Cipla Ltd Management Discussions.

Globally, the past 15 months were an unprecedented period with economies combating the extreme volatility, uncertainty and complexity presented by the COVID-19 pandemic.

Governments and central banks initiated massive fiscal and liquidity measures to shore up countries and economies finances battered by widespread lockdowns imposed to contain the pandemic. The pandemic tested the resilience and agility of businesses to adapt to evolving consumer demand patterns, while tackling several challenges in the supply chain.

Globally, the healthcare systems have led the relentless fight against the pandemic, interms of diagnosis, repurposing medications and developing vaccines in record timelines. The healthcare fraternity ingeniously accelerated the efficient adoption of digital technologies to exchange data insights and consistently evolve the patient care continuum to provide targeted outcomes.

Even as vaccination coverage is being ramped up globally through a determined effort by government and private institutions, uncertainties continue to loom due to the emergence of new strains extending the tenure of the pandemic and delaying the return to complete normalcy.

In this backdrop, while new demand patterns are evolving across geographies, we continue to operate in an environment of uncertainty which limits the ability of the Company to make accurate projections about the business trajectory for the upcoming years. Meanwhile, we continue to collaborate with partners in the value chain, as we navigate the course into the new normal.

Long-term pandemic preparedness will remain a key agenda for the Company.

We have fortified our businesses through several re-imagination initiatives across our procurement, manufacturing and distribution operations. Our business and cost reimagination initiatives, supply consistency and operational excellence during the course of the year have translated into improved business health metrics. We continue to support the Government by ramping up supplies of our COVID-19 portfolio with enhanced capacities and by leveraging new collaborations to service the surging demand for COVID-19 drugs. To ensure a safe operating environment for our colleagues, we have enhanced the safety protocols across our network and initiated measures like deploying a 24x7 ambulance, providing consultation and setting up quarantine facilities.

During the year, Cipla witnessed continued growth across all markets. The Company established a new threshold in operating profitability in FY 2020-21, and going forward, Cipla will focus its efforts on sustaining the structural improvement in the years to come. We continue to track the progress of our strategic goals and are firmly on track to achieve our aspirations.

Overview

For over 85 years, Cipla has provided access to life-saving medicines in our relentless pursuit to improve health outcomes and positively impact the lives of patients in over 80 countries globally.

Backed by strong R&D capabilities, Cipla continues to serve patients as the custodian of respiratory health and complex generic medicines, through the Companys deep portfolio of innovative drug device combinations, complex formulations and broad-spectrum capabilities in injectables and oral solids, amongst

Others.

Cipla enjoys a formidable presence in branded as well as unbranded generic market franchises, with leadership positions in India, South Africa, priority territories in Emerging markets, Europe and US, across major therapies and product categories. The Company is strategically poised to build a global consumer wellness franchise with market leadership in select categories, by unlocking consumer potential of our brands in India and leveraging our dominant presence in the South African OTC market.

Ciplas global efforts in combating COVID-19 and delivering on our promise of Caring for life

In FY 2020-21, Cipla contributed significantly to the global efforts in combating COVID-19 and delivered on our promise of Caring for life. The Company supported government and frontline workers across geographies and we offered our comprehensive product portfolio for diagnosis and treatment under partnerships. Keeping with our commitment to the community, Cipla is continuously investing to enhance the product portfolio and manufacturing infrastructure to ensure uninterrupted supplies and digital engagement to deliver superior value to physicians, patients and all other stakeholders.

Global pharmaceutical industry structure and key developments

As per a recent IQVIA2 report, the global medicine market is projected to grow at 3-6% annually, and exceed USD 1.6 trillion by 2025. This excludes the USD 157 billion projected to be spent on vaccines.

The usage of medicine was disrupted globally in 2020, with variable timing and impact across developed as well as emerging countries.

This was largely attributable to the short-term stock piling of chronic medicines including over the counter products and higher fill rates after the onset of the pandemic and the resultant economic impact of quarantines and lockdowns. The simultaneous re-purposing of drugs and vaccines led to shifts in demand for existing therapies and changes in patient behaviours. While the short-term impact from COVID-19 in 2020 and 2021 has been significant, the long-term impact on growth trends is expected to be limited. This would be subject to the success of phased rollout of vaccines and booster shots against new strains, with vaccination rates of 70% or higher globally by end of 2022 enabling the targeted herd immunity levels. It is estimated that 40% of the global population will achieve herd immunity by the end of 2021 itself.

