,472 (99.83%) (0.17%) 469 274,623,671 135,387 (99.95%) (0.05%)
The Resolutions were approved by the overwhelming majority of the shareholders. The results were also published in Financial Express and Punjabi Tribune and posted on the website of the Company. 6. CODE OF CONDUCT The Code of Conduct for the Directors and Employees of the Company is posted on the website of the Company.
32
Ranbaxy Laboratories Limited
(2) Remuneration Committee The Company has constituted Compensation Committee as detailed in 4(ii) hereinabove. The Chair man of the Compensation Committee is an independent director and was present at the last Annual General Meeting. (3) Shareholders Rights The quarterly financial results are published in the newspapers as mentioned under the heading "Means of Communication" at Sl. No. 9 hereinbelow and also displayed on the website of the Company. The results are not separately circulated to the shareholders. (4) Audit qualifications There are no audit qualifications in the Company's financial statements for the year under reference. (5) Training of Board Members No specific training programme was arranged for Board members. However, at the Board/ Committee meetings detailed presentations are made by Professionals, Consultants as well as Senior Executives of the Company on the business related matters, risk assessment, strategy, effect of the regulatory changes etc. (6) Mechanism for evaluating NonExecutive Board Members The Company has not adopted any mechanism for evaluating individual performance of NonExecutive Directors. (7) Whistle Blower Policy The Company has laid down a Code of Conduct for all its employees across the organisation. The Code of Conduct of the Company lays down that the employees shall promptly report any concern or breach and suggests not to hesitate in reporting a violation or raising a policy concern to the Code Compliance Cell or concerned superior. The Code provides that the Company shall support and protect employees for doing so. The Company does not have a Whistle Blower Policy. 9. MEANS OF COMMUNICATION (a) The Company regularly intimates unaudited as well as audited financial results to the Stock Exchanges immediately after these are taken on record by the Board. These financial results are normally published in the Business Standard/ Financial Express, the Punjabi Tribune and are displayed on the website of the Company www.ranbaxy.com. Further in compliance of
Clause 52 of the Listing Agreement, the above information and other communication sent to Stock Exchanges have also been filed under Corporate Filing and Dissemination System (CFDS) and are available at website, www.corpfiling.co.in. The official news releases and the presentations made to the investors/analysts are also displayed on the Company's website. (b) Management Discussion and Analysis Report forms part of the Report of the Directors. 10. SHAREHOLDER INFORMATION Annual General Meeting Date : May 10, 2010 Time : 11.00 A.M. Venue : The National Institute of Pharmaceutical Education and Research (NIPER) Sector-67, S.A.S. Nagar (Mohali)- 160 062 (Punjab). No Special resolution is proposed to be passed by Postal Ballot at the aforesaid Annual General Meeting. Financial Calendar Adoption of Quarterly 3rd/4th week of Results for the quarter ending* – June 30, 2010 July 2010 – September 30, 2010 October 2010 – December 31, 2010 January 2011 – March 31, 2011 April 2011 * Subject to the amendment in the Listing Agreements. Book Closure Dates May 3, 2010 to May 10, 2010 (both days inclusive) LISTING ON STOCK EXCHANGES The Equity Shares of the Company as on December 31, 2009, were listed on the Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd. Global Depository Receipts (GDRs) are listed on the Stock Exchange at Luxembourg. Foreign Currency Convertible Bonds (FCCBs) have been listed with the Singapore Exchange Securities Trading Limited. The Company confirms that it has paid annual listing fees due to the Stock Exchanges for the year 2009-2010. STOCK CODE 1. The National Stock - Ranbaxy Exchange of India Ltd. 2. Bombay Stock Exchange Ltd. - 359 (Physical) 500359 (Demat)
33
Ranbaxy Laboratories Limited
REGISTRAR AND TRANSFER AGENTS M/s. Alankit Assignments Ltd. (Alankit), 2E/8, 1st Floor, Jhandewalan Extension, New Delhi-110 055 is the Registrar and Share Transfer Agent for physical shares of the Company. Alankit is also the depository interface of the Company with both National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL). However, keeping in view the convenience of shareholders, documents relating to shares will continue to be received by the Company at Corporate Office of the Company at Plot No. 90, Sector 32, Gurgaon-122001 (Haryana) Tel No. 91-124-4135000, Registered Office at A-11, Industrial Area Phase-III, Sahibzada Ajit Singh Nagar (Mohali)-160055, (Punjab) and Head Office at 12th Floor, Devika Tower, 6, Nehru Place, New Delhi-110019 Tel No. 91-1126237508; email address: [email protected]. Market Price Data (Rs.) Month Bombay Stock National Stock Exchange Exchange (BSE) (NSE) Low 161.15 159.65 133.15 160.00 167.60 242.70 236.00 257.00 312.10 362.05 374.00 454.00 High 257.70 244.00 168.85 202.00 286.45 312.30 298.60 346.00 418.60 419.50 461.80 538.45 Low 165.10 159.25 133.10 160.00 167.50 242.55 236.00 257.40 312.20 362.05 374.10 455.10
SHARE TRANSFER SYSTEM With a view to expedite the process of share transfers, the Board of Directors of the Company has delegated the power of share transfer to some of the Directors with appropriate individual limits. The delegated Director(s) attend(s) to the share transfer formalities once in a fortnight. The shares for transfers received in physical form are transferred expeditiously, provided the documents are complete and the shares under transfer are not under any dispute. The share certificates duly endorsed are returned immediately to shareholders. Confirmation in respect of the requests for dematerialisation of shares is sent to the respective depositories i.e. NSDL and CDSL expeditiously. DEMATERIALIZATION OF SHARES The shares of the Company are in compulsory demat segment and are available for trading in the depository systems of both NSDL and CDSL. As on December 31, 2009, 412,597,279 equity shares of the Company, forming 98.14% of the Share Capital of the Company, stand dematerialised. International Securities Identification Number - INE015A01028 (with NSDL and CDSL) Shareholding Pattern as on December 31, 2009
Category No. of Percentage of Shares held Shareholding (%)
High January 2009 257.70 February 2009 244.00 March 2009 169.00 April 2009 202.20 May 2009 286.40 June 2009 311.80 July 2009 289.95 August 2009 348.00 September 2009 417.80 October 2009 419.40 November 2009 460.75 December 2009 538.00
Promoters-Daiichi Sankyo Company, Ltd., Japan 268,711,323 Mutual Funds & UTI 12,389,298 Banks, Financial Institutions, Insurance Companies 37,344,241 FIIs 28,582,858 Private Corporate Bodies 14,791,602 Public Shareholding 53,096,851 GDRs 5,501,185 Grand Total 420,417,358
63.92 2.94
8.88 6.80 3.52 12.63 1.31 100.00
Stock Price Performance Ranbaxy vs. BSE Sensex Year 2009
34
Ranbaxy Laboratories Limited
Distribution of Shareholding as on December 31, 2009
From To 1 - 50 51 - 100 101 - 200 201 - 300 301 - 400 401 - 500 501 - 600 601 - 700 701 - 800 801 - 900 901 - 1000 1001 - 2000 2001 - 3000 3001 - 4000 4001 - 5000 5001 &above Total No. of Shareholders Number 104009 29819 17732 7784 5391 3606 2633 1936 1503 1134 1697 5872 2070 1052 542 1498 188278 % Total 55.23 15.84 9.42 4.13 2.86 1.92 1.40 1.03 0.80 0.60 0.90 3.12 1.10 0.56 0.29 0.80 100% No. of Shares Number % Total 2346147 2506213 2780601 1992293 1883531 1687147 1462535 1266531 1142600 970424 1650711 8399113 5072374 3616659 2455376 381185103 0.56 0.60 0.66 0.47 0.45 0.40 0.35 0.30 0.27 0.23 0.39 2.00 1.21 0.86 0.58 90.67
upto March 8, 2011 by the holders into fully paid Equity Shares of Rs.5 each of the Company, which may subject to certain conditions, be represented by Global Depository Shares (GDS) with each GDS representing one share at a conversion price of Rs.716.32 per share, which is subject to adjustment in certain circumstances. In case if the Bonds are not converted into shares, the Company will redeem each Bond at 126.765% of its principal amount on the maturity date i.e. March 18, 2011. 5,501,185 GDRs representing 5,501,185 Equity Shares of Rs.5 each constituting 1.31% of the issued, subscribed and paid-up share capital of the Company, were outstanding as on December 31, 2009. Plant Locations of the Company 1. A-8-11 Industrial Estate Phase- III Sahibzada Ajit Singh Nagar (Mohali) - 160 055 (Punjab) 2. Village Toansa, P.O. Railmajra Distt. Nawanshahar (Punjab) - 144 533 3. A-41, Industrial Area Phase VIII-A Sahibzada Ajit Singh Nagar (Mohali) - 160 071 (Punjab) 4. Industrial Area 3 A.B. Road, Dewas - 450 001 Madhya Pradesh 5. Village & PO Ganguwala Tehsil Paonta Sahib - 173 025 Distt. Sirmour (H.P.) 6. Village Batamandi Tehsil Paonta Sahib - 173 025 Distt. Sirmour (H.P.) 7. E-47/9, Okhla Industrial Area Phase-II, Okhla, New Delhi - 110 020 8. Plot No. B-2 Madkaim Industrial Estate, Ponda, Goa 9 K-5, 6,7, Ghirongi Malanpur, Distt. Bhind - 477 116 (M.P.) Address for Correspondence Shareholders are requested to contact Mr. S. K. Patawari Company Secretary Ranbaxy Laboratories Ltd. Plot No. 90, Sector 32, Gurgaon-122001 Haryana Tel.No. 91-124-4185888, 4135000 Fax No.91-124-4106490 Email address : [email protected]
420417358 100%
Liquidity of Shares The Equity Shares of the Company have been included in the Sensex of the leading Stock Exchanges. Outstanding Stock Options Number of Stock Options outstanding as on December 31, 2009 7,413,016 *
* Options granted upto October 3, 2002 are entitled for additional shares on a proportionate basis in view of issue of bonus shares by the Company in the proportion of 3 : 5 in October 2002. The Company had allotted 23,834,333 Warrants to Daiichi Sankyo Company, Limited, Japan on October 20, 2008. Each Warrant is exercisable at any time between six months to eighteen months from the date of allotment at the option of the holder of the warrant for one fully paid Equity Share of the Company of Rs. 5 each at a price of Rs. 737. Rs.73.70 has been paid in respect of each Warrant (being 10% of the exercise price) at the time of allotment and the balance amount of Rs.663.30 for each Warrant will be payable at the time of exercise of Warrant(s). These warrants are outstanding as on December 31, 2009. The Company had raised US$440,000,000 in the year 2006 through Zero Coupon Convertible Bonds. The Bonds are convertible any time on or after April 27, 2006
35
Ranbaxy Laboratories Limited
Certificate
To the Members of Ranbaxy Laboratories Limited We have examined the compliance of conditions of Corporate Governance by Ranbaxy Laboratories Limited ("the Company") for the year ended on December 31, 2009, as stipulated in Clause 49 of the Listing Agreement of the Company with the stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company, for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.
For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826
Place : Gurgaon Dated : 25 February, 2010
36
CERTIFICATE FROM
CEO AND CFO
Ranbaxy Laboratories Limited
To the Board of Directors of Ranbaxy Laboratories Ltd. We, Atul Sobti, Chief Executive Officer & Managing Director and Omesh Sethi, President and Chief Financial Officer certify that : (a) We have reviewed financial statements and the cash flow statement for the year ended December 31, 2009 and that to the best of our knowledge and belief : (i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;
(ii) these statements together present a true and fair view of the Company's affairs and are in compliance with existing Accounting Standards, applicable laws and regulations. (b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company's Code of Conduct. (c) We accept responsibility for establishing and maintaining internal controls for financial reporting and have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.
(d) We have indicated to the Auditors and the Audit Committee that (i) there has not been any significant changes in internal control over financial reporting during the year under reference;
(ii) there has not been any significant changes in accounting policies during the year requiring disclosure in the notes to the financial statements; and (iii) there has not been any instances during the year of significant fraud of which we had become aware and the involvement therein, if any, of the management or an employee having a significant role in the Company's internal control system over financial reporting.
Atul Sobti CEO & Managing Director Place : Gurgaon Date : February 25, 2010
Omesh Sethi President and Chief Financial Officer
37
BOARD OF
DIRECTORS
Ranbaxy Laboratories Limited
Dr. Tsutomu Une Chairman Mr. Takashi Shoda Dr. Anthony H. Wild Mr. Akihiro Watanabe Mr. Percy K. Shroff Mr. Rajesh V. Shah Mr. Atul Sobti CEO & Managing Director COMPANY SECRETARY Mr. S. K. Patawari
REGIONAL HEADQUARTERS Gurgaon [India], London [UK], Johannesburg [South Africa] New Jersey [USA], Rio de Janeiro [Brazil] MARKETING OFFICES Douala [Cameroon], Kiev [Ukraine], Moscow [Russia], Ho Chi Minh City [Vietnam], Kaunas [Lithuania], Nairobi [Kenya], Abidjan [Ivory Coast], Yangon [Myanmar], Almaty [Kazakhstan], Dubai [UAE], Harare [Zimbabwe], Casablanca [Morocco], Sofia [Bulgaria] STATUTORY AUDITORS BSR & Co., Building No. 10, 8th Floor, Tower-B, DLF Cyber City, Phase - II, Gurgaon - 122002 [India] BANKERS ABN AMRO Bank NV, Calyon Bank, Citibank NA, Deutsche Bank AG Hong Kong & Shanghai Banking Corporation, Punjab National Bank, Standard Chartered Bank REGISTERED OFFICE A-11, Industrial Area Phase-III, Sahibzada Ajit Singh Nagar [Mohali] - 160 055, Punjab [India] Ph : [91-172] 2271450. Fax : [91-172] 2226925 CORPORATE OFFICE Plot No. 90, Sector 32, Gurgaon - 122 001, Haryana [India] Ph : [91-124] 4135000. Fax : [91-124] 4135001 HEAD OFFICE 12th Floor, Devika Tower, 6, Nehru Place, New Delhi - 110 019 [India] Ph : [91-11] 26237508. Fax : [91-11] 26225987
38
REPORT OF THE
DIRECTORS
Ranbaxy Laboratories Limited
Your Directors have pleasure in presenting the 49th Annual Report and Audited Accounts for the year ended December 31, 2009. STANDALONE WORKING RESULTS (UNDER INDIAN GAAP) Rs. in Million Year ended Year ended December 31, December 31, 2009 2008 45,359.09 43,393.63 11,002.73 (5,713.32) 394.66 (1,493.13) 1,482.03 10,619.17 4,899.33 5,719.84 (8,265.83) 13.76 (2,532.23) 1,458.28 7,474.52 1,544.69 (16,190.81) (5,742.79) (10,448.02) 2,162.69 19.50 (8,265.83)
Net Sales Profit/(Loss) before Interest, Exchange (Gain)/ Loss (Net) on Loans, Depreciation, Amortization, Impairment and Tax Interest Exchange (Gain)/ Loss on Loans Depreciation, Amortization and Impairment Profit/(Loss) before Tax Tax charge/ (Benefit) Profit/(Loss) after Tax Balance as per last Balance Sheet Transfer from Foreign Projects Reserve Surplus/(Deficit) carried forward CONSOLIDATED WORKING RESULTS (UNDER INDIAN GAAP) Net Sales Profit/(Loss) before Interest, Exchange (Gain)/ Loss (Net) on Loans, Depreciation, Amortization, Impairment and Tax Interest Exchange (Gain)/ Loss on Loans Depreciation, Amortization and Impairment Profit/(Loss) before Tax Tax charge / (Benefit) Profit/(Loss) after Tax Share in (Loss)/Profit of Associates(Net) Minority Interest Profit/(Loss) for the year Balance as per last Balance Sheet Transfer from Foreign Projects Reserve Surplus /(Deficit) carried forward
73,441.32 11,991.04 710.43 (1,493.13) 2,676.12 10,097.62 6,990.87 3,106.75 (32.38) (109.45) 2,964.92 (4,009.92) 13.76 (1,031.24)
72,555.23 (2,626.26) 2,055.01 7,494.35 2,824.69 (15,000.31) (5,650.84) (9,349.47) (78.21) (84.37) (9,512.05) 5,482.63 19.50 (4,009.92)
CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements for the year ended December 31, 2009, under Indian GAAP form part of the Annual Report. OPERATIONS The Company recorded net consolidated sales of Rs. 73,441 Mn against Rs.72,555 Mn in the previous year. Profit before Tax stood at Rs.10,098 Mn against a loss of Rs. 15,000 Mn for the previous year. Profit after Tax for the year stood at Rs. 3,107 Mn against a loss of Rs. 9,349 Mn for the previous year. The turnaround in profits from operations was primarily on account of revenues from First to File products in the US market, cost optimization and higher gross margin due to changes in product mix. The strengthening of rupee versus dollar also contributed towards increased earnings. The Company continues to focus on cost optimization and efficient working capital management. The Company has started pursuing Hybrid Business Model with Daiichi Sankyo Company, Limited (DS), its Holding Company, to leverage the strengths of both the organizations. During the year the Company launched a DS branded
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Ranbaxy Laboratories Limited
product in India and another Innovator product in Romania. The Company intends to launch such products in Africa as well in other countries. In addition, the Company and DS are working on various initiatives to leverage cost synergies arising from back-end functions such as IT and manufacturing. In regard to Application Integrity Policy, warning letters to its manufacturing facilities at Paonta Sahib (India) and Gloversville (USA) and import alert issued by USFDA, the Company is continuously making sincere efforts for early resolution of the issues raised by the USFDA and the Department of Justice and is fully co-operating with the said authorities. DIVIDEND In view of the carry forward losses, no dividend has been declared for the year. CHANGES IN CAPITAL STRUCTURE Allotment of shares on exercise of Employees' Stock Options During the year, the Company allotted Equity Shares (on pari-passu basis) pursuant to exercise of Stock Options by the eligible employees, as summarized below: Date of Allotment July 13, 2009 October 12, 2009 SUBSIDIARIES AND JOINT VENTURES Japan Japan, as the second largest Pharmaceutical market in the world, offers significant opportunity in the generic arena due to low generic penetration and the Ministry of Health, Labor and Welfare's target of 30% genericization in Japan by 2012. With a view to have a larger participation in growth in the generic filing opportunities in Japan, the Company set up a wholly-owned subsidiary in Japan under the name of Ranbaxy Japan K. K. and divested its stake in Nihon Pharmaceutical Industry Co. Limited, a joint venture in Japan with Nippon Chemiphar Co., Limited. China and Vietnam As a part of consolidating its operations, the Company has divested its stake in its subsidiaries in Vietnam and China, having manufacturing operations. However, the Company continues to have marketing presence in Vietnam and China as these are important pharmaceutical markets. A statement pursuant to Section 212 of the Companies Act, 1956 (“Act”), relating to subsidiary companies is attached to the accounts. In terms of the approval granted by the Central Government vide letter no. 47/708/2009-CL-III dated December 8, 2009, under Section 212(8) of the Act, the audited accounts and Reports of Board of Directors and Auditors of the Company's subsidiaries have not been annexed to this Annual Report. The consolidated financial statements prepared in accordance with Accounting Standard - 21 issued by the Institute of Chartered Accountants of India presented in this Annual Report include the financial information of the subsidiary companies. ACQUISITIONS The Company has acquired: (a) Marketing rights for dermatological and lifestyle products from Ochoa Laboratories Limited, to complement the Company's existing derma portfolio; and No. of Shares 2,160 45,445
(b) Business and manufacturing facility in Bangalore from Biovel Life Sciences Private Limited. This will provide a platform to the Company to manufacture vaccines as well as bio-therapeutics. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report, as required under the Listing Agreements with the Stock Exchanges, is enclosed at Annexure 'A'. EMPLOYEES' STOCK OPTION SCHEME Information regarding the Employees' Stock Option Scheme is enclosed at Annexure 'B'.
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Ranbaxy Laboratories Limited
LISTING AT STOCK EXCHANGES The Equity Shares of the Company continue to be listed on Bombay Stock Exchange Ltd. and The National Stock Exchange of India Ltd. Global Depository Shares are listed on the Stock Exchange at Luxembourg and Foreign Currency Convertible Bonds are listed on the Singapore Exchange Securities Trading Ltd. The annual listing fees for the year 2009-2010 have been paid to these Exchanges. DISCLOSURE OF PARTICULARS As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant information and data is given at Annexure 'C'. FIXED DEPOSITS The Company has not invited / received any fixed deposits during the year. DIRECTORS' RESPONSIBILITY STATEMENT In terms of provisions of Section 217(2AA) of the Companies Act, 1956, (“Act”), your Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, wherever applicable.
(ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company, as at the end of the accounting year and of the profit of the Company for the year. (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) The Directors have prepared the annual accounts on a going concern basis. DIRECTORS On May 24, 2009, Mr. Malvinder Mohan Singh stepped down as Chairman, CEO & Managing Director, Dr. Tsutomu Une was elected as the non - executive Chairman of the Board of Directors and Mr. Atul Sobti was appointed as the CEO & Managing Director of the Company. The shareholders of the Company vide their resolution dated September 22, 2009, passed through postal ballot, approved the appointment of Mr. Sobti as CEO & Managing Director of the Company for a period of 3 years. Mr. Sunil Godhwani and Mr. Balinder Singh Dhillon resigned from the Directorship of the Company effective May 24, 2009. The Directors place on record their appreciation for valuable contributions made by the outgoing Directors. Dr. Tsutomu Une and Mr. Atul Sobti who were appointed as Directors of the Company in the casual vacancies caused by resignations of Mr. V.K. Kaul and Mr. Vivek Mehra respectively, hold office upto the date of this Annual General Meeting. The Company has received Notice(s) along with requisite deposit from member(s) under Section 257 of the Companies Act, 1956, proposing the candidature of Dr. Tsutomu Une and Mr. Atul Sobti as Directors of the Company. Mr. Atul Sobti being the Managing Director will not be liable to retire by rotation in terms of the Articles of Association of the Company. Mr. Percy Shroff was appointed as a Director of the Company on March 27, 2009 against the casual vacancy caused by resignation of Mr. Harpal Singh. CORPORATE GOVERNANCE Report on Corporate Governance along with the Certificate of the Auditors, M/s. BSR & Co. Chartered Accountants, confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the stock exchanges forms part of the Annual Report. COST AUDIT The reports of M/s. R.J. Goel & Co., Cost Accountants, in respect of audit of the cost accounts relating to formulations and bulk drugs for the year ended December 31, 2009, will be submitted to the Central Government in due course.
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Ranbaxy Laboratories Limited
AUDITORS M/s. BSR & Co., Chartered Accountants, retire as Auditors of the Company at the conclusion of ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office of the Auditors, if re-appointed. STATEMENT OF EMPLOYEES Statement of particulars of employees as required under Section 217(2A) of the Companies Act, 1956 ("Act") and Rules framed thereunder forms part of this Report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Act, this Report and Accounts are being sent to all the shareholders excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder interested in obtaining a copy of the statement may write to the Company Secretary at the Corporate Office of the Company. ACKNOWLEDGEMENTS The Directors wish to place on record their appreciation of the significant contribution made by each and every employee of the Company. The Directors also thank all other stakeholders for their support and encouragement. Your Directors look forward to your continued support in the years to come.
On behalf of the Board of Directors
Gurgaon March 25, 2010
Dr. Tsutomu Une Chairman
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Ranbaxy Laboratories Limited
ANNEXURE A
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
INDUSTRY STRUCTURE & DEVELOPMENTS The global pharmaceuticals market sales grew by approximately 5.7% (at constant exchange rate), to reach US$ 727 Bn in 2009. North America, Europe and Japan remained the key markets accounting for about 86% of the worldwide pharmaceutical sales in 2009. Developed Markets (US, Japan, UK, Spain, Germany, France, Italy and Canada) grew by 4% during the year. The 'Pharmerging' markets (Brazil, Russia, India, China, Turkey, Mexico and South Korea) continued to strengthen their position in the global landscape and grew by 17% in 2009. Global pharmaceutical market is projected to grow at a cumulative average growth rate (CAGR) of 4-7% for the 2008-2013 period. Forecasted CAGR for the Developed Market ranges between 2-5%, while the Pharmerging markets are expected to have a CAGR between 13-16%, for the same period1. Significant factors that have resulted in a slowdown in the pharmaceutical market are (a) lower consumer spend due to the economic downturn, (b) increased volume for generic drugs leading to a decrease in the total value for the industry, and (c) lesser number of new patent protected products in the market. Pharmaceutical sales in North America, the world's largest market, were US$ 316 Bn, a growth of 4.0%, constituting 43% of the global sales in 2009; of these sales in the United States accounted for US$ 298 Bn and grew by 3.9%. Europe clocked sales of US$ 226 Bn, a growth of 4.7%, and contributed 31% to the global pharmaceutical industry. Sales in Latin America, led by key markets of Brazil and Mexico, grew by 11.9%, to reach US$ 33 Bn. Asia, Africa and Australia combined, grew by 9.6%, to US$ 152 Bn; Japan, the world's second largest market, recorded sales of US$ 80 Bn, and grew by 6.1%. The industry, especially in the generics market, has become highly competitive. This, coupled with the drying up of pipelines of innovator companies is leading to consolidation in the generics and innovator industry, as a consequence, new hybrid models between innovator and generic companies are evolving. Thus, the pharmaceutical industry is witnessing adoption of new business models, where innovator and generic companies work together to leverage each other's strengths. The new business model will help innovator companies get access to emerging markets, lower manufacturing and R&D cost base; while generics companies will gain from higher R&D capabilities of innovators and access to innovator drugs. Generics2 The global generics market grew by 7.7% in 2009 to US$ 83 Bn, with the top eight markets (US, Germany, UK, Canada, France, Spain, Italy and Japan) contributing 76%. Growth in the generics segment in top eight markets was 8%, surpassing the 3% growth witnessed in the branded segment in the same countries. In Japan, while generics accounted for only 14% of the market by volume, growth during the year was a promising 12%. Ranbaxy's collaboration with Daiichi Sankyo Co. Ltd. (DS) gives the Company opportunity to tap the large genericizing Japanese market. Growth in emerging markets is driven by increasing domestic consumption due to strengthening of healthcare infrastructure, greater awareness and improving economic conditions. Generics segment in emerging markets is predominantly branded, which further improves attractiveness. With over US$ 80 Bn of drugs going off patent in the next two years, and a higher generic penetration across developed and emerging markets, the generics market will continue to provide attractive growth opportunities. Ranbaxy, with its diversified geographic reach across developed and emerging markets, is well positioned to capitalise on opportunities in both segments of the market.
1 2
Source: IMS 31st Edition, January 2010 Based on IMS MAT Nov 2009
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Ranbaxy Laboratories Limited
The collaborative business model, as mentioned earlier, will also leverage lower R&D cost and reach of the generics companies, especially in emerging markets, for the innovator companies. With competitive advantages in R&D, manufacturing and marketing, Indian companies today stand at the forefront to partner with innovator pharmaceutical organizations. The prevailing market environment in these geographies is discussed below: USA: Generics market grew by 7% to US$ 34 Bn in 2009. Generics continued to play an increasingly prominent role in the US healthcare market and accounted for 72% of total US pharmaceutical market volume, reaching an all time high in 2009. A major growth driver for generics is the upcoming patent expiries for many blockbuster pharmaceutical products, which will become open to generic competition. According to the baseline forecast by IMS Health, the US generics market is expected to deliver a CAGR in excess of 14% in value terms, over the period 2005 to 2010. Europe: Generics market in Europe grew by 6.2% in value terms, up from 4.7% growth reported in the last year, and accounted for 37.4% of the market in volume terms, up from 36.4% in previous year. The key markets in Western Europe were under pressure from price erosion. While the volumes remained at a peak during the year, lower prices affected growth. Generics market in Germany grew by 8%, in France and Spain by 7%, while in the UK, growth was 5% during 2009. Romania, a key market in Central Europe, was impacted due to healthcare reforms, and the market was also under pressure from unprecedented currency fluctuation. Central, Eastern & Southern Europe, continued to experience buoyant growth, led by a higher per capita pharmaceutical expenditure, and an increasing utilization of generic drugs, driven by the government's efforts to reduce healthcare spend. India: The Indian pharmaceutical market grew at a robust 16.9% in 2009 to Rs. 401 Bn (ORG IMS MAT Dec 2009). Acute therapy dominated the market with a value contribution of 71%. The acute segment grew 16.3% during the year as against 18.7% growth witnessed in the chronic segment. Of the overall market growth, existing products contributed 10.3%, New products (launched in the last two years) contributed 5.7%, while price changes contributed 0.9%. The Indian pharmaceutical sector continues to demonstrate strong growth despite the global economic slowdown, due to inherent strength of the Indian domestic market, economic growth, healthcare infrastructure expansion, rising incidence of chronic diseases and increase in healthcare access in the extra urban and rural markets. The potential of the Indian pharmaceutical market is recognized by most of the major players, which is manifested in diverse strategies being adopted by various organizations. Such strategies include sales force and geographical expansion and new products launches, etc. In order to gain market penetration, companies are increasing their reach into the extra-urban and rural markets as well. At present, USA, Europe and India are the three largest markets for Ranbaxy. OUTLOOK ON OPPORTUNITIES Outlook for the global generics industry continued to be positive and the segment is expected to witness significant growth based on (a) opportunities arising from the US$ 80 Bn drugs going off patent in the next two years, (b) increasing healthcare burden in developed economies, leading to higher genericization, (c) room for more genericization in some major markets such as Japan, Australia and France, and (d) increasing healthcare costs in developing economies, where generic pharmaceuticals generally have an edge over the innovator companies, due to lower price structure and better reach. Ranbaxy, with ground operations in 46 countries, and presence in 125, is among the top 10 generics pharmaceutical companies globally. With its exclusive First-to-File (FTF) marketing opportunities in the United States, including some of the world's highest selling drugs (e.g. Atorvastatin and Esomeprazole), Ranbaxy has a balanced revenue-mix, with high growth emerging markets contributing 56% to sales, and developed markets contributing 44%, including revenue from the Active Pharmaceutical Ingredients (API) business. Collaborating with DS, our Holding Company, Ranbaxy, has adopted a unique Hybrid Business model. During the year, Ranbaxy began to leverage its global marketing presence to market DS's innovator products. In this context, Ranbaxy launched Olmesartan, an innovative product of DS in India. Raloxifene, another DS innovation, was launched
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Ranbaxy Laboratories Limited
in Romania by Ranbaxy's subsidiary, Terapia Ranbaxy. The Company plans to launch such products in Africa as well as some other countries. A new business division was established within Ranbaxy's subsidiary in Mexico, to market DS's innovator products. Ranbaxy and DS aim to harness synergies in other diverse areas such as R&D, manufacturing, distribution, IT, etc., as we continue to engage together. In order to consolidate its operations, optimize cost and improve efficiency Ranbaxy undertook a change in the business model of its global manufacturing operations, divesting its manufacturing facilities in China and Vietnam. It also restructured its business operations in Europe. USA: USA remains a key market for the Company, and will be the catalyst of future revenue growth, on the back of a strong product pipeline. As on December 31, 2009, the Company had 204 ANDAs filed with the USFDA, of which 138 have been approved. Market size of pipeline of the Company's pending ANDAs, at innovator prices, is about US$ 45 Bn. Of these, the Company believes that it has a Paragraph-IV / FTF status on 13 applications, with sales of close to US$ 24 Bn, at current innovator prices. The Company launched three products with exclusivity during the year, viz., Sumatriptan in February, Valacyclovir in November, and Oxcarbazepine suspension in December. Europe: Business in Europe remained under pressure during the year. Competition among generic companies continued to increase, putting pressure on prices. Romania, the Company's largest market in Europe, is witnessing a liquidity crunch in the distribution channel, and also expected to undergo multiple healthcare reforms, which is adversely affecting the market growth. Despite the many challenges, Ranbaxy has maintained its leadership position in generics+OTC segment in this market. The Company is variablizing its cost structure in Europe to counter the difficult market conditions. India: The Indian pharmaceutical market is expected to grow at 11-12% per annum to reach US$ 20 Bn by 2015 and US$ 30Bn by 2020, which will place it among the world's 10 largest pharmaceutical markets. The key catalysts for this will be strong economic growth, increasing health awareness, healthcare infrastructure expansion, rising incidence of chronic disease, and increase in healthcare access in the extra urban & rural markets. The emergence of an organized pharmaceutical retail segment and the fast growing area of medical insurance are likely to be other important factors that would positively impact the sector in the coming years. OUTLOOK ON THREATS, RISKS AND CONCERNS The global generics business has risks associated with patent litigation, regulatory issues and product liability, particularly in developed markets. Innovator pharmaceutical companies also continuously develop ways to enhance lifecycle of their patented drugs, to delay entry of alternate generics. Further, emerging markets are becoming more competitive, with entry of new players. Ranbaxy, as a global generic Company, faces all such regulatory, compliance, and market risks. Manufacturing of pharmaceutical products heavily regulated and controlled by regulatory and government authorities across the world. Failure to fully comply with such regulations, could lead to stringent actions from the authorities/ government, revocation of drug approvals, failure or delay in obtaining approvals for new products, product recalls of existing drugs sold in the market, prohibition on the sale or import of non-complying products, and criminal proceedings against non-complying manufacturers. Regulators across the world, including the USFDA, have become stricter with the pharmaceutical industry. Regulatory requirements and consequences for non-compliance are also getting more severe. The USFDA invoked its Application Integrity Policy (AIP) against Ranbaxy's Poanta Sahib manufacturing facility in February 2009. Further, in December 2009, the Company received a warning letter from the USFDA for its liquid manufacturing facility located in Gloversville, New York, USA, for certain cGMP violations. The Company continues to co-operate fully with the concerned authorities, towards a speedy resolution of the USFDA and Department of Justice related issues. As regards the warning letter, the Company has retained the services of a global consulting firm to provide expertise and advice on issues cited by the USFDA. The above-mentioned issues may have a negative impact on Company.
