Aurobindo Pharma Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the 34th Annual Report of your Company together with the audited accounts for the financial year ended March 31, 2021.

FINANCIAL HIGHLIGHTS

( in Million)

2020-21 2019-20
Revenue from operations 158,236.8 133,707.7
Profit before depreciation, interest, tax and Exceptional items 41,198.3 26,978.7
Depreciation 4,880.0 4,733.3
Finance cost 286.8 979.1
Profit before tax 41,930.1 23,700.5
Provision for tax 10,801.0 4,931.7
Net profit after tax 31,129.1 18,768.8
Other Comprehensive Income/ (Expense) (64.2) (127.0)
Total Comprehensive income for the period 31,064.9 18,641.8

DIVIDEND

Your Company has paid first interim dividend of 125% i.e. 1.25 per equity share of 1, second interim dividend of 125% i.e. 1.25 per equity share of 1 and third interim dividend of 150% i.e. 1.50 per equity share of 1. The total dividend for the financial year 2020-21 comes to 400% i.e. 4.00 per equity share of 1 against 300% i.e. 3.00 per equity share of 1 paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top one thousand listed entities based on market capitalisation are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on your Companys website at: https://www.aurobindo. com/wp-content/uploads/2018/10/Dividend-Distribution-Policy. pdf

Performance Review

Your Company is the leading generic pharma company globally and now ranks as 7th largest generic company by sales and second largest listed Indian pharmaceutical company by revenues. Your Company has become the largest supplier in the USA by volume in last quarter of the financial year. Your Company maintained its growth momentum in revenue and profitability despite headwinds caused by the pandemic.

On a standalone basis, your Companys revenue witnessed a growth of 18.3% reaching 158,236.8 million in FY21, as against 133,7077 million in the corresponding previous period. The Formulations business registered a growth of 23.5% to 123,853.0 million driven by strong growth in exports, which are up by 23.6% to 123,186.1 million. The API business witnessed a growth of 3.0% to 34,269.3 million despite sales of weaker sales of anti-infective products which was impacted by the pandemic. EBITDA for the year increased by 52.7% to 41,198.3 million vs. 26,978.7 million in the corresponding previous period. Gross Profit margin improved by 340 bps to 54.2% of revenue (vs. 50.8% revenue in FY20), which led EBITDA margin for the year to improve by 580 bps to 26.0% of revenue (vs. 20.2% of revenue in FY20). Profit before Tax for the year increased by 76.9% to 41,930.1 million. Your Companys net profit (before Other Comprehensive Income) increased by 65.9% to 31,129.1 million as against 18,768.8 million in FY20. The diluted Earnings Per Share stood at 53.13 compared to 32.03 in FY20.

On a consolidated basis, the revenues increased by 7.3% to 247,746.2 million. The Company attained a healthy growth inspite sales from select therapies being impacted due to the pandemic. The growth was driven by new product launches across markets and increase in market share of existing products. The Formulations business posted a growth of 8.4% to 216,859.7 million from 200,119.3 million in the corresponding previous period. The Active Pharmaceutical Ingredients (APIs) business remained flat at 30,859 million. The growth in API segment led by strong growth of 25.0% in Non Betalactam segment to 13,557.6 million. EBITDA margin improved 40 bps to 21.5% vis-a-vis 21.1% in FY20 despite 200 bps increase in R&D expenses. R&D expenditure for the year was 15,095.7 million or 6.1% of revenue, increased from 9,580.2 million or 4.1% of revenue in FY20. EBITDA before forex and other income stood at 53,334.1 million, witnessing a 9.6% growth year-on-year. Your Company reported a Net Profit of 53,338.4 million, an increase of 87.6% over the corresponding previous period, including one off gains from the sale of Natrol business (refer below). The Diluted Earnings Per Share (reported) stood at 91.05 compared to 48.56 in FY20.

During the year, your Company divested Natrol LLC, the dietary supplements business in the USA, for US$ 550 million consideration and acquired the balance stake in its Joint Venture Company, Eugia Pharma Specialities Limited and also provided a goodwill write-off with respect to earlier acquisitions done by the Company. As a result of all these, the Company received an exceptional gain (net of the tax) of 20,658.3 million. Adjusted net profit for the year was 32,683.3 million, an increase of 13.8%.