Long term budget pressures are expected to increase the reliance on cost containment initiatives and lead to proliferation in the use of generic medicines. In developed countries, the adoption of new treatments, offset by patent life cycles and access to generics and biosimilars, are expected to continue as the main factors influencing medicine spend and growth. Medicine spending for developed nations is expected to be in the range of 2%- 5% over the next five years. New brands are projected to sustain the historically high period of spending on novel medicines through 2025, while maintaining the absolute spending levels of the past five years. Growth in emerging countries will be led by China, which is expected to accelerate post-pandemic, driven by greater uptake and use of new original medicines. Meanwhile, medicine spending for developed countries is projected to grow in the range of 7%-10% over the next five years. Immunology, oncology and neurology are expected to be the largest contributors to medicine spending over the next five years, with the continued flow of new medicines expected to offset the impact due to loss of exclusivity.

Despite the challenges imposed by the pandemic, Cipla continued to focus on tapping in-licensing opportunities in biosimilars, oncology and metabolic aliments in line with the global medicine usage trends. The Company entered into partnership with Alvotech for marketing and distribution of oncology products in South Africa and biosimilars in Australia & New Zealand markets. With the aim to further improve the access of innovative medicines in India, we expanded our partnership with Roche for distributing oncology products, and with Boehringer Ingelheim for co-marketing antidiabetic products in India. Strengthening our decade long commitment to rare respiratory diseases, Cipla also launched Nintedanib for the treatment of IPF in India.

The Company will continue to expand its portfolio and deepen partnerships with global innovators to allow greater access to cost- effective medicines and treatment options that will positively impact healthcare outcomes.

Digital ecosystems

• Digitalised clinical trials in product development

• Personalised remote healthcare delivery such as tele-medicine and tele-health for patients

• Virtual engagement with healthcare professionals and key opinion leaders

• Artificial intelligence, machine learning and natural language processing (NLP) to augment clinical research, genomic studies and generation of real-world evidence and associated modalities

Accelerated drug discovery & approvals

• Novel pathways of research & development and accelerated developmental timelines for future drug discoveries on life- threatening ailments

• Collaborations with public stakeholders and competitors on funding and research for mutually beneficial outcomes

• Collaborations with regulatory agencies on guidance standards to fast- track product approvals and facilitate remote facility inspections

Healthcare budgets & pricing actions

• Re-calibration of healthcare budgets to boost healthcare infrastructure for creating ICU capacities, testing capabilities and associated infrastructure

• Continued focus on policy options to negotiate the pricing of prescription drugs to reduce cost and increase access for patients

Promoting diversity & addressing inequalities

• Inclusive clinical research and promoting diversity in recruitment of medical teams

Evolving regulatory framework across key markets3

In 2020, the regulatory authorities across the globe collaborated their efforts to contain the spread of the pandemic by fast-tracking approvals of repurposed drugs, diagnostic tests and vaccines developed by indigenous and foreign players. While inspections for facilities were deferred for safety reasons in several countries, regulatory approvals for non- COVID-19 indications continued to receive high priority to ensure timely approvals and commercialisation by pharmaceutical companies.

India

Learning from the challenges during the peak phases of the pandemic, the Indian regulatory authorities announced several landmark reforms to boost Indias exports, as well as reduce dependency on API and key starting raw material imports. The regulatory authorities also sharpened their focus on other aspects of the healthcare value chain to ensure continuity of supply for medicines, affordability and long-term preparedness for combatting future pandemics.

• The NPPA brought more drugs under NLEM during the year. The Government of Indias Ministry of Health, along with the NPPA, is in discussions to update the NLEM in 2021 and revise the price capping.

• Consistent expansion of Jan Aushadhi stores offering generic medicines at affordable prices continue to offer price competition

to pharmaceutical companies. There are ~7,500 Jan Aushadhi stores in India till date.

• During the year, the government achieved the targeted 70,000 Ayushman Bharat Health and Wellness Centres thereby expanding access to COVID-19 and non- COVID-19 screenings for chronic conditions and tele-consultations. The National Health Authority also extended the insurance scheme to cover free COVID-19 care for registered citizens.

• E-pharmacies have significantly improved their presence in the healthcare ecosystem during the pandemic by enhancing their product portfolio to include wellness products, while servicing more pin codes and offering diagnostics and teleconsultation services. Consolidation of major e-pharmacies and entry of large horizontals will have potential pricing implications for pharmaceutical companies over the long term.