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Ranbaxy Laboratories Limited
In the Indian pharmaceutical market, pricing for certain pharmaceutical products is governed by the Drug Pricing Policy, through the Drug Price Control Order, 1995 (DPCO). Ranbaxy has some pending legal cases, and may face negative consequences on this account. Further, adverse changes in DPCO / Drug Policy may affect the Company's performance. Overseas business contributes 77% of Ranbaxy's total turnover. Sharp movement in foreign exchange rates can, therefore, have significant impact on the Company's financial results. SEGMENT-WISE PERFORMANCE Ranbaxy recorded global consolidated sales of US$ 1,519 Mn in 2009, with emerging and developed markets contributing 54% and 38% respectively, to sales. Dosage form sales constituted 92% of global sales during the year, balance being the API business. Overseas markets constituted 77% of the total dosage form sales of the Company. INTERNAL CONTROL SYSTEMS AND ADEQUACY With the objective of safeguarding the Company's assets and ensuring financial compliance, there are documented and well established operating procedures in the Company and its subsidiaries, in India and overseas. The Internal Audit function at Ranbaxy reports directly to the CEO & MD and the Audit Committee. The Internal Audit function is headed by a Vice President, and the team comprises of well qualified, experienced professionals who conduct regular audits across the Company's global operations. The matters brought up by the Internal Audit team are periodically communicated to the CEO & MD and the Audit Committee, in the form of Internal Audit reports / comments. On the financial operations, the Finance function of the Company is adequately staffed with professionally qualified and experienced personnel. FINANCIAL PERFORMANCE During the year, the Company recorded consolidated Global sales of Rs. 73,441 Mn (US$ 1,519 Mn). Operating margins improved significantly primarily due to the launch of Valacyclovir (FTF) in USA, favourable forex movement, and close management of costs during the year. Earnings before tax were at Rs. 10,098 Mn (US$ 209 Mn), and Earnings after tax were at Rs. 3,107 Mn (US$ 64 Mn), representing 4% margin to sales. HUMAN RESOURCES Human resources are the most valuable asset for the Company, and Ranbaxy continues to seek, retain and enrich the best available talent. The Company provides an environment which encourages initiative, innovative thinking, and rewards performance. The Company ensures training and development of its personnel through succession planning, job rotation, on-the-job training, and various training programs and workshops. The total number of employees of the Company and its subsidiaries as on December 31, 2009 stood at 12,995. CAUTIONARY STATEMENT: Statements in the "Management Discussion and Analysis" describing the Company's objectives, estimates, expectations or projections may be "forward looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations, include Government regulations, patent laws, tax regimes, economic developments within India and countries in which the Company conducts business, litigation and other allied factors. Note: Market size and growth rate for 2009 are based on IMS MAT Sep 2009 data unless otherwise indicated.
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Ranbaxy Laboratories Limited
ANNEXURE B
Information regarding the Employees' Stock Option Scheme (As on December 31, 2009) S. No. Details 1. 2. 3. 4. 5. Total No. of Options in force at the beginning of the year Options granted in the year 2009 No. of Options vested during the year No. of Options exercised during the year No. of shares arising as a result of exercise of options during the year (including additional shares allotted on account of bonus shares as explained in Note 2 below) No. of Options lapsed and forfeited during the year Variance in terms of options Money realized by exercise of options during the year Total No. of Options in force at the end of the year Nos. 7,272,849 1,472,725 1,257,680 36,825
47,605 1,295,733 N.A. Rs. 11,490,128 7,413,016
6. 7. 8. 9. Notes : 1.
The Grant/ Exercise and number of Stock Options outstanding as on June 30, 2005, have been proportionately adjusted in view of the sub-division of equity shares of the Company from the face value of Rs. 10 each into 2 equity shares of Rs. 5 each. Options granted upto October 3, 2002, are entitled for additional shares on account of bonus shares in the ratio of 3 for 5.
2.
Pricing formula: Closing price of the Equity Shares of the Company prior to the date of meeting of the Compensation Committee (CC) in which stock options are granted on the stock exchange on which the shares of the Company are listed. The closing price of the shares of the Company at the National Stock Exchange of India Limited on January 20, 2009 was Rs. 215.15 per share. Accordingly, exercise price of the options granted by the CC at the meeting held on January 21, 2009 was fixed at Rs. 216 per share of Rs. 5 each. (i) Options granted in the year 2009 to senior managerial personnel*: Name Mr. Atul Sobti Mr. Arun Sawhney Mr. Omesh Sethi Dr. Sudershan K. Arora Mr. Dipak Chattraj Mr. Ramesh L. Adige Dr. Pradip Kumar Bhatnagar Mr. Sanjeev I. Dani Mr. Satish Kumar Chawla Mr. Ranjan Chakravarti Dr. T.G. Chandrashekhar Mr. K. Venkatachalam Mr. Debashish Dasgupta * Designation (Present) No. of Options granted 50,000 15,000 10,000 17,500 10,000 15,000 12,500 12,500 10,000 7,500 10,000 15,000 5,000
CEO & Managing Director President - Global Pharmaceuticals Business President & Chief Financial Officer President - Research & Development President - Corporate Development President - Corporate Affairs & Global Corporate Communications Senior Vice President - New Drug Discovery Research Senior Vice President & Regional Director - Asia, CIS & Africa Vice President - Global Internal Audit Vice President - Global Therapy and Alliance Management Vice President -Quality Senior Vice President & Regional Director - North America & LATAM Vice President & Regional Director - Europe
Excludes the Senior Managerial personnel who ceased to be in employment with the Company. : : Nil Nil
(ii) Employees who have been granted 5% of more of the options granted during the year (iii) Employees who have been granted options during any one year equal to or exceeding 1% of the issued capital of the Company at the time of grant
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Ranbaxy Laboratories Limited
(iv) Diluted earnings per share (EPS) (v) (a) Method of calculation of employee compensation cost Difference between the employee compensation cost so computed at (a) above and the employee compensation cost that shall have been recognized if it had used the fair value of the options The impact of this difference on profits and on EPS of the Company
: :
Rs. 10.74 The Company has calculated the employee compensation cost using the Intrinsic value of the stock options. Rs. 105.99 Mn
(b)
:
(c)
:
Profit/(Loss) after tax : Rs. 5,719.84 Less: additional employee compensation cost based on fair value : Rs. 105.99 Adjusted PAT : Rs. 5,613.85 Adjusted EPS (diluted) : Rs. 10.51
Mn
Mn Mn
(vi) Weighted-average exercise price and fair value of Stock Options granted : (Post split adjusted price) Stock Options granted on 12.01.2001 03.12.2001 01.04.2002 07.02.2003 22.01.2004 17.01.2005 17.01.2006 17.01.2007 16.01.2008 11.06.2008 19.12.2008 21.01.2009 (vii) Description of the method and significant assumptions used during the year to estimate the fair value of the options, including the following weighted average information Weighted average exercise price (in Rs.) 336.50 297.50 372.50 283.50 496.00 538.50 392.00 430.00 391.00 561.00 219.00 216.00 Weighted average Fair value (in Rs.) 145.00 188.50 226.00 132.50 212.50 215.68 194.07 232.57 107.06 172.89 63.31 92.97 Closing market price at NSE on the date of grant (in Rs.) 324.15 369.48 449.48 317.45 503.10 534.33 391.15 429.65 390.75 560.75 218.60 215.15
: The Black Scholes option pricing model was developed for estimating fair value of traded options that have no vesting restrictions and are fully transferable. Since Option pricing models require use of substantive assumptions, changes therein can materially affect fair value of Options. The option pricing models do not necessarily provide a reliable measure of fair value of options.
The main assumptions used in the Black-Scholes option pricing model during the year were as follows : Particulars Options granted on 21.01.2009 1.49 % 6.5 years 6.22 % 38.60 %
Dividend yield Expected life of options from the date(s) of grant Risk free interest rate Expected volatility
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Ranbaxy Laboratories Limited
ANNEXURE C
Information pursuant to Companies (Disclosure of Particulars in Report of Board of Directors) Rules, 1988 forming part of the Report of the Directors 1. CONSERVATION OF ENERGY AND ITS IMPACT Measures for Conservation of Energy Impact resulting into saving (in Rs. Million) 19.80 0.02 7.70 6.60 4.84 3.62 3.60 2.91 2.50 2.10 2.00 1.26 1.11 1.0 0.66 0.64 0.41 0.30 0.10
Power Factor maintained UNITY & Load Factor maintained above 50% concession for Load Factor received Reduction of steam high pressure header from 8.2 to 7.4 Kg / CM2 KGK chiller's replaced by trane chiller and Brine facility modified from central generation to user areas Combining the Cooling tower Pump Discharge lines for Utilities & 3X60KL Fermentation Plant thereby Running only one 110 KW pump instead of 2 Nos. being run separately for 2 different streams 55KW Nitrogen Plant Air compressor is stopped by looping the Instrument Air compressor supply to inlet of Nitrogen plant resulting in substantial saving as well as optimum utilization of Instrument Air Compressor Re-engineering of Brine system in old utility. Re-engineering has improved flow rate resulting in efficiency improvement. This has resulted in stoppage of one compressor Rebate in power tariff by maintaining unity power factor through automatic and manual controls. Air flow optimization in Air Washers and VAHUs. Two nos. inefficient AHUs and Air Washer replaced in MP-01 500 KVA Diesel Generation installed and running during weekly off days and Peak load restriction hours instead of running of 1500KVA Generator earlier Chilled Water facility modifications from central generation to users areas, energy saving of 90KW 5 KW (35CFM) Air compressor is installed and running for purified water plant during 2nd and 3rd shifts instead of 97 KW Air compressors Integration of two cooling water & Chilled water headers of Mohali-3 & Mohali-2 Power saving by auto switching (Motion Sensor). Running time of light fixtures reduced from 24 hours to 10 hours. Replacement of steam traps and recovery of Hot condensate back to boiler house Looped the raw water header with the process water line thereby using Bore well pressure for Process water circulation , this stopped 7.5 KW pump operation for process water, this also has led to substantial energy saving Optimization of pump head in New Utility Cooling tower. Replacement of Fan Type cooling towers with Jet type cooling towers Increase in condensate recovery from 20% to 40% from 7011 Tons of steam production. The additional automatic condensate recovery systems installed in two plants Replacement of old lamp type indicators (Each 5 watt) with LED type indicators(0.8 watt) total number 550
2. RESEARCH & DEVELOPMENT a) Specific areas in which R&D is carried out – Develop technology for Active Pharmaceutical Ingredients (APIs), conventional & value added innovative dosage forms - complying with international quality & regulatory norms – Develop "Platform Technologies" and "Products" in the area of Novel Drug Delivery Systems – Discovery and Development of new drug molecules in select areas: Infectious Diseases, Metabolic Diseases, Inflammatory/Respiratory Diseases and Oncology – GLP/cGCP complying Bioavailability/Bioequivalence, Toxicology and Clinical Studies (Phase - I, II & III) – Innovation in packaging for improved patient convenience & compliance – Up-gradation of existing technologies / products on ongoing basis b) Benefits derived as result of R&D activities – Technology to manufacture APIs and Dosage Forms – Oral Controlled Release Dosage Forms leading to better patient convenience and compliance – Improved productivity / process efficiencies – Internationally competitive prices and product quality
49
Ranbaxy Laboratories Limited
– Safe and environment friendly processes – Generation of Intellectual wealth for the Company in key potential markets – Grant of process patents for Active Pharmaceutical Ingredients (APIs) as well as dosage forms (both conventional & novel drug delivery systems) – Product patents in the areas of drug discovery research – Self reliance and import substitution for conservation of Foreign Exchange – Foreign exchange earnings / savings – Speed to marketplace – Enhanced business through Licensing arrangements and strategic alliances – Enhanced Global presence / visibility c) Future plan of action – Continue augmenting R&D capabilities & productivity through technological innovations, use of modern scientific and technological techniques, training and development, benchmarking and global networking – Greater thrust in the areas of Novel Drug Delivery Systems – Continue developing innovative, commercially viable process know-how for both Active Pharmaceutical Ingredients (APIs) and dosage forms – Continue strengthening the Clinical Research infrastructure and capabilities complying international GLP/ cGCP norms – Continue improvements in packaging for pharmaceuticals to ensure shelf-life/stability, quality and, better patient convenience and compliance – Enhance national and international research networking and strategic alliances d) Expenditure on R&D Rs. Million Year ended Year ended December 31, December 31, 2009 2008 – Capital 221.98 558.28 – Revenue 4,721.84 4,155.46 – Total 4,943.82 4,713.74 – % to turnover 10.90% 10.86% 3. TECHNOLOGY, ABSORPTION, ADAPTATION AND INNOVATION a) Efforts in brief, made towards technology absorption and innovation – As per 2(a) above b) Benefit derived as a result of the above efforts, e.g. product improvement, cost reduction, product development. – As per 2(b) above Future course of action a) To continue developing innovative and commercially viable process know-how for APIs and Dosage Forms (Conventional and Noval Drug Delivery System) b) Information in case of imported technology (imports during the last five years) – Not applicable 4. FOREIGN EXCHANGE EARNINGS AND OUTGO Activities relating to exports, initiatives taken to increase exports; development of new export markets of products and export plans – Overseas sales (excluding sales to Nepal) were Rs 28,258.24 Mn for the financial year December 31, 2009. – Drug Master Files (DMFs) for API were filed with the regulatory authorities in several markets. – Continued to receive income by way of royalty, technical and management service fee and dividend from overseas subsidiaries / affiliates. – Initiatives were taken for development of new export markets. These include setting up a new division to co-market Daiichi Sankyo’s innovator products. – Also launched differentiated branded products of Originator in Romania through Terapia Ranbaxy – Japan export market was also tapped for API. – In the year under review the Company launched Dosage Formulations of Valacyclovir,Oxycodone & Sumatreptan in the International markets. – Ranbaxy plans to further leverage its association with Daiichi Sankyo (DS), its Holding Company, to launch DS’s products in other export markets including 6 African countries for which plans are already underway. Rs. Million Year ended Year ended December 31, December 31, 2009 2008 Earnings 31,364.51 28,537.83 Outgo 13,100.41 14,403.56
50
FORM - A
Ranbaxy Laboratories Limited
Form for disclosure of particulars with respect to conservation of energy Current Year 2009 A. Electricity and Fuel Consumption 1. Electricity (a) Purchased Units (KWH) Total Amount (Rs. Million) Rate/Unit (Rs.) (b) Own Generation i) Through Diesel Generator Unit (KWH) Unit per Ltr. of Diesel Oil Cost/Unit ii) Through Steam Turbine/Generator 2 3 Coal (Specify quality and where used) Furnace Oil Qty. (K. Ltrs.) Total Amount (Rs Million) Average Rate (Rs. per Ltr.) 4 Others/internal generation Units Electricity Active Pharmaceutical Ingredients (kwh per kg) Dosage Forms (kwh per 1000 packs) Standards (if any) No specific standards consumption per unit depends on product mix B. Consumption per unit of production Current Year Previous Year 12,308,322 3.48 Rs. 8.29 Not Applicable Not Applicable 16,364 378.90 Rs. 23.15 Not Applicable 8,070,600 3.61 Rs. 8.94 Not Applicable Not Applicable 16,188 476.62 Rs. 29.44 Not Applicable 132,372,169 561.87 Rs. 4.24 127,981,552 521.70 Rs. 4.08 Previous Year 2008
91.36 105.78
70.55 91.73
Furnace Oil Active Pharmaceutical Ingredients (Ltrs per Kg) Dosage Forms K.Ltrs per 1000 packs) Coal Others
11.05 0.01 Not Applicable Not Applicable
8.95 0.01 Not Applicable Not Applicable
51
TEN YEARS
AT A GLANCE
2000 Results for the year Sales Index Exports Index Gross Profit Index Profit before Tax Index Profit after Tax Index Equity Dividend Index Equity Dividend (%) Earning per share (Rs.) Year-end Position Gross Block+ Index Net Block Index Net Current Assets Index Net Worth Index Share Capital Reserve & Surplus Book value per share (Rs.) No. of Employees 9241.5 1.0 6443.7 1.0 8257.7 1.0 15826.5 1.0 1158.9 14667.6 136.56 5784 9278.2 1.0 6130.5 1.0 7454.5 0.9 16069.7 1.0 1158.9 14910.8 138.66 6424 10448.8 1.1 6753.9 1.0 9564.4 1.2 18828.1 1.2 1854.5 16973.6 17366.6 1.0 8019.6 1.0 3177.1 1.0 1945.4 1.0 1824.4 1.0 869.2 1.0 75 15.74 20545.4 1.2 10290.8 1.3 3924.1 1.2 2777.7 1.4 2519.6 1.4 1158.9 1.3 100 21.86 28197.9 1.6 18502.9 2.3 7304.8 2.3 7133.8 3.7 6235.8 3.4 2001 2002
Ranbaxy Laboratories Limited
Rs. Million 2003 2004 2005 2006 2007 2008 2009
35334.9 2.0 24674.6 3.1 10061.4 3.2 9563.7 4.9 7947.8 4.4 3156.3 3.6 170 42.61
36143.4 2.1 24562.4 3.1 7211.7 2.3 6283.4 3.2 5284.7 2.9 3162.6 3.6 170 28.26
35366.5 2.0 23371.1 2.9 3178.8 1.0 2013.6 1.0 2237.0 1.2 3166.7 3.6 170 5.68 ^
40587.1 2.3 27175.7 3.4 6081.7 1.9 4429.8 2.3 3805.4 2.1 3168.9 3.6 170 9.87 ^
41844.9 2.4 26411.2 3.3 9865.6 3.1 7744.1 4.0 6177.2 3.4 3171.5 3.6 170 11.31
43083.6 2.5 28109.8 3.5 (5713.3) (1.8) (16190.8) (8.3) (10448.0) (5.7) 0.0 0.0 0 -27.29
45211.8 2.6 28377.5 3.5 11002.7 3.5 10619.2 5.5 5719.8 3.1 0 0 0 10.74
2434.0 $ 2.8 150 28.86
12470.6 1.3 8017.9 1.2 13302.9 1.6 23217.8 1.5 1855.4 21362.3 125.13 6797
16669.4 1.8 11417.4 1.8 9466.8 1.1 25095.1 1.6 1858.9 23236.2 135.00 7195
22321.6 2.4 16328.1 2.5 11281.0 1.4 23773.0 1.5 1862.2 21910.8 63.84 ^ 7174
24354.5 2.6 17359.1 2.7 12630.0 1.5 23500.1 1.5 1863.4 21636.7 63.05 ^ 8020
25889.0 2.8 17969.4 2.8 12588.2 1.5 25383.9 1.6 1865.4 23518.6 68.04 8141
28155.1 3.0 18854.4 2.9 8493.6 1.0 37167.7 2.3 2101.9 35065.8 88.42 8536
30358.36 3.3 20083.2 3.1 12210.7 1.5 41346.1 2.6 2102.09 39243.96 98.35 9655
101.52 $$ 6297
Index : No. of times + Includes Capital Work-in-Progress * * * After 1:1 Bonus Issue and conversion of outstanding warrants. $ Includes Interim Dividend Rs 5 per share, prior to issue of bonus shares and Final Dividend of Rs 10 per share $$ Post issue of Bonus shares in the ratio of 3 for 5 in October, 2002. ^ After Share split Sales are stated net of excise duty recovered from 2002 onwards Earning per share are stated on fully diluted basis from 2002 onwards Sales are stated net of excise duty and discount from 2008 onwards
52
AUDITORS’
REPORT
Ranbaxy Laboratories Limited
To the Members of Ranbaxy Laboratories Limited a) We have audited the attached Balance Sheet of Ranbaxy Laboratories Limited ("the Company") as at 31 December 2009 and also the Profit and Loss Account and the Cash Flow Statement (together known as 'financial statements') of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. b) We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. c) As required by the Companies (Auditor's Report) Order, 2003 ('the Order') issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, ("the Act"), we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. d) Further to our comments in the Annexure referred to above, we report that: (i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (iii) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (iv) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act, to the extent applicable; (v) on the basis of written representations received from the directors of the Company as at 31 December 2009, and taken on record by the Board of directors, we report that none of the directors is disqualified as at 31 December 2009 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act; e) Without qualifying our opinion, we draw attention to note 2 on schedule 23 to the financial statements. Consequent to the Food and Drug Administration (FDA) of United States of America import alerts and the FDA letter dated 25 February 2009 imposing the Application Integrity Policy, the Company had recorded a provision of Rs. 2,631.11 million during the year ended 31 December 2008 towards loss of inventory in hand, expected higher sales returns and expected reversal of export benefits. The basis and assumptions used by the management in calculating these provisions were based on significant judgment and estimates due to involvement of uncertainty and actual result could have been different from management's estimate. During the year, the Company carried out a reassessment and determined that the related provision of Rs. 937.81 million is no longer required and accordingly the same has been written back in the Profit and Loss Account. f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Act, in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of the affairs of the Company as at 31 December 2009; ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826
Place : Gurgaon Dated : 25 February 2010
53
Ranbaxy Laboratories Limited
Annexure to the Auditors’ Report
(Referred to in our report of even date) (i) (a) (b) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification. Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption. The inventory, except goods-in-transit, has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.
(c) (ii) (a) (b) (c) (iii) (iv)
The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories and fixed assets and with regard to the sale of goods and services. In our opinion and according to the information and explanations given to us, we have not observed any major weakness in the internal control system during the course of the audit. In our opinion and according to the information and explanations given to us, there are no contracts ad arrangements, the particulars of which need to be entered into the register maintained under section 301 of the Companies Act, 1956. The Company has not accepted any deposits from the public.