Your Companys performance excluding Natrol and exceptional items stood as follows - Revenue increased by 77% to 236,807.5 million. EBITDA before Forex and Other income increased by 8.6% to 49,971.0 million and net profit increased by 12.1% to 30,364.7 million.

The US is the largest market for your Company and accounted for 49.8% of the total revenue. US business reported a growth of 7.3% growth at 123,244.7 million. The business witnessed a growth despite headwinds such as reduction in elective surgeries and sales of select therapies getting impacted due to COVID-19. New product launches coupled with an increase in the market share of existing products led to an improvement in the revenues. Your Company has launched 53 products in FY21. The TRx share in the USA for the quarter ending March 2021 stands at 8.7%, positioning us as the largest player, as per IQVIA data.

Your Company continues to strengthen its pipeline for the global markets including the US market. As on March 31, 2021, your Company filed 639 Abbreviated New Drug Applications (ANDAs) on a cumulative basis. Of the total count, 439 have received final approvals and 29 have got tentative approvals, including 8 ANDAs, which are tentatively approved under the US Presidents Emergency Plan for AIDS Relief (PEPFAR), while 171 ANDAs are currently under review.

Your Company registered a marginal 2.3% growth in its Europe formulations business to 60,607.9 million in FY21 compared to the previous years revenue of 59,218.3 million on account of stock-up at the start of pandemic in Q4FY20. Your Company now operates in 11 countries in EU/UK and is present across multiple channels including pharmacy (Gx), hospital (Hx) and tender (Tx). Despite headwinds, Your Companys performance in France, Germany, UK and Italy led to overall growth in Europe. Your Companys focus during the year was to improve the profitability of the acquired Apotex business.

The ARV Formulations business reported a robust growth of 48.8% with revenues of 18,627.7 million. The significant early mover advantage Aurobindo had in TLD (Tenofovir 300mg + Lamivudine 300mg + Dolutegravir 50mg tablet) single pill regimen along with rapid conversion of TLE to TLD in the institution segment has contributed towards this growth.

Growth Markets, which includes Brazil, Canada, Columbia and South Africa grew by 6.1% to 14,379.4 million.

OUTLOOK

Your Company posted healthy performance in FY21 despite challenges faced by the industry due to partial lockdown across the globe. The inherent strength of your Company is a diversified product basket and launching of new products consistently. With vaccination progressing well across our key markets such as the USA and Europe, the pickup in elective surgeries and footfall in pharmacies are expected to improve. This would improve demand for some of the therapeutic segments which were impacted during the pandemic.

Your Company is working on complex and differentiated products in multiple areas comprising oncology & hormonal products, biosimilars, depot injections, vaccines, topicals, transdermal patches, inhalers, nasals and complex peptide products which will drive the next phase of growth. Your Company is also in the process of commissioning the capacities for some of the complex therapeutic areas. The viral vaccine facility will be ready for commercial production by end of July2021.

Your Company is committed to grow in its key geographies i.e. USA and Europe. In the US, around 200 ANDAs are awaiting final approval and annual sales as per IQVIA data is US$ 95 billion as on March 31, 2021. Apart from this, over 300 ANDAs are under development, including the differentiated pipeline. Your Company is in the process of expanding the capacity in Unit X (APL Healthcare Unit IV), the oral solid manufacturing facility dedicated for the US market. It also completed the construction of injectable facility in USA which is used to manufacture high value and low volume products.

For Europe markets, more than 250 products are under development in general oral and oncology product categories, which will be launched in the next two to three years. Your Company is also building a dedicated injectable facility for Europe and Growth Markets to strengthen its presence in the Hospital segment in Europe. The facility will be commissioned in the next 12-18 months.

In the ARV space, your Company has achieved a dominant market share in Dolutegravir segment. The Company aims to retain large portion of the market share achieved by it in the respective products in the ARV segment.

In Growth Markets; Canada, South Africa and China are the key geographies for your Company. In Canada, your Company has a robust product pipeline with over 150 products registered. The Company is in the process of launching over 50 products in the next two years which include both orals and injectables. China will be an important geography for your Company going ahead. It is in the process of completing construction of its an oral solid manufacturing facility in China. So far we have filed 28 products from the China facility.

In its API business, Aurobindo has been working towards making products more competitive. Your Company is expanding capacities to cater to external sales. Recently, your Company has been awarded for setting up capacities for 3 fermentation based products from the Government of India under the PLI scheme. Aurobindo is in the process of executing these projects. Once these capacities are on-stream, it can meet a significant part of the global demand for these products.