• In FY 2020-21, the Union Government announced performance linked Incentive (PLI) scheme for formulations, drugs, APIs, intermediates and key starting materials across multiple therapies. This is a step in the right direction to boost manufacturing of complex/innovative products and enhance Indian pharmas self-sufficiency for APIs.

The United States of America

The US pharmaceutical market continues to be the largest pharmaceutical market in the world, given the countrys increasing demand for affordable medications for chronic ailments and that a significant number of USFDA approved manufacturing facilities are outside the US.

• The pandemic has led USFDA to explore alternative methods to conduct inspection of overseas mission-critical facilities such as inspection reports from foreign regulators, records requests and product sampling, to complement the agencys oversight activities and ensure timely inspection to avoid backlogs and drug shortages.

• The USFDA initiated rolling reviews of the information to accelerate emergency use authorisation (EUA) approvals in place of full dossier of information for a new drug application, such as vaccines. The USFDA has also issued new COVID-19 specific guidance on product development which will encourage collaborative efforts in clinical development between regulators and industry for new, critical life-saving drugs and complex generics.

• The US Department of Health & Human Services and USFDA took actions to provide safe, effective and more affordable drugs to US patients in fulfillment of the US Governments executive orders on drug pricing and onshoring the production of essential drugs and critical inputs. While the rule-making procedure has been temporarily paused for the executive price orders, similar efforts will continue

to increase price competition in the prescription drug market and further reduce cost of medicines, as foreign manufacturers evaluate the economic feasibility of shifting supply chains for local manufacturing to service US patients.

South Africa

• In 2020, the countrys apex regulatory body - The South African Health Products Regulatory Authority (SAHPRA) - continued to progress on its 2020-2024 strategic goals that aim to address the backlog of regulatory applications for new chemical entities and generic drugs, the need for dedicated human resources, migration to electronic submissions, improved governance, and an ecosystem that allows regular and transparent communication between all stakeholders. During the year, SAHPRA highlighted the major reasons for delay in clearing backlogs and encouraged cooperation from applicants to follow the newly issued regulatory guidelines under the Backlog Clearance Programme (BCP; launched in 2019) to improve quality gaps in applications, which will translate into lesser queries, improved communication and faster clearances.

• The agency is also scheduled to launch an online OTC directory which shall assist the patients and healthcare professionals with a detailed guide on all registered OTC products available in South Africa.

Europe

• The UK Medicines & Healthcare Products Regulatory Agency (MHRA) issued multiple post-Brexit regulatory guidelines on drugs, medical devices, clinical trials and licensing of drugs and biologics. Further, the UKMHRA cited that Great Britain will adopt decisions taken by the European Commission on the approval of new marketing authorisations in the community marketing authorisation procedure.

• In Germany, driven by the COVID-19 pandemic, the government is pushing for a digital transformation of the healthcare sector by establishing a dedicated fund under the Hospital Future Act. Recently published laws such as the Digital Care Act will enable physicians to hold online video consultations, reimburse patients for using prescribed digital health apps and provide access to secure health data network for treatment to all stakeholders.

• In Spain, new measures were directed towards significantly boosting the healthcare spend for 2021 in comparison to 2020, to leverage the pandemic as an opportunity to improve the healthcare model and enhance the national health system. These initiatives included funding for COVID-19 vaccines, modernising and updating primary care infrastructure, increased public health programme budgets for chronic diseases such as HIV, AIDS, tuberculosis, hepatitis, cancer and other rare diseases.

Emerging Markets

Healthcare spends for securing supply of vaccines and providing hospital care are expected to remain elevated in 2021 across emerging markets, even as countries maintain efforts to contain the COVID-19 pandemic.

However, underlying fundamentals such as aging population, rising income, rapid urbanisation, steady increase in noncommunicable diseases like heart disease, cancer and diabetes and shift in mindset from illness to wellness amongst patients, will continue to fuel growth in demand for high quality, on-demand insights, diagnosis and treatment options.

Cipla is committed to further developing its quality management, monitoring and evaluation system to ensure full compliance with regulatory requirements, data integrity and governance, with manufacturing processes that produce high-quality products that are exported to leading markets across the world.

Financial performance

In FY 2020-21, Cipla reported a solid 12% YoY growth in overall revenue, driven by respiratory unlocking in the US, diversified growth across geographies, focused portfolio execution on COVID-19 products backed by solid supply consistency to service demand across businesses.

There was an accelerated improvement in all business and financial health metrics with consolidated PAT and Return on Invested Capital (RoIC) at a multi-year high of H 2,405 crores and 20.2%, respectively.