(v)
(vi)
(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules prescribed by the Central Government for maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, in respect of its 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 records. (ix) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted / accrued in the books of account in respect of undisputed statutory dues including Provident fund, Investor education and protection fund, Employees' state insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and other material statutory dues have generally been regularly deposited during the year by the Company with the appropriate authorities. There were no dues on account of cess under section 441A of the Companies Act, 1956, since the date from which the aforesaid section comes into force has not yet been notified by the Central Government. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident fund, Investor education and protection fund, Employees' state insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and other material statutory dues were in arrears as at 31 December 2009 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues of Income tax, Wealth tax and Customs duty which have not been deposited with the appropriate authorities on account of any dispute. According to the information and explanations given to us, the following dues of Sales tax, Service tax and Excise duty have not been deposited by the Company on account of disputes:
54
Ranbaxy Laboratories Limited
Name of the statute Central Excise Act, 1944
Nature of dues Central Excise (Cenvat, Interest and Penalty) Service Tax (Penalty)
Amount (Rs. in Million) 44.42
Period to which the amount relates 2001-2006
Forum where dispute is pending/Remarks Delhi high court/ CESTAT/ Commissioner/ Joint Secretary Commissioner, Indore Sales Tax Tribunal
The Finance Act, 1994/2003 (Service Tax)
3.07
2006-2007
Punjab General Purchase Tax Sales Tax Act, 1948. (Interest and Penalty) U.P Sales Tax Act, 1948. Sales Tax
2.25
1989-90 and 1990-91 2008-09
3.67
Sales tax tribunal Additional Commissioner
In our opinion, the Company's accumulated losses at the end of the financial year are less than fifty percent of its net worth. Further, the Company has not incurred cash losses during the financial year. However, the Company had incurred cash loss during the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to its bankers or debenture holders. There were no dues to financial institutions. (xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi / mutual benefit fund / society. (xiv) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. (xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. (xvi) In our opinion and according to the information and explanations given to us, the term loans taken by the Company have been applied for the purpose for which they were raised. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on short-term basis have not been used for long-term investment. (xviii)The Company has not made any preferential allotment of shares during the year to Companies / firms/ parties covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company issued non-convertible debentures during the year which were redeemed before the year end. According to the information and explanations given to us, security was not created in respect of these debentures as they were redeemed before expiry of the time limit for creation of security as stipulated in the letter of allotment. (xx) The Company has not raised any money by public issues during the year. (xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit. For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
(x)
55
Ranbaxy Laboratories Limited
Balance Sheet as at 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
Schedule SOURCES OF FUNDS Shareholders’ funds Share capital Equity share warrants Share application money pending allotment Reserves and surplus Loan funds Secured loans Unsecured loans
As at 31 December 2009
As at 31 December 2008
1 23(3)(b) 2
2,102.09 1,756.59 1.95 37,485.42 41,346.05 1,758.27 31,725.53 33,483.80 74,829.85
2,101.85 1,756.59 – 33,309.22 37,167.66 2,422.72 34,565.27 36,987.99 74,155.65
3 4
APPLICATION OF FUNDS Fixed assets 5 Gross block Less :Accumulated depreciation, amortisation and impairment Net block Capital work-in-progress (including capital advances) 23(5) Investments Deferred tax assets (net) Current assets, loans and advances Inventories Sundry debtors Cash and bank balances Loans and advances Other current assets Less: Current liabilities and provisions Current liabilities Provisions Net current assets Significant accounting policies 22 Notes to the financial statements 23 The schedules referred to above form an integral part of the Balance Sheet 6 7 8 9 10 11 12
26,209.20 10,275.15 15,934.05 4,149.16 20,083.21 38,336.90 4,199.08 12,304.82 15,346.48 7,541.24 9,648.16 1,558.74 46,399.44 26,558.44 7,630.34 34,188.78 12,210.66 74,829.85
23,867.45 9,300.67 14,566.78 4,287.66 18,854.44 36,180.28 10,627.38 11,985.19 10,245.35 19,349.39 6,745.27 1,345.54 49,670.74 35,679.74 5,497.45 41,177.19 8,493.55 74,155.65
13 14
As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
56
Ranbaxy Laboratories Limited
Profit and Loss Account for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
For the year ended 31 December Schedule 2009 INCOME Operating income Less : Excise duty Other income Net foreign exchange gain (other than on loans) EXPENDITURE Materials consumed Personnel expenses Operating and other expenses Net foreign exchange loss (other than on loans) 15 47,974.89 147.29 47,827.60 2,763.87 1,790.40 52,381.87 20,480.28 7,284.04 13,614.82 – 41,379.14 11,002.73
For the year ended 31 December 2008 45,031.48 310.01 44,721.47 2,086.64 – 46,808.11 20,453.61 6,087.86 15,715.50 10,264.46 52,521.43 (5,713.32)
16 23(11)
17 18 19 23(11)
Profit/ (loss) before interest, exchange (gain)/ loss (net) on loans, depreciation, amortisation, impairment and tax charge/(benefit) Interest 23(6) Exchange (gain)/ loss (net) on loans Profit/ (loss) before depreciation, amortisation, impairment and tax charge/(benefit) Depreciation, amortisation and impairment 5 Profit/ (loss) before tax Tax charge / (benefit) 20 Profit/ (loss) after tax Balance brought forward Transfer from foreign projects reserve Deficit carried forward to Schedule 2 Earnings/ (loss) per share (Rs.) 21 Basic - Par value of Rs. 5 per share Diluted - Par value of Rs. 5 per share Significant accounting policies 22 Notes to the financial statements 23
394.66 (1,493.13) 12,101.20 1,482.03 10,619.17 4,899.33 5,719.84 (8,265.83) 13.76 (2,532.23) 13.61 10.74
1,458.28 7,474.52 (14,646.12) 1,544.69 (16,190.81) (5,742.79) (10,448.02) 2,162.69 19.50 (8,265.83) (27.29) (27.29)
The schedules referred to above form an integral part of the Profit and Loss Account
As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
57
Ranbaxy Laboratories Limited
Cash flow statement for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
A. CASH FLOW FROM OPERATING ACTIVITIES Net profit/ (loss) before taxes Adjustments for : Depreciation, amortisation and impairment Fixed assets written off Deferred employees compensation charge / (reversal) Unrealised foreign exchange loss/ (gain) Fair valuation (gain)/ loss on derivatives Dividend income Profit on disposal of investments Unclaimed balances/ excess provision written back Profit on sale of assets (net) Reversal of provision for diminution in value of long term investments Provision for diminution in value of current investment Interest expense Interest income Investment written off Provision / write-off of doubtful debts, advances and other current assets Operating loss before working capital changes Adjustments for : Increase in inventories Increase in sundry debtors (Increase) / decrease in loans and advances Increase in trade / other payables Increase in other current assets Cash generated from/(used in) operating activities before taxes Direct taxes paid (net of refunds) Net Cash used in operating activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Proceeds from sale of fixed assets Sale of other investments Investment in subsidiaries Decrease / (increase) in fixed deposit with a maturity more than 90 days Sale proceeds of investments (net of expenses) Decrease / (increase) in loans / advances to subsidiaries (Increase) / decrease in secured loans to employees Interest received Dividend received Net cash (used in) / generated from investing activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of capital (including premium) Proceeds from equity share warrants Decrease in short term bank borrowings (net) Decrease in long term borrowings Increase in other borrowings (net) Short term borrowings from non convertible debentures Re-payment of short term borrowings of non convertible debentures Interest paid Issue expenses of equity share capital and warrants Dividend paid Tax on dividend Net cash (used in) / generated from financing activities INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Effect of exchange (gain) / loss on cash and cash equivalents Cash and cash equivalents at the end of the year Notes : Cash and cash equivalents include : Cash, cheques in hand and remittances in transit With banks in : Current accounts Deposit accounts Cash and cash equivalents at the end of the year Add: Fixed deposit pledged (restricted cash) Fixed deposit with original maturity of more than 90 days Unclaimed dividend Cash and bank balances at the end of the year For the year ended 31 December 2009 10,619.17 1,482.03 12.00 (8.17) (1,818.26) (8,932.47) (9.54) (420.33) (1,116.76) (237.34) – 53.92 394.66 (945.47) – 48.71 (11,497.02) (877.85) (319.64) (5,410.08) (112.09) 2,453.38 (14.42) (3,402.85) (4,280.70) (2,373.64) (6,654.34) (2,747.61) 358.56 – (2,404.49) 3,865.19 614.28 324.42 (8.02) 849.34 9.54 861.21 13.44 – (1,737.94) – 15.17 2,000.00 (2,000.00) (432.09) – – – (2,141.42) (7,934.55) 8,622.07 1.79 689.31 68.05 121.26 500.00 689.31 0.79 6,784.81 66.33 7,541.24 For the year ended 31 December 2008 (16,190.81) 1,544.69 50.28 3.75 5,454.50 7,702.14 (11.01) (42.83) (177.19) (943.98) (9.86) – 1,458.28 (866.76) 93.42 166.38 14,421.81 (1,769.00) (2,224.48) (788.34) 905.12 920.56 (204.55) (1,391.69) (3,160.69) (736.11) (3,896.80) (2,683.08) 1,147.05 (4,349.96) (2,551.24) (10,650.00) 3,055.72 (1,825.18) 1.26 740.16 11.01 (17,104.26) 34,389.19 1,756.59 (3,517.67) (498.53) 33.40 16,870.00 (16,870.00) (1,435.31) (201.40) (2,239.42) (380.59) 27,906.26 6,905.20 1,721.37 (4.50) 8,622.07 222.48 199.59 8,200.00 8,622.07 0.75 10,650.00 76.57 19,349.39
As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place Dated : Gurgaon : 25 February 2010
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place Dated : Gurgaon : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
58
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 1 Share Capital Authorised 598,000,000 (Previous year 598,000,000) Equity shares of Rs. 5 each 100,000 (Previous year 100,000 ) Cumulative preference shares of Rs 100 each Issued, subscribed and paid up 420,417,358 (Previous year 420,369,753) Equity shares of Rs. 5 each fully paid
As at 31 December 2009
As at 31 December 2008
2,990.00 10.00 3,000.00 2,102.09
2,990.00 10.00 3,000.00 2,101.85
2,102.09 2,101.85 Notes: 1. Issued, subscribed and paid up capital includes: 293,698,988 (previous year 293,698,988) equity shares of Rs. 5 each allotted as fully paid bonus shares by capitalisation out of share premium and reserves. [ii] 6,562,308 (previous year 6,562,308) equity shares of Rs. 5 each allotted as fully paid up pursuant to a contract without payment being received in cash. [iii] 5,501,185 Global Depository Shares (GDSs) (previous year 7,227,121) representing 5,501,185 (previous year 7,227,121) equity shares of Rs. 5 each constituting 1.31% (previous year 1.72%) of the issued subscribed and paid-up share capital of the Company. 2. 268,711,323 (previous year 268,711,323) equity shares of Rs. 5 each are held by Daiichi Sankyo Company Limited, Japan, the holding company, also being the ultimate holding company. Also refer to note 3 on schedule 23. SCHEDULE - 2 Reserves and surplus (a) Capital reserve (b) Amalgamation reserve (c) Share premium account Balance at the beginning of the year Add : Received during the year Add : Transferred from employees stock option outstanding Less : Utilised for preferential allotment issue expenses Less : Premium payable on redemption of Zero Coupon Foreign Currency Convertible Bonds (FCCBs) Less : Tax (benefit)/reversal for premium payable on redemption of FCCBs Also refer to note on schedule 7 (d) Foreign projects reserve Balance at the beginning of the year Less: Transfer to Profit and Loss account (e) Hedging reserve (net of tax) Balance at the beginning of the year Utilised / (additions) during the year
5.41 43.75 37,862.17 11.26 1.89 37,875.32 – 1,083.41 1,227.17 35,564.74
5.41 43.75 5,010.50 34,164.47 31.45 39,206.42 201.40 1,731.33 (588.48) 37,862.17
18.35 13.76 4.59 (792.58) 763.85 (28.73)
37.85 19.50 18.35 – (792.58) (792.58)
59
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
As at 31 December 2009 (f) Employees stock option outstanding Balance at the beginning of the year Add: Amortisation/ (reversal) of deferred employee compensation Less: Transferred to share premium on exercise of stock option Also refer to note 4 on schedule 23 (g) General reserve Balance at the beginning of the year Less: Transitional loss recognised pursuant to early adoption of Accounting Standard - 30 “Financial Instruments: Recognition and Measurement” (h) Deficit brought forward from Profit and Loss Account SCHEDULE - 3 Secured loans Loans from banks Note: The above is secured against inventories, sundry debtors and moveable assets, both present and future. SCHEDULE - 4 Unsecured loans Short term loans from banks Other loans Zero coupon foreign currency convertible bonds (FCCB)* From Banks# From Others# Notes : * The Company has outstanding FCCBs aggregating to US $ 440 million. The bondholders have an option to convert FCCBs into equity shares of the Company at a price of Rs. 716.32 per share (subject to adjustment, if any) with a fixed exchange rate of Rs. 44.15 per US $ at any time on or after 27 April 2006 but before 9 March 2011. Further, these FCCBs may be redeemed, in whole, at the option of the Company at any time on or after 18 March 2009, but on or before 6 February 2011, subject to the satisfaction of certain conditions. These FCCBs are redeemable on 18 March 2011, at a premium of 26.765 percent (net of withholding tax) of their principal amount unless previously converted, redeemed, purchased or cancelled. # Other loans due for repayment within one year From banks From others 67.67 (8.17) 59.50 1.89 57.61
As at 31 December 2008 95.75 3.37 99.12 31.45 67.67
4,370.28
16,151.24
– 4,370.28 (2,532.23) 37,485.42
11,780.96 4,370.28 (8,265.83) 33,309.22
1,758.27 1,758.27
2,422.72 2,422.72
4,676.95 20,475.40 6,395.71 177.47 31,725.53
6,257.78 21,379.60 6,765.59 162.30 34,565.27
1,112.19 19.78
– 14.83
60
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 5
Gross block Additions* Deletions/ adjustments As at 31 December 2009** As at 1 January 2009 Net block As at 31 December 2009** As at 31 December 2008
Fixed assets
Description
As at 1 January 2009
Accumulated depreciation, amortisation and impairment For the Deletions/ As at year $ adjustments 31 December 2009**
173.69 259.49 3,064.45 16,858.48 1,001.69 405.09 – 280.16 159.34 – 2,982.52 1,669.60 416.95 23,867.45 7,919.59 0.03 – 640.77 912.86 211.00 26,209.20 426.44 200.70 9,300.67 107.78 10.30 1,482.03 1,544.69 – 260.13 361.74 798.30 361.74 666.38 – 44.11 – 260.13 0.01 – 507.55 163.61
– – 628.44 1,768.80 65.08 80.70
– – 0.72 241.04 19.82 119.03
173.69 259.49 3,692.17 18,386.24 1,046.95 366.76
– – 517.75 6,756.37 272.58 98.71
– – 85.80 1,137.43 60.01 36.60
– – 0.30 200.08 8.23 38.80
– – 603.25 7,693.72 324.36 96.51 361.74 450.36 534.21 211.00 10,275.15 9,300.67
173.69 259.49 3,088.92 10,692.52 722.59 270.25 – 347.94 378.65 – 15,934.05 14,566.78
173.69 259.49 2,546.70 10,102.11 729.11 306.38 – 111.89 327.11 10.30 14,566.78
Tangible assets Land – Freehold # – Leasehold Buildings Plant and machinery Furniture and fixtures Vehicles Intangible assets Product development @ Patent, trade marks, designs and licences @@ Software @@ Non compete Total
361.74 778.27
Ranbaxy Laboratories Limited
61
Gross block 1.23 48.39 85.03 85.03 11.63 – Accumulated depreciation Net block 1.23 36.76 – Remaining useful lives 1-5 years 1-6 years
753.55 211.00 23,867.45
Previous Year
22,614.80
Notes : * Additions to fixed assets include Rs. 221.98 (previous year Rs. 558.28) towards assets used for research and development. ** The above includes the following assets held for disposal, which are being carried at the lower of their net block and net realisable value:
Description
Land
Building
Plant and machinery
There were no assets which were held for disposal as at 31 December 2008
# @
$
@@
Freehold land includes land valued at Rs. 25.48 (previous year Rs. 25.48) pending registration in the name of the Company. The Company during the year provided for an impairment loss of Rs. nil (previous year Rs. 331.32 ) on certain product development rights. The impairment loss was determined owing to the prevailing market conditions of the underlying molecules for which the product development rights were acquired. During the current year, consequent to a change in the probability for extension of lease term for a leased property, the Company has recorded accelerated depreciation on assets constructed on that leased property amounting to Rs. 141.70 (previous year Rs. nil). Remaining useful lives of intangible assets as at 31 December 2009 is as under:
Description
Patent, trade marks, designs and licences Software
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
Schedule - 6
Investments CURRENT Class of shares Trade : Quoted Krebs Biochemicals & Industries Limited Face value per share Number of shares 2009 2008
As at 31 December 2009 2008
Equity shares
Rs. 10
1,050,000
–
35.33 35.33
– –
LONG TERM Investments in shares of companies (fully paid-up) Trade : Quoted Zenotech Laboratories Limited Equity shares Krebs Biochemicals & Industries Limited Equity shares Unquoted Shimal Research Laboratories Limited Shivalik Solid Waste Management Limited Biotech Consortium India Limited Nimbua Greenfield (Punjab) Limited Non trade : Quoted Fortis Healthcare Limited The Great Eastern Shipping Company Limited Subsidiary companies: Domestic Vidyut Investments Limited Ranbaxy Drugs Limited Ranbaxy Drugs and Chemicals Company Solus Pharmaceuticals Limited Rexcel Pharmaceuticals Limited Gufic Pharma Limited Ranbaxy Life Sciences Research Limited Ranbaxy SEZ Limited Overseas Ranbaxy (Netherlands)BV., The Netherlands # Ranbaxy (Hongkong) Ltd., Hongkong Ranbaxy Pharmacie Generiques SAS, France Ranbaxy (Guangzhou China) Ltd., China Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy (Nigeria) Ltd.,Nigeria Ranbaxy Unichem Co. Ltd., Thailand
Rs. 10 Rs. 10
16,127,293 –
16,127,293 1,050,000
2,463.53 – 2,463.53 934.00 0.20 0.50 2.50 937.20
2,463.53 89.25 2,552.78 934.00 0.20 0.50 2.50 937.20
Equity shares Equity shares Equity shares Equity shares
Rs. 10 Rs. 10 Rs. 10 Rs. 10
9,340,000 20,000 50,000 250,000
9,340,000 20,000 50,000 250,000
Equity shares Equity shares
Rs. 10 Rs. 10
14,097,660 500
14,097,660 500
140.98 0.03 141.01
140.98 0.03 141.01
Equity shares Equity shares 10% NCRP ** Equity shares Equity shares Equity shares Equity shares Equity shares Preference Share Equity shares Ordinary shares Equity shares Equity shares Capital contribution Ordinary shares Ordinary shares Ordinary shares
Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 10 Rs. 100 Re. 1 Rs. 1,000 Rs. 10 EUR 100 HK $ 1 9 US $ 5,900,000 RM 1 Naira 1 Bahts 100
25,008,400 3,100,020 250 3,100,000 14,900,700 12,500,000 4,900 24,500,000 2,000,000 50,000 3,939,716 2,400,000 800,000 3,189,248 13,070,648 206,670
25,008,400 3,100,020 250 3,100,000 14,900,700 12,500,000 4,900 24,500,000 2,000,000 50,000
250.08 31.00 * 17.25 783.01 735.00 535.22 24.50 200.00 0.50
250.08 31.00 * 17.25 783.01 735.00 535.22 24.50 200.00 0.50 26,543.26 9.84 3,400.02 193.95 36.56 7.40 21.20 32,788.79 36,419.78 (239.50) 36,180.28 2,693.79 2,679.33 33,486.49
3,939,716 28,947.75 2,400,000 9.84 800,000 3,400.02 – 3,189,248 36.56 13,070,648 7.40 206,670 21.20 34,999.33 38,576.40
Less: Provision for diminution in value of long term investments Aggregate book value of quoted investments Market value of quoted investments Aggregate book value of unquoted investments (net of provision for dimunition) Investments (bank certificates of deposit) purchased and sold during the year – ABN Amro Bank – Corporation Bank – Federal Bank – IDBI Bank – Punjab National Bank – State Bank of India Notes * Rounded off to Rs. Nil. ** NCRP denotes Non convertible redeemable preference shares. # include Rs. 7,028.59 (previous year Rs. 4,624.10) paid as share premium reserve.
(239.50) 38,336.90 2,639.88 3,807.18 35,697.02
– – – – – –
479.32 246.22 147.34 728.61 883.26 480.03
62
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 7 Deferred tax assets (net) Deferred tax asset arising on account of : Provision for doubtful debts and advances Provision for employee benefits FCCB loan revaluation Revlauation of External commercial borrowings (ECBs) FCCB redemption premium charged to share premium account Tax losses carried forward Others Less: Deferred tax liability arising on account of : Depreciation, amortisation and impairment Others Less: Deferred tax asset not carried forward Deferred tax assets (net)
As at 31 December 2009 134.06 80.91 – 237.59 – 7,960.24 56.73 8,469.53 2,807.68 165.94 2,973.62 1,296.83 4,199.08
As at 31 December 2008 117.96 83.24 413.77 – 1,227.17 11,655.67 116.65 13,614.46 2,821.14 165.94 2,987.08 – 10,627.38
Note: On the basis of profit from operations made subsequent to year end, profit on sale of materials relating to a First to File (FTF) product in the United States of America, milestone payment from an exclusivity settlement and certain other factors, the Company believes that there is virtual certainty in respect of the carrying amount of net deferred tax asset. Consequently, an amount of Rs. 1,296.83, representing excess over the amount arrived at on the basis of test of virtual certainty, has not been recognized as deferred tax asset. Further, due to a similar assessment as mentioned above, the deferred tax asset of Rs.1,227.17 relating to premium payable on redemption of FCCBs has not been carried forward with corresponding adjustment through Share Premium Account. SCHEDULE - 8 Inventories Stores and spares Raw materials Packaging materials Finished goods – Own manufactured – Others Work-in-progress SCHEDULE - 9 Sundry debtors* (Considered good except where provided for) Debts outstanding for a period exceeding six months Secured Unsecured – Considered good – Considered doubtful Other debts – Secured – Unsecured considered good Less : Provision for doubtful debts
74.15 4,720.32 398.64 3,147.26 698.07 3,266.38 12,304.82
92.31 4,707.81 412.93 3,256.88 719.42 2,795.84 11,985.19
0.65 2,167.05 294.75 2,462.45 330.71 12,848.07 13,178.78 15,641.23 294.75 15,346.48
0.01 2,086.71 252.74 2,339.46 296.40 7,862.23 8,158.63 10,498.09 252.74 10,245.35
* Refer to note 15 of schedule 23 for dues from parties parties under the same management as defined under Section 370(IB) of the Companies Act, 1956.
63
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 10 Cash and bank balances Cash in hand Cheques in hand Remittances in transit Balances with scheduled banks in: – Current accounts – Deposit accounts # – Unclaimed dividend accounts Balances with non-scheduled banks in: – Current accounts *
As at 31 December 2009 4.75 3.35 59.95 53.16 7,285.60 66.33 68.10 7,541.24
As at 31 December 2008 4.98 – 217.50 122.28 18,850.75 76.57 77.31 19,349.39
# Includes deposit receipts of Rs. 0.79 (Previous year Rs 0.75) pledged with Government Authorities. * Closing and maximum balance outstanding at any time during the year on current accounts with non scheduled banks is given hereunder: Balance Maximum balance during the year ended
1 2 3
4 5 6 7 8 9 10 11 12 13 14 15 16
AB Vilnius Bankas, Kaunas, Lithuania ABN AMRO Bank, Moscow, Russia Banque Internationale Pour Le Commerce Et L'industrie du Cameroun, Douala, Cameroon Barclays Bank of Kenya Ltd, Nairobi Kenya Bank Handlowy W Warszawie SA, Warsaw, Poland Calyon Corporate, Ho Chi Minh City, Vietnam Calyon Corporate, Kiev, Ukraine Citi Bank, Almaty, Kazakhstan Citi Bank, Sofia, Bulgaria Credit Du Maroc, Boulevard Mohammed V. Casablanca, Morocco. Myanmar Investment and Commercial Bank Yangon, Myanmar Societe Generale De Banques Au Cameroun Douala, Cameroon The HongKong & Shanghai Banking Corporation, Singapore Standbic Bank, Nairobi, Kenya Standbic Bank Zimbabwe Limited Causeway Zimbabwe, Harare The Hongkong & Shanghai Banking Corporation, Dubai, UAE
As at As at 31 December 31 December 31 December 31 December 2009 2008 2009 2008 10.85 6.94 17.73 18.28 10.21 8.43 93.14 158.13 4.41 0.63 7.56 4.43
– 0.54 2.71 19.17 0.02 1.82 0.49 2.17 5.13 – 5.86 1.77 2.95 68.10
1.44 16.24 2.86 23.21 4.92 0.80 0.50 1.94 4.50 0.56 0.50 0.82 3.02 77.31
1.44 16.24 3.49 63.83 21.36 5.10 0.90 6.67 9.52 0.60 7.47 3.67 6.73
1.44 16.57 2.93 61.86 10.17 2.64 1.16 4.90 8.11 7.50 6.35 2.53 12.18
64
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 11 Loans and advances (Considered good, except where provided for) Secured loans to employees * Unsecured loans and advances: Loans to employees Advances recoverable in cash or in kind or for value to be received – Considered good – Doubtful Balances with central excise and customs Loans and advances to subsidiaries# Minimum alternative tax (MAT) credit entitlement Advance income-tax (net of provision for tax Rs. 1,814.50 as at 31 December 2008) Less : Provision for doubtful advances
As at 31 December 2009 52.35 93.30 1,285.43 73.83 1,962.65 1,533.78 4,720.65 – 9,721.99 73.83 9,648.16
As at 31 December 2008 44.33 85.07 1,274.24 70.33 1,873.14 1,858.20 1,219.00 391.29 6,815.60 70.33 6,745.27
* Includes amount due from an officer of the Company of Rs. 4.02 (previous year 0.34). The maximum balance at any time during the year was Rs. 4.02 (previous year Rs. 0.43). # Refer to note 18 of schedule 23 for loans and advances to parties under the same management as defined under Section 370(IB) of the Companies Act, 1956. SCHEDULE - 12 Other current assets (Unsecured, considered good except where provided for) Export incentives accrued Exchange gain accrued on forward contracts Insurance claims receivable Interest accrued but not due Others – Considered good – Doubtful Less : Provision for doubtful other current assets SCHEDULE - 13 Current liabilities Sundry creditors^ – Dues to micro and small enterprises@ – Others # Book overdraft Interest accrued but not due on loans Unpaid dividend Payable towards unrealised loss on currency options Advance from customers Other liabilities $ ^ # $ @
664.09 559.63 12.41 236.86 85.75 25.84 1,584.58 25.84 1,558.74
654.69 458.80 8.42 140.74 82.89 23.97 1,369.51 23.97 1,345.54
Includes due to subsidiary companies / entities. Includes payable to employees such as salary, bonus etc. Includes statutory dues payable in respect of employees benefits such as provident fund, ESI etc. The Ministry of Micro, Small and Medium Enterprises has issued an Office Memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Based on the information available with the management, there are no overdues outstanding to micro and small enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006. Further, the Company has not received any claim for interest from any supplier under the said Act.
21.69 9,053.41 49.78 36.67 66.33 16,669.65 317.97 342.94 26,558.44 371.62 140.52 7.54
19.38 8,096.00 265.72 74.10 76.57 26,760.86 69.05 318.06 35,679.74 2,120.72 129.96 0.59
65
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
As at 31 December 2009 SCHEDULE - 14 Provisions Employee retirement benefits # Income-tax (net of advance tax Rs. 2,760.20 as at 31 December 2009) Premium payable on redemption of FCCB # Also refer to note 9 on schedule 23 Year ended 31 December 2009
As at 31 December 2008
2,108.31 828.24 4,693.79 7,630.34
1,887.07 – 3,610.38 5,497.45 Year ended 31 December 2008
SCHEDULE - 15 Operating income Sales Domestic Export Royalty, technical know-how and product development Export incentives Income from settlement agreements Others
16,981.62 28,377.47 45,359.09 476.68 546.73 1,441.15 151.24 2,615.80 47,974.89
15,454.78 27,938.85 43,393.63 439.34 870.73 172.69 155.09 1,637.85 45,031.48
SCHEDULE - 16 Other income Interest* [gross of tax deducted at source Rs.179.58 (previous year Rs. 194.35)] Dividend from overseas subsidiaries [gross of tax deducted at source Rs. 0.43 (previous year Rs. 0.43)] Profit on sale of assets [net of loss Rs. 26.54 (previous year Rs. 19.45)] Profit on sale of current investments Profit on sale of investment in subsidiary Unclaimed balances / excess provision written back (Also refer to note 2 on schedule 23) Reversal of deferred employees compensation Reversal of provision for diminution in the value of long term investments Miscellaneous Notes : * Interest includes: Current investments - non trade Income-tax refunds Loans and deposits: – Short term deposits with banks – Long term deposits – Subsidiary companies – Employees loans – Others
945.47 9.54 237.34 – 420.33 1,116.76 8.17 – 26.26 2,763.87
866.76 11.01 943.98 42.83 – 177.19 – 9.86 35.01 2,086.64
– 2.35 936.35 – 0.36 5.51 0.90 945.47
0.12 2.36 569.44 8.33 281.75 4.03 0.73 866.76
66
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 17 Materials consumed Raw materials consumed* Stores and spares consumed Packaging materials consumed Finished goods purchased Increase in work in progress and finished goods Opening stock Work-in-progress Finished goods – Own manufactured – Others Less : Closing stock Work-in-progress Finished goods – Own manufactured – Others Net increase Increase in excise duty *Includes site variation cost amounting to Rs. 412.60 (previous year Rs. nil) paid to subsidiaries. SCHEDULE - 18 Personnel expenses Salaries, wages and bonus Contribution to provident and other funds Workmen and staff welfare Amortisation of deferred employees compensation SCHEDULE - 19 Operating and other expenses Freight, clearing and forwarding Advertising and sales promotion Travel and conveyance Legal and professional (Refer to note 7 of Schedule 23) Market research Commission Communication Insurance Rent (refer to note 8 of schedule 23) Claims paid Rates and taxes Regulatory filing fee Printing and stationery Analytical charges Processing charges Excise duty Power and fuel Running and maintenance of vehicles
Year ended 31 December 2009 13,460.05 1,027.31 1,533.43 4,812.06
Year ended 31 December 2008 14,565.21 995.43 1,924.22 4,211.64
2,795.84 3,256.88 719.42 6,772.14
2,190.53 3,029.95 395.77 5,616.25
3,266.38 3,147.26 698.07 7,111.71 (339.57) (13.00) 20,480.28
2,795.84 3,256.88 719.42 6,772.14 (1,155.89) (87.00) 20,453.61
6,478.80 477.85 327.39 – 7,284.04
5,375.60 430.18 278.33 3.75 6,087.86
1,046.52 2,098.36 1,055.64 2,340.90 661.39 503.75 222.87 298.02 482.99 100.27 182.03 264.23 84.22 81.01 804.81 24.74 1,367.98 129.24
1,588.79 1,956.52 1,054.03 1,794.24 903.71 648.94 207.25 248.59 458.73 1,907.22 156.41 58.62 85.85 63.53 866.66 18.69 1,406.76 112.20
67
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
Year ended 31 December 2009 Repairs and maintenance – Buildings – Plant and machinery – Others Cash discounts Conferences and meetings Clinical trials Recruitment and training Fixed assets written off Investment written off Provision / write-off of doubtful debts, advances and other current assets Provision for diminution in value of current investment Miscellaneous expenses SCHEDULE - 20 Tax charge / (benefit) Current income-tax Minimum alternative tax credit entitlement Deferred tax charge/ (credit) Fringe benefit tax Tax - earlier years # # Net of credit adjusted of Rs. 6.50 (previous year Rs. 27.01) 35.92 138.90 339.74 54.46 77.11 454.89 124.26 12.00 – 48.71 53.92 525.94 13,614.82
Year ended 31 December 2008 43.29 116.03 336.97 55.04 110.79 509.52 118.53 50.28 93.42 166.46 – 578.43 15,715.50
3,546.90 (3,501.65) 4,807.81 35.50 10.77 4,899.33
225.80 (40.00) (6,083.41) 155.20 (0.38) (5,742.79)
Schedule - 21 Earnings per share Net profit/(loss) attributable to equity shareholders Net profit/(loss) available for equity shareholders Less: Exchange gain on FCCBs Number of weighted average equity shares Basic Effect of dilutive equity shares on account of * – Employees stock options outstanding – Foreign Currency Convertible Bonds Diluted Nominal value of equity share (Rs.) Earning/ (loss) per share (Rs.) Basic Diluted * Following are the potential equity shares considered to be anti dilutive in nature, hence these have not been adjusted to arrive at the dilutive earnings per share. – – – Employees stock options outstanding Foreign Currency Convertible Bonds Equity share warrants
5,719.84 (904.20) 4,815.64 420,380,856 819,480 27,119,165 448,319,501 5.00 13.61 10.74
(10,448.02) – (10,448.02) 382,846,324 – – 382,846,324 5.00 (27.29) (27.29)
– – 23,834,333
300,486 27,119,165 23,834,333
68
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standards as specified in the Companies (Accounting Standards) Rules, 2006, other pronouncements of the Institute of Chartered Accountants of India (ICAI), and the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India, to the extent applicable. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenses for the year. Examples of such estimates include provisions of future obligation under employee retirement benefit plans, the useful lives of fixed assets and intangible assets, etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future periods. Fixed assets and depreciation Fixed assets are stated at the cost of acquisition or construction, less accumulated depreciation and impairment losses. Cost comprises the purchase price and any attributable costs of bringing the assets to their working condition for intended use. Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily take a substantial period of time to be ready for their intended use, are capitalized. Depreciation on fixed assets, except leasehold improvements, is provided using the straight-line method and at the rates specified in Schedule XIV to the Companies Act, 1956, which are reflective of the estimated useful lives of the fixed assets. Leasehold improvements are depreciated over their estimated useful life, or the remaining period of lease from the date of capitalization, whichever is shorter. Depreciation is calculated on a pro-rata basis from the date of installation till the date the assets are sold or disposed off. Assets costing individually Rs. 5,000 or less are fully depreciated in the year of purchase. Intangible assets and amortization Intangible assets comprise patents, trademarks, designs and licenses, computer software, non-compete fee and product development rights, and are stated at cost less accumulated amortization and impairment losses, if any. These are amortized over their estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The management estimates the useful lives for the various intangible assets as follows: Years Patents, Trademarks, Designs and Licenses 5 Computer Software 6 Non-Compete Fee Term of the respective agreements ranging from 1 to 10 years Product Development 5 Impairment of assets The carrying values of assets are reviewed at each reporting date to determine if there is indication of any impairment. If any indication exists, the asset’s recoverable amount is estimated. For assets that are not yet available for use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount and is recognised in the Profit and Loss Account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised. Revenue recognition Revenue from sale of goods is recognized on transfer of significant risks and rewards of ownership to the customer. Revenue includes excise duty and is shown net of sales tax, value added tax and applicable discounts and allowances. Allowances for sales returns are estimated and provided for in the year of sales.