In R&D, your Company will maintain focus on difficult to manufacture, differentiated products, with possible low competitive pressure. Filing momentum is in line with the strategy of moving towards complex and differentiated products.

RESEARCH AND DEVELOPMENT (R&D)

Aurobindo over the years has consistently invested in R&D for improving capabilities and adding talented people across the globe. Your Company now has a team of comprising of more than 1,700 scientists and analysts. This enables the Company to develop a wide range of medications from generics to complex speciality products. Currently, Aurobindo has eight Research and Development (R&D) centres, of which five are in India and three are in the USA. The R&D centres are equipped with cutting edge technologies where the talented scientists develop generics and difficult-to-develop products and strive to improve productivity. During FY21, your Company invested 6.1% of its consolidated revenue or 15,100 million as against 9,580 million or 4.1% of its consolidated revenue in FY20 in research and development.

Your Company is focused on developing specialty and difficult- to-make complex products in the respiratory and dermatological therapeutic areas, including metered dose inhalers (MDIs), dry powder inhalers (DPIs), nasal sprays, topical lotions, creams, ointments and transdermal patches. The products are developed for global markets, where the Company will be able to file the product, get approval and market the product in all markets globally. Your Company is further diversifying its product portfolio by working on multiple R&D initiatives.

During the year, your Company has achieved some key milestones such as filing its first inhaler with the USFDA. It strengthened its Nasal spray portfolio by adding one more product to the pipeline. It also completed its phase II clinical trials for its PCV vaccine and would commence phase III trials soon. Apart from this the specialty pipeline including depot injections, patches, topicals etc. are progressing well.

Your Company has made progress in setting up the manufacturing facility for topical, transdermal and inhalers in North Carolina, USA where it has completed a validation batch for 1 inhaler product out of 3 and clinical studies have been initiated. For topicals, 2 manufacturing plants are in place, one in North Carolina and one in Hyderabad, India. So far, 3 products have been taken for validation batches and more than 27 products are in the pipeline for development. Besides this, your Company has built a development lab in its Research Centre-II, which is based at Hyderabad at AuroHealth.

Your Company has made substantial progress in Biosimilars with completing Phase I study of the lead molecule and proceeding to conduct Phase III clinical trials. With a focus on microbial based products the company has decided to expand one more bioreactor line (microbial). The Company has entered into a distribution partnership in certain regulated markets in Europe where we do not have presence.

Awards & Accolades

• Regional award (Telangana) for Promoting Health in the workplace & Innovative HR Practices in the Pharma space by World HRD congress

• National Best Employer of the Year 2020 by World HRD Congress & Economic times

• Innovation in Employee Engagement & Most Collaborative Hiring Team by Transformance Forums

• Aurobindo Pharma Limited has won 3 awards in India Packaging Award-2020 conducted by Innopack Pharma Confex (formerly known as UBM India Private Limited)

o Award- 1: Integrated Drug Delivery System

o Award- 2: Packaging Design Shapes & Structures

o Award- 3: Sustainable Packaging- Solid Dosage Form

o Aurobindo Pharma Limited has won Indiastar Award 2020 for Integrated Drug Delivery System from Indian Institute of Packaging

• The Energy Cell of Corporate Engineering Department, participated in the CIIs "21st National Award for Excellence in Energy Management 2020" and was awarded as "Energy Efficient Unit" under Pharma & Bulk Drugs category. In the last three financial years, APL Unit-1 has implemented 52 energy saving projects by investing 244.5 million, which have resulted in electricity savings of 21.66 million kWh; thermal energy savings of 21.83 MCal; and financial savings of 286.8 million

• In recognition of Aurobindos flagship program on nutrition (providing meals to underprivileged), the World CSR day Organisation along with Asia HRD Congress, Mumbai awarded Aurobindo Pharma Foundation with "Telangana CSR Leadership Awards 2020" under Concern for Health and Nutrition category.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statements of Subsidiary companies/Associate companies/Joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The Company has formulated a policy for determining material subsidiaries. The policy is available on the Companys website and can be accessed at https://www.aurobindo.com/wp-content/ uploads/2019/04/Policy-Material-Subsidiary-March-2019.pdf.

