Transcription
ConsolidatedFinancialStatements
150LUPIN LIMITED Integrated Report 2020 - 21This page is intentionally left blank
Corporate OverviewStatutory ReportsFinancial StatementsIndependent Auditor’s ReportTo the Members of Lupin LimitedReport on the Audit of ConsolidatedFinancial StatementsOpinionWe have audited the consolidated financialstatements of Lupin Limited (hereinafter referredto as the "Holding Company") and its subsidiaries(Holding Company and its subsidiaries togetherreferred to as “the Group”) and its joint venture,which comprise the consolidated balance sheet asat March 31,2021, and the consolidated statementof profit and loss (including other comprehensiveincome), consolidated statement of changesin equity and consolidated statement of cashflows for the year then ended, and notes to theconsolidated financial statements, including asummary of significant accounting policies andother explanatory information (hereinafter referredto as “the consolidated financial statements”).In our opinion and to the best of our informationand according to the explanations given to us, andbased on the consideration of reports of otherauditors on separate financial statements of suchsubsidiaries and joint venture as were audited by theother auditors, the aforesaid consolidated financialstatements give the information required by theCompanies Act, 2013 (“Act”) in the manner sorequired and give a true and fair view in conformitywith the accounting principles generally acceptedin India, of the consolidated state of affairs of theGroup and joint venture as at March 31, 2021, ofits consolidated profit and other comprehensiveincome, consolidated changes in equity andconsolidated cash flows for the year then ended.Basis for OpinionWe conducted our audit in accordance with theStandards on Auditing (SAs) specified undersection 143(10) of the Act. Our responsibilitiesunder those SAs are further described in theAuditor’s Responsibilities for the Audit of theConsolidated Financial Statements section of ourreport. We are independent of the Group andthe joint venture in accordance with the ethicalrequirements that are relevant to our audit of theconsolidated financial statements in terms of theCode of Ethics issued by the Institute of CharteredAccountants of India and the relevant provisionsof the Act, and we have fulfilled our otherethical responsibilities in accordance with theserequirements. We believe that the audit evidenceobtained by us along with the considerationof audit reports of the other auditors referredto in sub paragraph (a) of the “Other Matters”paragraph below, is sufficient and appropriate toprovide a basis for our opinion on the consolidatedfinancial statements.Key Audit MattersKey audit matters are those matters that, in ourprofessional judgment, were of most significancein our audit of the consolidated financialstatements of the current period. These matterswere addressed in the context of our audit of theconsolidated financial statements as a whole, andin forming our opinion thereon, and we do notprovide a separate opinion on these matters.The key audit matter1. Revenue Recognition:How the matter was addressed in our audit Refer to note 1B(m) of accounting policy and note 39in consolidated financial statements.To obtain sufficient and appropriate audit evidence, ourprincipal audit procedures and procedures performedby component auditors amongst others included thefollowing:– Comparing the accounting policies in respect ofrevenue recognition with applicable accountingstandards to ensure compliance; Revenue from the sale of pharmaceutical productsis recognized when control over goods is transferredto a customer. The actual point in time when revenueis recognised varies depending on the specific termsand conditions of the sales contracts entered intowith customers. The Company has a large number ofcustomers operating in various geographies and salescontracts with customers have distinct terms relatingto the recognition of revenue, the right of return andprice adjustments. We identified the recognition of revenue from sale ofproducts as a key audit matter considering: Revenue is a key performance indicator for theCompany. Accordingly, there could be pressure tomeet the expectations of investors / otherstakeholders and / or to meet revenue targetsstipulated in performance incentive schemes for areporting period. We have considered that there is arisk of fraud related to revenue being overstated byrecognition in the wrong period or before control haspassed.– Testing design, implementation and operatingeffectiveness of the Company’s internal controlsincluding general IT controls and key IT applicationcontrols over recognition of revenue;– Performing substantive testing of selected samplesof revenue transactions recorded during the yearend. For a sample of year-end sales, we verifiedcontractual terms of sales invoices / contracts,shipping documents and acknowledged deliveryreceipts for those transactions;– Testing of any unusual non-standard manual journalentries that impacted revenue recognised.151