69
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Service income is recognised as per the terms of contracts with customers when the related services are rendered, or the agreed milestones are achieved. Income from royalty, technical know-how arrangements, exclusivity and patents settlement, licensing arrangements is recognized on an accrual basis in accordance with the terms of the relevant agreement. Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Dividend income is recognised when the right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on the time proportion method. Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at the lower of cost or fair value, determined on an individual investment basis. Long-term investments are carried at cost less any other-than-temporary diminution in value, determined, separately in respect of each category of investment. Inventories Raw material, packaging material and stores and spare parts are carried at cost. Cost includes purchase price, those subsequently recoverable by the enterprise from the concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used. The carrying cost of raw materials, packaging materials and stores and spare parts are appropriately written down when there is a decline in replacement cost of such materials and finished products in which they will be incorporated are expected to sold below cost. Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. The comparison of cost and net realisable value is made on an item by item basis. Cost of work in progress and manufactured finished goods is determined on weighted average basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on weighted average basis. Excise duty liability is included in the valuation of closing inventory of finished goods. Research and development costs Revenue expenditure on research and development is expensed out under the respective heads of account in the year in which it is incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use and sell the asset. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the Profit and Loss account as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Fixed assets used for research and development are depreciated in accordance with the Company’s policy. Materials identified for use in research and development process are carried as inventories and charged to Profit and Loss Account on issuance of such materials for research and development activities. Employee stock option based compensation The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of the options given to employees under the employee stock option schemes of the Company, is recognised on a straight line basis and amortised over the vesting period on a straight line basis.
70
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Foreign currency transactions Transactions in foreign currency are recorded at the exchange rate prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Profit and Loss Account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date, not covered by forward exchange contracts, are translated at year end rates. The resultant exchange differences are recognised in the Profit and Loss Account. Non-monetary assets are recorded at the rates prevailing on the date of the transaction. Profit and Loss items at representative offices located outside India are translated at the respective monthly average rates. Monetary Balance sheet items at representative offices at the balance sheet date are translated using the year-end rates. Non-monetary Balance Sheet items are recorded at the rates prevailing on the date of the transaction. Forward contracts are entered into to hedge the foreign currency risk of the underlying outstanding at the balance sheet date. The premium or discount on such contracts is amortized as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognized as an income or expense for the period. The exchange difference on such a forward exchange contract is calculated as the difference between (a) the foreign currency amount of the contract translated at the exchange rate at the Balance Sheet date, or the settlement date where the transaction is settled during the reporting period, and (b) the same foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognized in the Profit and Loss Account in the reporting period in which the exchange rates change. Derivative instruments and hedge accounting The Company uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. Forward and option contracts are fair valued at each Balance Sheet date. The resultant gain or loss (except relating to effective hedges) from these transactions are recognised in the Profit and Loss Account. The gain or loss on effective hedges is recorded in the Hedging Reserve (reported under Reserves and Surplus) until the transactions are complete. On completion, the gain or loss is transferred to the Profit and Loss account of that period. To designate a forward or options contract as an effective hedge, the management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. In the absence of being designated as an effective hedge, a gain or loss is recognised in the Profit and Loss Account. Employee benefits Short – term employee benefits All employee benefits payable / available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the Profit and Loss Account in the period in which the employee renders the related service. Defined benefit plans Defined benefit plans of the Company comprise gratuity, provident fund and pension plans. Gratuity: The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee’s salary and the tenure of employment. Vesting occurs upon completion of five years of service. The Company makes annual contributions to gratuity fund established as trust. Provident fund In respect of employees, the Company makes specified monthly contribution towards the employees’ provident fund to the provident fund trust administered by the Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on respective investments of the trust and the notified interest rate.
71
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Pension The Company has an obligation towards pension, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee’s salary and the tenure of employment. Vesting occurs upon completion of 20 years of service. Actuarial valuation The liability in respect of defined benefit plans, other than provident fund schemes, is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary primarily using the Projected Unit Credit Method, which recognizes each year of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. The contributions made to provident fund trust are charged to Profit and Loss Account as and when they become payable. In addition, the Company recognizes liability for shortfall in the plan assets vis-à-vis the fund obligation, if any. The Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standard Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, the Company’s actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly, the Company is unable to exhibit the related information. Defined contribution plans Under the superannuation scheme, a defined contribution plan, the Company pays fixed contributions and has no obligation to pay further amounts. Such fixed contributions are recognized in the Profit and Loss Account on accrual basis. Other long term employee benefits Compensated absences As per the Company’s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. The value of benefits is determined based on the seniority and the employee’s salary. Long service award As per the Company’s policy, employees of the Company are eligible for an award after completion of specified number of years of service with the Company. Actuarial valuation The Company accounts for the liability for compensated absences payable in future and long service awards based on an independent actuarial valuation using the projected unit credit method as at the year end. Actuarial gains and losses are recognized immediately in the Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Taxes on income Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Incometax law) and deferred tax charge or credit. Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a
72
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and are written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. Provision for Fringe Benefit tax for the year has been determined in accordance with the provisions of section 115WC of the Income Tax Act, 1961. Minimum alternative tax payable under the provisions of the Income Tax Act 1961 is recognized as an assets in the year in which credit become eligible and is set off to the extent allowed in the year in which the Company becomes liable to pay income taxes at the enacted tax rates. Provisions, contingent liabilities and contingent assets A provision is created when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. The Company does not recognise assets which are of contingent nature until there is virtual certainty of realisability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognised in the financial statements of the period in which the change occurs. Leases Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as an operating lease. Lease payments under operating lease are recognized as an expense in the Profit and Loss Account on a straight-line basis over the lease period. Earnings per share Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period are adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.
73
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 1. Background Ranbaxy Laboratories Limited ('the Company') together with its subsidiaries, joint venture and associates, operates as an integrated international pharmaceuticals organisation with businesses encompassing the entire value chain in the marketing, production and distribution of pharmaceuticals products. The Company’s shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India. Its Global Depository Shares (representing equity shares of the Company) are listed on the Luxembourg Stock Exchange and Foreign Currency Convertible Bonds ( FCCBs) are listed on the Singapore Stock Exchange. Food and Drug Administration ('FDA') investigation On 16 September 2008, the Company received two warning letters and an Import Alert from the United States of America (USA) FDA, covering 30 generic drugs being manufactured at its Paonta Sahib and Dewas manufacturing facilities in India. The issue raised in the warning letters relate to “Current Good Manufacturing Practice” being followed at the said plants and does not in any way raises questions on product’s quality, safety or effectiveness. In 2008, consequent to Import Alert, the Company was not able to sell the products covered under Import Alert, and accordingly, it had recorded a provision of Rs. 2,631.11 million in that year, towards inventory, expected sales return and related exports benefits. On 25 February 2009, the Company received a letter from the US FDA indicating that the Agency had invoked its Application Integrity Policy ('AIP') against the Paonta Sahib facility (the “facility”). The management of the Company believes that there was no falsification of data generated at the facility and also believes that there is no indication of a pattern and practice of submitting untrue statements of material facts and there was no other improper conduct. Accordingly, the Company, based on opinion from its legal council, believes that there is no incremental present obligation existing at the balance sheet date on account of these notices. The company continues to fully cooperate with the concerned authorities for their final clearance, pending which there would be delays for new product approvals and sale of existing products in the United States of America. During the current year, the Company has performed a re-assessment of the amount of provisions created in 2008 and reversed a provision of Rs. 937.81 million which is included in unclaimed balances/ excess provisions written back, which in view of the Company is no longer required now. In the year 2008, the department of Justice (DOJ), USA had filed certain charges against the Company citing possible issues with the data submitted by the Company, in support of product filing. The Company continues to work diligently with the concerned authorities towards resolution of the issue. On 28 October 2008, Daiichi Sankyo Company Limited, Japan (Daiichi Sankyo) acquired majority stake in the Company. The Company issued the following shares/ warrants to Daiichi Sankyo. a) 46,258,063 equity shares of Rs. 5 each allotted as fully paid up on a preferential basis. b) 23,834,333 warrants issued on 20 October 2008. Each warrant is convertible into one equity share of Rs. 5 each at a premium of Rs. 732 per share at any time between six months to eighteen months from the date of allotment of warrants (Rs. 73.70 per warrant being 10% of the exercise price received). Share-based compensation The Company’s Employee Stock Option Schemes (“ESOSs”) provide for the grant of stock options to eligible management employees and Directors of the Company and subsidiaries. The ESOSs are administered by the Compensation Committee of the Board of Directors of the Company (“Committee”). Options are granted on the basis of performance and the grade of the employee. Presently there are three ESOSs (“ESOS I”, “ESOS II” and “ESOS 2005”). Options are granted at the discretion of the committee to select employees depending upon certain criterion. The ESOSs limits the maximum grant of options to an employee at 25,000 for ESOS I and 40,000 each for ESOS II and ESOS 2005 in any given year. ESOS I and II provide that the grant price of options is to be determined at the average of the daily closing price of the Company’s equity shares on the NSE during a period
2.
3.
4.
74
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements of 26 weeks preceding the date of the grant. ESOS 2005 provides that the grant price of options will be the latest available closing price on the stock exchange on which the shares of the Company are listed, prior to the date of the meeting of the Committee in which the options are granted. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered. The options vests evenly over a period of five years from the date of grant. Options lapse if they are not exercised prior to the expiry date, which is ten years from the date of the grant. The Shareholders' Committee from time to time have approved issuance of options under the Employees Stock Options Scheme(s) as per details given below: Date of approval No. of options 29 June 2002 2,500,000 25 June 2003 4,000,000 30 June 2005 4,000,000 The stock options outstanding as on 30 June 2005 are proportionately adjusted in view of the sub-division of equity shares of the Company from the face value of Rs.10 each into 2 equity shares of Rs. 5 each Options granted upto 3 October 2002 are entitled for additional bonus shares in the ratio of 3:5. The movement of the options (post split) for the year ended 31 December 2009 is given below: WeightedWeightedaverage average exercise remaining prices contractual life (Rs.) (years) 439.59 216.00 310.84 312.03 471.97 401.68 455.98 6.73 9.05 – – – 6.30 4.88
Stock options (numbers) Outstanding, beginning of the year Granted during the year Forfeited during the year Allotted during the year Lapsed during the year Outstanding, end of the year* Exercisable at the end of the year* 7,272,849 1,472,725 (530,760) (36,825) (764,973) 7,413,016 3,906,091
Range of exercise prices (Rs.) 219.00-561.00 216.00-216.00 216.00-538.50 216.00-372.50 283.50-538.50 216.00-561.00 216.00-561.00
*Includes options exercised, pending allotment as at 31 December 2009 The movement of the options (post split) for the year ended 31 December 2008 is given below: Weightedaverage exercise prices (Rs.) 446.52 373.05 436.56 350.65 473.41 439.59 457.31 Weightedaverage exercise prices (years) 6.87 9.15 – – – 6.73 5.50
Stock options (numbers) Outstanding, beginning of the year Granted during the year Forfeited during the year Exercised during the year Lapsed during the year Outstanding, end of the year Exercisable at the end of the year 7,168,956 1,774,825 (456,910) (880,605) (333,417) 7,272,849 3,450,209
Range of exercise prices (Rs.) 283.50-538.50 219.00-561.00 283.50-538.50 283.50-538.50 283.50-538.50 219.00-561.00 283.50-538.50
75
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 5. Capital work-in-progress (including capital advances) Capital advances to vendors amounting to Rs.164.44 (previous year Rs. 59.33). [ii] Project related expenses (directly allocable) amounting to Rs. 277.68 (previous year Rs. 356.86) as under : As at 31 December Particulars 2009 2008 Opening balance 356.86 208.68 Add :Addition during the year Salaries, wages and bonus 39.35 63.94 Contributions to provident and other funds 4.97 6.05 Workmen and staff welfare 1.18 2.33 Raw materials 4.54 26.66 Power and fuel 3.67 28.45 Insurance 0.14 2.39 Others 15.76 27.62 426.47 366.12 Less : Capitalised during the year 148.79 9.26 Balance as at year end 277.68 356.86 Interest on fixed loans and debentures Interest includes interest paid on fixed period loans amounting to Rs. 148.04 (previous year Rs. 867.73) Payment to auditors (exclusive of service tax) For the year ended 31 December a] Statutory auditors 2009 2008 Statutory audit fee 9.50 6.30 Tax audit fee 3.25 # 2.75 Limited review fee 4.50 ^ 1.60 Other matters 6.02 @ 2.01 Out of pocket expenses 1.07 $ 1.56 24.34 14.22 # # Paid to previous statutory auditors ^ Includes Rs. 0.50 paid to previous statutory auditors @ Includes Rs. 2.22 paid to previous statutory auditors $ Includes Rs. 0.37 paid to previous statutory auditors b] Cost auditors Audit fee 0.66 0.76 Certification 0.29 0.29 Out of pocket expenses 0.08 0.11 1.03 1.16 Leases The Company has leased facilities under cancellable and non-cancellable operating leases arrangements with a lease term ranging from 3 to 17 years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expense recognised during the year amounts to Rs. 482.99 (previous year Rs. 458.73). The future minimum lease payments in respect of non-cancellable operating leases as at 31 December 2009 and 31 December 2008 are: As at 31 December 2009 2008 a] not later than one year 135.05 129.94 b] later than one year but not later than five years 311.32 384.40 c] later than five years 107.37 169.33 683.67 553.74
6. 7.
8.
76
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 9. Employee benefits The Company primarily provides the following retirement benefits to its employees: (a) Pension (b) Gratuity (c) Compensated absences During the year, the Company has recognised an expense of Rs. 257.09 (Previous year Rs. 223.36) pertaining to employers' contribution to provident fund schemes and superannuation fund which is included in "personnel cost" in schedule 18. The following tables sets out the disclosures relating to pension and gratuity benefits as required by Accounting Standard - 15 'Employee Benefits': Pension Gratuity (Unfunded) (Funded) Change in the present value of obligation : Present value of obligation as at 1 January 2009 1,571.19 482.17 1,205.49 378.88 Add: Interest cost 117.84 40.03 99.45 30.74 Add: Current service cost 93.20 36.40 106.91 39.09 Less: Benefits paid 54.56 130.15 32.59 48.80 Add: Actuarial (gain)/loss on obligations 28.83 96.62 191.92 82.25 Present value of obligation as at 31 December 2009 1,756.50 525.07 1,571.18 482.16 Gratuity (Funded) Change in the Fair value of Plan Assets : Fair value of plan assets as of 1 January 2009 439.19 354.53 Add: Actual return on plan assets 35.89 29.62 Add: Contributions 94.36 103.84 Less: Benefits paid 130.15 48.80 Fair value of plan assets as of 31 December 2009 439.29 439.19
77
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements Gratuity (Funded) Reconciliation of present value of defined benefit obligation and the fair value of assets Present value of funded obligation as of 31 December 2009 Less: Fair value of plan assets as at the end of the period funded status Present value of unfunded obligation as of 31 December 2009 Unfunded net liability recognised in Balance Sheet Pension (Unfunded) Expenses recognised in the Profit and Loss Account Current service cost Add: Interest cost Add: Expected return on plan assets Less: Settlement credit Add: Net actuarial (gain)/loss recognised Total expenses recognised in the Profit & Loss account 93.20 106.91 117.84 99.45 – – 2.51 15.34 28.83 191.92 237.36 382.94
525.07 482.16 439.29 439.19 85.78 42.97 85.78 42.97 Gratuity (Funded) 36.40 39.09 40.03 30.74 (38.57) (30.31) 2.11 2.80 99.30 82.94 135.05 119.66
Note- Figures in italics are for the year ended 31 December 2008 The major categories of plan assets as a percentage of total plan assets are as under: Particulars Gratuity Central Government securities 18% 15% State Government securities 11% 12% Bonds and securities of public sector / Financial Institutions 60% 62% Deposit with Reserve Bank of India 11% 11%
78
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements The following table sets out the assumptions used in actuarial valuation of leave encashment, pension and gratuity: Leave Particulars Encashment Pension Gratuity (Unfunded) (Unfunded) (Funded) Discount rate 7.50% 7.50% 7.50% 8.25% 8.25% 8.25% Rate of increase in compensation levels # 10.0% 10.0% 10.0% 5.5% 5.5% 5.5% Rate of return of plan assets N.A. N.A. 8% N.A. N.A. 8% Expected average remaining working lives of 20.55 - 24.08 20.58 20.58-24.08 employees (years) 21.14-24.50 21.20 21.20-24.50 The liability for leave encashment, pension and gratuity as at 31 December 2009 was Rs. 266.03 (Previous year Rs. 272.90), 1,756.50 (previous year Rs. 1,571.19) and Rs. 85.78 (previous year Rs. 42.97) respectively. # 10% for the first three years and 5% thereafter. Figures in italics are for the year ended 31 December 2008 10. Hedging and Derivatives The Company uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. The following are the outstanding forward exchange contracts and currency options entered into by the Company: As at 31 December 2009 Category Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) As at 31 December 2008 Category Forward contracts Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) Currency USD EUR GBP USD JPY JPY Cross Currency INR USD USD INR USD Amount (in millions) USD 218.40 USD 35.30 USD 0.17 USD 1403.00 JPY 10,350.00 JPY 11,800.00 Buy/ Sell Sell Sell Sell Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging Hedging Currency USD EUR USD JPY JPY Cross Currency INR USD INR USD Amount (in millions) USD 20.00 USD 1.44 USD 1038.5 JPY 10,350.00 JPY 11,800.00 Buy/ Sell Sell Sell Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging
79
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements The outstanding forward contracts, which are classified as cash flow hedges and effective as at 31 December 2009 are as follows: Currency USD Cross Currency INR Amount (in millions) USD 20.00 Loss, net of tax (28.73)
The Company’s unhedged foreign currency exposures on account of payables/ receivables not hedged are as follows: As at 31 December 2009 As at 31 December 2008 (in original (in original currency) (in Rupees) currency) (in Rupees) Receivables* – EURO 22.05 1,469.99 1.63 110.58 – BRL 24.98 666.21 – – – ZAR 102.30 640.96 103.53 531.18 – RUB 410.90 267.24 5.18 8.57 – GBP 2.73 205.53 3.34 237.21 – AUD 2.04 85.18 2.22 76.20 – SEK 10.62 68.99 13.88 86.34 – NZD 1.10 37.18 2.10 59.69 – MYR 2.73 37.05 0.98 13.72 – CNY 2.99 20.40 – – – JPY 36.22 18.31 23.99 12.86 – AED 0.65 8.28 5.95 78.68 – VND – – 231.38 0.64 – MMK – – 0.18 1.36 * USD - INR currency exposure for receivable balances is hedged fully, however USD to above currency is unhedged to the extent stated above. Payables – USD 51.73 2,406.05 9.38 455.77 – EURO 4.27 284.68 0.77 52.31 – CAD 2.61 115.30 0.01 0.40 – GBP 0.44 33.08 0.02 1.42 – JPY 24.22 12.24 41.11 24.20 – DKK – – 2.23 20.35 Others# 5.36 15.33 Bank balances – USD 0.62 28.84 0.71 34.50 – LTL 0.56 10.81 0.35 6.89 – CFR 94.04 9.55 49.29 5.20 – RUB 5.90 3.83 2.10 3.47 – PLN 0.03 0.49 1.00 16.22 – UAH 0.53 3.04 0.72 4.48 Others# 5.92 5.60 Loans – USD 666.86 31,016.74 637.30 30,966.14 – JPY – – 1,800.00 965.15 # Exposures in other currencies which are not significant has been aggregated for this disclosure. For derivates refer note above.
80
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 11. Foreign exchange (gain)/ loss other than loans Foreign exchange loss / (gain) Fair valuation (gain) / loss on derivatives For the year ended 31 December 2009 2008 1,423.48 (725.96) (3,213.88) 10,990.42 (1,790.40) 10,264.46 For the year ended 31 December 2009 2008 186.44 229.08 20.67 44.40 1.99 2.46 52.00 – 4.84 1.34 265.94 277.28
12. a]
Directors' remuneration* Salaries and allowances Contribution to provident and other funds* Directors' fee Commission Perquisites
* Does not include the following: a) Liabilities in respect of gratuity, pension and leave encashment (for one of the directors) as the same is determined on an actuarial basis for the company as a whole. b) Amortisation of deferred employee compensation on grant of stock options. c) Compensation cost of Rs. 481.38 for the loss of office to a director (previous year Rs. nil). d) Pension paid/ payable to non-executive directors for the services rendered in earlier years as a whole time director/ employees Rs. nil (previous year Rs. 2.29). During the year, the Company has received requisite approvals for managerial remuneration paid to its director in the previous year, which was in excess of the limit under the Companies Act, 1956 b] Determination of net profits in accordance with the provisions of section 349 of the Companies Act, 1956 and commission payable to directors: For the year ended 31 December 2009 Profit before tax as per Profit and Loss account 10,619.17 Less: Profit on sale of assets (net) 237.34 Profit on sale of investments 420.33 657.67 Add: Directors' remuneration (including commission) 265.94 Fixed assets written off 12.00 277.94 Net profit 10,239.44 Maximum remuneration which can be paid to Whole-time Directors as per Companies Act, 1956 1023.94 Maximum commission which can be paid to other Directors as per Companies Act, 1956 102.39 Commission to directors : (As determined by the Board of Directors) Whole-time 35.00 Others 17.00 52.00 In view of losses in the year ended 31 December 2008, net profit under section 349 of the Companies Act, 1956 was not determined.
81
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 13. Commitments and Contingent liabilities As at 31 December i) Claims against the Company not acknowledged as debts, under dispute: 2009 2008 (a) DPCO * 1,703.30 1,504.10 (b) Excise matters 75.42 68.57 (c) Octroi tax matters ** 171.00 171.00 (d) Sales tax matters 12.76 7.96 (e) Other matters *** 190.71 179.59 (f) Service tax matters 3.07 – * The Company has received demand for payment to the credit of the Drug Prices Equalisation Account under Drugs (Price Control) Order, 1995 (DPCO) which is being contested by the Company in respect of its various products. Further, the Company has deposited Rs. 319.59 (previous year Rs. 297.91) under protest. ** The Company has been contesting a case with Municipal Corporation of Mohali (MCM) under which MCM is contesting that Octroi has to be paid by the Company at 1% as against 0.5% being paid by the Company. The amounts represents the differential. *** These represent cases pending at various forums on account of employee/ worker related cases, State electricity board, Punjab Land Preservation Act etc. The Company believes that the probability of any liability on account of any cases pending (including those pending with DOJ) is remote. ii) Estimated amount of contracts remaining to be executed on capital 773.85 597.28 account and not provided for (net of advances) 14. The aggregate amount of revenue expenditure incurred on research and development is shown in the respective heads of account. The break-up of the amount is as under: For the year ended 31 December 2009 2008 Salaries, wages and bonus 1,309.08 1,225.26 Contribution to provident and other funds 81.57 76.52 Workmen and staff welfare 68.37 55.84 Raw materials consumed 1,135.09 665.60 Stores and spares consumed 531.99 537.86 Power and fuel 272.27 244.86 Clinical trials 451.55 507.78 Rent 213.09 198.36 Printing and stationery 16.61 20.77 Insurance 38.06 30.92 Communication 56.37 48.49 Legal and professional charges 53.95 29.36 Travel and conveyance 85.50 103.73 Running and maintenance of vehicles 34.34 26.51 Analytical and processing charges 49.32 63.89 Repairs and maintenance – Buildings 6.44 10.07 – Plant and machinery 44.34 35.85 – Others 94.54 87.69 13.43 10.17 Recruitment and training Others 165.93 175.93 4,721.84 4,155.46
82
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) 15. Related party disclosures a] Relationship : i) Holding company (also being the ultimate holding company) 1 Daiichi Sankyo Co., Ltd. , Japan (from 20 October 2008) ii) Subsidiaries (domestic): 1 Ranbaxy Drugs and Chemicals Company 2 Solus Pharmaceuticals Limited 3 Ranbaxy SEZ Limited 4 Rexcel Pharmaceuticals Limited 5 Gufic Pharma Limited 6 Ranbaxy Life Sciences Research Limited 7 Ranbaxy Drugs Limited 8 Vidyut Investments Limited 9 Solrex Pharmaceuticals Company (a Partnership firm) iii) Subsidiaries including step down subsidiaries (overseas): 1 Ranbaxy (Netherlands) BV, The Netherlands 2 Ranbaxy (Hong Kong) Limited, Hong Kong 3 Ranbaxy Inc., USA 4 Ranbaxy Egypt (L.L.C.), Egypt 5 Ranbaxy (Guangzhou China) Ltd., China (upto 29 December 2009) 6 Ranbaxy Farmaceutica Ltda, Brazil 7 Ranbaxy Signature, LLC. USA 8 Ranbaxy PRP(Peru) SAC 9 Ranbaxy Australia Pty Ltd., Australia 10 Lapharma GmbH, Germany 11 Ranbaxy Unichem Co. Ltd., Thailand 12 Ranbaxy USA, Inc., USA 13 Ranbaxy Italia S.p.A, Italy 14 Ranbaxy (Malaysia) Sdn. Bhd., Malaysia 15 Be-Tabs Investments (Proprietary) Ltd., South Africa 16 Ranbaxy Japan KK (from 09 November 2009) 17 Ranbaxy NANV, The Netherlands 18 Ranbaxy (Poland) S. P. Zoo, Poland 19 Ranbaxy (Nigeria) Limited, Nigeria 20 Ranbaxy Europe Limited, U.K. 21 Ranbaxy (UK) Limited, U.K 22 Basics GmbH , Germany. 23 ZAO Ranbaxy, Russia 24 Terapia S.A., Romania 25 Ranbaxy Pharmaceuticals Inc., USA 26 Ranbaxy Laboratories Inc., USA 27 Ohm Laboratories Inc., USA 28 Ranbaxy Hungary Kft, Hungary (upto 22 May 2009)
83
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) 29 Terapia Distributie S.R.L., Romania 30 Ranbaxy Pharma AB, Sweden 31 Office Pharmaceutique Industriel et Hospitalier SARL, France 32 Ranbaxy Ireland Limited, Ireland 33 Ranbaxy (S.A.) Proprietary Limited, South Africa 34 Ranbaxy Holdings (UK) Ltd., U.K 35 Ranbaxy Do Brazil Ltda, Brazil 36 Laboratorios Ranbaxy, S.L., Spain 37 Ranbaxy Vietnam Company Ltd., Vietnam (upto 05 October 2009) 38 Ranbaxy Pharmacie Generiques SAS, France 39 Ranbaxy Pharmaceuticals Canada Inc., Canada 40 Sonke Pharmaceuticals (Pty) Ltd., South Africa 41 Ranbaxy Mexico S.A.de C.V. (from 13 November 2009) 42 Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda, Portugal 43 Ranbaxy Belgium N.V., Belgium 44 Be-Tabs Pharmaceuticals (Proprietary) Ltd. 45 Rexcel Egypt (L.L.C.), Egypt iv) Joint Venture (Overseas) 1 Nihon Pharmaceutical Industry Co. Ltd., Japan (Investment made by Ranbaxy (Netherlands) BV, The Netherlands) (upto 8 December 2009) v) Associates (domestic) 1 Zenotech Laboratories Limited 2 Shimal Research Laboratories Limited vi) Key management personnel 1 Mr. Malvinder Mohan Singh, Chairman, CEO & Managing Director (upto 24 May 2009) 2 Mr. Atul Sobti, CEO and Managing Director 3 Mr. Ramesh L Adige (Upto 19 December 2008) vii) Relatives of Key management personnel with whom transactions during the year and / or previous year 1 Mrs. Nimmi Singh, mother of Mr. Malvinder Mohan Singh (upto 24 May 2009) viii) Entities over which significant influence is exercised by Mr. Malvinder Mohan Singh with whom transactions were carried out in the current year and / or previous year 1 Fortis Healthcare Limited (Including its subsidiaries) 2 Religare Securities Limited 3 Ran Air Services Limited 4 Religare Travels (India) Limited 5 Religare Capital Markets Limited 6 Super Religare Laboratories Limited 7 Fortis Clinical Research Limited 8 Religare Enterprises Limited 9 Escorts Heart Institute and Research Centre Limited 10 Religare Technova IT Services Limited (formerly Fortis Financial Services Limited) 11 Oscar Investments Limited
84
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) b] Transactions with the related parties
Holding Company Subsidiaries, Key Joint Ventures management and Associates personnel Entities over which significant influence is exercised Total
Transactions
Sales Royalty, technical know-how and product development Dividend from overseas subsidiaries Sale of Intellectual property rights (fixed assets) Unclaimed balances/ excess provision written back Interest received Rent received Other income Finished goods purchased Market research expenses Procurement cost of exhibit batches Regulatory filing expenses Advisory services Analytical and processing charges Clinical Trials Product quality claim Business support expenses
– – – – – – – – – – – – – – – – 0.23 – 1.46 – – – – – – – – – – – – – –
17,199.19 (15,418.91) 195.06 (78.22) 9.54 (11.01) 166.89 – 928.42 – 0.36 (281.75) 1.04 – 2.40 (9.26) 1,199.32 (1,259.54) 656.86 (898.40) 412.35 (127.10) 193.24 – – 153.58 (164.10) 61.02 (55.39) 57.14 (1,668.45) 1.30 (2.51)
– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
– (18.03) – – – – – – – – – – – – 13.73 (32.33) – – – – – – – – – (201.40) – – – – – – – –
17,199.19 (15,436.94) 195.06 (78.22) 9.54 (11.01) 166.89 – 928.42 – 0.36 (281.75) 1.04 – 16.13 (41.59) 1,199.55 (1,259.54) 658.32 (898.40) 412.35 (127.10) 193.24 – – (201.40) 153.58 (164.10) 61.02 (55.39) 57.14 (1,668.45) 1.30 (2.51)
85
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Transactions Holding Company Subsidiaries, Key Joint Ventures management and Associates personnel Entities over which significant influence is exercised Total
Travel and conveyance Royalty paid Freight, clearing and forwarding Commission Personnel expenses Technical services availed Amount written off Investments made Loans and advances given Loan and advance received back Purchase of fixed assets Sale of investment Sale of fixed assets Equity capital contribution (including premium) Equity share warrants money received
2.20 – 0.36 – – – – – – – – – – – – – – – – – – – – – – – – (34,092.19) – (1,756.59)
– – 1.18 (1.66) 0.68 (0.56) 0.35 (0.23) – – – – – (112.05) 2,404.49 (3,936.45) 5.50 (10,488.50) 330.05 (8,159.82) – – – – 38.05 – – – – –
– – – – – – – – 250.64 (279.30) – – – – – – – – – – – – – – – – – – – –
– – – – – – – – – – 98.03 (403.36) – – – – – – – – 97.57 (434.34) – (44.00) – – – – – –
2.20 – 1.54 (1.66) 0.68 (0.56) 0.35 (0.23) 250.64 (279.30) 98.03 (403.36) – (112.05) 2,404.49 (3,936.45) 5.50 (10,488.50) 330.05 (8,159.82) 97.57 (434.34) – (44.00) 38.05 – – (34,092.19) – (1,756.59)
Note: Figures in brackets are for previous year
86
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) c] Transaction in excess of 10% of the total related party transactions
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
1
Sales Ranbaxy Pharmaceuticals, Inc. USA ZAO Ranbaxy, Russia Subsidiary Company Subsidiary Company 8,557.05 1,318.95 6,674.58 1,875.18
2
Royalty, Technical know-how and product development Ohm Laboratories, Inc, USA Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy (Guangzhou China) Limited, China Ranbaxy Nigeria Limited, Nigeria Ranbaxy Pharmaceuticals, Inc. USA Ranbaxy Unichem Company Ltd., Thailand Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company 65.86 50.68 45.76 – – 18.46 5.22 2.17 2.15 166.89 850.93 0.36 – – 1.04 – 19.13 – 23.45 19.99 10.19 6.68 1.96 2.37 – – – 140.52 140.35 –
3
Dividend from overseas subsidiaries Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy Unichem Company Ltd., Thailand Ranbaxy Nigeria Limited, Nigeria
4 5 6
Sale of Intellectual property rights (fixed assets) Basics GmbH, Germany. Unclaimed balances/ excess provision written back Ranbaxy Pharmaceuticals, Inc. USA Interest received Ranbaxy Drugs and Chemicals Company, India Rexcel Pharmaceuticals Ltd, India Solus Pharmaceuticals Ltd, India
7
Rent Received Solrex Pharmaceuticals Company, India (A Partnership firm)
8
Other Income Solrex Pharmaceuticals Company, India (A Partnership firm) Zenotech Laboratories Limited, India Ranbaxy Unichem Company Ltd., Thailand Subsidiary Company Associates 1.71 0.69 – – 9.26 Subsidiary Company Subsidiary Company 1,003.26 144.19 1,172.77 0.77
9
Finished goods purchased Solrex Pharmaceuticals Company, India (A Partnership firm) Ranbaxy (Malaysia) Sdn. Bhd., Malaysia
87
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
10
Market research expenses Ranbaxy Inc., USA Ranbaxy Europe Limited, U.K. Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Holding company Holding company Subsidiary Company Subsidiary Company Subsidiary Company 339.11 268.19 412.35 – 45.16 22.47 24.95 30.96 19.85 34.06 96.15 23.37 61.02 34.55 13.10 5.97 – – 1.30 2.20 0.36 0.24 0.94 0.68 315.79 582.61 102.28 24.82 – – – – – 48.64 107.98 7.48 55.39 – – 8.65 1,270.98 266.84 2.51 – – 0.24 1.42 0.56
11
Procurement cost of exhibit batches Ohm Laboratories, Inc, USA Terapia S.A., Romania
12
Regulatory filing fee Basics GmbH, Germany. Laboratorios Ranbaxy, S.L., Spain Ranbaxy Italia S.p.A, Italy Ranbaxy Pharmacie Generiques SAS, France Ranbaxy Beligium N.V., Belgium
13
Analytical and processing charges Solrex Pharmaceuticals Company, India (A Partnership firm) Ranbaxy Ireland Limited, Ireland, India Terapia S.A., Romania
14 15
Clinical trials Terapia S.A., Romania Product quality claim Ranbaxy Farmaceutica Ltda, Brazil Ranbaxy Pharmacie Generiques SAS, France ZAO Ranbaxy, Russia Ranbaxy Pharmaceuticals, Inc. USA Ohm Laboratories, Inc, USA
16 17 18
Business support expenses Ranbaxy Inc., USA Travel and conveyance Daiichi Sankyo Co., Limited, Japan Royalty paid Daiichi Sankyo Co., Limited , Japan Gufic Pharma Limited Terapia S.A., Romania
19
Freight, clearing and forwarding Ranbaxy Ireland Limited, Ireland
88
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
20 21
Commission paid Ranbaxy Drugs and Chemicals Company, India Personnel Cost (Also refer to note 12) Mr. Malvinder Mohan Singh ( Upto 24th May 2009) Mr. Atul Sobti Services availed Fortis Clinical Research Limited, India
Subsidiary Company Key Management Personnel Key Management Personnel Entities over which significant influence is exercised Entities over which significant influence is exercised Subsidiary Company Subsidiary Company Associate Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Subsidiary Company Entities over which significant influence is exercised Entities over which significant influence is exercised Entities over which significant influence is exercised
0.35 167.41 79.54
0.23 237.18 29.08
22
48.54
233.50
Religare Technova IT Services Limited, India
33.38 – 2,404.50 – – – 5.50 – – 164.99 165.00 97.57
65.13 112.05 1,248.74 1,385.21 525.00 553.00 – 4,992.50 4,992.50 4,082.29 4,065.50 145.84
23 24
25
26
27
Amount written off Ranbaxy Nigeria Limited, Nigeria Investments made Ranbaxy (Netherlands) BV, The Netherlands Zenotech Laboratories Limited Rexcel Pharmaceuticals Limited Solus Pharmaceuticals Limited Loans and advances given Ranbaxy Drugs and Chemicals Company, India Rexcel Pharmaceuticals Limited, India Solus Pharmaceuticals Limited, India Loan and advances received back Rexcel Pharmaceuticals Ltd, India Solus Pharmaceuticals Ltd, India Purchase of fixed assets Religare Technova IT Services Limited, India
Fortis Clinical Research Limited, India
–
288.50
28
Sale of Investment Religare Enterprises Limited
–
44.00
89
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Related party relationship For the For the year ended year ended 31 Dec. 31 Dec. 2009 2008
29 30 31
Sale of Fixed Assets ZAO Ranbaxy, Russia Equity capital contribution (including premium) Daiichi Sankyo Co., Ltd., Japan Equity share warrants money received Daiichi Sankyo Co., Ltd., Japan Holding Company – 1,756.59 Holding Company – 34,092.19 Subsidiary Company 38.05 –
d]
Balances due from/to the related parties
Holding Subsidiaries* Joint Key Company Ventures and management Associates personnel Total
Sr. Transactions No.
