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Company Information

Home » Market » Company Information

Cipla Ltd.

Sep 23, 03:26
968.90 +4.25 (+ 0.44 %)
 
VOLUME : 568414
Prev. Close 964.65
Open Price 965.00
TODAY'S LOW / HIGH
959.65
 
 
 
969.50
Bid PRICE (QTY.) 969.05 (64)
Offer PRICE (Qty.) 969.50 (238)
52 WK LOW / HIGH
706.45
 
 
 
997.20
Sep 23, 03:14
968.35 +4.85 (+ 0.50 %)
 
VOLUME : 1161086
Prev. Close 963.50
Open Price 965.45
TODAY'S LOW / HIGH
959.50
 
 
 
969.50
Bid PRICE (QTY.) 968.35 (43)
Offer PRICE (Qty.) 968.40 (2377)
52 WK LOW / HIGH
706.50
 
 
 
997.00
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Market Cap. ( ₹ ) 78112.30 Cr. P/BV 4.26 Book Value ( ₹ ) 227.19
52 Week High/Low ( ₹ ) 997/707 FV/ML 2/1 P/E(X) 32.48
Bookclosure 25/08/2021 TTM EPS ( ₹ ) 31.51 Div Yield (%) 0.52
AUDITOR'S REPORT
You can view full text of the latest Director's Report for the company.
Year End :2021-03 

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of Cipla Limited ('the Company'), which comprise the Balance Sheet as at 31st March, 2021, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ('Act') in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including Indian Accounting Standards ('Ind AS') specified under Section 133 of the Act, of the state of affairs (financial position) of the Company as at 31st March, 2021, its profit (including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

4. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5. We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter

How our audit addressed the key audit matter

Drugs (Prices Control) Orders (DPCO) matters:

The Company is regulated by National Pharmaceutical Pricing Authority, Government of India (NPPA). There are number of legal and regulatory cases, of which the most significant is under Drugs (Prices Control) Orders (DPCO) as disclosed in Note 39 to the standalone financial statements, relating to overcharging of certain drugs under DPCO.

According to NPPA's public disclosure, the total demand against the Company aggregates to H 3,676.07 crore as at 31st March, 2021, of which:

a) H 3,456.39 crore relates to matters pending at Honourable Bombay High Court, wherein the Company has deposited H 175.08 crore being 50% of the total demand of H 350.15 crore as at 1st August, 2003 under protest pursuant to direction of Honourable Supreme Court of India; and

Our audit of DPCO matters included, but was not

limited to, the following procedures:

a) Obtained an understanding of the management's process for updating the status of the matters, assessment of accounting treatment in accordance with Ind AS 37, and for measurement of amounts involved;

b) Evaluated the design and tested the operating effectiveness of key controls around above process;

c) Inspected correspondence with the Company's external legal counsel in order to corroborate our understanding of these matters, accompanied by discussions with both internal and external legal counsels. Tested the objectivity and competence of such management experts involved;

Key audit matter

How our audit addressed the key audit matter

b) H 219.68 crore relates to other matters, wherein

d)

Obtained direct confirmation from the external

based on facts and legal advice, the Company

legal counsel handling DPCO matters with respect

has recorded a charge of H 6.89 crore (including

to the legal determination of the liability arising

interest) during the year ended 31st March, 2021

from such litigation, conclusion of the matters

and carries a total provision of H 111.15 crore

in accordance with the requirements of Ind AS

(including interest) as at 31st March, 2021.

37 and disclosures to be made in the financial

The amounts involved are material and the application of accounting principles as given under Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets ('Ind AS 37'), in order to determine the amounts

statements. Evaluated the response received from the external legal counsel to ensure that the conclusions reached are supported by sufficient legal rationale;

to be recognised as liability or to be disclosed as a

e)

Assessed the appropriateness of methods used,

contingent liability or not, is inherently subjective and

and the reliability of underlying data for the

needs careful evaluation and significant judgement to

calculations made for quantifying the amounts

be applied by the management.

involved. Tested the arithmetical accuracy of

Considering the materiality and the inherent

such calculations; and

subjectivity which involves significant management judgement in predicting the outcome of the matter, DPCO matters have been considered to be a key audit matter for the current period audit.

f)

Evaluated the Company's disclosures for adequate disclosure regarding the significant litigations of the Company.