Cipla is committed to deepening our presence in branded markets, portfolio expansion, strengthening manufacturing capabilities and supply consistency, operational excellence, digital transformation and developing the talent pipeline to sustain the robust performance and create value for all shareholders.

Growth in key markets

• One-India: FY 2020-21 witnessed strong progress on the One-India strategy with 15% YoY growth, led by strong synergies in distribution and portfolio management. Amid the pandemic, the growth in the branded prescription business was driven by COVID-19 portfolio and traction in chronic therapies, even as acute demand was subdued. The solid performance in trade generics was driven by high order flow and strong demand across regions. The consumer business witnessed sharp revenue growth supported by traction in organic brands and brands that transitioned from the trade generics business. After crossing the USD 1 billion aspiration for the One India business in FY 2020-21, Cipla is committed to consistently deliver market beating growth.

• North America: The US markets reported revenue of USD 551 million, led by the continued ramp-

up in Albuterol share and consistent launches from complex generic pipeline. During the year, gAdvair was filed with the USFDA and is currently under active review with the agency. Cipla also settled an on-going litigation to launch the generic version of complex asset Revlimid in FY 2020-21 which improves medium-term earnings visibility

and significantly enhances complex product portfolio for the US market. The approval from USFDA is awaited.

• South Africa, Sub-Saharan Africa and Cipla Global Access:

The South Africa business continued strong performance in FY 2020-21. The private business outperformed the market with an 11% YoY growth in local currency. The tender business also witnessed solid traction and grew by 7% YoY in local currency. Cipla continued to expand its product portfolio through partnerships for oncology products and biosimilar candidates in immunology and oncology space. Furthermore, the SubSaharan Africa business grew by 13% YoY in USD terms, driven by strong commercial execution. The Cipla Global Access businesses grew by 38% YoY in USD terms on the back of higher orders.

• Emerging Markets & Europe: In EMEU, the momentum continued in focused DTM and B2B businesses with 21% YoY growth in Emerging Markets and 17% YoY growth in Europe in USD terms. Cipla inked partnerships to expand its biosimilar portfolio in Australia, New Zealand and select emerging markets.

• API: The API business grew by 2% and continued to deliver high margins, while maintaining a robust order book and high visibility of seedings & lock-ins.

The diluted Earnings Per Share (EPS) for the year stood at H 29.79 (FY 2019-20: H19.16). During the year, the Company set up a strong governance protocol for liquidity and working capital management to build adequate cash balances for operational purposes during the pandemic. The focused cost discipline and re-imagination efforts led to improved free cash flow generation of H 2,856 crores (FY 2019-20: H 1,955 crores), which in turn resulted in a net cash positive position of H 1,921 crores (FY 2019-20: Net debt H 807 crore), significantly strengthening the Companys Balance Sheet. Furthermore, the business delivered historically the highest RoIC of 20.2%

(FY 2019-20: 12.5%) for the year. In FY 2020-21, the Companys net debt to equity stood at -0.10 (FY 2019-20: 0.05).

Operating Profitability: In terms of quality of earnings, in FY 2020-21, the Company reported 350bps+ YoY improvement in EBITDA margin to 22.5%. The historically high margins are attributable to strong cost optimisation initiatives, which along with higher mix of digital engagements, led to strong improvement in efficiency and productivity.

Balance Sheet health: The Company continues to deploy capital into value-accretive opportunities across geographies. In FY 2020-21, the focused discipline on optimising operating expenses, working capital and capital expenditure led to improved free cash flow generation of H 2,856 crores (FY 2019-20: H 1,955 crores) and net cash positive position of H 1,921 crores (FY 2019-20: Net debt H 807 crore); significantly strengthening the Companys balance sheet. In FY 2020-21, the Company prepaid USD 137 million term debt for InvaGen acquisition during the year. The expenditure on tangible assets for the year was H 630 crores (FY 2019-20: H 573 crores), spent on routine as well as growth investments largely in India and China, with modest additions in USA and SAGA. The capital expenditure for the year in intangible assets (net of sales) was H 189 crores (FY 2019-20: H 427 crores), largely spent on brands acquired and in-licensed in India.

Strong free cash flow generation enabled the Company to maintain healthy debt protection metrics with debt-to-equity ratio improving to 0.09 (FY 2019-20: 0.18), net cash-to-equity improving to 0.10 (FY 2019-20: net debt-to- equity 0.05) and the net debt-to-EBITDA improving to -0.45 (FY 2019-20: 0.25). Growth in earnings led to 400bps+ expansion in the return on net-worth to 14.1% (FY 2020-21: 10.1%).