1 (i) (ii) (iii) (iv) (v) (vi)
Debtors Ranbaxy (Hong Kong) Limited, Hong Kong Ranbaxy (Malaysia) Sdn. Bhd., Malaysia Ranbaxy (UK) Limited, U.K ZAO Ranbaxy, Russia Ranbaxy Nigeria Limited, Nigeria Ranbaxy Ireland Limited, Ireland – – – – – – – – – – – – – – – – – – – – – – – – 101.34 (111.93) 122.98 (32.50) 114.13 (230.25) 629.11 (1,672.54) 58.75 (242.14) 329.36 (390.08) 150.19 (213.22) 602.92 (531.08) 38.15 0.84 (29.14) 686.74 (898.63) 140.13 (79.70) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 101.34 (111.93) 122.98 (32.50) 114.13 (230.25) 629.11 (1,672.54) 58.75 (242.14) 329.36 (390.08) 150.19 (213.22) 602.92 (531.08) 38.15 – 0.84 (29.14) 686.74 (898.63) 140.13 (79.70)
(vii) Ranbaxy PRP(Peru) SAC (viii) Ranbaxy (S.A.) Proprietary Limited, South Africa (ix) (x) (xi) Be-Tabs Investments (Proprietary) Ltd., South Africa Ranbaxy Egypt (L.L.C.), Egypt Ranbaxy Farmaceutica Ltda, Brazil
(xii) Ranbaxy Australia Pty Ltd., Australia
90
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued)
Sr. Transactions No. Holding Subsidiaries* Joint Key Company Ventures and management Associates personnel Total
(xiii) Ranbaxy Italia S.p.A, Italy (xiv) Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda, Portugal (xv) Ranbaxy Pharmacie Generiques SAS, France (xvi) Ranbaxy Pharma AB, Sweden (xvii) Ranbaxy Beligium N.V., Belgium (xviii)Ranbaxy Pharmaceuticals, Inc. USA (xix) Basics GmbH , Germany. (xx) Ranbaxy Vietnam Company Ltd., Vietnam (xxi) Laboratorios Ranbaxy, S.L., Spain 2. 3. 4 Creditors Loans and advances to subsidiaries Payable to directors (commission)
– – – –
182.21 (95.81) 5.89 (14.86)
– – – –
– –
182.21 (95.81) 5.89 (14.86)
– – – – – – – – – – – – – – 0.96 – – – – –
53.49 (130.96) 80.16 (151.43) 46.97 (82.84) 7,104.67 – – (23.77) – (3.08) – (105.27) 371.62 (2,120.72) 1,533.78 (1,858.20) – –
– – – – – – – – – – – – – – 4.11 (3.30) – – – – 35.00 –
53.49 (130.96) 80.16 (151.43) 46.97 (82.84) 7,104.67 – – (23.77) – (3.08) – (105.27) 376.69 (2,124.02) 1,533.78 (1,858.20) – –
Note: figures in brackets are for previous year * Dues from parties parties under the same management as defined under Section 370(IB) of the Companies Act, 1956. 16. Segment Information In accordance with AS-17 “Segment Reporting”, segment information has been given in the consolidated financial statements of Ranbaxy Laboratories Limited, and therefore, no separate disclosure on segment information is given in these financial statements.
91
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements (Continued) 17. Additional information pursuant to paragraphs 3 & 4 of part II of schedule VI to the Companies Act,1956 (As certified by the management and accepted by the auditors) a] Particulars of installed capacities and actual production Unit of measure Installed Actual capacity production as at for the 31 December year ended 2009 31 December 2009 9,601.60 2,862.00 43.80 48.00 35.00 – – 4,056.81 1,218.33 23.79 83.06 41.81 561.60 38.78 Actual Installed production capacity for the as at year ended 31 December 31 December 2008 2008 9,424.00 2,992.00 43.80 48.00 39.00 – – 5,665.98 1,632.25 32.85 108.11 45.75 742.47 32.88
Dosage forms Tablets Capsules Dry syrups/Powders Ampoules Vials Liquids $ Drops $ Nos in million Nos in million Bottles in million Nos in million Nos in million Kilolitres Kilolitres
Active pharmaceuticals ingredients and drugs intermediates Tonnes Ointments Tonnes
1,917.89 *
1,060.09 # 504.95
2,001.57 *
1,322.57# 497.59
* In different denominations than actual production. # Inclusive of production used for captive consumption. $ Installed capacity is not given as the same is manufactured by loan licensees. Notes : 1. In terms of press Note no 4 (1994 series) dated October 25, 1994 issued by the department of Industrial Development, Ministry of Industry, Government of India and Notification no. S.O. 137 (E) dated March 01, 1999 issued by the Department of industrial Policy and Promotion, Ministry of Industry, Government of India, Industrial licencing has been abolished in respect of bulk drugs and formulations. Hence there are no registered/ Licenced capacities for these bulk drugs and formulations. Installed capacity being effective operational capacity has been calculated on a double shift basis for dosage forms facilities and on a continuous basis for active pharmaceuticals ingredients and drug intermediates, it may vary according to the production mix. Actual production includes production at loan licensee locations.
2
3
92
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements b] Particulars of Production, Purchases, Sales and Stock of finished goods
Class of Goods Tablets Capsules Dry syrups/ Powders Ampoules Vials Liquids Drops Active pharmaceuticals ingredients and drugs intermediates Ointments Others Unit of measure Nos./Million Nos./Million Bottles /Million Nos./Million Nos./Million Kilolitres Kilolitres Opening Stock Production Purchases Sales Closing Stock Quantity Value Quantity Quantity Value Quantity@ Value Quantity Value 836.33 1,057.82 4,056.81 669.87 820.53 5,665.98 205.72 212.06 8.27 5.42 21.83 16.24 8.63 12.30 594.06 587.53 8.94 5.82 336.17 1,218.33 293.77 1,632.25 101.93 77.14 67.31 74.80 250.27 197.11 110.28 92.71 7.46 5.46 23.79 32.85 83.06 108.11 41.81 45.75 561.60 742.47 38.78 32.88 2,025.19 1,376.06 1,811.14 1,068.07 359.27 384.08 73.62 20.85 3.17 2.07 53.92 53.88 2,312.30 2,885.58 8.14 9.38 492.87 533.21 139.40 347.15 24.92 12.18 530.97 482.87 358.54 349.17 11.60 15.17 6,131.67 17,087.42 7,310.66 20,622.81 1,605.90 5,135.74 2,022.67 6,062.95 97.82 1,462.41 50.86 2,661.50 96.64 104.59 971.85 788.40 786.66 1,079.98 836.33 1,057.82 177.42 205.72 7.86 8.26 11.42 21.83 8.81 8.63 331.57 594.06 4.84 8.95 289.95 336.17 91.20 101.93 65.26 67.31 261.12 250.27 59.80 110.28 3.01 7.46
95.55 2,879.71 103.30 2,810.46 3,136.39 3,621.52 51.02 39.13 959.75 970.45 78.73 76.95
Tonnes Tonnes
127.32 1,866.17 1,060.09 130.00 1,778.30 1,322.57 219.14 128.10 119.22 74.31 59.67 11.59 3,976.30 3,425.72 504.95 497.59
171.54 1,177.90 1,247.70 # 14,323.39 206.15 814.17 1,531.40 # 6,934.45 862.16 950.95 463.44 297.27 236.36 292.38 4,812.06 4,211.64 1,414.66 1,676.82 1,357.50 1,504.88 635.98 650.75 45,211.80 43,083.60
111.25 1,808.94 127.32 1,866.17 171.59 219.14 108.71 119.22 77.36 59.67 3,845.33 3,976.30
Notes: @ Inclusive of physician samples. # Excludes 446.70 (previous year 865.60) tonnes used for captive consumption. Figures in italics are for 2008. Sales are exclusive of excise duty and trade discount.
c] Consumption of raw materials (quantity in metric tonnes) Raw material For the year ended 31 December 2009 Quantity Amount 92.21 1,035.69 121.60 334.02 39.81 325.74 123.94 295.69 192.10 251.40 11,217.51 13,460.05 For the year ended 31 December 2008 Quantity Amount 85.36 1,317.23 299.60 687.05 33.89 311.91 133.38 355.23 269.94 503.09 11,390.70 14,565.21
3 - CI - 7 - ACCA Erythromycin 'A'95 Cefuroxime Axetil Crystalline 7 ADCA 6APA Others
93
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements d] Consumption of raw materials, components and spares
For the year ended For the year ended 31 December 2009 31 December 2008 Raw Components, Raw Components, materials Spares & materials Spares & Packaging Packaging materials * materials *
Indigenous Imported
Rs. Million As % of total Rs. Million As % of total
4,604.26 34.21% 8,855.79 65.79%
2,218.21 86.62% 342.53 13.38%
7,054.60 48.43% 7,510.61 51.57%
2,403.07 82.31% 516.57 17.69%
* Inclusive of components and spares used for maintenance of plant and machinery For the year ended 31 December 2009 2008 e] Imports on C. I. F. basis: Raw materials Components and spares Capital goods f] Expenditure in foreign currencies Interest Royalty paid Legal and professional charges Others * * Other includes overseas personnel expenses, advertisement and sales promotion, regulatory filling fee, commission, market research expenses rent and travel and conveyance etc. g] Dividend paid to non-resident shareholders Final dividend Number of shareholders Number of shares held Dividend remitted Year to which it relates h] Earnings in foreign exchange F.O.B. value of exports (excluding Nepal) Royalty/Technical know-how and product development Dividend Others (freight, insurance etc.) 6,076.74 151.53 312.75 6,541.02 314.00 3.46 1,778.17 4,463.76 6,559.39 6,148.99 70.11 503.90 6,723.00 499.88 2.34 1,370.20 5,807.87 7,680.29
– – – – 27,728.90 265.90 9.54 3,360.17 31,364.51
27 45,902 0.28 2007 26,817.32 182.25 11.00 1,527.26 28,537.83
94
Ranbaxy Laboratories Limited
Schedules forming part of the financial statements for the year ended 31 December 2009
(Rupees in millions, except for share data and if otherwise stated)
SCHEDULE - 23 Notes to the financial statements 18. Information pursuant to clause 32 of the listing agreements with stock exchanges Loans and advances in the nature of loans to wholly-owned subsidiary companies are as under: Balance As at 31 December 2009 2008 Interest free with no specified payment schedule: a) Ranbaxy Drugs Limited b) Rexel Pharmaceuticals Limited c) Solus Pharmaceuticals Limited d) Ranbaxy Netherlands B.V., The Netherland Interest bearing with no specified payment schedule: a) Ranbaxy Drugs & Chemicals Company Limited 3.16 753.22 771.90 – 1,528.28 3.10 918.20 936.90 – 1,858.20 Maximum balance during the year ended 31 December 2009 2008 3.16 918.20 936.90 – 1,858.26 3.10 2,948.47 2,369.89 12.44 5,333.90
5.50 – 5.50 – 5.50 – 5.50 – 1,533.78 1,858.20 1,863.76 5,333.90 The above parties are also companies under the same management as defined under Section 370(IB) of the Companies Act, 1956. 19. Previous year figures have been regrouped/ reclassified, wherever necessary to conform to current year’s classification. Previous year figures have been audited by another firm of chartered accountants. For and on behalf of the Board of Directors
Dr. Tsutomu Une Chairman Sushil K. Patawari Company Secretary Place : Gurgaon Dated : 25 February 2010
Atul Sobti CEO & Managing Director
Omesh Sethi President and CFO
95
Ranbaxy Laboratories Limited
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
I. Registration Details : Registration No. Balance Sheet Date : 0 3 0 1 3 7 1 4 2 7 2 0 Year 0 9 State Code : 1 6
Date
Month
II. Capital Raised during the year (Amount in Rs. Thousands) Public Issue : Employees Stock Options : Bonus Issue : N I L N I L 2 4 1 Rights Issue : Preferential Allotment : Private Placement : N N N I I I L L L
III. Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands) Total Liabilities : Source of Funds Paid-up-Capital : Equity share warrant money Share application money pending allotment Secured Loans : Deferred tax liability : Application of Funds Net Fixed Assets : Net Current Assets : Accumulated Losses : 2 1 0 2 0 2 N 8 1 I 3 0 L 2 6 0 5 7 6 Investments : Deferred Tax Asset : Misc. Expenditure : 3 8 4 3 1 N 3 9 I 6 9 L 9 0 0 8 0 0 1 7 N 5 I 2 1 1 7 0 5 2 6 1 8 L 0 5 9 2 9 9 5 7 0 0 0 0 Unsecured Loans : 3 1 7 2 5 5 2 6 Reserves & Surplus : 3 7 4 8 5 4 1 7 1 0 9 0 1 8 6 3 7 Total Assets : 1 0 9 0 1 8 6 3 7
IV. Performance of Company (Amount in Rs. Thousands) Turnover : Profit / Loss Before Tax : Earning Per Share in Rs. V. 4 5 0 3 6 5 1 1 9 9 3 0 1 . 9 7 6 0 4 1 Total Expenditure : Profit / Loss After tax : Dividend Rate % : 4 1 5 7 7 6 1 N 2 9 I 7 8 L 0 4 4 4
+ -
1
+ -
Generic Names of Three Principal Products of the Company Item Code No. Product Description Item Code No. Product Description Item Code No. Product Description 2 9 4 F 4 1 9 0 L O R 0 L 0 I L L I N E X I N
C E 2 9
A C 2 0
C E 2 9
P H A 4 1 1
A M O X Y C
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
96
Ranbaxy Laboratories Limited
Statement Regarding Subsidiary Companies Pursuant to Section 212(3) of the Companies Act, 1956
Net aggregate amount of subsidiary company’s profits after deducting its losses or vice-versa, so far as it concerns members of Holding Company which are not dealt within the Company’s account For the current financial year {Profit / (Loss)} Rs. Million For the previous financial years {Profit / (Loss)} Rs. Million Net aggregate amount of Subsidiary Company’s profit after deducting its losses or vice-versa, dealt within the Company’s account For the current financial year Rs. Million For the previous financial years Rs. Million
Name of Subsidiary Company
Financial year to which accounts relates
Holding Company’s interest as at close of financial year of subsidiary company Shareholding %age
Domestic : Gufic Pharma Limited Ranbaxy Drugs Limited Ranbaxy Drugs and Chemicals Company (A public company with unlimited liability) Ranbaxy Life Sciences Research Ltd. Ranbaxy SEZ Limited Rexcel Pharmaceuticals Limited Solus Pharmaceuticals Limited Vidyut Investments Limited Overseas : Ranbaxy Australia Pty. Ltd. Australia Ranbaxy Belgium N.V. Belgium Ranbaxy Farmaceutica Ltda. Brazil Ranbaxy Do Brazil Ltda Brazil Ranbaxy Pharmaceuticals Canada Inc. Canada Ranbaxy Egypt (L.L.C.) Egypt Rexcel Egypt (L.L.C.) Egypt Ranbaxy Pharmacie Generiques SAS France Office Pharmaceutique Industriel Et Hospitalier SARL (“OPIH SARL”) France Basics GmbH Germany Lapharma GmbH Germany Ranbaxy (Hong Kong) Limited Hong Kong Ranbaxy Hungary Gyogyszereszeti Kft # Hungary 2009 2009 2009 2009 2009 100.00 100.00 100.00 100.00 100.00 (115.16) 28.06 206.46 (0.65) 160.43 (372.97) (45.07) (386.84) (12.32) 309.83 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 2009 2009 2009 98.00 100.00 100.00 0.25 (0.06) 0.05 2.02 (0.42) 6.23 Nil Nil Nil Nil Nil Nil
2009 2009 2009 2009 2009
80.07 100.00 100.00 100.00 100.00
10.06 (0.04) (4.87) (1.64) 0.63
9.86 (0.03) 30.05 (6.62) (233.82)
Nil Nil Nil Nil Nil
Nil Nil Nil Nil 78.45
2009 2009 2009
100.00 100.00 100.00
25.43 (8.43) 0.17
(23.23) (14.94) (187.25)
Nil Nil Nil
Nil Nil Nil
2009
100.00
(4.69)
(43.40)
Nil
Nil
2009 2009 2009 2009
100.00 100.00 100.00 100.00
13.84 (0.26) 83.98 –
239.30 (0.15) (9.89) (0.28)
Nil Nil Nil Nil
Nil Nil Nil Nil
97
Ranbaxy Laboratories Limited
Name of Subsidiary Company
Financial year to which accounts relates
Holding Company’s interest as at close of financial year of subsidiary company Shareholding %age
Net aggregate amount of subsidiary company’s profits after deducting its losses or vice-versa, so far as it concerns members of Holding Company which are not dealt within the Company’s account For the current financial year {Profit / (Loss)} Rs. Million 692.43 (355.49) 113.42 (50.94) 124.56 (6.65) (1.97) (94.67) For the previous financial years {Profit / (Loss)} Rs. Million 1,159.10 (390.27) 372.12 (200.15) 333.15 (9.76) 28.67 (123.91)
Net aggregate amount of Subsidiary Company’s profit after deducting its losses or vice-versa, dealt within the Company’s account For the current financial year Rs. Million For the previous financial years Rs. Million
Ranbaxy Ireland Ltd. Ireland Ranbaxy Italia S.p.A Italy Ranbaxy Malaysia Sdn. Bhd. Malaysia Ranbaxy Mexico S.A. de C.V. Mexico Ranbaxy Nigeria Ltd. Nigeria Ranbaxy-PRP (Peru) S.A.C. Peru Ranbaxy Poland S.P. Z.o.o. Poland Ranbaxy Portugal Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda Portugal Ranbaxy (Guangzhou China) Limited $ Republic of China Terapia S.A. Romania Terapia Distributie SRL Romania ZAO Ranbaxy Russia Ranbaxy (S.A.) (Proprietary) Ltd. South Africa Be-Tabs Pharmaceuticals (Proprietary) Ltd. South Africa Be-Tabs Investments (Proprietary) Ltd. South Africa Sonke Pharmaceuticals (Pty) Ltd South Africa Laboratorios Ranbaxy, S.L. Spain Ranbaxy Pharma AB Sweden Ranbaxy (Netherlands) B.V. (“RNBV”) The Netherlands Ranbaxy N.A.N.V. Antilles, The Netherlands Ranbaxy Unichem Company Ltd. Thailand
2009 2009 2009 2009 2009 2009 2009 2009
100.00 100.00 68.09 100.00 85.31 100.00 100.00 100.00
Nil Nil 5.22 Nil 2.16 Nil Nil Nil
Nil Nil 32.77 Nil 18.39 Nil Nil Nil
2009
83.00
78.08
(247.49)
Nil
Nil
2009 2009 2009 2009 2009
96.70 96.70 100.00 100.00 100.00
675.36 (267.37) 287.91 51.21 112.54
3,009.75 50.12 (32.35) 204.63 800.40
Nil Nil Nil Nil Nil
Nil Nil Nil Nil Nil
2009
100.00
0.72
58.52
Nil
Nil
2009 2009 2009 2009
68.40 100.00 100.00 100.00
10.26 0.05 86.34 504.71
(54.82) (801.11) (88.35) (70.18)
Nil Nil Nil Nil
Nil Nil Nil Nil
2009 2009
100.00 88.56
(0.31) 29.44
(12.48) 151.41
Nil 2.17
Nil 6.49
98
Ranbaxy Laboratories Limited
Name of Subsidiary Company
Financial year to which accounts relates
Holding Company’s interest as at close of financial year of subsidiary company Shareholding %age
Net aggregate amount of subsidiary company’s profits after deducting its losses or vice-versa, so far as it concerns members of Holding Company which are not dealt within the Company’s account For the current financial year {Profit / (Loss)} Rs. Million 73.26 (0.25) 14.04 (507.80) 957.94 42.08 111.87 241.52 21.28 35.82 For the previous financial years {Profit / (Loss)} Rs. Million (1,223.23) 12.70 26.94 1,191.22 1,621.18 174.32 1,922.91 (146.31) (392.95) (52.67)
Net aggregate amount of Subsidiary Company’s profit after deducting its losses or vice-versa, dealt within the Company’s account For the current financial year Rs. Million For the previous financial years Rs. Million
Ranbaxy (U.K.) Ltd. United Kingdom Ranbaxy Holdings (U.K.) Ltd. United Kingdom Ranbaxy Europe Ltd. United Kingdom Ranbaxy, Inc. USA Ranbaxy Pharmaceutical, Inc. USA Ranbaxy USA, Inc. USA Ohm Laboratories, Inc. USA Ranbaxy Laboratories, Inc. USA Ranbaxy Signature LLC, USA USA Ranbaxy Vietnam Company Ltd., $ Vietnam Exchange rate conversion at year end
2009 2009 2009 2009 2009 2009 2009 2009 2009 2009
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 67.50 100.00
Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Note: (i) In terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956, the annual accounts of the subsidiary companies and the related detailed information will be made available upon request by the investors of the Company and of its subsidiary companies. These documents will also be available for inspection by any investor at the Head Office of the Company at 12th Floor, Devika Tower, 6, Nehru Place, New Delhi - 110019, and that of the subsidiary companies concerned. (ii) The Board of Directors at its meeting held on October 26, 2009, approved for seeking exemption from the Government under Section 212(8) of the Companies Act, 1956, in respect of the subsidiary Companies. (iii) Ranbaxy Japan KK, Japan and Ranbaxy Maxico Servicios S.A. de C.V., Maxico, step down whollyowned subsidiaries were incorporated on November 9, 2009 and November 13, 2009 respectively. Audited accounts of these two subsidiary companies not yet became due. $ Divested/liquidated during the year: Ranbaxy (Guangzhou China) Limited, Republic of China Ranbaxy Hungary Gyogyszereszeti Kft, Hungary Ranbaxy Vietnam Company Ltd., Vietnam
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Place : Gurgaon Dated : 25 February 2010 Omesh Sethi President and CFO Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
99
CONSOLIDATED FINANCIAL STATEMENTS –
INDIAN GAAP
Ranbaxy Laboratories Limited
Auditors' report to the Board of Directors of Ranbaxy Laboratories Limited on the consolidated financial statements of Ranbaxy Laboratories Limited and its subsidiaries, associates and joint ventures 1 We have audited the attached consolidated Balance Sheet of Ranbaxy Laboratories Limited, ('the Company') its subsidiaries, associates and joint ventures (collectively known as 'the Group') as at 31 December 2009, and also the consolidated Profit and Loss Account and the Consolidated Cash Flow Statement (together known as 'consolidated financial statements') for the year ended on that date, annexed thereto. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 2 We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3 We did not audit the financial statements and other financial information of certain subsidiaries and of certain joint ventures and associates (interests in which have been incorporated in these consolidated financial statements). These subsidiaries, joint ventures and associates account for 23% of total assets and 39% of total revenues and other income, as shown in these consolidated financial statements. Of the above: (a) The financial statements and other financial information of some of the subsidiaries incorporated outside India as drawn up in accordance with the generally accepted accounting principles of the respective countries ('the local GAAP') have been audited by other auditors duly qualified to act as auditors in those countries. These subsidiaries account for 21% of total assets and 36% of total revenue and other income as shown in these consolidated financial statements. For purposes of preparation of consolidated financial statements, the aforesaid local GAAP financial statements have been restated by the management of the said entities so that they conform to the generally accepted accounting principles in India. This has been done on the basis of a reporting package prepared by the Company which covers accounting and disclosure requirements applicable to consolidated financial statements under the generally accepted accounting principles in India. The reporting packages made for this purpose have been audited by the other auditors and reports of those other auditors have been furnished to us. Our opinion on the consolidated financial statements, insofar as it relates to these entities, is based on the aforesaid audit reports of these other auditors. (b) The financial statements and other financial information of the remaining subsidiaries, joint ventures and associates have not been subjected to audit either by us or by other auditors, and therefore, unaudited financial statements for the year ended 31 December 2009 of these entities have been furnished to us by the management. These subsidiaries, joint ventures and associates account for only 2% of total assets and 3% of total revenues and other income as shown in these consolidated financial statements, and therefore are not material to the consolidated financial statements, either individually or in the aggregate. 4 We report that the consolidated financial statements have been prepared by the Company's management in accordance with the requirements of Accounting Standards 21, Consolidated Financial Statements, Accounting Standard 23, Accounting for Investments in Associates in consolidated Financial Statements, and Accounting Standard 27, Financial Reporting of interests in Joint Ventures prescribed by the Companies (Accounting Standards) Rules, 2006. 5 Without qualifying our opinion, we draw attention to note 2 on schedule 23 to the consolidated financial statements. Consequent to the Food and Drug Administration (FDA) of United States of America' import alerts and the FDA letter dated 25 February 2009 imposing the Application Integrity Policy, the Group had recorded a provision of Rs. 2,631.11 million during the year ended 31 December 2008 towards loss of inventory in hand, expected higher sales returns and expected reversal of export benefits. The basis and assumptions used by the management in calculating these provisions were based on significant judgment and estimates due to involvement of uncertainty and actual result could have been different from management's estimate. During the year, the Group carried out a reassessment and determined that the related provision of Rs. 937.81 million is no longer required and accordingly the same has been written back in the Consolidated Profit and Loss Account. 6 Based on our audit and to the best of our information and according to the explanations given to us and on consideration of reports of other auditors on separate financial statements and on the consideration of the unaudited financial statements and on other relevant financial information of the components, in our opinion the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India, in the case of: (a) the Consolidated Balance Sheet, of the state of affairs of the Group as at 31 December 2009; (b) the Consolidated Profit and Loss Account, of the profit of the Group for the year ended on that date; and (c) the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date. For B S R & Co. Chartered Accountants Place : Gurgaon Dated : 25 February 2010 Vikram Aggarwal Partner Membership No. 089826
100
Ranbaxy Laboratories Limited
Consolidated Balance Sheet as at 31 December 2009
(Rupees in millions, except share data and if otherwise stated)
As at 31 December Schedule 2009
As at 31 December 2008
SOURCES OF FUNDS Shareholders' funds Share capital Equity share warrants Share application money pending allotment Reserves and surplus Minority interest Loan funds Secured loans Unsecured loans Deferred tax liability (net) APPLICATION OF FUNDS Fixed assets Gross block Less : Accumulated depreciation, amortisation and impairment Net block Capital work-in-progress (including capital advances) Investments Deferred tax asset (net) Current assets, loans and advances Inventories Sundry debtors Cash and bank balances Loans and advances Other current assets Less: Current liabilities and provisions Current liabilities Provisions Net current assets
1 23(5)(b) 2
2,102.09 1,756.59 1.95 39,573.29 43,433.92 533.22 2,186.62 34,108.60 36,295.22 160.54 80,422.90
2,101.85 1,756.59 – 39,104.03 42,962.47 674.61 2,911.35 39,937.32 42,848.67 246.63 86,732.38
3 4 5
6 62,785.54 17,880.49 44,905.05 6,230.66 51,135.71 5,407.40 4,906.19 18,406.99 18,399.47 12,416.34 9,065.26 1,797.90 60,085.96 32,510.83 8,601.53 41,112.36 18,973.60 80,422.90 61,941.64 17,041.97 44,899.67 4,707.37 49,607.04 5,431.50 12,476.01 19,643.14 13,310.08 23,956.38 6,436.24 1,755.19 65,101.03 39,800.36 6,082.84 45,883.20 19,217.83 86,732.38
23(7) 7 5 8 9 10 11 12
13 14
Significant accounting policies 22 Notes to the consolidated financial statements 23 The schedules referred to above form an integral part of the Consolidated Balance Sheet As per our report attached For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010 For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
101
Ranbaxy Laboratories Limited
Consolidated Profit and Loss Account for the year ended 31 December 2009
(Rupees in millions, except share data and if otherwise stated) For the year ended 31 December 2009 76,117.65 147.29 75,970.36 2,935.45 1,931.23 80,837.04 32,079.98 14,174.73 22,591.29 – 68,846.00 For the year ended 31 December 2008 74,449.96 310.01 74,139.95 2,599.46 – 76,739.41 31,831.49 12,626.47 23,843.68 11,064.03 79,365.67
Schedule INCOME Operating income Less : Excise duty Other income Net foreign exchange gain (other than on loans) EXPENDITURE Materials consumed Personnel expenses Operating and other expenses Net foreign exchange loss (other than on loans) 15
16 23(10)
17 18 19 23(10)
Profit/ (loss) before interest, exchange (gain)/loss (net) on loans, depreciation, amortisation, impairment, tax charge / (benefit), share in loss of associates and minority interest 11,991.04 Interest 23(8) 710.43 Exchange (gain) / loss on loans (1,493.13) Profit/ (loss) before depreciation, amortisation, impairment, tax charge / (benefit), share in loss of associates and minority interest 12,773.74 Depreciation, amortisation and impairment 6 2,676.12 Profit/ (loss) before tax charge / (benefit), share in loss of associates and minority interest 10,097.62 Tax charge / (benefit) 20 6,990.87 Profit/ (loss) after tax charge / (benefit) and before share in loss of associates and minority interest 3,106.75 Less: Share in loss of associates (net) 23(20) 32.38 Less: Minority interest 23(19) 109.45 Profit/ (loss) for the year 2,964.92 Balance brought forward (4,009.92) Transfer from foreign projects reserve 13.76 Deficit carried forward to Schedule 2 (1,031.24) Earnings/ (loss) per share (Rs.) 21 Basic - Par value of Rs. 5 per share 7.05 Diluted - Par value of Rs. 5 per share 4.60 Significant accounting policies 22 Notes to the consolidated financial statements 23 The schedules referred to above form an integral part of the Consolidated Profit and Loss Account
(2,626.26) 2,055.01 7,494.35
(12,175.62) 2,824.69
(15,000.31) (5,650.84)
(9,349.47) 78.21 84.37 (9,512.05) 5,482.63 19.50 (4,009.92) (24.85) (24.85)
As per our report attached
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary
For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place : Gurgaon Dated : 25 February 2010
102
Ranbaxy Laboratories Limited
Consolidated Cash Flow Statement For The Year Ended 31 December 2009
(Rupees in millions, except share data and if otherwise stated)