During the year, the following are the changes in the subsidiaries of the Company:

Ceased subsidiaries / JVs

During the period under review:

Aurovitas Pharma Ceska Republica S.r.o, a wholly owned step- down subsidiary of Agile Pharma B.V. merged with Aurovitas Spol s.r.o (Formerly Apotex (CR) Spol s.r.o.) w.e.f. April 1, 2020.

Apotex N.V merged with Aurobindo NV/SA w.e.f. April 1, 2020

Natrol LLC ceased to be step-down subsidiary of the Company w.e.f. November 30, 2020

New subsidiaries / JVs

During the period under review, following subsidiaries companies were incorporated/acquired:

• Curateq Biologics Private limited, India, a wholly owned subsidiary was incorporated w.e.f. April 25, 2020

• Auro Cure Private Limited was incorporated as a wholly owned subsidiary w.e.f. July 5, 2020

• Aurobindo Pharma Foundation was incorporated as a wholly owned subsidiary Ltd under Section 8 of the Companies Act 2013 w.e.f. July 20, 2020.

• AuroZest Private Limited was incorporated as a wholly owned subsidiary w.e.f. August 6, 2020

• Aurobindo Antibiotics Private Limited was incorporated as a wholly owned step-down subsidiary w.e.f. October 6,2020

• Lyfius Pharma Private Limited was incorporated as a wholly owned step-down subsidiary w.e.f. November 16, 2020

• Qule Pharma Private Limited was incorporated as a wholly owned step-down subsidiary w.e.f. November 16, 2020

• MviYes Pharma Ventures Private Limited became a wholly owned subsidiary of the Company w.e.f. November 7, 2020 by virtue of this, Eugia Pharma Specialities has become wholly owned subsidiary of the Company

• Wytells Pharma Private Limited was incorporated as a wholly owned subsidiary to Eugia Pharma Specialities Limited w.e.f. February 20, 2021.

• Auro Steriles LLC was incorporated as a wholly owned subsidiary of Aurobindo Pharma USA Inc w.e.f. April 1, 2021.

• Eugia Injectable Inc was incorporated as a wholly owned subsidiary of Eugia Pharma Specialities Limited w.e.f. April 1, 2021.

• Nurya Brands Inc, was incorporated on April 28, 2021 in the USA as a subsidiary to Auro Health LLC.

• NVNR (Ramannapet I) Power Plant Private Limited and NVNR (Ramannapet II) Power Plant Private Limited in which the Company is holding 26% each became associate companies w.e.f. May 12, 2021.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com, in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Companys subsidiaries will be provided to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

On December 31, 2018, Securities and Exchange Board of India amended the Prohibition of Insider Trading Regulations, 2015, prescribing various new requirements with effect from April 1, 2019. In line with the amendments, your Company has adopted an amended Code of Conduct to regulate, monitor and report trading by Designated Persons and their Immediate Relatives under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. The Code of Conduct is amended from time to time in line with the amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code of practices and procedures for fair disclosure of unpublished price sensitive information and has been made available on the Companys website at https:// www.aurobindo.com/wp-content/uploads/2019/04/Code-Fair- Disclosure-PIT-Feb2019.pdf

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims to conduct the affairs in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. All employees and Whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of Code of Conduct and Ethics and leak of price sensitive information under the Companys Code of Conduct formulated for regulating, monitoring and reporting by Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. It also provides for adequate safeguards against the victimisation of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy is available on the Companys website https://www.aurobindo.com/wp-content/ uploads/2021/07/Whistle-Blower-Policy-APL.pdf

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexual harassment cases at workplace and the said process ensures complete anonymity and confidentiality of information. Your Company has constituted an Internal Compliance Committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention and prohibition of sexual harassment at the workplace. The policy provides for protection against sexual harassment of women at the workplace and for the prevention and redressal of such complaints. During the year, the Company has not received any complaint. The Company has been conducting regular awareness programmes aimed at prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled and a tentative calendar of the meetings is created in consultation with the Directors. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, seven Board Meetings and seven Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

Key Managerial Personnel

Mr. K. Nithyananda Reddy, Whole-time Director and Vice Chairman, Mr. N. Govindarajan, Managing Director, Dr. M. Sivakumaran, Whole-time Director, Mr. M. Madan Mohan Reddy, Whole-time Director, Mr. P. Sarath Chandra Reddy, Whole-time Director, Mr. Santhanam Subramanian, Chief Financial Officer and Mr. B. Adi Reddy, Company Secretary are the key Managerial Personnel of the Company in accordance with the provisions of Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. During the year, Mr. Girish Paman Vanvari was appointed as an Additional Director categorised as Independent Director of the Company.