FY 2020-21 financials: The Companys consolidated income from operations during FY 2020-21 grew by 12% to H 19,160 crores.

EBITDA for the year was H 4,303 crores or 22.5% of revenue. Profit after tax for the year stood at H 2,405 crores or 12.6% of revenue.

Total income from operations: Revenue growth in FY 2020-21 was driven by respiratory unlocking in the US, diversified growth across geographies and focused portfolio execution on COVID-19 products, while ensuring supply consistency to service demand across India, South Africa, Emerging Markets, Europe and North America operations. The Companys consolidated income from operations grew by 12% to H 19,160 crores (FY 2019-20: H 17,132 crores). Despite the pandemic, the Company demonstrated resilient operations across geographies by maintaining strategic inventory of critical raw materials, robust supply of essential medicines and prioritising critical launches in generics and consumer business.

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA): In FY 2020-21, the Company reported EBITDA of H 4,303 crores (FY 2019-20: H 3,230 crores), with an EBITDA margin of 22.5% to revenue (FY 201920: 18.9%). Cost re-imagination initiatives, higher share of digital engagements and lower on-ground activity led to cost savings, which drove the 350bps+ YoY expansion in operating profitability for FY 2020-21.

Employee expenses: Ciplas employee expenses for the year stood at H 3,252 crores, an increase of 7% over FY 2019-20. The increase was largely due to annual increments and performance-linked components.

Other expenses: In FY 2020-21, the other expenses which included R&D, quality, sales & marketing, regulatory, manufacturing, etc. stood at H 4,303 crores, declining by 12% over FY 2019-20. The other expenses accounted for 22.5% of the revenue (FY 2019-20: 28.6%).

The YoY decline was largely driven by cost optimisation initiatives and lower on-ground activity in the pandemic-imposed lockdown period during the year. The Company intends to preserve a good share of the structural improvements in FY 2021-22 and continue to invest in growth opportunities across businesses.

R&D investments5:

The Y-o-Y moderation in R&D as a % of revenue was on account of higher revenue and lower R&D spends led by completion of large- scale gAdvair trials in FY 2019-20 as well as lower clinical trials and other developmental activities in wake of the pandemic and impact of the lockdown in FY 2020-21. However, the absolute trajectory of the spends and product filings remains intact, with all priority assets progressing well and other portfolio development efforts remaining on course.

Depreciation and amortisation: During FY 2020-21, depreciation and amortisation expenses (including the impact of change in lease accounting) stood at H 1,068 crores (FY 2019-20: H 1,175 crores).

Finance costs: During FY 2020-21, finance expenses stood at H 161 crores (FY 2019-20: H 197 crores). The YoY decline was primarily due to prepayment of USD 137 million term debt for InvaGen acquisition during the year.

Income tax: The effective tax rate stood at 27% for FY 2020-21.

Profit after tax: The profit after tax (PAT) for the year was H 2,405 crores or 12.6% of revenue (FY 2019-20: 9.0%). Robust growth in operating profitability, lower depreciation and lower interest expenses on reducing debt drove PAT to a historic high in FY 2020-21.

Debt-Equity: Strong free cash-flow generation enabled the Company to maintain a healthy debt- to-equity ratio, improving it to 0.09 (FY 2019-20: 0.18). The Company prepaid USD 137 million term debt for InvaGen acquisition during the year. As of 31st March, 2021, the Companys long-term debt stands at USD 138 million towards the InvaGen acquisition and ZAR 720 million for operational requirements atCipla Medpro South Africa (Pty) Limited.

Interest Coverage Ratio: Reduced interest expenses on account of debt repayments and growth in operating profitability improved the interest coverage ratio to 26.8 in FY 2020-21 (FY 2019-20: 16.4)

Debtors turnover ratio: Prudent and timely collections improved the debtors turnover ratio to 5.6 in FY 2020-21 (FY 2019-20: 4.4).

Return on Net-worth: Growth in earnings drove the 400bps+ expansion in the return on net-worth to 14.1% (FY 2020-21: 10.1%).

No material changes and commitments have occurred after the close of the year till the date of this report, which may affect the financial position of the Company. Further, there have been no significant changes in other key financial ratios requiring disclosure and explanation as per the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Business performance One-India

Ciplas One-India business comprises of branded prescription drugs, trade generics and consumer health products. Keeping with our commitment to provide high quality medicines and consumer products to our patients in India, over the years Cipla has rapidly expanded the breadth and depth of the product portfolio. This was achieved through organic launches and brand acquisitions as well as by leveraging partnerships with large multi-national pharmaceutical companies for channeling innovative life-saving medications. Ciplas therapy shaping campaigns are targeted to improve medicine uptake and positively

impact the life of patients and the communities we engage with.