A. CASH FLOW FROM OPERATING ACTIVITIES Net profit/ (loss) before taxes Adjustments for: Depreciation, amortisation and impairment Fixed assets written off Deferred employees compensation charge Deferred employees compensation reversal Unrealised foreign exchange (gain) / loss (net) Foreign exchange loss/(gain) on integral operations Fair valuation (gain)/ loss on derivatives Dividend income Profit on sale of long term investments Unclaimed balances/ excess provision written back (Also refer to note 2 of schedule 23) Profit on sale of assets (net) Provision for diminution in value of long term investment Loss on valuation of current investments Interest expense Interest income Investment written off Provisions/ write off for doubtful debts, advances and other current assets Operating profit before working capital changes Adjustments for: Decrease/ (increase) in inventories (Increase)/ decrease in sundry debtors Decrease in loans and advances Decrease/ (increase) in other current assets Increase/ (decrease) in trade / other payables Cash generated/ (used in) from operating activity before taxes Direct taxes paid (net of refunds) Net cash used in operating activity B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Proceed from sale of fixed assets Purchase of investments Investment in associates Cash paid for acquisition of minority interest Sale proceeds of investments (net of cash transferred) Decrease/ (increase) in fixed deposit with original maturity of more than 90 days Interest received Dividend received Net cash generated from/ (used in) investing activity C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of capital (including premium) Proceeds from equity share warrants Decrease in short term bank borrowings (net) Decrease in long term borrowings (net) Increase in other borrowings (net) Short term borrowings from non convertible debentures Re-payment of short term borrowings of non convertible debentures Issue expenses of share capital and warrants Interest paid Dividend paid to minority shareholders of subsidiaries Dividend paid Tax on dividend Net cash (used in)/ generated from financing activities INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Effect of exchange loss/ (gain) on cash and cash equivalents Cash and cash equivalents at the end of the year Notes : Cash and cash equivalents include: Cash and cheques in hand and remittances in transit With banks in: Current accounts Deposit accounts Cash and cash equivalents at the end of the year Add: Fixed deposit pledged (restricted cash) Unclaimed dividend Fixed deposit with original maturity of more than 90 days Cash and bank balances at the end of the year As per our report attached
For B S R & Co. Chartered Accountants Vikram Aggarwal Partner Membership No. 089826 Place Dated : Gurgaon : 25 February 2010 For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place Dated : Gurgaon : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary For the year ended 31 December 2009 For the year ended 31 December 2008
10,097.62 2,676.12 7.97 – (8.17) (2,013.55) 160.53 (8,932.47) (9.78) (533.22) (858.40) (137.67) – 127.78 710.43 (1,106.21) – 353.44 (9,563.20) 534.42 865.11 (5,774.95) 1,166.21 90.59 3,923.68 270.64 805.06 (2,426.31) (1,621.25) (5,220.51) 316.14 (237.46) – (739.54) 1,499.61 4,008.56 1,015.01 9.78 651.59 13.44 – (2,830.91) (1,644.52) 15.17 2,000.00 (2,000.00) – (769.59) (6.28) – – (5,222.69) (6,192.35) 11,782.77 114.32 5,476.10 75.79 3,319.44 2,081.01 5,476.24 5,476.24 0.79 66.33 6,872.98 12,416.34
(15,000.31) 2,824.69 – 3.75 – 5,909.84 (204.73) 7,702.14 (29.38) (42.83) 177.38 (933.20) 433.72 – 2,055.01 (1,053.26) 93.42 273.61 17,210.16 2,209.85 (3,359.10) 1,880.04 970.60 (639.43) (1,222.23) (2,370.12) (160.27) (1,359.94) (1,520.21) (5,748.80) 1,410.98 (5,212.01) (1,391.53) (21.32) 3,055.72 (10,881.54) 913.51 29.38 (17,845.61) 34,389.19 1,756.59 (2,805.07) (1,725.25) 33.40 16,870.00 (16,870.00) (201.40) (2,055.01) (7.53) (2,239.42) (380.59) 26,764.91 7,399.09 4,295.80 (87.82) 11,782.71 388.60 2,609.94 8,784.23 11,782.77 11,782.77 1,215.50 76.57 10,881.54 23,956.38
103
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 1 Share Capital Authorised 598,000,000 (previous year 598,000,000) equity shares of Rs. 5 each 100,000 (previous year 100,000) cumulative preference shares of Rs. 100 each Issued, subscribed and paid up 420,417,758 (previous year 420,369,753) equity shares of Rs. 5 each fully paid
As at 31 December 2009 2,990.00 10.00 3,000.00
As at 31 December 2008 2,990.00 10.00 3,000.00
2,102.09 2,102.09
2,101.85 2,101.85
Notes: 1. Issued, subscribed and paid up capital includes: 293,698,988 (previous year 293,698,988) equity shares of Rs. 5 each allotted as fully paid bonus shares by capitalisation out of share premium and reserves. [ii] 6,562,308 (previous year 6,562,308) equity shares of Rs. 5 each allotted as fully paid up pursuant to contract without payment being received in cash. [iii] 5,501,185 Global Depository Share (GDSs) (previous year 7,227,121) representing 5,501,185 (previous year 7,227,121) equity shares of Rs. 5 each constitute 1.31% of the issued subscribed and paid-up share capital of the Company, are outstanding. 2. 268,711,323 (previous year 268,711,323) equity shares of Rs. 5 each are held by Daiichi Sankyo Company Limited, Japan, the holding company, also being the ultimate holding company. Also refer to note 5 on schedule 23 SCHEDULE - 2 Reserves and surplus (a) Capital reserve (b) Amalgamation reserve (c) Revaluation reserve Balance at the beginning of the year Less: Utilised during the year Also refer schedule 6 (d) Share premium account Balance at the beginning of the year Add: Received during the year Add: Transfered from employees stock option outstanding Less: Utilised for preferential allotment issue expenses Less: Premium payable on redemption of Zero Coupon Foreign Currency Convertible Bonds (FCCBs) Less : Tax reversal / (benefit) for premium payable on redemption of FCCBs Also refer schedule 5 (e) Foreign projects reserve Balance at the beginning of the year Less: Transfer to Consolidated Profit and Loss Account (f) Hedging reserve (net of tax) Balance at the beginning of the year Add: Utilised / (addition) during the year
71.77 43.75 185.11 (113.95) 71.16
71.77 43.75 187.31 (2.20) 185.11
37,862.18 11.26 1.89 37,875.33 – 1,083.41 1,227.17 35,564.75
5,010.51 34,164.47 31.45 39,206.43 201.40 1,731.33 (588.48) 37,862.18
18.35 13.76 4.59 (792.58) 763.85 (28.73)
37.85 19.50 18.35 – (792.58) (792.58)
104
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
As at 31 December 2009 (g) Employee stock options outstanding Balance at the beginning of the year Add: (Reversal) / amortisation of deferred employees compensation Less: Transferred to share premium on exercise of stock option Also refer to note 6 on schedule 23 (h) General reserve Balance at the beginning of the year Less: Transitional loss recognised pursuant to early adoption of Accounting Standard - 30 "Financial Instruments: Recognition and Measurement" (i) Foreign currency translation reserve Balance at the beginning of the year Add: (Deduction) / addition during the year (j) Deficit brought forward from Consolidated Profit and Loss Account SCHEDULE - 3 Secured loans Loan from banks ^ Finance lease liability** 67.67 (8.17) 59.50 1.89 57.61
As at 31 December 2008 95.75 3.37 99.12 31.45 67.67
4,370.28
16,151.24
– 4,370.28 1,287.42 (838.07) 449.35 (1,031.24) 39,573.29
11,780.96 4,370.28 (922.79) 2,210.21 1,287.42 (4,009.92) 39,104.03
1,807.60 379.02 2,186.62
2,474.47 436.88 2,911.35
Notes: ^ Secured against certain assets, property, equipment and other immovable property, inventories and sundry debtors of Ranbaxy Laboratories Limited and Ranbaxy (U.K.) Ltd. ** Secured against assets taken on finance lease by Ranbaxy Phamaceuticals Inc., United States of America. (Also refer to note 9(a) on schedule 23) SCHEDULE - 4 Unsecured loans Short term loans from banks Other loans # Zero coupon foreign currency convertible bonds (FCCBs)* From banks From others
5,684.54 20,475.40 7,771.19 177.47 34,108.60
8,407.79 21,379.60 9,987.63 162.30 39,937.32
Notes: * The Parent Company has outstanding FCCBs aggregating to US $ 440 million. The bondholders have the option to convert FCCBs into equity shares of Ranbaxy Laboratories Limited at a price of Rs. 716.32 per share (subject to adjustment, if any) with a fixed exchange rate of Rs. 44.15 per US $, at any time on or after 27 April 2006 but before 9 March 2011. Further, these FCCBs may be redeemed, in whole, at the option of Ranbaxy Laboratories Limited at any time on or after 18 March 2009, but before 6 February 2011, subject to the satisfaction of certain conditions. These FCCBs are redeemable on 18 March 2011, at a premium of 26.765 percent (net of withholding tax) of their principal amount unless previously converted, redeemed, purchased or cancelled. # Other loans due for repayment within one year From banks 2,487.67 1,738.97 From others 19.78 14.83
105
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
As at 31 December 2009 SCHEDULE - 5 Deferred tax asset / liability (net) Deferred tax asset arising on account of: Provision for doubtful debts and advances Employee benefits FCCB loan revaluation FCCB redemption premium charged to share premium account Tax losses carried forward Others Less: Deferred tax liability arising on account of: Depreciation, amortisation and impairment Others Deferred tax asset (net) Aggregate of net deferred tax assets jurisdictions Aggregate of net deferred tax liabilities jurisdictions Deferred tax asset (net)
As at 31 December 2008
22.54 23.56 – – 7,222.49 648.22 7,916.81 3,005.22 165.94 3,171.16 4,745.65 4,906.19 160.54 4,745.65
131.83 152.51 413.77 1,227.17 12,748.92 815.97 15,490.17 3,094.85 165.94 3,260.79 12,229.38 12,476.01 246.63 12,229.38
In respect of Ranbaxy Laboratories Limited, on the basis of profit from operations made subsequent to year end, profit on sale of materials relating to First to File (FTF) product in the United States of America, milestone payment from an exclusivity settlement and certain other factors, the Group believes that there is virtual certainty in respect of the carrying amount of net deferred tax asset. Consequently, deferred tax asset of Rs. 1,296.83 has been written off. Further, due to a similar assessment as mentioned above, the deferred tax asset of Rs.1,227.17 relating to premium payable on redemption of FCCBs has not been carried forward with corresponding adjustment through share premium account. In respect of other countries, where there is carry forward tax losses as at year end, deferred tax asset amounting to Rs. 917.30 has not been recognised.
106
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
Gross block Additions* Deletions/ adjustments Translation As at 31 December 2009** As at 1 January 2009
SCHEDULE - 6
Accumulated depreciation, amortisation and impairment Net block For the Deletions/ Translation As at As at As at year $ adjustments 31 December 31 December 31 December 2009** 2009** 2008
Fixed assets
Description
As at 1 January 2009
918.80 262.66 6,919.86 22,546.31 1,877.35 855.09 – 2.97 – – 2.08 78.88 – 282.95 1.75 – 1,569.05 572.14 541.26 – 397.69 207.98 – 4,158.79 4,628.06 302.07 3.55 – 2,636.11 793.58 (132.05) (5.88) – (678.78) 2,416.90 4,985.45 1,031.33 211.00 62,785.54 61,941.64 2,735.86 497.72 200.70 17,041.97 13,645.14 440.77 114.68 10.30 2,676.12 2,824.69 551.96 – (61.89) – 21,446.32 361.75 613.54 361.75 – – – – 4.83 (25.60) (0.23) 0.21 579.96 3.95 3.86 246.47 0.08 4.91 51.13 0.27 0.23 (9.94) (0.02) 0.10 (13.96) – (70.25) (3.37) – (268.55) 1,144.28
0.46 6.75 644.98 2,094.57 155.32 106.81
50.72 ## – 348.63 ## 1,114.15 148.19 112.01
(37.71) (0.41) (232.58) (152.28) (12.95) (17.41)
830.83 269.00 6,983.63 23,374.45 1,871.53 832.48
– – 1,076.48 10,126.23 777.61 400.62
– 1.19 208.29 1,580.59 157.07 111.60
– – 115.85 914.12 103.46 69.96
– (0.01) (31.62) (115.29) (9.96) (14.23)
– 1.18 1,137.30 10,677.41 821.26 428.03 287.66 0.33 3.16 520.70 361.75 2,823.43 607.28 211.00 17,880.49 17,041.97
830.83 267.82 5,846.33 12,697.04 1,050.27 404.45 292.30 3.62 0.70 20,925.62 – 2,162.02 424.05 – 44,905.05 44,899.67
918.80 262.66 5,843.38 12,420.08 1,099.74 454.47 359.09 1.13 3.57 20,905.37 – 2,286.02 335.06 10.30 44,899.67
605.56 1.21 8.48
21,518.91 361.75
Ranbaxy Laboratories Limited
107
Gross block Accumulated depreciation Net block 204.22 (202.99) 48.39 (–) 85.03 (–) – (–) 11.63 (–) 85.03 (–) 204.22 (202.99) 36.76 (–) – (–)
Tangible assets Land – Freehold # – Leasehold Buildings^ Plant and machinery Furniture and fixtures Vehicles Assets taken on lease – Building – Plant and machinery – Vehicles Intangible assets Goodwill Product development @ Patent, trade marks, designs and licences@@ Software@@ Non compete fee Total Previous year
5,021.88 832.78 211.00 61,941.64 55,690.25
Notes : * Additions to fixed assets during the year include Rs. 221.98 (previous year Rs. 558.28) towards assets used for research and development. ** The above includes the following assets held for disposal, which are being carried at the lower of their net block and net realisable value
Description
Land
Building
Plant and machinery
# @
$
@@
Figures in brackets are for previous year Freehold land includes Rs. 25.48 (previous year Rs. 25.48) pending registration in the name of Ranbaxy Laboratories Limited. During the year, Ranbaxy Laboratories Limited provided for an impairment loss of Rs. nil (previous year Rs. 331.32) on certain product development rights. The impairment loss was determined owing to the prevailing market conditions of the underlying molecules for which the product development rights were acquired. During the current year, consequent to a change in the probability for extension of lease term for a leased property, Ranbaxy Laboratories Limited has recorded accelerated depreciation on assets constructed on that leased property amounting to Rs. 141.70 (previous year Rs. nil). Remaining useful lives of intangible assets as at 31 December 2009 is in the range of 1-10 years: Description Remaining useful lives Patents, trade marks, designs and licences 1-10 years Software 1-6 years
##
Includes adjustment of Rs. 184.99 (accumulated depreciation of Rs. 71.04) on account of revaluation carried out by Ranbaxy Ireland Limited.
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
As at 31 Dec. 2009 As at 31 Dec. 2008
Schedule - 7
Investments
Nature of investment CURRENT Trade: Quoted Krebs Biochemicals & Industries Limited Non trade: Quoted Orchid Chemicals and Pharmaceuticals Limited Trust securities Non trade - unquoted Zero % NABARD-2019 Zero % NABARD-2019 Zero % NABARD-2019 6.85% IIFCL Face value Numbers 2009 2008
Equity shares
Rs. 10
1,050,000
–
35.33
–
Equity shares
Rs. 10
9,169,977
–
1,684.98
–
Bonds Bonds Bonds Bonds
Rs. 10,000 Rs. 10,000 Rs. 10,000 Rs. 100
9,245 2,650 2,650 1,000,000
– – – –
86.97 24.92 24.92 100.65 237.46 1,957.77
– – – – – –
LONG TERM Investments in shares/ warrants of companies (fully paid) Trade: Quoted Krebs Biochemicals & Industries Limited Equity shares Sawai Pharmaceutical Co.,Ltd # Equity shares Unquoted Nimbua Greenfield (Punjab) Limited Equity shares Shivalik Solid Waste Management Limited Equity shares Biotech Consortium India Limited Equity shares Tomita Pharmaceutical Co.,Ltd # Equity shares Sidmak Laboratories (India) Limited Equity shares Non trade : Quoted The Great Eastern Shipping Company Limited Fortis Healthcare Limited Orchid Chemicals and Pharmaceuticals Limited Autobacs Seven Co.,Ltd # Unquoted Kapasa B.V Associates (trade) Quoted Zenotech Laboratories Limited Unquoted Shimal Research Laboratories Limited
Rs. 10 – Rs. 10 Rs. 10 Rs. 10 – Rs. 10
– – 250,000 20,000 50,000 – 167,330
1,050,000 1,500 250,000 20,000 50,000 2,500 167,330
– – 2.50 0.20 0.50 – 10.54 13.74
89.25 2.76 2.50 0.20 0.50 1.89 10.54 107.64
Equity shares Equity shares Equity shares Equity shares
Rs. 10 Rs. 10 Rs. 10 –
500 14,097,660 – –
500 14,097,660 9,669,977 871
0.03 140.98 – – – 141.01
0.03 140.98 1,854.75 0.84 485.90 2,482.50
Equity shares Equity shares
Rs. 10 Rs. 10
16,127,293 9,340,000
16,127,293 9,340,000
2,313.63 * 981.75 ** 3,295.38 5,407.90 0.50 5,407.40 2,313.63 1,841.74 141.01 1,930.12 981.75 13.24 – – – – – –
2,361.82 * 965.94 ** 3,327.76 5,917.90 486.40 5,431.50 2,361.82 1,728.85 2,088.62 1,841.28 965.94 15.63 479.32 246.22 147.34 728.61 883.26 480.03
Less: Provision for diminution in value of long term investments Aggregate book value of quoted investments of associates Market value of quoted investments of associates Aggregate book value of long term quoted investments of others Market value of long term quoted investments of others Book value of long term unquoted investments in associates Book value of long term unquoted investments in others Investment (bank certificates of deposit) purchased and sold during the year – ABN Amro Bank – Corporation Bank – Federal Bank – IDBI Bank – Punjab National Bank – State Bank of India Notes: # Held by Nihon Pharmaceuticals Industry Co. Ltd., Japan * Includes goodwill Rs. 1,900.18 (previous year Rs. 1,900.18) ** Includes goodwill Rs. 681.67 (previous year Rs. 681.67)
108
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 8 Inventories Stores and spares Raw materials Packaging materials Finished goods Work-in-progress SCHEDULE - 9 Sundry debtors (Considered good except where provided for) Debts outstanding for a period exceeding six months Secured Unsecured – Considered good – Considered doubtful Other debts – Secured – Unsecured considered good
As at 31 December 2009 140.64 6,683.91 715.55 6,979.84 3,887.05 18,406.99
As at 31 December 2008 181.49 6,689.18 795.20 8,788.35 3,188.92 19,643.14
0.65 2,757.28 575.90 3,333.83 1,525.24 14,116.30 15,641.54 18,975.37 575.90 18,399.47
0.01 2,889.11 565.52 3,454.64 1,237.49 9,183.47 10,420.96 13,875.60 565.52 13,310.08
Less : Provision for doubtful debts SCHEDULE - 10 Cash and bank balances Cash in hand Cheques in hand Remittances in transit Balances with banks: – Current accounts – Deposit accounts # – Unclaimed dividend account Include deposit receipts pledged with: – Government authorities – Banks Schedule - 11 Loans and advances (Considered good, except where provided for) Secured loans to employees Unsecured loans and advances: Advances recoverable in cash or in kind or for value to be received – Considered good – Doubtful Minimum alternate tax (MAT) credit entitlement Advance income tax (net of provision for tax of respective tax jurisdiction) Less : Provision for doubtful advances #
12.49 3.35 59.95 3,319.44 8,954.78 66.33 12,416.34 0.79 –
15.39 – 373.21 2,609.94 20,881.27 76.57 23,956.38 0.75 1,214.75
55.32
49.37
4,102.58 77.42 4,720.65 186.71 9,142.68 77.42 9,065.26
4,318.61 85.19 1,219.00 849.26 6,521.43 85.19 6,436.24
109
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 12 Other current assets (Unsecured, considered good except where provided for) Export incentives accrued Exchange gain accrued on forward contracts Insurance claims Interest accrued but not due Others – Considered good – Doubtful Less : Provision for doubtful other current assets SCHEDULE - 13 Current liabilities Sundry creditors * Book overdraft Interest accrued but not due on loans Acceptances Unpaid dividend Payables towards unrealised loss on currency options Other liabilities * Including advance from customers SCHEDULE - 14 Provisions Employee benefits# Income-tax (net of advance income tax paid in respective jurisdiction) Premium payable on redemption of FCCB Provision for contingency # Also refer to note 12 on schedule 23
As at 31 December 2009 664.26 559.63 12.41 241.38 320.22 25.84 1,823.74 25.84 1,797.90 14,393.92 49.78 36.37 1.75 66.33 16,669.65 1,293.03 32,510.83
As at 31 December 2008 654.69 562.75 8.63 154.08 375.04 24.17 1,779.36 24.17 1,755.19 11,039.44 265.72 74.10 120.73 76.57 26,760.86 1,462.94 39,800.36
2,342.51 1,501.96 4,693.79 63.27 8,601.53 Year Ended 31 December 2009 73,441.32 73,441.32 546.80 505.92 1,441.15 182.46 2,676.33 76,117.65 1,106.21 533.22 137.67 – 858.40 8.17 9.78 282.00 2,935.45
2,194.44 232.48 3,610.38 45.54 6,082.84 Year Ended 31 December 2008 72,555.23 72,555.23 870.77 589.14 172.69 262.13 1,894.73 74,449.96 1,053.26 – 940.39 42.83 177.38 – 29.38 356.22 2,599.46
SCHEDULE - 15 Operating income Sales Export incentives Royalty, technical know-how and product development Income from settlement agreements Other service income SCHEDULE - 16 Other income Interest Profit on sale of long term investments (Also refer to note 3 on schedule 23) Profit on sale of assets [net of loss Rs. 26.54 (previous year Rs. 25.88)] Profit on sale of current investments Unclaimed balances / excess provisions written back (Also refer to note 2 on schedule 23) Reversal of deferred employees compensation Dividend Miscellaneous
110
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 17 Materials consumed Raw materials consumed* Stores and spares consumed Packaging materials consumed Finished goods purchased Decrease/(increase) in work-in-progress and finished goods Opening stock Work-in-progress Finished goods Less : Closing stock Work-in-progress Finished goods Decrease / (increase), net (Increase) in excise duty * Includes site variation cost amounting to Rs. 423 (previous year Rs. nil) SCHEDULE - 18 Personnel expenses Salaries,wages and bonus Contribution to provident and other funds Workmen and staff welfare Amortisation of deferred employees compensation
Year ended 31 December 2009
Year ended 31 December 2008
19,968.77 1,380.63 2,613.08 7,020.12
20,254.10 1,285.78 3,236.92 8,887.73
3,188.92 8,788.35 11,977.27
2,745.57 7,485.66 10,231.23
3,887.05 6,979.84 10,866.89 1,110.38 (13.00) 32,079.98
3,188.92 8,788.35 11,977.27 (1,746.04) (87.00) 31,831.49
12,197.98 1,108.23 868.52 – 14,174.73
10,810.78 1,088.39 723.55 3.75 12,626.47
SCHEDULE - 19 Operating and other expenses Freight, clearing and forwarding Advertising and sales promotion Travel and conveyance Legal and professional Market research Commission Communication Insurance Rent (refer to note 9 (b) of schedule 23) Rates and taxes Regulatory filing fee Printing and stationery Analytical charges Processing charges Excise duty Power and fuel Running and maintenance of vehicles
1,868.36 4,238.28 1,268.54 3,115.02 661.39 1,346.12 433.20 471.41 840.25 450.42 571.47 163.39 152.45 1,125.32 24.74 1,657.75 397.69
2,441.19 3,672.43 1,370.89 2,602.15 903.71 1,330.19 405.37 428.90 817.51 327.84 699.10 157.20 168.43 1,412.23 18.69 1,586.45 395.58
111
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
Repairs and maintenance – Buildings – Plant and machinery – Others Cash discounts Conferences and meetings Clinical trials Recruitment and training Fixed assets written off Provisions/write off for doubtful debts, advances and other current assets Investments written off Loss on valuation of current investments Provision for diminution in the value of long-term investment Royalty Miscellaneous SCHEDULE - 20 Tax charge / (benefit) Current income-tax Minimum alternate tax credit entitlement Deferred tax charge / (credit) Fringe benefit tax Tax - earlier years # # Net of credit adjusted of Rs. 6.50 (previous year Rs. 27.01) SCHEDULE - 21 Earnings per share Net profit / (loss) attributable to equity shareholders Profit / (loss) after tax Less: Exchange gain on Foreign Currency Convertible Bonds Number of weighted average equity shares Basic Effect of dilutive equity shares on account of * – Employees stock options outstanding – Foreign Currency Convertible Bonds Diluted Nominal value of equity share (Rs.) Earning / (loss) per share (Rs.) Basic Diluted * Following are the potential equity shares considered to be anti dilutive in nature, hence these have not been adjusted to arrive at the dilutive earnings per share: – Employees stock options outstanding – Foreign Currency Convertible Bonds – Equity share warrants
Year ended 31 December 2009 67.15 253.52 449.86 273.22 172.18 454.89 210.31 7.97 353.44 – 127.78 – 22.17 1,413.00 22,591.29
Year ended 31 December 2008 90.88 171.78 585.59 376.01 211.18 527.08 205.57 – 273.61 93.42 – 433.72 – 2,136.98 23,843.68
4,558.31 (3,501.65) 5,888.49 35.50 10.22 6,990.87
745.13 (40.02) (6,510.25) 155.57 (1.27) (5,650.84)
2,964.92 (904.20) 2,060.72 420,380,856 819,480 27,119,165 448,319,501 5.00 7.05 4.60
(9,512.05) – (9,512.05) 382,846,324 – – 382,846,324 5.00 (24.85) (24.85)
– – 23,834,333
300,486 27,119,165 23,834,333
112
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The consolidated financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the Accounting Standards as specified in the Companies (Accounting Standards) Rules, 2006, other pronouncements of the Institute of Chartered Accountants of India (ICAI) and the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India, to the extent applicable. Principles of consolidation The consolidated financial statements include the financial statements of Ranbaxy Laboratories Limited, ("Parent Company"), its subsidiaries, joint ventures and associates (collectively known as "the Group"). Name of subsidiaries/joint venture/associates Country of Effective group incorporation shareholding (%) Subsidiaries Ranbaxy Australia Pty Ltd. Australia 100.00 Ranbaxy Belgium N.V. Belgium 100.00 Ranbaxy Farmaceutica Ltda. Brazil 100.00 Ranbaxy Do Brazil Ltda. Brazil 100.00 Ranbaxy Pharmaceuticals Canada Inc. Canada 100.00 Ranbaxy Egypt (L.L.C.) Egypt 100.00 Rexcel Egypt (L.L.C.) Egypt 100.00 Ranbaxy Pharmacie Generiques SAS France 100.00 Office Pharmaceutique Industriel Et Hospitalier SARL ("OPIH SARL") France 100.00 Basics GmbH Germany 100.00 Lapharma GmbH Germany 100.00 Ranbaxy (Hong Kong) Limited Hong Kong 100.00 Ranbaxy Hungary Kft (upto 22 May 2009) Hungary 100.00 Ranbaxy Drugs and Chemicals Company India 100.00 Ranbaxy Drugs Limited India 100.00 Rexcel Pharmaceuticals Limited India 100.00 Solus Pharmaceuticals Limited India 100.00 Solrex Pharmaceuticals Company# India 100.00 Vidyut Investments Limited India 100.00 Ranbaxy SEZ Limited India 100.00 Gufic Pharma Limited India 98.00 Ranbaxy Life Sciences Research Limited India 80.07 Ranbaxy Ireland Limited Ireland 100.00 Ranbaxy Italia S.p.A Italy 100.00 Ranbaxy Japan KK (from 9 November 2009) Japan 100.00 Ranbaxy (Malaysia) Sdn. Bhd. Malaysia 68.09 Ranbaxy Mexico S.A.de C.V. Mexico 100.00 Ranbaxy Mexico Servicios S.A.de C.V. (from 13 November 2009) Mexico 100.00 Ranbaxy Nigeria Limited. Nigeria 85.31 Ranbaxy PRP (Peru) SAC. Peru 100.00 Ranbaxy Poland S.P. Zoo Poland 100.00
113
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Name of subsidiaries/joint venture/associates Country of incorporation Effective group shareholding (%) 100.00 83.00 96.70 96.70 100.00 100.00 100.00 100.00 68.40 100.00 100.00 100.00 100.00 88.56 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 67.50 100.00
Ranbaxy Portugal - Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda Portugal Ranbaxy (Guangzhou China) Limited (upto 29 December 2009) Republic of China Terapia S.A. Romania Terapia Distributie S.R.L. Romania ZAO Ranbaxy Russia Ranbaxy (S.A.) Proprietary Limited South Africa Be-Tabs Pharmaceuticals (Proprietary) Ltd.* South Africa Be-Tabs Investments (Proprietary) Ltd.* South Africa Sonke Pharmaceuticals (Pty) Ltd South Africa Laboratorios Ranbaxy, S.L. Spain Ranbaxy Pharma AB Sweden Ranbaxy (Netherlands) BV The Netherlands Ranbaxy NANV The Netherlands Ranbaxy Unichem Company Ltd. Thailand Ranbaxy (UK) Ltd. United Kingdom Ranbaxy Holdings (UK) Ltd. United Kingdom Ranbaxy Europe Ltd. United Kingdom Ranbaxy Inc. United States of America Ranbaxy Pharmaceuticals, Inc. United States of America Ranbaxy USA, Inc. United States of America Ohm Laboratories, Inc. United States of America Ranbaxy Laboratories Inc. United States of America Ranbaxy Signature LLC United States of America Ranbaxy Vietnam Company Ltd. (upto 5 October 2009) Vietnam Joint Venture Nihon Pharmaceutical Industry Co., Ltd (upto 8 December 2009) Japan Associates Zenotech Laboratories Limited India Shimal Research Laboratories Limited India # A partnership firm, in which two subsidiaries of the Parent Company are partners. * 75% till 12 June 2009
50.00 46.99 24.91
The consolidated financial statements have been combined on a line-by-line basis by adding the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances/transactions and unrealised profits in full. The amounts shown in respect of reserves comprise the amount of the relevant reserves as per the Balance Sheet of the Parent Company and its share in the post-acquisition increase/decrease in the reserves of the consolidated entities. Proportionate share of interest in joint venture has been accounted for by the proportionate consolidation method in accordance with Accounting Standard - 27 "Financial reporting of Interest in Joint Ventures".
