TO THE MEMBERS OF

SUN PHARMACEUTICAL INDUSTRIES LIMITED

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying standalone financial statements of SUN PHARMACEUTICAL INDUSTRIES LIMITED ("the Company"), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act, as applicable.

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

AUDITOR’S RESPONSIBILITY

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

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder and the Order under section 143(11) of the Act.

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

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

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

OPINION

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 2016, and its loss and its cash flows for the year ended on that date.

EMPHASIS OF MATTER

We draw attention to Note 55 to the standalone financial statements. As referred to in the said Note, remuneration to the Managing Director and a Whole-time Director of the Company for the previous year ended 31st March, 2015 is in excess of the limits specified under Schedule V to the Act by Rs. 20.7 Million. In this regard, we have been informed by the Management of the Company that they have made further representations to the Central Government in respect of their applications for approving the amounts of maximum remuneration for the three years ending 31st March, 2017, including for the excess amounts already paid / provided. The response in respect of the foregoing is awaited from the Central Government.

Our opinion is not modified in respect of this matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

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

c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards prescribed under section 133 of the Act, as applicable.

e) On the basis of the written representations received from the directors as on 31st March, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.

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, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 28(A)(i) to the standalone financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts – Refer Notes 6 and 9 to the standalone financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company except a sum of Rs. 9.8 Million, which are held in abeyance due to pending legal cases.

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

For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
RAJESH K. HIRANANDANI
Partner
(Membership No. 36920)
Place: Mumbai
Date: 30th May, 2016

ANNEXURE "A" TO THE INDEPENDENT AUDITOR’S REPORT

(REFERRED TO IN PARAGRAPH 1(F) UNDER ‘REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS’ OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SUN PHARMACEUTICAL INDUSTRIES LIMITED)

REPORT ON THE INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING UNDER CLAUSE I OF SUBSECTION 3 OF SECTION 143 OF THE COMPANIES ACT, 2013 "THE ACT"

We have audited the internal financial controls over financial reporting of Sun Pharmaceutical Industries Limited ("the Company") as of 31st March, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

MANAGEMENT’S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (the "Guidance Note"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

INHERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

OPINION

In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
RAJESH K. HIRANANDANI
Partner
(Membership No. 36920)
Place: Mumbai
Date: 30th May, 2016

ANNEXURE "B" TO THE INDEPENDENT AUDITOR’S REPORT

(REFERRED TO IN PARAGRAPH 2 UNDER ‘REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS’ SECTION OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SUN PHARMACEUTICAL INDUSTRIES LIMITED)

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

(b) The Company has a program of verification of fixed assets to cover all the items in a phased manner over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed / agreement for sale along with registered power of attorney / consent terms taken on record by the Honorable Bombay City Civil Court at Bombay / share certificate / other documents evidencing title provided to us, we report that, the title deeds, comprising all the immovable properties of freehold land and buildings, are held in the name of the Company as at the balance sheet date, except the following:

Particulars of the freehold land Gross / Net Block as at 31st March, 2016 Remarks
(Rs. in Million)
Located in Himachal Pradesh admeasuring 645,150 Square meters 76.3 The title deeds are in the name of Ranbaxy Laboratories Limited, erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act, 1956 in terms of the approval of the Honorable High Courts of Gujarat and Punjab and Haryana.
Located in Punjab admeasuring 370,527 Square meters 27.2
Located in Haryana admeasuring 64,161 Square meters 109.0
Located in Madhya Pradesh admeasuring 91,330 5.8
Square meters
Located in Karnataka admeasuring 30,362 Square meters 28.3
Located in Punjab admeasuring 8,364 Square meters 2.5 The title of this land is under dispute in respect of which we have been informed by the Management of the Company that they have filed a Special Leave Petition with the Honorable Supreme Court against the order passed by the Honorable High Court of Punjab and Haryana and the matter is under adjudication.

In respect of a building where the Company is entitled to the right of occupancy and use and disclosed as fixed assets in the standalone financial statements, we report that the agreement / non-convertible preference shares / compulsorily convertible debentures entitling the right of occupancy and use of building, are in the name of the Company as at the balance sheet date.

In respect of immovable properties of land and buildings that have been taken on lease and disclosed as fixed assets in the standalone financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement, except the following:

Particulars of the leasehold land Gross Block as at 31st March, 2016 Net Block as at 31st March, 2016 Remarks
(Rs. in Million) (Rs. in Million)
Located in Maharashtra admeasuring 20,000 Square meters. * 25.8 17.0 The lease agreements are in the name of Crosslands Research Laboratories Limited which was merged with Ranbaxy Laboratories Limited, erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act, 1956 in terms of the approval of the Honorable High Courts of Gujarat and Punjab and Haryana.
*includes composite consideration for land and building.
Located in Goa admeasuring 1,000 Square meter 3.3 2.6
Located in Punjab admeasuring 323,866 Square meters 239.6 210.8 The lease agreements are in the name of Ranbaxy Laboratories Limited, erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act, 1956 in terms of the approval of the Honorable High Courts of Gujarat and Punjab and Haryana.
Located in Madhya Pradesh admeasuring 630,552 Square meters 229.0 220.1
Located in Gujarat admeasuring 24,000 Square meters 1.0 0.6 The lease agreement is in the name of Gujarat Lyca Limited, erstwhile Company that was merged with the Company under Sections 391 to 394 of the Companies Act, 1956 in terms of the approval of the Honorable High Court of Gujarat.