None of the directors of the Company are disqualified under the provisions of the Companies Act, 2013 (‘Act) or under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Independent Directors have provided confirmations as contemplated under section 149(7) of the Act. As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a certificate from Company Secretary in Practice that none of the directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority, forms part of Corporate Governance Report as Annexure-A

Appointments/Re-appointment

As per the provisions of the Companies Act, 2013, Dr. M. Sivakumaran and Mr. P. Sarath Chandra Reddy will retire as directors at the ensuing Annual General Meeting and being eligible, seek re-appointment. The Board recommends their reappointment.

The re-appointment of Mr. K. Nithyananda Reddy as Whole-time Director designated as Vice Chairman, Mr. N. Govindarajan as Managing Director, Dr. M. Sivakumaran as Whole-time Director and Mr. M. Madan Mohan Reddy as Whole-time Director are being proposed. The appointment of Mr. Girish Paman Vanvari as Nonexecutive Independent Director is also being proposed at the ensuing Annual General Meeting for the approval of Members.

Cessation

Mr. M. Sitarama Murty ceased to be Director of the Company w.e.f. April 1, 2021 as his tenure as Independent Director of the Company was completed on close of business hours of March 31, 2021. The Board expressed its gratitude to Mr. Murty for his service on the Board as Director, for his sound business advice and valued counsel and for all that he has contributed to the Board of Directors and to the Company.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. i n the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation(1) of Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 (including any statutory modification(s) or reenactments) thereof for the time being in force) and confirmed that they have registered their names in the Independent Directors Databank. In terms of Regulation 25(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognises and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Companys website: https://www.aurobindo.com/wp-content/ uploads/2018/10/Policy-on-Board-Diversity.pdf

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The Annual Performance Evaluation was conducted for all Board Members, for the Board and its Committees for the financial year 2020-21. This evaluation was led by the Nomination and Remuneration / Compensation Committee of the Company. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 and in accordance with the Guidance Note on Board Evaluation issued by SEBI in January 2017. The Board evaluation was conducted through questionnaires designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/ recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of minority shareholders interest and enhancing shareholders value, experience and expertise to provide feedback and guidance to top management on business strategy, governance, risk and understanding of the organisations strategy, etc.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The policy of the Company on directors appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Companys website: https://www.aurobindo.com/wp- content/uploads/2018/10/Nomination-and-Remuneration-Policy.pdf.

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under review were on arms length basis and in the ordinary course of business. All related party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval. The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company https://www.aurobindo.com/wp-content/ uploads/2018/10/Related-Party-Transaction-Policy.pdf.

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of subsection (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

There were no materially significant related party transactions which could have potential conflict with the interests of the Company at large.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-3 to this Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2021 is available on the Companys website and can be accessed at: https://www.aurobindo.com/wp-content/uploads/2021/07/ AnnualReturn202021.pdf

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz. Mr. M. Sitarama Murty, Mr. N. Govindarajan, Mr. P. Sarath Chandra Reddy, Mr. K. Ragunathan and Mr. Girish Paman Vanvari as on March 31,2021. Mr. M. Sitarama Murty ceased to be member and Chairman of Risk Management Committee w.e.f. April 1, 2021 on his retirement as an Independent Director of the

Company. Mr. Girish Paman Vanvari, was appointed as a Chairman of Risk Management Committee w.e.f. April 1,2021. The Company has established a separate department to monitor the enterprise risk and for its mitigation. The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. Risk management policy of the Company outlines a framework for identification of internal and external risks specifically faced by the Company, in particular including financial, operational, sectoral, sustainability (ESG related risks), information, cyber security risks or any other risk as may be determined by the Committee; measures for risk mitigation including systems and processes for internal control of identified risks; and Business continuity plan. Risk is an integral part of the Companys business, and sound risk management is critical to the success of the organisation. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on a regular basis at the time of review of quarterly financial results of the Company. A report on the risks and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS REPORT

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 30th Annual General Meeting (AGM) held on August 31, 2017, had appointed M/s. B S R & Associates LLP, Chartered Accountants as Statutory Auditors for a period of 5 years i.e. up to the conclusion of the 35th AGM to be held in the year 2022. Further, as per Companies (Amendment) Act, 2017 effective from May 7, 2018, the provisions relating to ratification of the appointment of Statutory Auditors at every AGM are not required to be followed. The Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