114
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES An investment in an associate has been accounted for by the equity method of consolidation from the date on which it falls within the definition of associates in accordance with Accounting Standard-23 "Accounting for investments in Associates in Consolidated Financial Statements". The excess/deficit of cost to the Parent Company of its investment over its portion of net worth in the consolidated entities at the respective dates on which investment in such entities was made is recognised in the consolidated financial statements as goodwill/capital reserve. The Parent Company's portion of net worth in such entities is determined on the basis of book values of assets and liabilities as per the financial statements of the entities as on the date of investment and if not available, the financial statements for the immediately preceding period adjusted for the effects of significant changes. Entities acquired/ sold during the year have been consolidated from/ upto the respective date of their acquisition/ disposal. The consolidated financial statements are presented, to the extent possible, in the same format as that adopted by the Parent Company for its separate financial statements. Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenses for the year. Examples of such estimates include provisions of future obligation under employee retirement benefit plans, the useful lives of fixed assets and intangible assets, etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods. Fixed assets and depreciation Fixed assets are stated at the cost of acquisition or construction, less accumulated depreciation and impairment losses. Cost comprises the purchase price and any attributable costs of bringing the assets to their working condition for intended use. Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily take a substantial period of time to be ready for their intended use, are capitalised. Depreciation on fixed assets, except leasehold improvements, is provided using the straight-line method and at the rates reflective of estimate useful lives of fixed assets, unless minimum rates subscribed by respective local laws. Leasehold improvements are depreciated over their estimated useful life, or the remaining period of lease from the date of capitalisation, whichever is shorter. The management's estimate of the useful lives for various categories of fixed assets are given below Years Building Plant and machinery Furniture and fixtures Vehicles 29 - 61 3 - 33 3 - 17 4 - 10
Depreciation is calculated on a pro-rata basis from the date of installation till the date the assets are sold or disposed. Assets costing individually Rs. 5,000 or less are depreciated fully in the year of purchase. Intangible assets and amortisation Intangible assets comprise goodwill, patents, trademarks, designs and licenses, software, non-compete fee and product development rights, and are stated at cost less accumulated amortisation and impairment losses, if any.
115
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES These are amortised over their estimated useful lives on a straight-line basis, commencing from the date the asset is available to the entities for its use. The management estimates the useful lives for the various intangible assets as follows: Years Patents, trademarks, designs and licenses Software Non-compete fee Product development 5 - 10 6 Term of the respective agreements ranging from 1 to 10 years 5
Goodwill reflects the excess of cost of acquisition over the book value of net assets acquired on the date of the acquisition. Goodwill is tested for impairment on an annual basis. Impairment of assets The carrying values of assets other than goodwill are reviewed at each reporting date to determine if there is indication of any impairment. Goodwill is tested for impairment at least once in year. If any indication exists, the asset's recoverable amount is estimated. For assets that are not yet available for use, the recoverable amount is estimated at each reporting date. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount and is recognised in the Consolidated Profit and Loss Account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised. Revenue recognition Revenue from sale of goods is recognised on transfer of significant risks and rewards of ownership to the customer. Revenue includes excise duty and is shown net of sales tax, value added tax and applicable discounts and allowances. Allowances for sales returns are estimated and provided for in the year of sales. Service income is recognised as per the terms of contracts with customers when the related services are rendered, or the agreed milestones are achieved. Income from royalty, technical know-how arrangements, exclusivity and patents settlement, licensing arrangements is recognised on accrual basis in accordance with the terms of the relevant agreement. Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Dividend income is recognised when the right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on the time proportionate method. In the United States of America, large customers are major wholesalers who resell products to third party customers like managed care organisations, drug store chains and pharmacies. A significant part of gross revenues from such wholesalers are subject to various forms of rebates and allowances (referred to as "Chargebacks"), which are recorded as reductions from the gross revenues. The computation of the estimate for expected chargebacks is complex and involves significant judgment based on historical experience and estimated wholesaler inventory levels, as well as expected sell-through levels by the wholesalers to indirect customers. The primary factors considered in developing and evaluating provision for chargeback includes the average historical chargeback credits and an estimate of the inventory held by such wholesalers, based on internal analysis of wholesaler's historical purchases and contract sales.
116
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at the lower of cost and fair value, determined on an individual investment basis. Long-term investments are carried at cost less any other-than-temporary diminution in value, determined separately in respect of each category of investment. Inventories Raw material, packaging material and stores and spare parts are carried at cost. Cost includes purchase price, other than those subsequently recoverable by the enterprise from the concerned revenue authorities, freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used. The carrying cost of raw materials, packaging materials and stores and spare parts are appropriately written down when there is a decline in replacement cost of such materials and finished products in which they will be incorporated are expected to sold below cost. Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. The comparison of cost and net realisable value is made on an item by item basis. Cost of work in progress and manufactured finished goods is determined on weighted average basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on weighted average basis. Excise duty liability is included in the valuation of inventory of finished goods. Research and development costs Revenue expenditure on research and development is expensed out under the respective heads of account in the year in which it is incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the entity has sufficient resources to complete the development and to use and sell the asset. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the Consolidated Profit and Loss Account as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Fixed assets used for research and development are depreciated in accordance with the Group's policy. Materials identified for use in research and development process are carried as inventories and charged to Consolidated Profit and Loss Account on issuance of such materials for research and development activities. Employee stock option based compensation The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of the options given to employees under the employee stock option schemes of the Company, is recognised on a straight line basis and amortised over the vesting period on a straight line basis. Foreign currency transactions The reporting currency of the Group is the Indian Rupee. However, the local currencies of non-integral overseas subsidiaries and joint venture are different from the reporting currency of the Group.
117
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Transactions in foreign currency and forward contracts Transactions in foreign currency are recorded by the reporting entities at the exchange rate prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Consolidated Profit and Loss Account. Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date, not covered by forward exchange contracts, are translated at year end rates. The resultant exchange differences are recognised in the Consolidated Profit and Loss Account. Non-monetary assets are recorded at the rates prevailing on the date of the transaction. Forward contracts are entered into to hedge the foreign currency risk of the underlying outstanding at the Balance Sheet date. The premium or discount on such contracts is amortized as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or expense for the period. The exchange difference on such a forward exchange contract is calculated as the difference between (a) the foreign currency amount of the contract translated at the exchange rate at the Balance Sheet, or the settlement date where the transaction is settled during the reporting period, and (b) the same foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last Balance Sheet. Such exchange differences are recognised in the Consolidated Profit and Loss Account in the reporting period in which the exchange rates change. Integral and non-integral operations The consolidated financial statements of the foreign integral subsidiaries and representative offices (collectively referred to as the 'foreign integral operations') are translated into Indian Rupees as follows:• Profit and Loss items, except opening and closing inventories and depreciation, are translated at the respective monthly average rates. Opening and closing inventories are translated at the rates prevalent at the commencement and close respectively of the accounting period. Depreciation is translated at the rates used for the translation of the values of the assets on which depreciation is calculated. Non-monetary Balance Sheet items, other than inventories, are translated using the exchange rate at the date of transaction i.e., the date when they were acquired. Monetary Balance Sheet items and inventory are translated using year-end rates. The net exchange difference resulting from the translation of items in the financial statements of foreign integral operations is recognised as income or expense for the year. Contingent liabilities are translated at the closing rate.
• • • •
The financial statements of the foreign non integral subsidiaries and joint venture (collectively referred to as the 'foreign non integral operations') are translated into Indian Rupees as follows:• • • • • All assets and liabilities, both monetary and non-monetary, (excluding share capital, opening reserves and surplus) are translated using the year-end rates. Share capital and opening reserves and surplus are carried at historical cost. Profit and Loss items are translated at the respective monthly average rates. The resulting net exchange difference is credited or debited to the foreign currency translation reserve. Contingent liabilities are translated at the closing rate.
A reclassification from foreign integral operations to foreign non-integral operations or vice versa is made consequent to change in the way operations of entities are financed and operates. The translated amounts for non-monetary items of reclassified entities on the date of such reclassification are treated as the historical cost for those items in the period of change and subsequent periods. Exchange differences which have been deferred in foreign currency translation reserve are not recognised as income or expenses until the disposal of that entity.
118
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Derivative instruments and hedge accounting The Group uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. Forward and options contracts are fair valued at each Balance Sheet and the resultant gain or loss (except relating to effective hedges) from these transactions are recognised in the Consolidated Profit and Loss Account. The gain or loss on effective hedges is recorded in the Hedging Reserve (reported under Reserves and Surplus) until the transactions are complete. On completion, the gain or loss is transferred to the Consolidated Profit and Loss Account of that period. To designate a forward or options contract as an effective hedge, the management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. In the absence of a designation as effective hedge, a gain or loss is recognised in the Consolidated Profit and Loss Account. Employee benefits Short - term employee benefits All employee benefits payable / available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the Consolidated Profit and Loss Account in the period in which the employee renders the related service. Defined benefit plans Gratuity Indian entities of the Group have an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee's salary and the tenure of employment. Vesting occurs upon completion of five years of service. These entities make annual contributions to gratuity fund established as trust. Provident fund In respect of employees, Indian entities of the Group makes specified monthly contribution towards the employees' provident fund to the provident fund trust administered by the Parent Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. These Indian entities have an obligation to make good the shortfall, if any, between the return on receptive investments of the trust and the notified interest rate. Pension The Indian entities have an obligation towards pension, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount based on the respective employee's salary and the tenure of employment. Vesting occurs upon completion of 20 years of service. Retirement pension payment plan Ranbaxy Pharmacie Generiques SAS and one its subsidiary company in France also has a retirement pension payments plan as per collective agreement. The payment is made at the time of retirement. Valuation The liability in respect of defined benefit plans, other than provident fund schemes, is accrued in the books of account on the basis of actuarial valuation carried out by an independent actuary primarily using the Projected Unit Credit Method, which recognizes each year of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined
119
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Consolidated Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs. The contributions made to provident fund trust are charged to Consolidated Profit and Loss Account as and when they become payable. In addition, the Indian entities recognizes liability for shortfall in the plan assets vis-à-vis the fund obligation, if any. The Guidance on implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standard Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, actuary of these entities have expressed an inability to reliably measure provident fund liabilities. Accordingly, the Group is unable to exhibit the related information. Defined contribution plans Under certain retirement benefits plans of entities in the Group, there are a defined contribution plans such as superannuation, social security schemes etc. These entities pays fixed contributions and have no obligation to pay further amounts. Such fixed contributions are recognised in the Consolidated Profit and Loss Account on accrual basis. Other long term employee benefits Compensated absences In respect of certain entities of the Group, as per that entity's policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either be utilised during the service, or encashed. Encashment can be made during service, on early retirement, on withdrawal of scheme, at resignation and upon death of the employee. The value of benefits is determined based on the seniority and the employee's salary. Valuation These entities account for the liability for compensated absences payable in future and long service awards based on an independent actuarial valuation using the Projected Unit Credit Method as at the year end. Actuarial gains and losses are recognised immediately in the Consolidated Profit and Loss Account. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Long service award As per the Parent Company's policy, employees of the Parent Company are eligible for an award after completion of specified number of years of service with the Parent Company. Taxes on income Income tax expense comprises current and deferred tax. Income tax expense in Consolidated Profit and Loss Account is the aggregate of the amounts of tax expense appearing in the separate financial statements of the Parent Company, its subsidiaries and joint ventures. The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to each entity using tax rates enacted or substantially enacted at the Balance Sheet. Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period of each entity in the Group. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and are written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. The break-up of the major components of the deferred tax assets and liabilities as at
120
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
SCHEDULE - 22 SIGNIFICANT ACCOUNTING POLICIES Balance Sheet date has been arrived at after setting off deferred tax assets and liabilities where the entity has a legally enforceable right to set-off assets against liabilities and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws. Provision for Fringe Benefit Tax for Indian entities for the year has been determined in accordance with the provisions of section 115WC of the Income-tax Act, 1961. Minimum alternate tax payable under the provisions of the Income-tax Act 1961 is recognised as an assets in the year in which credit become eligible and is set off to the extent allowed in the year in which the Indian entity becomes liable to pay income tax at the enacted tax rates. Provisions, contingent liabilities and contingent assets A provision is created when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. The Group does not recognise assets which are of contingent nature until there is virtual certainty of realisability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognised in the financial statements of the period in which the change occurs. Leases Operating leases Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as an operating lease. Lease payments under operating lease are recognised as an expense in the Consolidated Profit and Loss Account on a straight-line basis over the lease period. Finance leases Assets taken on a finance lease are capitalised at an amount equal to the fair value of the leased assets or the present value of minimum lease payments at the inception of the lease, whichever is lower. Such leased assets are depreciated over the lease tenure or the useful life, whichever is shorter. The lease payment is apportioned between the finance charges and reduction of outstanding liability. The finance charge is allocated to the periods over the lease tenure to produce a constant periodic rate of interest on the remaining liability. Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year are adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.
121
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 1. Background Ranbaxy Laboratories Limited ("the Parent Company") together with its subsidiaries, joint venture and associates operates as an integrated international pharmaceuticals organisation with businesses encompassing the entire value chain in the marketing, production and distribution of pharmaceuticals products. The Group presently has manufacturing facilities in eight countries, namely India, the United States of America, Brazil, Ireland, Malaysia, Nigeria, Romania and South Africa. The Group's major markets include the United States of America, India, Europe, Russia/CIS and South Africa. The research and development activities of the Group are principally carried out at its facilities in Gurgaon, near New Delhi, India. The Parent Company’s shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India and its Global Depository Share (representing equity shares of the Parent Company) are listed on the Luxembourg Stock Exchange and Foreign Currency Convertible Bonds (FCCBs) are listed on the Singapore Stock Exchange. Food And Drug Administration (“FDA”) Investigation On 16 September 2008, the Parent Company received 2 warning letters and an Import Alert from the US FDA, covering 30 generic drugs being manufactured at its Paonta Sahib and Dewas manufacturing facilities in India. The issue raised in the warning letters relate to “Current Good Manufacturing Practice” being followed at the said plants and does not in any way raises questions on product’s quality, safety or effectiveness. In 2008, consequent to Import Alert the Group was not able to sell the products covered under Import Alert and accordingly, it had recorded a provision of Rs. 2,631.11 towards inventory in that year, expected sales return and related exports benefits. On 25 February 2009, the Parent Company received a letter from the US FDA indicating that the Agency had invoked its Application Integrity Policy (“AIP”) against the Paonta Sahib facility (the “facility”). The management of the Parent Company believes that there was no falsification of data generated at the facility and also believes that there is no indication of a pattern and practice of submitting untrue statements of material fact and there was no other improper conduct. Accordingly, the Group, based on opinion from its legal counsel believe that there is no incremental present obligation existing at the Balance Sheet date on account of these notices. The Group continues to fully cooperate with the concerned authorities for their final clearance, pending which there would be delays for new product approvals and sale of existing products in the United States of America (USA). During the current year, the Group has performed re-assessment of carrying amount of related provision created in 2008 and reversed a provision of Rs. 937.81 which is included in the unclaimed balances/ excess provisions written back and materials consumed, which in the view of the Group is no longer required. [ii] In the year 2008, the Department of Justice (DOJ), USA has filed certain charges against the Parent Company citing possible issues with the data submitted by the Parent Company, in support of product filing. The Group continuous to work diligently with the concerned authorities towards resolution of the issue. Joint venture / sale of subsidiary The Group has 50:50 joint venture with Nihon Pharmaceuticals Industry Co. Ltd., Japan.The following are the Group's share of assets, liabilities, income and results of the joint venture, which are included in the Consolidated Balance Sheet and Consolidated Profit and Loss Account respectively: As at 31 December Particulars 2009 2008 Balance sheet Reserve and surplus – 518.88 Loan fund – 148.12 Fixed assets (net) – 280.4 Investments – 5.50 Current assets (net) – 393.33 Deferred tax assets (net) – 30.66
2.
3.
122
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements For the year ended 31 December 2009 2008 Profit and Loss Income Expenditure Interest Depreciation Tax expense Profit after tax [ii] 829.92 670.84 1.98 32.70 49.29 75.11 684.74 577.65 0.41 16.55 31.62 58.51
The Group disposed off its entire holding in Nihon Pharmaceutical Industry Co., Ltd. for an agreed consideration of Rs. 847.03 and recognized loss on disposal of Joint venture amounting to Rs. 123.65 which is included in "Profit on sale of long term investments". The transaction was effective from 8 December 2009. The Group disposed off its entire holding in Ranbaxy (Guangzhou China) Limited for an agreed consideration of Rs. 646.30 and recognised gain on disposal of subsidiary amounting to Rs. 536.31 which is included in "Profit on sale of long term investments". The transaction was effective from 29 December 2009.
4.
Investments in subsidiaries During the current year, the Group exercised the available call option and acquired entire shareholding of minority shareholders (25%) in Be-Tabs Pharmaceuticals (Proprietory) Limited and Be-Tabs Investments (Proprietory) Limited in South Africa for an agreed consideration of Rs. 739.54 and recognized goodwill of Rs. 541.26 representing excess of consideration over carrying amount of minority on the date of purchase. Consequently, Be-Tabs Pharmaceuticals (Proprietory) Limited and Be-Tabs Investments (Proprietory) Limited has become a 100% subsidiary of the Group with effect from 12 June 2009.
5.
On 28 October 2008 Daiichi Sankyo Co., Ltd., Japan (Daiichi Sankyo) acquired majority stake in the Company. The Company issued the following shares/ warrants to Daiichi Sankyo: (a) (b) 46,258,063 equity shares of Rs. 5 each allotted as fully paid up on a preferential basis. 23,834,333 warrants issued on 20 October 2008. Each warrant is convertible into one equity share of Rs. 5 each at a premium of Rs. 732 per share at any time between six months to eighteen months from the date of allotment of warrants (Rs. 73.70 per warrant being 10% of the exercise price received).
6.
Share-based compensation The Parent Company’s Employee Stock Option Schemes (“ESOSs”) provide for the grant of stock options to eligible management employees and Directors of the Parent Company and its subsidiaries. The ESOSs are administered by the Compensation Committee of the Board of Directors of the parent Company (“Committee”). Options are granted on the basis of performance and the grade of the employee. Presently there are three ESOSs (“ESOS I”, “ESOS II” and “ESOS 2005”). Options are granted at the discretion of the committee to select employees depending upon certain criterion. The ESOSs limits the maximum grant of options to an employee at 25,000 for ESOS I and 40,000 each for ESOS II and ESOS 2005 in any given year. ESOS I and II provide that the grant price of options is to be determined at the average of the daily closing price of the Company’s equity shares on the NSE during a period of 26 weeks preceding the date of the grant. ESOS 2005 provides that the grant price of options will be the latest available closing price on the stock exchange on which the shares of the Parent Company are listed, prior to the date of the meeting of the Committee in which the options are granted. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.
123
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements The options vests evenly over a period of five years from the date of grant. Options lapse if they are not exercised prior to the expiry date, which is ten years from the date of the grant. The Shareholders' Committee of the Parent Company from time to time have approved issuance of options under the Employees Stock Options Scheme(s) as per details given below: Date of approval 29 June 2002 25 June 2003 30 June 2005 No. of options 2,500,000 4,000,000 4,000,000
The stock options outstanding as on 30 June 2005 are proportionately adjusted in view of the sub-division of equity shares of the Parent Company from the face value of Rs.10 each into 2 equity shares of Rs. 5 each. Options granted upto 3 October 2002 are entitled for additional bonus shares in the ratio of 3:5. The movement of the options (post split) for the year ended 31 December 2009 is given below:
WeightedWeightedaverage Range of average remaining Stock options exercise prices exercise prices contractual life (numbers) (Rs.) (Rs.) (years)
Outstanding, beginning of the year Granted during the year Forfeited during the year Allotted during the year Lapsed during the year Outstanding, end of the year* Exercisable at the end of the year*
7,272,849 1,472,725 (530,760) (36,825) (764,973)
219.00-561.00 216.00-216.00 216.00-538.50 216.00-372.50 283.50-538.50
439.59 216.00 310.84 312.03 471.97 401.68 455.98
6.73 9.05 – – – 6.30 4.88
7,413,016 216.00-561.00 3,906,091 216.00-561.00
*Includes options exercised, pending allotment as at 31 December 2009 The movement of the options (post split) for the year ended 31 December 2008 is given below:
Weightedaverage exercise prices (Rs.) Weightedaverage remaining contractual life (years)
Stock options (numbers)
Range of exercise prices (Rs.)
Outstanding, beginning of the year Granted during the year Forfeited during the year Exercised during the year Lapsed during the year Outstanding, end of the year Exercisable at the end of the year
7,168,956 1,774,825 (456,910) (880,605) (333,417) 7,272,849 3,450,209
283.50-538.50 219.00-561.00 283.50-538.50 283.50-538.50 283.50-538.50 219.00-561.00 283.50-538.50
446.52 373.05 436.56 350.65 473.41 439.59 457.31
6.87 9.15 – – – 6.73 5.50
124
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 7. Capital work-in progress (including capital advances) includes: Capital advances to vendors amounting to Rs. 235.30 (previous year Rs. 109.50). [ii] Project related expenses (directly allocable) amounting to Rs. 299.28 (previous year Rs. 356.86) as under: As at 31 December Particulars 2009 2008 Opening balance 356.86 208.68 Add: Addition during the year Salaries, wages and bonus 40.49 63.94 Contributions to provident and other funds 26.62 6.05 Workmen and staff welfare 1.18 2.33 Raw materials 4.54 26.66 Power and fuel 4.40 28.45 Insurance 0.14 2.39 Others 19.78 31.14 454.01 369.64 Less : Capitalised during the year 154.73 12.78 Balance as at year end 299.28 356.86 Interest on fixed loans and debentures Interest includes interest paid on fixed period loans and debentures amounting to Rs. 288.96 (previous year Rs. 1,212.80). Leases Finance lease a] The Group has acquired assets under finance lease comprising mainly of building, plant and machinery and vehicles. The future minimum lease rentals and the present value of future minimum lease payments as at 31 December 2009 and 31 December 2008 are as under: Minimum lease Present value of minimum payments lease payments As at 31 December As at 31 December 2009 2008 2009 2008 i) not later than one year 84.45 84.49 55.89 50.74 ii) later than one year but not later than five years 350.45 348.44 287.97 262.31 ii) later than five years 36.03 131.61 35.16 123.83 Total 470.93 564.54 379.02 436.88 Operating lease b] The Group has leased facilities under cancellable and non-cancellable operating leases arrangements with a lease term ranging from 3 to 17 years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expense recognised during the year amounts to Rs. 840.25 (previous year Rs. 817.51). The future minimum lease payments in respect of non-cancellable operating leases as at 31 December 2009 and 31 December 2008 are: As at 31 December 2009 2008 i] not later than one year 248.28 217.88 ii] later than one year but not later than five years 537.65 639.42 iii] later than five years 120.99 169.33 Total 906.92 1,026.63
8. 9.