In 2020, Cipla contributed significantly to the global cause of combating COVID-19 and delivered on our promise of Caring for life.

The Company supported the Government and frontline workers across geographies and offered a comprehensive product portfolio for diagnosis and treatment under partnerships for treatment of moderate to severe patients, besides offering test kits for rapid and scalable testing and improved diagnosis.

Comprehensive portfolio offerings to combat COVID-19

Brand Molecule Therapy area
Ciplenza Favipiravir Mild to moderate symptoms
Cipremi Remdesivir Moderate to severe symptoms
ELIFast SARS CoV-2-IgG antibody detection ELISA Anti-body detection kit
CIPtest SARS CoV-2 IgG ELISA Rapid antigen test kit

In FY 2021-22, Cipla has further expanded its COVID-19 portfolio with novel formulations under partnership with global pharmaceutical companies and is working on the logistics to ensure their availability in the coming weeks and months.

Partner Molecule Therapy area
Merck & Co., Inc. Molnupiravir* Non-hospitalised patients with confirmed COVID-19
Roche Casirivimab and Imdevimab Mild to moderate COVID-19 in high-risk patients
Eli Lilly & Company Baricitinib Combination with Remdesivir for the treatment of COVID-19 in hospitalised adults

India: Branded prescription business

In FY 2020-21, the branded prescription business delivered market beating growth of 14% and scaled to H 6,030 crores.

The revenue growth was supported by the COVID-19 portfolio which offset the low-to- moderate growth in some of the core therapies due to subdued acute demand and lower patient footfalls in light of the pandemic restrictions. Cipla continued to maintain stable ranks and comfortable market shares across leading therapies with strong focus on field force productivity with prudent additions. In emerging therapies like dermatology, ophthalmology and oncology, Cipla outperformed the market and also increased market shares.

Therapy Market Rank Market Share Cipla Growth Market Growth
Overall 3 5.3% 7% 4%
Chronic 2 8.1% 12% 8%
Respiratory 1 24.6% 4% -8%
Cardiac 4 5.4% 10% 13%
Urology 1 14.8% 7% 4%

Source: IQVIA MAT March 2021

Ciplas solid marketing and distribution strengths in India enable broader access to transformative treatments for our partners. During the year, the business strengthened existing partnerships with MNCs as well as entered into new partnerships for innovative life-saving oncology and anti-diabetic medications. These collaborations represent Ciplas unwavering commitment to address the unmet needs of patients and ensure better medical outcomes through an enhanced portfolio of offerings in these therapeutic areas.

Partner Brand Molecule Type of Partnership Therapy area
RoChe Herclon Trastuzumab Marketing & distribution Oncology
Pharma Avastin Bevacizumab
Rituximab Rituximab
Boehringer Oboravo Empagliflozin Co- marketing Oral anti- diabetes
Ingelheim Oboravo Met Empagliflozin + Metformin
Tiptengio Empagliflozin + Linagliptin

Ciplas biggest patient awareness initiative, #BerokZindagi, was launched on digital platforms to provide seamless support to patients and healthcare professionals.

Over the past ten years, Cipla has played a pivotal role in creating awareness on the diagnosis and treatment of IPF amongst the medical fraternity. Continuing with our legacy of providing medical outcomes for rare diseases, Cipla launched generic Nintedanib for the treatment of IPF in India.

Outlook FY 2021-22

Cipla will continue to galvanise the fight against COVID-19 pandemic by ramping up portfolio supply to increase availability and maximise reach. In FY 2021-22, Cipla will continue to monitor growth in core therapies, maintain market-beating growth focus on partnerships in chronic portfolio, and further strengthen engagements with HCPs and patients by incubating and leveraging the digital ecosystem.

India Trade Generics Business

In FY 2020-21, the trade generics business continued to maintain its leadership position as Indias largest trade generics business serving patients in tier-3 and tier-4 towns, with a cumulative reach of ~15,000+ pin codes in India through a robust supply chain that includes ~5,500 stockists. The trade generics business caters to over 26 categories under acute and chronic therapies that include 150+ brands and 11+ dosage forms.