The Statutory Auditors report forms part of the Annual Report. The notes on financial statements referred to in the Auditors Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

INTERNAL AUDITORS

Ernst & Young LLP are the internal auditors of the Company and to maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is clearly defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of the internal control system of the Company, its compliance with applicable laws/regulations, accounting procedures and policies. Based on the reports of the Internal Auditors, corrective actions were undertaken and thereby strengthened the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on quarterly basis.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014, the Company is maintaining the cost records as its business is covered under the regulated sector viz. drugs and pharmaceuticals. Audit of the Companys cost records is not applicable since the Companys revenues from exports, in foreign exchange, exceed 75% of its total revenues.

INTERNAL FINANCIAL CONTROLS

The Internal Financial Controls (IFC) framework institutionalised in Aurobindo has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance related controls and also Information Technology (IT) controls, comprising IT General Controls (ITGC) and application level controls. The ITGC would include controls over the IT environment, computer operations, access to programs and data, program development and program changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorisation levels.

In order to further strengthen the existing IFC framework and to support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined & identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The internal auditors conduct ‘Process & Control Review on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to the Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

• Establishment of policies & procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

• Physical existence and ownership of assets at a specified date;

• Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

• Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate value;

• Preparation of financial information as per the timelines defined by the relevant authorities.

These controls cover the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to the Companys policies, safeguarding of its assets of the Company, prevention and detection of its frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has an internal control system, commensurate with the size, scale and complexity of its operation.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. A. Mohan Rami Reddy, a Company Secretary in Practice to undertake the secretarial audit of the Company for the financial year 2020-21. The Secretarial Audit Report issued in form MR-3 is in Annexure- 4 to this Report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report. Also, pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the same to stock exchanges where the shares of the Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the CA 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established the Corporate Social Responsibility Committee (CSR Committee).

The Board on the recommendation of CSR Committee, adopted a CSR Policy. The same is available on Companys website at https://www.aurobindo.com/wp-content/uploads/2021/07/CSR- policy-cleaned-May2021-Reviewed.pdf. The CSR objectives are designed to serve societal, local and national goals in the locations that we operate in, creating a significant and sustained impact on local communities. During the financial year 2020-21, the Companys CSR efforts included COVID-19 relief works over and above its usual CSR commitments.

The Company undertakes its CSR activities through Aurobindo Pharma Foundation, a wholly owned subsidiary of the Company incorporated under Section 8 of the Companies Act 2013.

The CSR projects approved by the Board for the year 2021-22 are placed on the Companys website at: https://www.aurobindo. com/sustainability/annual-action-plan/. The Annual Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-5 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-6 to this Report. The statement containing particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open for inspection at the Registered Office of the Company during business hours on all working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining such details may write to the Company Secretary of the Company.

Affirmation that the remuneration is as per the remuneration policy of the Company.

In compliance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board, on the recommendation of the Nomination and Remuneration/Compensation Committee approved the Policy for Selection, Appointment of Directors, KMPs and Senior Management persons. The said Policy provides a framework to ensure that suitable succession plan is in place for appointment of Directors on the Board and other management personnel. The Policy also provides for selection and remuneration criteria for appointment of Directors and senior management persons. The Company affirms that the remuneration is as per the remuneration policy of the Company.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. The Company has also taken D&O Insurance Policy covering the Companys Directors and Officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2021 to the date of signing of the Boards Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report. The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all the units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Companys performance even during the prevalence of COVID-19 pandemic challenges. Your Board would like to express its gratitude to the employees for demonstrating high level of commitment and perseverance during the pandemic.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules) mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years in the unpaid dividend account to the IEPF, also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF.

Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to the IEPF account on due dates. The details of amount of unclaimed unpaid dividend and corresponding shares transferred to the IEPF during the financial year 2020-21 have been provided in the AGM Notice.

SHARE CAPITAL

During the financial year under review, there has been no change in the Authorised and Paid-up Share Capital of the Company. The paid-up share capital of the Company as on March 31, 2021 was 585,938,609 divided into 585,938,609 equity shares of 1 each. The Company has not issued any shares, debentures, bonds or any non-convertible securities during the financial year under review.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

OTHER DISCLOSURES

There were no significant material orders passed by the Regulators or Courts or Tribunals that would impact the going concern status of the Company and its operations in future.