152LUPIN LIMITED Integrated Report 2020 - 21The key audit matter2. Intangible Assets:How the matter was addressed in our audit Refer note 1B(d)&(g) of significant accounting policies.To obtain sufficient and appropriate audit evidence, ourprincipal audit procedures and procedures performedby component auditors amongst others included thefollowing: The carrying value of Intangible Assets including InProcess Research and Development (IPR&D) aggregateto 17,501.6 million as at 31 March 2021. IPR&D aretested for impairment annually and other intangibleassets are evaluated for any indicators of impairmentannually.– Testing the design and operating effectiveness ofcontrols over impairment assessment includingapproval of forecasts and valuation models used; The group assesses impairment triggers with respectto intangible assets and tests IP R&D for impairmentannually, at each cash generating unit (CGU) level. Therecoverable amount of the CGUs, being the higher ofthe value in use and fair value less costs of disposal,is compared with the carrying value to identify anyimpairment. Value in use is usually derived fromdiscounted future cash flows. The discounted cashflow model uses several assumptions. These includeestimates of future sales volumes, prices, operationaland selling costs, terminal value growth rates, potentialproduct obsolescence, new product launches and theweighted average cost of capital. The likely impactthe Covid 19 pandemic on these can also increase theuncertainty involved in these estimates.– Assessing the valuation methodology used andtesting the mathematical accuracy of the impairmentmodels; Considering the inherent uncertainty, complexity andjudgment involved and the significance of the value ofthe assets, impairment assessment of intangible assetshas been considered as a key audit matter.– Evaluating past performances where relevant andhistorical accuracy of the forecasts made;3. Uncertain tax positions (UTPs): The Group is subject to complexities arising fromvarious tax positions on deductibility of expenses aswell as allowability of tax incentives / exemptions.These are subject to periodic challenges by local taxauthorities leading to protracted litigations. There area number of open tax matters under litigation with taxauthorities over a number of years. The range of possible outcomes for provisions andcontingencies can be wide. Judgment to make certainjudgements in respect of estimates of tax exposuresand contingencies is required in order to assess theadequacy of tax provision. Provision for current tax and valuation of UTPs havebeen identified as a key audit matter due to theinherent complexity in the underlying tax laws andthe extent of judgment involved in developing theseestimates. These matters are disclosed in note 45 tothe consolidated financial statements.Refer note 1B(k) in significant accounting policies.– Assessing identification of CGUs with reference tothe guidance in the applicable accounting standards;– Evaluating the valuation assumptions, such asdiscount rates, growth in sales, probability of successof new products, operating and selling costs used.Consideration of the impact of economic slowdowncaused by Covid 19 pandemic on these assumptions;– Performing sensitivity analysis of key assumptions.These include future revenue growth rates, relatedcosts and the discount rate applied in the valuationmodels.– Considering the impact of any adjusting events afterthe balance sheet date but before the reporting onthe carrying values of the assets.To obtain sufficient and appropriate audit evidence, ourprincipal audit procedures included, amongst others, thefollowing:– Testing the design and operating effectiveness ofthe controls over ascertaining completeness ofUTPs, provisions for current tax and uncertain taxpositions;– Challenging the adequacy of related provisionsin conjunction with tax specialists by consideringchanges to business and tax legislation in keyjurisdictions, making relevant enquiries and readingof correspondence with authorities where relevant;– Verifying the calculation for current tax provision.Analyse movements for any release, increase orcontinued provision during the year;– Challenging judgments with respect to probabilityof outflow arising from outstanding litigations afterconsidering the status of recent tax assessments,audits and enquiries, recent judicial pronouncementsand judgments in similar matters. Also considerdevelopments in the tax environment and outcomeof past litigations. We focused our work on thejurisdictions with greatest potential exposureinvolving higher level of judgements.