125
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 10. Foreign exchange (gain)/loss other than on loans As at 31 December 2009 2008 1,282.65 73.61 (3,213.88) 10,990.42 (1,931.23) 11,064.03 For the year ended 31 December 2009 2008 186.44 229.08 20.67 44.40 1.99 2.46 52.00 – 4.84 1.34 265.94 277.28
Foreign exchange loss Fair valuation (gain)/loss on derivatives 11. Directors' remuneration * (covered by section 198 of the Companies Act, 1956) Salaries and allowances Contribution to provident and other funds * Directors' fee Commission Perquisites
* Does not include the following: a) Liabilities in respect of gratuity, pension, compensated absences determined (for one of the director) as the same is determined on an actuarial basis for company as a whole. b) Amortisation of deferred employee compensation on grant of stock options. c) Compensation cost Rs. 481.38 for loss of office to a director (previous year Rs. nil). d) Pension paid/ payable to non-executive directors for the services rendered in earlier years as a whole time director/ employees Rs. nil (previous year Rs. 2.29). 12. Employee benefits The following tables set out the disclosures relating to pension, gratuity and retirement pension payment plan as required by Accounting Standard - 15 "Employee Benefits":
Pension Retirement pension payment plan Gratuity
Change in the present value of obligation: Present value of obligation as at 1 January 2009 Add: Interest cost Add: Current service cost Less: Benefits paid Add: Actuarial (gain)/loss on obligations Translation adjustments Present value of obligation as at 31 December 2009
1,571.19 1,205.49 117.84 99.45 93.20 106.91 (54.56) (32.59) 28.83 191.92 – – 1,756.50 1,571.19
66.05 49.51 2.76 2.49 5.11 4.33 (2.42) – 0.21 0.32 (1.30) 9.40 70.41 66.05
486.74 383.00 40.37 31.07 36.91 39.57 (130.61) (48.80) 96.78 81.90 – – 530.19 486.74
126
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements Change in the fair value of plan assets: Fair value of plan assets as of 1 January 2009 Add: Actual return on plan assets Add: Contributions Less: Benefits paid Fair value of plan assets as of 31 December 2009 Reconciliation of present value of defined benefit obligation and the fair value of assets Present value of funded obligation as of 31 December 2009 Less: Fair value of plan assets as at the end of the period funded status Present value of unfunded obligation as of 31 December 2009 Unfunded net liability recognised in the Consolidated Balance Sheet Expense recognised in the Consolidated Profit and Loss Account
Pension Retirement pension payment plan Gratuity
Gratuity 439.19 354.52 36.28 29.62 98.99 103.85 (130.15) (48.80) 444.31 439.19 Gratuity 530.19 486.74 (444.31) (439.19) 85.88 47.55 85.88 47.55
Current service cost Add: Interest cost Add: Expected return on plan assets Less: Settlement cost/ credit Add: Net actuarial (gain)/loss recognised in the year Total expenses recognised in the Consolidated Profit and Loss Account
93.20 106.92 117.84 99.45 – – (2.51) (15.34) 28.83 191.92 237.36 382.95
5.11 4.33 2.76 2.49 – – (2.42) – 0.21 0.32 5.66 7.14
36.91 39.57 40.37 31.07 (38.95) (30.31) (2.14) (2.79) 99.47 82.59 135.66 120.12
The major categories of plan assets as a percentage of total plan assets are as under: Particulars Gratuity Central Government securities 19% 15% State Government securities 11% 12% Bonds and securities of public sector / Financial Institutions 59% 62% Deposit with Reserve Bank of India 11% 11%
127
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements The following table sets out the assumptions used in actuarial valuation of compensated absences, pension and gratuity: Particulars Compensated Pension Retirement Gratuity absences pension payment plan Discount rate 7.50% 7.50% 4.65% 7.50% 8%-8.25% 8.25% 4.25% 8%-8.25% Rate of increase in compensation levels # 5%-10% 5%-10% 2%-3% 5%-10% 5.5% 5.5% 2%-3% 5.5% Rate of return of plan assets Nil Nil Nil 8%-9% Nil Nil Nil 8% Expected average remaining working 20.55-26.57 20.58 – 20.58-26.57 lives of employees (years) 21.14-27.90 21.20 – 21.20-27.09 The liability for compensated absences, pension, gratuity, and retirement pension payment plan as at 31 December 2009 was Rs. 349.24 (previous year Rs. 396.90), Rs. 1,756.50 (previous year Rs. 1,571.19), Rs. 85.88 (previous year Rs. 47.55) and Rs. 70.41 (previous year Rs. 66.05) respectively. # 10% for the first three years and 5% thereafter Figures in italics are for the year ended 31 December 2008 Other plans a) The Parent Company and certain Group companies also have defined contribution plans, which are largely governed by local statutory laws of the respective countries and cover the eligible employees of the specific entity. These plans are funded both by the members and by the company contributions, primarily based on a specified percentage of the employees’ salary. The total contributions to these schemes during the year ended 31 December 2009 is Rs. 622.13 (previous year Rs. 594.35). b) Further, USA based subsidiaries participates in a savings plan under Section 401(k) of the Internal Revenue Code (“Code”) covering substantially all eligible employees. The plan allows for employees to defer up to 15% of their annual earnings within limitations specified under respective law on a pre-tax basis through voluntary contributions to the plan. The plan provides these USA based subsidiaries can make optional contributions in an amount up to the maximum allowable by respective law. Employees achieve a 25 percent vested status after one year of service and fully vested status after three years of service. During the year ended 31December 2009 the contributions to the plan is Rs. 47.13 (previous year Rs. 39.90).
128
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 13. Hedging and derivatives The Group uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. These foreign exchange forward contracts and options are not used for trading or speculation purposes. The following are the outstanding forward exchange contracts and currency options entered into by the Parent Company: As at 31 December 2009 Category Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) As at 31 December 2008 Category Forward contracts Forward contracts Forward contracts Forward contracts Currency options Currency Swaps Interest rate swap (JPY LIBOR) Currency USD EUR GBP USD USD JPY JPY Cross currency INR USD USD BRL INR USD Amount (in millions) USD 218.40 USD 35.30 USD 0.17 USD 5.25 USD 1403.00 JPY 10,350.00 JPY 11800.00 Buy/ Sell Sell Sell Sell Buy Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging Hedging Hedging Currency USD EUR USD JPY JPY Cross currency INR USD INR USD Amount (in millions) USD 20.00 USD 1.44 USD 1038.50 JPY 10,350.00 JPY 11,800.00 Buy/ Sell Sell Sell Sell Buy Purpose Hedging Hedging Hedging Hedging Hedging
The outstanding forward exchange contracts, which are classified as cash flow hedges and effective as at 31 December 2009 are as follows: Currency USD Cross currency INR Amount (in millions) USD 20.00 Gain / (loss) net of tax (28.73)
14. The Group's foreign currency exposure (balance denominated in currency other than currency of respective group entity) not hedged is as follows*: As at As at 31 December 2009 31 December 2008 (in original (in Rupees) (in original (in Rupees) currency) currency) Receivables # – JPY 16.26 8.22 23.99 12.86 – EURO 11.09 739.33 14.68 997.20 – NZD 1.10 37.09 2.10 59.56 – AUD 0.45 18.79 2.16 74.26 – AED 0.65 8.24 5.95 78.72 Others ## 0.21 12.03 # USD-INR currency exposure for receivable balance is hedged fully, however USD to above currencies is unhedged to the extent stated above
129
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements As at As at 31 December 2009 31 December 2008 (in original (in Rupees) (in original (in Rupees) currency) currency) Payables – USD 18.16 844.65 8.79 427.11 – EURO 2.40 160.01 0.75 50.95 – JPY 24.22 12.24 39.85 21.37 – KES 4.40 2.70 – – – DKK – – 2.23 20.35 Others ## 3.19 8.75 Bank balances – USD 0.62 28.84 0.71 34.50 – LTL 0.56 10.81 0.35 6.89 – CFR 94.04 9.55 49.29 5.20 – RUB 5.90 3.83 2.10 3.47 – PLN 0.03 0.49 1.00 16.22 – UAH 0.53 3.04 0.72 4.48 Others ## 5.92 5.60 ## Exposure to other currencies which are not significant has been aggregated for this disclosure Loans – USD 666.86 31,016.74 652.30 31,695.26 – JPY – – 1,800.00 965.15 – EURO 6.67 444.68 10.00 679.29 For derivatives refer note above 15. Commitments, contingent liabilities and provisions As at 31 December 2009 2008 i) ii) Guarantees issued by subsidiaries Claims against the Group not acknowledged as debts, under dispute: (a) (b) (c) (d) (e) (f) (g) * DPCO * Excise matters Octroi tax matters ** Sales tax matters Other matters *** Income tax matter Service tax matters 1,703.30 75.42 171.00 12.76 590.22 170.02 3.07 1,504.10 68.57 171.00 7.96 182.59 – – 48.07 1,236.61
The Parent Company has received demand for payment to the credit of the Drug Prices Equalisation Account under Drugs (Price Control) Order, 1995 which is being contested by the Company in respect of its various products. The Company has deposited Rs. 319.59 (previous year Rs.297.91) under protest.
130
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements ** The Company has been contesting a case with Municipal Corporation of Mohali (MCM) under which MCM is contesting that octroi has to be paid by the Company at 1% as against 0.5% being paid by the Company. The amounts represents the differential. These represents cases pending at various forums on account of employee / worker related cases (India and overseas), State electricity board, Punjab Land Preservation Act, property disputes etc.
***
The Group believes that the probability of any liability on account of any of the above mentioned cases is remote. The Group is also involved in other lawsuits, claims, investigations and proceedings, including patent and commercial matters, which arise in the ordinary course of business. However, there are no such matters pending that the Group expects to be material in relation to its business. iii) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances). 902.94 1,311.71
Certain entities of the Group have created provision towards claims made against these entities in relation to commercial, employee related and leased property matters. The movement in provision is as follows: As at 31 December 2009 Balance as at the beginning of the year Add: Provision made during the year Less: Payment made during the year Translation adjustments Balance as at the end of the year 45.54 39.37 (27.79) 6.16 63.28 2008 30.29 11.05 – 4.20 45.54
16. The aggregate amount of revenue expenditure incurred on research and development is shown in the respective heads of account. The break-up of the amount is as under: For the year ended 31 December Salaries, wages and bonus Contribution to provident and other funds Workmen and staff welfare Materials and consumables Power and fuel Clinical trials Rent Printing and stationery Insurance Communication Legal and professional charges Travel and conveyance Analytical testing and processing charges Repairs and maintenance Recruitment and training Others 2009 1,352.21 93.47 70.21 1,696.77 275.38 455.01 213.12 16.61 38.50 57.77 71.12 87.34 64.52 186.14 13.83 183.21 4,875.21 2008 1,272.37 89.41 57.85 1,217.59 247.56 527.08 200.22 26.95 31.52 49.78 47.11 107.24 80.83 138.92 10.66 208.81 4,313.90
131
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements 17. Related party disclosures a] Relationship : i] Holding company (also being the ultimate holding company) 1 Daiichi Sankyo Co., Ltd. , Japan (from 20 October 2008) ii] Fellow subsidiary (overseas) with whom transactions have taken place during the year or previous year 1 Daiichi Sankyo Europe GmbH iii] Joint venture (overseas) 1 Nihon Pharmaceutical Industry Co. Ltd., Japan (Investment made by Ranbaxy (Netherlands) BV, the Netherlands) (upto 8 December 2009) iv] Associates (domestic) with whom transactions have taken place during the year or previous year 1 Zenotech Laboratories Limited 2 Shimal Research Laboratories Limited v] Key managerial personnel 1 Mr. Malvinder Mohan Singh, Chairman, CEO and Managing Director (upto 24 May 2009) 2 Mr. Atul Sobti, CEO and Managing Director 3 Mr. Ramesh L Adige (Upto 19 December 2008) vi] Relatives of Key managerial personnel with whom transactions have taken place during the year or previous year (upto 24 May 2009) 1 Mrs. Nimmi Singh, mother of Mr. Malvinder Mohan Singh vii] Entities over which significant influence is exercised by Mr. Malvinder Mohan Singh with whom transactions have taken place during the year or previous year (upto 24 May 2009) 1 Fortis Healthcare Limited (including its subsidiaries) 2 Religare Securities Limited 3 Ran Air Services Limited 4 Religare Travels (India) Limited 5 Religare Capital Markets Limited 6 Super Religare Laboratories Limited 7 Fortis Clinical Research Limited 8 Religare Enterprises Limited 9 Escorts Heart Institute and Research Centre Limited 10 Religare Technova IT Services Limited (formerly Fortis Financial Services Limited) 11 Oscar Investments Limited
132
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements b] Transactions with the related parties Transactions Holding company Fellow subsidiaries Joint Key Entities ventures management over which and personnel significant associates influence is exercised 25.34 (215.54) 0.69 – 7.49 – – – – – – – – – – – – – – – – – – – – – – – 32.30 (48.35) – – 0.96 – – – – – – – – – – – – – (1,385.21) – – – – – – – – – – – – – 250.64 (279.30) – – – – – – – – – – – – – – – – – – – – – – 98.03 (638.47) 97.57 (434.34) – (44.00) – – – – – – – (18.03) 13.73 (32.33) Total
Sales Other income Finished goods purchased Market research expenses Product quality claim Travel and conveyance Royalty paid Personnel cost Technical services availed Purchase of fixed assets Sale of investment – Investment made Equity capital contribution (including premium) Equity share warrants money received
– – 40.06 – 0.23 – 1.46 – – – 2.20 – 0.36 – – – – – – – – – – – – (34,092.19) – (1,756.59)
25.34 (233.57) 54.48 (32.33) 40.02 (48.35) 1.46 – 0.96 – 2.20 – 0.36 – 250.64 (279.30) 98.03 (638.47) 97.57 (434.34) – (44.00) – (1,385.21) – (34,092.19) – (1,756.59)
Figures in brackets are for previous year
133
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements c] Transaction in excess of 10% of the total related party transactions Sr. Transactions No. 1. Sales Nihon Pharmaceuticals Industry Co. Ltd, Japan Other income Daiichi Sankyo Co., Ltd., Japan Oscar Investments Limited, India Related party relationship Joint Venture Year ended Year ended 31 Dec. 31 Dec. 2009 2008 25.34 215.54
2.
Fortis Clinical Research Limited
Holding Company Entities over which significant influence is exercised Entities over which significant influence is exercised Associates Fellow subsidiary Holding company Joint venture
40.06 6.87
– 15.70
6.86
16.63
3.
Finished goods purchased Zenotech Laboratories Limited, India Daiichi Sankyo Europe GMBH Market research expenses Daiichi Sankyo Co., Ltd., Japan Product quality claim Nihon Pharmaceuticals Industry Co. Ltd., Japan Travel and conveyance Daiichi Sankyo Co., Ltd., Japan Royalty paid Daiichi Sankyo Co., Ltd., Japan Personnel cost (Also refer to note 11 on schedule 23) Mr. Malvinder Mohan Singh Mr. Atul Sobti Technical services availed Fortis Clinical Research Limited, India
32.30 7.49 1.46 0.96
48.35 – – –
4. 5.
6. 7. 8.
Holding company Holding company
2.20 0.36
– –
Key management personnel Key management personnel
167.41 79.54 48.54
237.18 29.08 233.50
9.
Entities over which significant influence is exercised Religare Capital Markets Limited, Entities over which India significant influence is exercised Religare Technova IT Services Entities over which Limited, India significant influence is exercised
–
235.11
33.38
65.13
134
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements Sr. Transactions No. 10. Purchase of fixed assets Religare Technova IT Services Limited, India Fortis Clinical Research Limited, India 11. Sale of investment Religare Enterprises Limited, India Investments made Zenotech Laboratories Limited, India Equity capital contribution (including premium) Daiichi Sankyo Co., Ltd., Japan Equity share warrants money received Daiichi Sankyo Co., Ltd., Japan Related party relationship Year ended Year ended 31 Dec. 31 Dec. 2009 2008 97.57 145.84
Entities over which significant influence is exercised Entities over which significant influence is exercised Entities over which significant influence is exercised Associates
–
288.50
–
44.00
12.
–
1,385.21
13.
Holding company
–
34,092.19
14.
Holding company Joint Key ventures management and personnel associates – – 4.11 (3.29) – – 35.00 –
– Entities over which significant influence is exercised – (12.84) – (38.35)
1,756.59 Total
d]
Balances due from/to the related parties Transactions Holding Fellow company subsidiaries
Debtors Creditors
16.39 – 0.96 –
– – 7.40 –
16.39 (12.84) 47.47 (41.64)
Figures in brackets are for previous year 18. Segment information Business segments For management purposes, the Group reviews the performance on the basis of business units identified as Pharmaceuticals and other business, which are reportable segments. Pharmaceuticals segment comprises manufacture and trading of Formulations, Active Pharmaceuticals Ingredients (API) and Intermediate, Generics, Drug discovery and Consumer Health Care products. Other business comprises rendering of financial services.
135
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements Geographic Segments The Group's business is organized into key geographic segments. Revenues are attributable to individual geographic segments based upon the location of the customers. Assets and liabilities are attributable to individual geographic segments based upon the location of the respective assets / liabilities. Other Information All segment revenue, expenses, assets and liabilities are directly attributable to the segments and disclosed accordingly. The accounting policies consistently used in the preparation of the consolidated financial statements are also applied to revenues and expenditure of individual segments. Segment information disclosures as required under accounting standard on "Segment Reporting" as specified in the Companies (Accounting Standards) Rules, 2006. Primary segment information Pharmaceuticals 2009 2008 External revenue Total revenue Profit / (loss) before tax Tax charge / (benefit) Profit / (loss) before tax Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation, amortisation and impairment Non cash expenses other than depreciation, amortisation and impairment b] 75,969.46 75,969.46 10,096.87 74,139.35 74,139.35 (15,004.07) Others 2009 2008 0.90 0.90 0.75 0.60 0.60 3.82 Segment total 2009 2008
a]
111,704.58
118,051.83
17.13
76,438.63
89,170.75
0.21
5,682.08 2,676.11
5,761.54 2,824.68
– 0.01
75,970.36 74,139.95 75,970.36 74,139.95 10,097.62 (15,000.25) 6,990.87 (5,650.84) 3,106.75 (9,349.41) 19.48 111,721.71 118,071.31 9,813.55 14,544.27 121,535.26 132,615.58 3.20 76,438.84 89,173.95 1,662.50 479.11 78,101.34 89,653.06 – 5,682.08 5,761.54 0.01 2,676.12 2,824.69
489.19
985.50
– North America
(3.62) Asia Pacific 6,937.96 (5,714.68) 3,202.75 (2,970.37) 73.34 (201.06)
489.19
981.88
Secondary segment information - Geographical India Europe 19,400.42 (15,827.99) Segment assets 63,759.22 (68,213.73) Capital expenditure 2,938.13 (4,274.68) Figures in brackets are for previous year Segment revenue
Others
Total
15,896.74 19,574.98 (18,196.67) (19,749.15) 28,542.63 15,650.02 (41,452.74) (13,003.00) 758.76 1,349.60 (469.81) (282.63)
14,160.26 75,970.36 (14,651.46) (74,139.95) 10,380.64 121,535.26 (6,975.74) (132,615.58) 562.25 5,682.08 (533.36) (5,761.54)
136
Ranbaxy Laboratories Limited
Schedules forming part of the consolidated financial statements
(Rupees in millions, except share data and if otherwise stated)
SCHEDULE - 23 Notes to the Consolidated Financial Statements (Continued) 19. The share of minority shareholders in profit / (loss) of respective entity is as under: Name of entity For the year ended 31 December 2009 2008 53.81 23.17 19.15 24.02 16.74 5.55 14.08 15.35 3.84 6.23 2.00 1.97 0.01 0.01 (0.13) 7.02 (0.05) 1.05 109.45 20. The Group share in profit / (loss) of associates is as under: Name of entity 84.37
Ranbaxy (Malaysia) Sdn. Bhd. Ranbaxy Nigeria Limited Ranbaxy (Guangzhou China) Limited Terapia S.A Ranbaxy Unichem Company Ltd Ranbaxy Life Sciences Research Limited Gufic Pharma Limited Be-Tabs Pharmaceuticals (Proprietary) Ltd Be-Tabs Investments (Proprietary) Ltd
Zenotech Laboratories Limited Shimal Research Laboratories Limited
For the year ended 31 December 2009 2008 (48.19) (110.14) 15.81 31.93 (32.38) (78.21)
21. Previous year figures have been regrouped/ reclassified, wherever necessary to conform to current year’s classification. Previous year figures have been audited by another firm of Chartered Accountants.
For and on behalf of the Board of Directors Dr. Tsutomu Une Chairman Omesh Sethi President and CFO Place : Gurgaon Dated : 25 February 2010 Atul Sobti CEO & Managing Director Sushil K. Patawari Company Secretary Place : Gurgaon Dated : 25 February 2010
137
FINANCIAL DETAILS OF THE
SUBSIDIARY COMPANIES
FOR THE YEAR ENDED DECEMBER 31, 2009
Rs. in Million
Name of the Subsidiary Closing exchange rate against Indian Rupee as on December 31, 2009 Capital Reserves Total assets Total liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Provision before for tax tax Profit after tax Proposed dividend
Ranbaxy Laboratories Limited
Domestic: Gufic Pharma Limited Ranbaxy Drugs Limited Ranbaxy Drugs and Chemicals Company (A public company with unlimited liability) Ranbaxy Life Sciences Research Limited Ranbaxy SEZ Limited Rexcel Pharmaceuticals Limited Solus Pharmaceuticals Limited Vidyut Investments Limited Overseas : Ranbaxy Australia Pty. Ltd. Australia Ranbaxy Belgium N.V. Belgium Ranbaxy Farmaceutica Ltda. Brazil Ranbaxy Do Brazil Ltda Brazil Ranbaxy Pharmaceuticals Canada Inc. Canada Ranbaxy Egypt (L.L.C.) Egypt Rexcel Egypt (L.L.C.) Egypt Ranbaxy Pharmacie Generiques SAS France Office Pharmaceutique Industriel Et Hospitalier SARL (“OPIH SARL”) France Basics GmbH Germany Lapharma GmbH Germany Ranbaxy (Hong Kong) Limited Hong Kong Ranbaxy Hungary Gyogyszereszeti Kft Hungary # Ranbaxy Ireland Ltd. Ireland 41.8410 66.6667 26.6667 175.73 37.46 463.12 (488.13) 39.85 (180.38) 98.73 227.49 411.13 150.18 – – 148.25 (115.16) 358.78 47.86 361.41 – (115.16) 19.80 154.94 28.06 206.46 – – – 1.0000 1.0000 1.0000 0.50 31.00 62.00 2.32 (0.48) 6.29 3.05 33.73 76.17 0.23 3.21 7.88 – – 34.30 0.24 – 0.35 0.30 (0.06) 0.14 0.04 – 0.09 0.26 (0.06) 0.05 – – –
1.0000 1.0000 1.0000 1.0000 1.0000
50.60 0.50 125.00 149.01 250.08
199.92 (0.07) 635.18 625.74 (233.18)
260.54 0.46 1,547.70 1,547.20 17.14
10.02 0.03 787.52 772.45 0.24
– – 1,542.05 1,542.05 –
– – – – –
13.96 (0.04) (0.30) (1.19) 0.77
3.90 – 4.57 0.45 0.12
10.06 (0.04) (4.87) (1.64) 0.65
– – – – –
1,404.89 1,122.15
– 2,502.84
26.6667 44.2478
15.83 99.56
(12.97) 470.26
6.91
4.05
–
1.88
(0.99) 238.11
(0.34) 77.68
(0.65) 160.43
– –
1,684.82 1,115.00
– 3,228.33
8.4818 8.4818 66.6667
41.15 2.04 496.56
3.25 (21.34) 204.57
105.49 21.16
61.09 40.46
– –
233.64 48.46
36.75 3.67 0.46
11.32 12.10 0.29
25.43 (8.43) 0.17
– – –
1,979.64 1,278.51
– 2,760.65
66.6667
88.67
(59.11)
169.64
140.08
–
–
(5.52)
(0.82)
(4.69)
–
66.6667 66.6667 6.0024
325.00 1.67 14.41
419.81 (0.41) 74.09
1,071.78 1.33 257.29
326.97 0.07 168.79
– 1,496.60 – – – 650.23
28.46 (0.25) 83.98
14.62 0.01 –
13.84 (0.26) 83.98
– – –
0.2448
0.28
(0.28)
–
–
–
–
–
–
–
–
66.6667
474.10
520.93
1,468.42
473.39
– 1,743.12
73.50
14.41
59.09
–
138
Ranbaxy Laboratories Limited
Rs. in Million
Name of the Subsidiary Closing exchange rate against Indian Rupee as on December 31, 2009 Capital Reserves Total assets Total liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Provision before for tax tax Profit after tax Proposed dividend
Ranbaxy Italia S.p.A Italy Ranbaxy Malaysia Sdn. Bhd. Malaysia Ranbaxy Mexico S.A. de C.V. Mexico Ranbaxy Nigeria Ltd. Nigeria Ranbaxy-PRP (Peru) S.A.C. Peru Ranbaxy Poland S.P. Z.o.o. Poland Ranbaxy Portugal Com E Desenvolv De Prod Farmaceuticos Unipessoal Lda Portugal Ranbaxy (Guangzhou China) Limited Republic of China # Terapia S.A. Romania Terapia Distributie S.R.L. Romania ZAO Ranbaxy Russia Ranbaxy (S.A.) (Proprietory) Ltd. South Africa Be-Tabs Pharmaceuticals (Proprietary) Ltd. South Africa Be-Tabs Investments (Proprietary) Ltd. South Africa Sonke Pharmaceuticals (Pty.) Ltd. South Africa Laboratorios Ranbaxy, S.L. Spain Ranbaxy Pharma AB Sweden Ranbaxy (Netherlands) B.V. (“RNBV”) The Netherlands Ranbaxy N.A.N.V. Antilles, Netherlands Ranbaxy Unichem Company Ltd. Thailand
66.6667 13.5870
840.00 108.70
(745.76) 686.74
1,147.57 1,053.33 1,320.81 525.37
–
721.85 (279.14) 216.27
76.35 (355.49) 46.61 169.66
– –
– 1,465.03
3.5613
239.12
(251.73)
150.25
162.86
–
289.56
(51.61)
(0.67)
(50.94)
–
0.3142 16.1031
12.57 66.51
463.67 (16.41)
714.35 228.32
238.11 178.22
– –
916.12 316.25
188.45 1.91
63.89 8.56
124.56 (6.65)
– –
16.2075 66.6667
69.55 258.67
26.70 (218.59)
144.93 93.81
48.68 53.73
– –
393.85 118.57
4.13 (93.55)
5.87 1.13
(1.74) (94.67)
– –
6.8166
444.79
(204.12)
501.42
260.75
–
884.02
95.84
1.77
94.07
–
15.7233 15.7233 1.5382 6.2657
393.42 6,021.88 0.47 4.61 2.27 0.09 256.71 350.76
8,102.01 1,686.71 861.41 860.85
– 4,096.80 – 1,071.38 – 2,474.88 – 1,760.14
770.52 (46.12) 297.06 71.60
160.30 (0.23) 9.15 20.40
610.22 (46.35) 287.91 51.20
– – – –
1,691.59 1,430.27 1,042.38 689.35
6.2657
$
687.86
1,867.86 1,180.00
– 1,298.38 (126.23)
(13.69) (112.54)
–
6.2657
$
66.11
622.23
556.12
–
–
(10.35)
(9.63)
(0.72)
–
6.2657
$
(32.03)
322.95
354.98
–
623.28
14.40
4.14
10.26
–
66.6667 6.4977
333.33 7.15
(801.06) (2.01)
300.14 146.83
767.87 141.69 24.63
– – –
354.26 323.19 223.16
0.05 117.16 175.74
– 30.81 11.91
0.05 86.34 163.70
– – –
46.5350 23,267.64 7,647.46 30,939.73
46.5350
1.40
(12.79)
0.31
11.70
–
0.01
(0.31)
–
(0.31)
–
1.3941
139.41
199.57
344.19
5.21
–
533.69
48.56
15.32
33.24
–
139
Ranbaxy Laboratories Limited
Rs. in Million
Name of the Subsidiary Closing exchange rate against Indian Rupee as on December 31, 2009 Capital Reserves Total assets Total liabilities Investments (except in case of investment in subsidiaries)* Turnover Profit Provision before for tax tax Profit after tax Proposed dividend
Ranbaxy (U.K.) Ltd. United Kingdom Ranbaxy Holdings (U.K.) Ltd. United Kingdom Ranbaxy Europe Ltd. United Kingdom Ranbaxy Inc., USA Ranbaxy Pharmaceuticals, Inc., USA Ranbaxy USA, Inc. USA Ohm Laboratories, Inc., USA Ranbaxy Laboratories, Inc., USA Ranbaxy Signature LLC USA Ranbaxy Vietnam Company Ltd., Vietnam # # Rounded off to nil
*Detail of Investments Name of the subsidiary
75.1880 1,635.34 (1,149.97) 75.1880 2,297.46 12.45
875.20 2,312.07
389.83 2.16
– 1,558.65 – –
101.69 (0.25)
28.43 –
73.26 (0.25)
– –
75.1880 46.5350 46.5350 46.5350 46.5350 46.5350 46.5350 0.0025
0.75
40.98
228.96
187.23
– –
437.93 –
21.01 (23.26)
6.97
14.04
– – – – – – – –
604.96 2,626.12 $ 2,961.51 $ 216.40
6,207.86 2,976.78 9,711.78 6,750.27 823.25 606.85
484.60 (507.86) 253.56 (27.46) 203.98 964.66 42.08 111.86 241.52 31.52 35.82
– 11,508.15 1,218.22 – – 14.62 315.84
11.10 2,749.49 14,033.84 11,273.25 – 1,491.26 – 32.97 (548.30) (16.84) 8,021.56 6,530.30 2.50 19.31 550.80 3.18
– 10,056.96
– 2,095.36 (232.49) (474.01) – – 99.85 3.83 31.52 35.82 – –
Particulars
Nature of investments Capital Contribution Capital Contribution Equity shares
Face value Numbers
Amount (Rs. Million) 1,542.05 1,542.05
Solus Pharmaceuticals Ltd. Rexcel Pharmaceuticals Ltd.
Solrex Pharmaceuticals Company (A partnership firm) Solrex Pharmaceuticals Company (A partnership firm)
Ranbaxy Drugs and Chemicals Company Sidmak Laboratories (India) Limited (A public company with unlimited liability)
Rs. 10
167,330
34.30
Notes: (i) In terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956, the annual accounts of the subsidiary companies and the related detailed information will be made available upon request by the investors of the Company and of its subsidiary companies. These documents will also be available for inspection by any investor at the Head Office of the Company at 12th Floor, Devika Tower, 6, Nehru Place, New Delhi - 110019, and that of the subsidiary companies concerned.
(ii) The Board of Directors at its meeting held on October 26, 2009, approved for seeking exemption from the Government under Section 212(8) of the Companies Act, 1956, in respect of the subsidiary Companies. (iii) The Company has consolidated the financial statements of its subsidiaries as per Accounting Standard (AS) - 21 “Consolidated Financial Statements”, issued by The Institute of Chartered Accountants of India.
(iv) Ranbaxy Japan KK, Japan and Ranbaxy Maxico Servicios S.A. de C.V., Maxico, step down whollyowned subsidiaries were incorporated on November 9, 2009 and November 13, 2009 respectively. Audited accounts of these two subsidiary companies not yet became due. $ Divested/liquidated during the year: Ranbaxy (Guangzhou China) Limited, Republic of China Ranbaxy Hungary Gyogyszereszeti Kft, Hungary Ranbaxy Vietnam Company Ltd., Vietnam
140
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