Secretarial Standards

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Acquisitions / Disinvestment / Demerger / Merger

Acquisition of 100% ownership of Eugia Pharma Specialities Limited

The Company had entered into a share purchase agreement to acquire 100% equity share capital of MViyeS Pharma Ventures Private Limited (MViyeS). MViyeS was holding 32.18% shareholding in Eugia Pharma Specialities Limited, a joint venture company in which the Company was holding 67.82%. By this acquisition, both Eugia Pharma Specialities Limited and MViyeS Pharma Ventures Private Limited have become 100% subsidiaries of the Company. The said acquisition was completed on November 6, 2020.

Acquisition of 26% ownership in two solar power generating companies

The Company had entered into a binding agreement to invest 53.8 million each in NVNR (Ramannapet I) Power Plant Private Limited and NVNR (Ramannapet II) Power Plant Private Limited, Hyderabad based solar power generating companies, aggregating to 107.6 million by subscribing to equity shares and other securities of the said solar power generating companies to avail the benefit of captive consumption of Solar Power. After making the said investments, the Company is holding 26% of the share capital in each of the aforesaid solar power generating companies.

Disposal of Natrol LLC, a wholly owned step-down subsidiary in the USA

Aurobindo Pharma USA Inc, a wholly owned subsidiary of the Company had entered into a definite agreement with New Mountain Capital LLC, NY and its affiliate Jarrow Formulas Inc., and its entire holding in Natrol LLC for a sale consideration of US$ 550 million.

Merger Scheme

The Board of Directors of the Company at its meeting held on May 28, 2019 approved the Scheme of Amalgamation for merger of Companys wholly owned subsidiaries viz. APL Healthcare Limited, APL Research Centre Limited, Aurozymes Limited,

Curepro Parenterals Limited, Hyacinths Pharma Private Limited and Silicon Life Sciences Private Limited (a step-down wholly owned subsidiary) with the Company. Accordingly, the Company has made a joint application on August 7, 2019 with Honble National Company Law Tribunal, at Hyderabad (NCLT). Pursuant to the orders dated September 30, 2019, the required approvals of the Members and unsecured creditors were obtained at the meetings held on November 30, 2019.

Subsequently, a Joint Company Petition No. C. P (CAA) No.51/230/ HDB/2020 has been filed on December 9, 2019 for obtaining the sanction of the Honble Tribunal to the Scheme of Amalgamation and the same has been allowed by the Honble Tribunal at its hearing held on January 24, 2020 with directions to issue necessary paper publications seeking objections, if any, from the general public, and to serve the notices with various statutory authorities, income tax, stock exchanges, etc., and listed for final hearing on February 28, 2020. Compliance memo was filed on March 18, 2020 with the Honble NCLT and thereafter the Company in its Board meeting held on August 12, 2020 authorised the Restructuring Committee to look into the exclusion of APL Healthcare Limited from the purview of the Scheme and the Restructuring Committee in its meeting held on September 7, 2020, has approved to exclude APL Healthcare Limited and filed a joint Interlocutory Application (IA) before the NCLT and necessary reports of Regional Director and Official Liquidator are filed, arguments were completed and in the hearing that took place on February 1, 2021, the Honble Bench has heard from OL & RD that they didnt have any objections and accordingly, directed OL & RD to file their no objections in writing and posted the matter for hearing on February 8, 2021. The matter was heard on February 8, 2021 and February 24, 2021.

The NCLT on March 30, 2021 approved the Scheme of Amalgamation. The certified copy of the order was issued by the NCLT on April 7, 2021. The District Registrar, Hyderabad (South) & Collector under Indian Stamp Act-1899 has made endorsement in the Order that the Order issued by the NCLT is not chargeable to stamp duty under Indian Stamp Act, 1899. The Order was filed by Aurobindo and the subsidiary companies with the Registrar of Companies on April 29, 2021 which was subsequently approved.

CREDIT RATING

The Company has obtained the Credit ratings from India Ratings & Research Private Limited and it has assigned IND AA+/Stable/ IND A1+ for Companys fund based working capital facilities and IND A1 + for Companys non-fund-based working capital limits vide their letter dated July 3, 2020.

ACKNOWLEDGEMENTS

Your Directors are grateful for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and remain thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For, and on behalf of the Board,
K. Ragunathan
Place: Hyderabad Chairman
Date: May 31, 2021 DIN:00523576