Corporate OverviewThe key audit matter4. Goodwill: Refer note no. 1B(g) of significant accounting policies.Statutory ReportsFinancial StatementsHow the matter was addressed in our auditTo obtain sufficient and appropriate audit evidence, ourprincipal audit procedures and procedures performed The carrying value of goodwill aggregate to 19,624.2by component auditors amongst others included themillion as at 31 March 2021. The goodwill is evaluated for following:any indicators of impairment annually as required under – Testing the design and operating effectiveness ofInd AS 38.controls over impairment assessment includingapproval of forecasts and valuation models used; The group assesses impairment triggers with respect togoodwill annually, at each cash generating unit (CGU)– Assessing the valuation methodology used andlevel. The recoverable amount of the CGUs, being thetesting the mathematical accuracy of the impairmenthigher of the value in use and fair value less costs ofmodels;disposal, is compared with the carrying value to identifyany impairment. Value in use is usually derived from– Assessing identification of CGUs with reference todiscounted future cash flows. The discounted cash flowthe guidance in the applicable accounting standards;model uses several assumptions. These include– Evaluating the valuation assumptions, such asestimates of future sales volumes, prices, operationaldiscount rates, growth in sales, probability of successand selling costs, terminal value growth rates, potentialof new products, operating and selling costs used.product obsolescence, new product launches and theConsideration of the impact of economic slowdownweighted average cost of capital. The likely impactcaused by Covid 19 pandemic on these assumptions;the Covid 19 pandemic on these can also increase theuncertainty involved in these estimates.– Performing sensitivity analysis of key assumptions.These include future revenue growth rates, related Considering the inherent uncertainty, complexity andcosts and the discount rate applied in the valuationjudgment involved and the significance of the value ofmodels.the goodwill, impairment assessment of goodwill hasbeen considered as a key audit matter.– Evaluating past performances where relevant andhistorical accuracy of the forecasts made;– Considering the impact of any adjusting events afterthe balance sheet date but before the reporting onthe carrying values of the assets.Other InformationThe Holding Company’s management andBoard of Directors are responsible for the otherinformation. The other information comprises theinformation included in the holding Company’sIntegrated Report, but does not include the financialstatements and our auditor’s report thereon.Our opinion on the consolidated financial statementsdoes not cover the other information and we do notexpress any form of assurance conclusion thereon.In connection with our audit of the consolidatedfinancial statements, our responsibility is to read theother information and, in doing so, consider whetherthe other information is materially inconsistentwith the consolidated financial statements or ourknowledge obtained in the audit or otherwiseappears to be materially misstated. If, based on thework we have performed and based on the workdone / audit report of other auditors, we concludethat there is a material misstatement of this otherinformation, we are required to report that fact.We have nothing to report in this regard.Management’s and Board of Director’sResponsibilities for the ConsolidatedFinancial StatementsThe Holding Company’s Management and Boardof Directors are responsible for the preparationand presentation of these consolidated financialstatements in term of the requirements of the Actthat give a true and fair view of the consolidatedstate of affairs, consolidated profit and othercomprehensive income, consolidated statement ofchanges in equity and consolidated cash flows ofthe Group including its joint venture in accordancewith the accounting principles generally acceptedin India, including the Indian Accounting Standards(Ind AS) specified under section 133 of the Act.The respective Management and Board of Directorsof the companies included in the Group and of itsjoint venture are responsible for maintenance ofadequate accounting records in accordance withthe provisions of the Act for safeguarding the assetsof each company and for preventing and detectingfrauds and other irregularities; the selection andapplication of appropriate accounting policies;making judgments and estimates that are reasonableand prudent; and the design, implementation andmaintenance of adequate internal financial controls,that were operating effectively for ensuring accuracyand completeness of the accounting records,relevant to the preparation and presentation ofthe consolidated financial statements that givea true and fair view and are free from materialmisstatement, whether due to fraud or error, whichhave been used for the purpose of preparationof the consolidated financial statements by theManagement and Directors of the Holding Company,as aforesaid.153