In-line with the One-India strategy to drive portfolio synergies, during the year three brands with higher consumerisation potential were transferred to Cipla Health Limited (CHL), Ciplas consumer health business. Over the past two years, six brands with high consumer appeal have been transferred. Adjusted for these transfers, the business delivered a revenue growth of 18% led by strong growth in flagship brands on healthy order flow throughout the year. In FY 2020-21, the business focus continued on establishing sustainable growth post distribution reconfiguration in FY 2019-20 with simplification of commercialisation, customer centricity, new business opportunities and capability building.

During the year, the business efforts were invested in strengthening Omnigel brands market position. This included strong onground execution, digital engagements reaching out to over two lac retailers and focused TVC campaigns. This ensured that the brand grew by 37% YoY and secured #1 position in the pain category. Under new initiatives, business launched new website "Cipla Generics" for awareness and provide patients with easy access to information. The Company also designed a CRM model with the objective to extend reach and further strengthen channel partnership.

Outlook FY 2021-22

Ciplas trade generics business operates in a dynamic regulatory environment with uncertainty governing rationalisation of trade margins and proliferation of national as well as regional competition. Over the next year, the trade generics business intends to redefine leadership by creating distinctiveness in the market through the following initiatives:

• Making big brands bigger, strengthening current portfolio position in the market

• Ensuring best-in-class customer experience with enhanced CRM initiative

• Enhancing product offerings by introducing newer categories like ophthalmology, while strengthening cardio-diabetic and wellness category

• Investing in digital initiatives to enhance connect with channel and customers

Consumer Business

In India, Ciplas consumer health business is housed under CHL. The franchise has a well-entrenched consumer reach of ~225k+ chemists, 40k+ groceries, 700+ modern trade outlets as well as a solid presence on nine leading e-commerce platforms to capitalise on the tailwinds in online retail. In FY 2020-21, the Companys anchor brands Nicotex and Cofsils continued to maintain strong market position in their respective categories and reported strong revenue growth, driven by high consumer recall.

Cipla launched CIPHANDS hand sanitiser during the onset of the pandemic and continued to build the portfolio into a complete hygiene product range comprising of sanitisers, surface disinfectants, sprays, antiseptic liquids, germ protection wipes, germ protection hand wash and germ protection soaps. This demonstrated the business ability to launch and scale-up brands in a short time span.

During the year, the Company also successfully transferred additional brands with high consumer potential in select categories to CHL from trade generics business. The brands Clocip, Naselin and Cipladine were transferred in FY 2020-21, taking the overall number of brands transferred to six, including Prolyte ORS and Maxirich, and Mamaxpert which were transferred in FY 2019-20. These brands have registered healthy traction post transition, led by focused execution on channel and consumer campaigns.

in-line with the One-India strategy, the Company has also announced the transfer of the consumer business undertaking to CHL. The consumer business undertaking includes brands with high consumerisation potential across five categories from branded prescription and trade generics businesses, with annual revenue of over H 225 crores.

Outlook FY 2021-22

From a long-term perspective, Cipla intends to build a formidable wellness franchise with profitable growth across anchor and transitioned brands to establish a deeper connect with consumers and patients. Cipla will focus on brand-building in organic brands, leveraging consumer potential from brands in trade generics and prescription, foraying into new categories, while exploring inorganic route in pursuit of our mission of

Improving Consumers Lives, Everyday".

North America

Despite being an unprecedented year fraught with challenges induced by the pandemic, the North America business reported revenues of USD 551 million in FY 2020-21 - at par with last year that included base of an IP-enabled opportunity in Cinacalcet. North America contributed 21% to the Companys total revenue in FY 2020-21.

Business-wise sales ramp-up (USD million)

On the back of new launches and focus on expansion of respiratory footprint, Ciplas Direct-to-Market portfolio delivered commendable performance in FY 2020-21, maintaining the Companys position among top ten TRx generic players in the US. This was a result of a well- designed strategy synergising on-shore and off-share manufacturing capabilities and optimally balancing capital allocation across organic and inorganic initiatives. The launch of limited competition complex generics also aided the Companys performance during the year. Synergies from the acquisition have helped the DTM segment grow from USD 231 million in FY 2017-18 to USD 390 million in FY 2020-21. Driven by focused efforts on portfolio expansion during the year, Ciplas institutional business under Exelan Pharmaceuticals scaled-up to over USD 100 million. With focused investments in complex generics and consistent efforts to increase market share, the Company continues to expand its footprint in the US.