Based on the audit procedures performed, the judgements made by the management were reasonable and disclosures made in respect of these matters were appropriate in the context of the standalone financial statements taken as a whole.

Revenue from operations: (refer note 1 and 27 to the Standalone financial statements)

The Company recognises revenue from the sales of pharmaceutical products to resellers or distributors, out licensing arrangements and service fee. The Company recognises revenue from product sales when control of the product transfers, generally upon shipment or delivery to a customer. The Company records product sales net of estimated incentives/ discounts, returns, rebates and other related charges. The actual point in time when revenue is recognised varies depending on the specific terms and conditions of the sales contracts entered with customers.

Further, the Company has a large number of customers operating in various geographies and sales contracts with customers have a variety of different terms relating to the recognition of revenue, the entitlement to sales rebates, the right to return and price adjustments. Sales arrangements in certain jurisdictions lead to material deductions to gross sales in arriving at revenue.

Our audit included, but was not limited to, the following

procedures:

a) Obtained an understanding of the management's process for revenue recognition (from sale to customers, out-licensing arrangements and service fee), judgements in estimation and accounting treatment of discount schemes, returns, rebates and regulatory compliance requirements;

b) Evaluated the design and tested the operating effectiveness of the Company's internal controls, including general IT controls, key IT application controls exercised by the management, over recognition of revenue and measurement of various discount schemes, returns and rebates;

c) Evaluated the terms of the licensing arrangements to determine satisfaction of performance obligations under the contracts for appropriate revenue recognition and tested allocation of consideration between performance obligations to verify deferral of revenue in respect of unsatisfied performance obligations;

Key audit matter

How our audit addressed the key audit matter

The Company also has development and

d)

Performed substantive testing by selecting

commercialisation arrangements relating to research

samples of revenue transactions pertaining to

and development of new products. This includes in-

sale of products during the year, and verified

licensing and out-licensing arrangements and other

the underlying supporting documents including

types of complex agreements.

contracts, agreements, sales invoices and dispatch/shipping documents;

We identified the recognition of revenue from

operations as a key audit matter because:

e)

Performed cut-off testing procedures by testing samples of revenue transactions recorded during

a) Accrual towards rebates, discounts, returns and

the year in specific periods before and after year

allowances is complex and requires significant

end to conclude there has not been overstatement/

judgements and estimates in relation to contractual

understatement of revenue recorded for the year;

agreements/ commercial terms across various

geographies. Any change in these estimates can

f)

Obtained management workings for amounts

have a significant financial impact.

recognised towards discount schemes, returns and rebates during the year and as at year end. On a

b) The nature of development and commercialisation

sample basis, tested the underlying calculations

arrangements are often inherently complex

for amounts recorded as accruals and provisions

and unusual, requiring significant management

towards the aforementioned obligations, as

judgement to be applied in respect of revenue

per the terms of related schemes, contracts and

recognition.

regulations, and traced the underlying data to

c) The Company considers revenue as key benchmark

source documents;

for evaluating performances and hence, there is

g)

Evaluated historical accuracy of the Company's

risk of revenue being overstated due to pressure to

estimates of year-end accruals pertaining to

achieve targets, earning expectations or incentive

aforesaid arrangements made in the previous

schemes linked to performance for a reporting

years to identify any management bias;

period.

h)

Tested all the manual sales-related adjustments

d) Considering the widespread impact of the

made to revenue comprising of variable

outbreak due to COVID-19, point of transfer of

consideration under Ind AS 115 to ensure the

goods control (transit days) and probability of

appropriateness of revenue recognition during

collection from customers was required to be re-

the year; and

assessed in certain geographies.

i)

Evaluated the adequacy of disclosures in the standalone financial statements.

Based on audit procedures performed, we determined

that the revenue recognition and measurement is

appropriate in the context of the standalone financial

statements taken as a whole.

Recoverability of investments in subsidiaries:

The Company has investments of H 7,671.38 crore in subsidiaries being carried at cost in accordance with Ind AS 27, Separate Financial Statements. The Company assesses the recoverable amounts of each investment when impairment indicators exist by comparing the fair value (less costs of disposal) and carrying amount of that investment as on the reporting date.