154LUPIN LIMITED Integrated Report 2020 - 21In preparing the consolidated financial statements,the respective Management and Board of Directorsof the companies included in the Group and of itsjoint venture are responsible for assessing the abilityof each company to continue as a going concern,disclosing, as applicable, matters related to goingconcern and using the going concern basis ofaccounting unless the respective Board of Directorseither intends to liquidate the Company or to ceaseoperations, or has no realistic alternative but to doso.The respective Board of Directors of the companiesincluded in the Group and of its joint venture isresponsible for overseeing the financial reportingprocess of each company.Auditor’s Responsibilities for the Audit ofthe Consolidated Financial StatementsOur objectives are to obtain reasonable assuranceabout whether the consolidated financial statementsas a whole are free from material misstatement,whether due to fraud or error, and to issuean auditor’s report that includes our opinion.Reasonable assurance is a high level of assurance,but is not a guarantee that an audit conducted inaccordance with SAs will always detect a materialmisstatement when it exists. Misstatements canarise from fraud or error and are considered materialif, individually or in the aggregate, they couldreasonably be expected to influence the economicdecisions of users taken on the basis of theseconsolidated financial statements.As part of an audit in accordance with SAs, weexercise professional judgment and maintainprofessional skepticism throughout the audit.We also: Identify and assess the risks of materialmisstatement of the consolidated financialstatements, whether due to fraud or error, designand perform audit procedures responsive tothose risks, and obtain audit evidence that issufficient and appropriate to provide a basis forour opinion. The risk of not detecting a materialmisstatement resulting from fraud is higherthan for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions,misrepresentations, or the override of internalcontrol. Obtain an understanding of internal controlrelevant to the audit in order to designaudit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of theAct, we are also responsible for expressingour opinion on the internal financial controlswith reference to the consolidated financialstatements and the operating effectiveness ofsuch controls based on our audit. Evaluate the appropriateness of accountingpolicies used and the reasonableness ofaccounting estimates and related disclosuresmade by the Management and Board ofDirectors. Conclude on the appropriateness ofManagement and Board of Directors use of thegoing concern basis of accounting in preparationof consolidated financial statements and, basedon the audit evidence obtained, whether amaterial uncertainty exists related to eventsor conditions that may cast significant doubton the appropriateness of this assumption.If we conclude that a material uncertaintyexists, we are required to draw attention inour auditor’s report to the related disclosuresin the consolidated financial statements or, ifsuch disclosures are inadequate, to modify ouropinion. Our conclusions are based on the auditevidence obtained up to the date of our auditor’sreport. However, future events or conditions maycause the Group and its joint venture to cease tocontinue as a going concern. Evaluate the overall presentation, structure andcontent of the consolidated financial statements,including the disclosures, and whether theconsolidated financial statements represent theunderlying transactions and events in a mannerthat achieves fair presentation. Obtain sufficient appropriate audit evidenceregarding the financial information of suchentities or business activities within the Groupand its joint venture to express an opinion onthe consolidated financial statements. We areresponsible for the direction, supervisionand performance of the audit of financialinformation of such entities included in theconsolidated financial statements of which weare the independent auditors. For the otherentities included in the consolidated financialstatements, which have been audited by otherauditors, such other auditors remain responsiblefor the direction, supervision and performanceof the audits carried out by them. We remainsolely responsible for our audit opinion.Our responsibilities in this regard are furtherdescribed in para (a) of the section titled ‘OtherMatters’ in this audit report.We believe that the audit evidence obtained by usalong with the consideration of audit reports of the