(ii) As explained to us, the inventories, excluding stocks with some of the third parties, were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification. In respect of inventories lying with third parties, these have substantially been confirmed by them.

(iii) According to the information and explanations given to us, the Company has not granted loans, secured or unsecured, during the year, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 ("the Act"), and hence reporting under clause (iii)(a) of paragraph 3 of the Order is not applicable. In respect of loans, secured or unsecured, granted during earlier years, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Act:

(a) In respect of loans granted to wholly owned subsidiaries, where the aggregate amount involved is Rs. 4.8 Million (including interest accrued), the repayments or receipts of principal amounts and interest, where due during the year, have been regular as per stipulations and in respect of loans granted to an associate, there is no repayment or receipt of the principal amount of Rs. 512.0 Million and the interest thereon of Rs. 151.5 Million, which are overdue as per the stipulations.

(b) There is no overdue amount remaining outstanding as at the balance sheet date except in respect of amounts of Rs. 512.0 Million and Rs. 135.8 Million of principal and interest respectively, aggregating to Rs. 647.8 Million given to an associate, which has been overdue for more than 90 days, where there is no evidence of reasonable steps having been taken for the recovery of the principal outstanding or interest receivable. As represented by the Management of the Company, the Company is evaluating various options to recover its dues in respect of principal amount and interest.

Refer Note 45 to the standalone financial statements.

(iv) The Company has not granted any loans, made investments or provided guarantees or securities during the year covered under Section 185 and 186 of the Act and hence reporting under clause (iv) of paragraph 3 of the Order is not applicable.

(v) According to the information and explanations given to us, the Company has not accepted any deposit from the public in accordance with the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder and hence reporting under clause (v) of paragraph 3 of the Order is not applicable.

(vi) The maintenance of cost records has been specified by the Central Government under sub-section (1) of Section 148 of the Act. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended, prescribed by the Central Government under sub-section (1) of Section 148 of the Act, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value added Tax, Cess and other material statutory dues applicable to it with the appropriate authorities, though there have been slight delays in few cases.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value added Tax, Cess and other material statutory dues in arrears as at 31st March, 2016 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty and Value added Tax which have not been deposited as at 31st March, 2016 on account of disputes, are given below:

Name of Statute Nature of Dues Forum where dispute is pending Period to which the amount relates Amount (Rs. in Million)# Amount paid / adjusted under protest (Rs. in Million)
Income Tax Act, 1961 Income Tax, Interest and Penalty Commissioner (Appeals) 1998-99 to 2000-01, 2005-06 to 2010-11 3,419.6 2,712.7
Income Tax Appellate Tribunal (ITAT) 1995-96 to 1999-00, 2001-02 to 2004-05, 2007-08, 2009-10 and 2010-11 3,313.2 5,706.5
Sales Tax Act/ VAT (Various States) Sales Tax, Interest and Penalty Assistant / Additional / Senior Joint Commissioner 1999 - 00, 2000-01 and 2002- 03 to 2012-13 2.7 0.6
Appellate Authority 1998-99, 2008-09, 2012-13 and 2013-14 2.8 0.4
Tribunal 1998-99 to 2003-04 3.0 -
High Court 1999-00, 2001-02 to 2003-04 and 2005-06 to 2010-11 23.5 5.1
Entry Tax Madhya Pradesh Commercial Tax Appellate Board 2009-10 2.5 -
The Central Excise Act, 1944 Service Tax Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi 2006 to 2011 4.4 -
Customs Act, 1962 Custom Duty, Penalty and Interest High Court 2000-01 16.1 -
The Central Excise Act, 1944 Excise Duty, Interest and Penalty Settlement Commission 2000-01 4.2 -
Commissioner (Appeals) 2001-02 to 2014-15 57.1 4.5
Tribunal 2001-02 to 2014-15 1,364.2 204.6
High Court 2001-02 to 2004-05 and 2008- 09 to 2013-14 73.1 3.2
Supreme Court 2002-03 to 2003-04 16.9 16.9

# Net of amount paid / adjusted under protest

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions, banks and government and dues to debenture holders.

(ix) In our opinion and according to the information and explanations given to us, money raised by way of the term loans have been applied by the Company during the year for the purposes for which they were raised. The Company has not raised money by way of initial public offer, further public offer (including debt instruments) during the year.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid / provided managerial remuneration in excess of the limits and approvals prescribed under Section 197 read with Schedule V to the Act, to the following managerial personnel:

Managerial Position Excess amount of remuneration paid / provided Rs. ( In Million) Financial year ended Treatment of the excess remuneration in the respective year standalone financial statements Steps taken by the Company for securing refund
Managing Director 10.5 31st March, 2015 Charged to the Statement of Profit and Loss We have been informed by the Management of the Company that they have made further representations to the Central Government in respect of their applications for approving the amounts of maximum remuneration for the three years ending 31st March, 2017, including for the excess amounts already paid / provided. Refer Note 55 to the standalone financial statements
Whole time Director 10.2 31st March, 2015 Charged to the Statement of Profit and Loss

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of paragraph 3 of the Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Sections 177 and 188 of the Act, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards.

(xiv) During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of paragraph 3 of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year, the Company has not entered into any non-cash transactions with its directors or directors of its subsidiary or associate company or persons connected with them and hence provisions of Section 192 of the Act are not applicable.

(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
RAJESH K. HIRANANDANI
Partner
(Membership No. 36920)
Place: Mumbai
Date: 30th May, 2016