Our audit included, but was not limited to, the following procedures:

a) Obtained an understanding of the management's process for identification of impairment indicators and tested the design and operating effectiveness of internal controls over such identification and impairment measurement through fair valuation of identified investments;

Key audit matter

How our audit addressed the key audit matter

The Company has recorded an impairment loss on

b)

Involved auditor's experts to assess the

investment in Cipla Biotec Limited (formerly known as

appropriateness of the valuation methodologies

Cipla Biotec Private Limited) of H 10.88 crore during

used by the management;

the year ended 31st March, 2021. Refer note 5 to the standalone financial statements.

c)

Reconciled the cash flows to the business plans

Management's assessment of whether there

approved by the respective Board of Directors of the identified investee companies;

are impairment indications and estimate of the recoverable amounts of the identified investments

d)

Evaluated and challenged management's

determined through discounted cash flow valuation

assumptions such as implied growth rates during

method requires significant management judgement

explicit period, terminal growth rate, targeting

in carrying out the impairment assessment. The key

savings and discount rate for their appropriateness

assumptions used in management's assessment of

based on our understanding of the business of

the recoverable amounts include, but are not limited

the respective investee companies, past results

to, projections of future cash flows, growth rates,

and external factors such as industry trends

discount rates, estimated future operating and capital

and forecasts, including the possible impact of

expenditure. Changes to these assumptions could

COVID-19 pandemic on such assumptions;

lead to material changes in estimated recoverable

e)

Obtained and evaluated sensitivity analysis

amounts, resulting in either impairment or reversals of impairment taken in prior years.

performed by the management on key assumptions

of implied growth rates during explicit period,

Considering the materiality of amounts involved, and

terminal growth rates and discount rates;

the inherent subjectivity involved in estimating future

f)

Tested the mathematical accuracy of the

cash flows which required significant management

management computations with regard to cash

judgement, assessment of impairment losses to be

flows and sensitivity analysis;

recognised, if any, on the carrying value of aforesaid investments has been considered to be a key audit

g)

Performed independent sensitivity analysis of

matter for the current period audit.

aforesaid key assumptions to assess the effect

h)

of reasonably possible variations on the current estimated recoverable amount for each of the identified investments to evaluate sufficiency of headroom between recoverable value and carrying amount; and

Evaluated the adequacy of disclosures given in

the standalone financial statements, including disclosure of significant assumptions, judgements and sensitivity analysis performed, in accordance with applicable accounting standards.

Based on the audit procedures performed, we

determined that the management's assertion on

the

recoverability of investments in subsidiaries is

appropriate in the context of the standalone financial

statements taken as a whole.

Information other than the Financial Statements and Auditor's Report thereon

6. The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditor's report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

7. The accompanying standalone financial statements have been approved by the Company's Board of Directors. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Ind AS specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgement and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for

ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

8. In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

9. Those Board of Directors is also responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

10. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

11. As part of an audit in accordance with Standards on Auditing, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

o Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of internal control;

o Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under Section 143(3)0) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;

o Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

o Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern; and

o Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

12. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

13. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our

independence, and where applicable, related safeguards.

14. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

15. Based on our audit, we report that the Company has paid remuneration to its directors during the year in accordance with the provisions of and limits laid down under Section 197 read with Schedule V to the Act.

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

17. Further to our comments in Annexure I, as required by Section 143(3) of the Act, based on our audit, we report, to the extent applicable, that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit of the accompanying standalone financial statements;

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

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

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

e) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2021 from being appointed as a director in terms of Section 164(2) of the Act;

f) We have also audited the internal financial controls with reference to financial statements of the Company as on 31st March, 2021 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date and our report dated 14th May, 2021 as per Annexure II expressed unmodified opinion; and

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

i. The Company, as detailed in note 39 to the standalone financial statements, has disclosed the impact of pending litigations on its financial position as at 31st March, 2021;

ii. As detailed in note 51 to the standalone financial statements, the Company did not have any long-term contracts including

b i

derivative contracts for which there were any material foreseeable losses as at 31st March, 2021;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company during the year ended 31st March, 2021; and

iv. The disclosure requirements relating to holdings as well as dealings in specified bank notes were applicable for the period from 8th November, 2016 to 30th December, 2016, which are not relevant to these standalone financial statements. Hence, reporting under this clause is not applicable.

For Walker Chandiok & Co LLP

Chartered Accountants

Firm's Registration No.: 001076N/N500013

Ashish Gupta

Partner

Membership No.: 504662

UDIN: 21504662AAAADJ4428

Place: New Delhi

Date: 14th May, 2021