Corporate Overviewother auditors referred to in sub-paragraph (a) ofthe Other Matters paragraph below, is sufficient andappropriate to provide a basis for our audit opinionon the consolidated financial statements.We communicate with those charged withgovernance of the Holding Company and suchother entities included in the consolidated financialstatements of which we are the independent auditorsregarding, among other matters, the planned scopeand timing of the audit and significant audit findings,including any significant deficiencies in internalcontrol that we identify during our audit.We also provide those charged with governance witha statement that we have complied with relevantethical requirements regarding independence, and tocommunicate with them all relationships and othermatters that may reasonably be thought to bear onour independence, and where applicable, relatedsafeguards.From the matters communicated with those chargedwith governance, we determine those mattersthat were of most significance in the audit of theconsolidated financial statements of the currentperiod and are therefore the key audit matters.We describe these matters in our auditor’s reportunless law or regulation precludes public disclosureabout the matter or when, in extremely rarecircumstances, we determine that a matter shouldnot be communicated in our report because theadverse consequences of doing so would reasonablybe expected to outweigh the public interest benefitsof such communication.Other Matters(a) We did not audit the financial statements /financial information of 26 subsidiaries, whosefinancial statements/financial informationreflect total assets of 222,525.5 million as at31 March 2021, total revenues of 116,511.0million and net out cash flows amountingto 3,128.9 million for the year ended onthat date, as considered in the consolidatedfinancial statements. The consolidated financialstatements also include the Group’s share of netprofit (and other comprehensive income) of 14.1 million for the year ended 31 March, 2021,in respect of one joint venture, whose financialstatements/financial information have not beenaudited by us. These financial statements/financial information have been audited by otherauditors whose reports have been furnished tous by the Management and our opinion on theconsolidated financial statements, in so far as itrelates to the amounts and disclosures includedin respect of these subsidiaries and joint venture,Statutory ReportsFinancial Statementsand our report in terms of sub-section (3) ofSection 143 of the Act, in so far as it relates tothe aforesaid subsidiaries and joint venture isbased solely on the audit reports of theother auditors. Certain of these subsidiaries and joint ventureare located outside India whose financialstatements and other financial information havebeen prepared in accordance with accountingprinciples generally accepted in their respectivecountries and which have been audited byother auditors under generally acceptedauditing standards applicable in their respectivecountries. The Company’s management hasconverted the financial statements of suchsubsidiaries and joint venture located outsideIndia from accounting principles generallyaccepted in their respective countries toaccounting principles generally accepted in India.We have audited these conversion adjustmentsmade by the Company’s management.Our opinion, in so far as it relates to the balancesand affairs of such subsidiaries and joint venturelocated outside India, is based on the report ofother auditors and the conversion adjustmentsprepared by the management of the Companyand audited by us.(b) The financial statements/financial informationof two subsidiaries whose financial statements/financial information reflect total assets of nil as at 31 March 2021, total revenues of 89.0 million and net cash out flows amountingto 21.5 million for the year ended on thatdate, as considered in the consolidated financialstatements, have not been audited eitherby us or by other auditors. These unauditedfinancial statements/financial informationhave been furnished to us by the Managementand our opinion on the consolidated financialstatements, in so far as it relates to theamounts and disclosures included in respectof the subsidiaries, and our report in terms ofsub-sections (3) of Section 143 of the Act inso far as it relates to the aforesaid subsidiary,is based solely on such unaudited financialstatements / financial information. In ouropinion and according to the information andexplanations given to us by the Management,these financial statements/financial informationare not material to the Group.Our opinion on the consolidated financialstatements, and our report on Other Legal andRegulatory Requirements below, is not modified inrespect of the above matters with respect to our155
156LUPIN LIMITED Integrated Report 2020 - 21reliance on the work done and the reports of theother auditors and the financial statements/financialinformation certified by the Management.Report on Other Legal and RegulatoryRequirements A. As required by Section 143(3) of the Act, basedon our audit and on the consideration of reportsof the other auditors on separate financialstatements of such subsidiaries and joint ventureas were audited by other auditors, as noted inthe ‘Other Matters’ paragraph, we report, to theextent applicable, that:a) We have sought and obtained all theinformation and explanations which to thebest of our knowledge and belief werenecessary for the purposes of our auditof the aforesaid consolidated financialstatements.b) In our opinion, proper books of account asrequired by law relating to preparation of theaforesaid consolidated financial statementshave been kept so far as it appears from ourexamination of those books and the reportsof the other auditors.c) The consolidated balance sheet, theconsolidated statement of profit and loss(including other comprehensive income), theconsolidated statement of changes in equityand the consolidated statement of cash flowsdealt with by this Report are in agreementwith the relevant books of accountmaintained for the purpose of preparation ofthe consolidated financial statements.d) In our opinion, the aforesaid consolidatedfinancial statements comply with the IndAS specified under section 133 of the Act.e) On the basis of the written representationsreceived from the directors of the HoldingCompany as on March 31, 2021, taken onrecord by the Board of Directors of theHolding Company and the reports of thestatutory auditors of its two subsidiariescompany incorporated in India, none ofthe directors of the Group companiesincorporated in India is disqualified as onMarch 31, 2021, from being appointedas a director in terms of Section 164(2)of the Act.f) With respect to the adequacy of the internalfinancial controls with reference to financialstatements of the Holding Company, itssubsidiary company incorporated in Indiaand the operating effectiveness of suchcontrols, refer to our separate Report in“Annexure A”.B. With respect to the other matters to be includedin the Auditor's Report in accordance with Rule11 of the Companies (Audit and Auditor’s)Rules, 2014, in our opinion and to the best of ourinformation and according to the explanationsgiven to us and based on the consideration ofthe reports of the other auditors on separatefinancial statements of the subsidiaries andjoint venture, as noted in the ‘Other Matters’paragraph:i. The consolidated financial statementsdisclose the impact of pending litigationsas at March 31, 2021, on the consolidatedfinancial position of the Group and its jointventure. Refer Note 37 to the consolidatedfinancial statements.ii. Provision has been made in the consolidatedfinancial statements, as required underthe applicable law or Ind AS, for materialforeseeable losses, on long-term contractsincluding derivative contracts.iii. There has been no delay in transferringamounts to the Investor Education andProtection Fund by the Holding Companyor its subsidiary companies incorporated inIndia during the year ended March 31, 2021.iv. The disclosures in the consolidated financialstatements regarding holdings as well asdealings in specified bank notes duringthe period from 8 November 2016 to 30December 2016 have not been made in thefinancial statements since they do not pertainto the financial year ended March 31, 2021.C. With respect to the matter to be included in theAuditor’s report under section 197(16): In our opinion and according to the informationand explanations given to us and based onthe reports of the statutory auditors of suchsubsidiary company incorporated in India whichwere not audited by us, the remuneration paid
Corporate Overviewduring the current year by the Holding Companyand its subsidiary company to its directors is inaccordance with the provisions of Section 197 ofthe Act. The remuneration paid to any directorby the Holding Company and its subsidiarycompany is not in excess of the limit laid downunder Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed otherStatutory ReportsFinancial Statementsdetails under Section 197(16) which are requiredto be commented upon by us.For B S R & Co. LLPChartered AccountantsFirm's Registration No. 101248 W/W-100022Place: BengaluruDate: May 12, 2021Venkataramanan VishwanathPartnerMembership No. 113156ICAI UDIN: 21113156AAAACH3260157
158LUPIN LIMITED Integrated Report 2020 - 21Annexure A to the Independent Auditor’s report on theconsolidated financial statements of Lupin Limited for theperiod ended March 31, 2021Report on the internal financial controls with reference to the aforesaid consolidated financial statementsunder Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013(Referred to in paragraph A(f) under ‘Report on Other Legal and Regulatory Requirements’ section of ourreport of even date)OpinionIn conjunction with our audit of the consolidatedfinancial statements of the Company as of and forthe year ended March 31, 2021, we have auditedthe internal financial controls with reference toconsolidated financial statements of Lupin Limited(hereinafter referred to as “the Holding Company”)and such companies incorporated in India underthe Companies Act, 2013 which is its subsidiarycompany, as of that date.In our opinion, the Holding Company and suchcompany incorporated in India which
which comprise the consolidated balance sheet as at March 31,2021, and the consolidated statement of profit and loss (including other comprehensive income), consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a