Respiratory franchise in the US

Keeping with Ciplas pursuit to be the Lung Leaders of the world, the Company has time and again proven its unmatched ability to deliver complex respiratory products to the market. The launch of MDI Albuterol HFA in April 2020 is a testimony to Ciplas robust research and development capabilities in the inhalation segment. With Albuterol, Cipla has become the first Indian company to get an approval for a metered dose inhaler (MDI) in the US, demonstrating expertise in delivering drug-device based products. In addition, the Albuterol MDI is only the second ANDA for any MDI to be approved by the USFDA. Supported by

strong ramp-up in albuterol, the Companys respiratory portfolio has crossed USD 100 million in the current financial year.

Albuterol HFA market segment TRx Market Rank TRx Market Share
gProventil 1 87%
Generic market (AG +Gx) 3 16.5%
Total Market (Brand+Ag+Gx) 3 13.2%

Source: IQVIA weekly TRx ending 23rd April, 2021

As a custodian of human lungs, Cipla is committed to its vision of expanding our global respiratory franchise in the US on the back of strong respiratory drug-device developmental capabilities.

Currently, the Company is working towards developing respiratory products under various categories like ICS+LABA, LABA, LAMA and LAMA+LABA.

In Q1 FY 2020-21, Ciplas generic fluticasone propionate and salmeterol inhalation powder (gAdvair) was filed with the USFDA. The file on gAdvair is currently under active review by the USFDA.

Another milestone was added to the Companys achievements with filing of complex respiratory asset in Q1 FY 2020-21. Under nasal spray category, Cipla got approval from USFDA for two generic products: Sumatriptan Nasal Spray and Dihydroergotamine Mesylate capsule, which are targeted for migraine under the CNS category. These approvals have proven Ciplas capability in handling different dosage forms and complex drug-device combination products.

The Company continues to support patient demand for respiratory products with supplies of Budesonide, further supplemented by the launch of Albuterol inhaler in April 2020.

Unlocking of Respiratory & peptide injectable franchise in the US:

Formulation/ Brand Name Pre clinical Phase 1 Phase 2 Phase 3 Filed Approved Status
gAdvair
(Fluticasone
propionate FY 2020-21
+ Salmeterol
Xinafoate DPI)
Complex Filed Q1
Respiratory asset FY 2020-21
Partnered Filed in
inhalation asset FY 2020-21
Complex
inhalation asset 1 Development
Complex in progress
inhalation asset 2
Partnered
peptide
injectable Filed in H2 FY
Partnered 2020-21
peptide
injectable (NDA)

FY 2020-21: Pipeline Portfolio Update

During FY 2020-21, the Company continued its R&D investments for the US market, which has resulted in pipeline expansion to include multiple differentiated assets.

During the year, Cipla filed seven new ANDAs and received seven approvals.

As of 31st March 2021, as many as 62 of Ciplas ANDAs are under approval or are tentatively approved. This represents a strong pipeline for the US generics business, which will further drive growth in this geography.

South Africa, Sub-Saharan Africa and Cipla Global Access (SAGA)

In FY 2020-21, the SAGA region contributed 18% to overall revenue. In FY 2020-21, the region continued strong execution across businesses registering a growth of 7% on a YoY basis in USD terms. Cipla remains committed to providing access to world class medicines at affordable prices to patients in the African subcontinent. Over the years, Cipla has consistently strengthened its relationship with regulators, customers, partners and the larger community to create a long-term sustainable business.

Cipla is the 3rd largest pharmaceutical corporation in South Africa with strong presence in the private and tender businesses. Overall, the South Africa business grew at 10% in local currency terms with a strong growth of 11% in the private market and 7% in the tender market. In line with FY 2019-20, the private business contributed 68%, while the tender business contributed 32% to the overall South Africa business in FY 2020-21. Backed by strong launches and growth in base portfolio, the South Africa business surpassed ZAR 5 billion in FY 2020-21. Cipla launched 30 products across multiple categories and completed 116 dossier submissions during the year. This is likely to further accelerate South Africa business growth in the years to come.

Market conditions in South Africa in FY 202021 were challenging due to restrictions around COVID-19, which led to market stagnation. While Cipla continued to outperform the private market & OTC market in the first half of FY 2020-21, the overall growth was in line with the market in the second half of FY 2020-21. Cipla maintained overall market position in secondary terms.

Market Segment Market Rank Market Share Cipla Growth Market Growth
South Africa Private 3 7.0% -0.9% -4.0%
South Africa OTC 3 7.0% 1.2% -1.3%

Source: IQVIA MAT March 2021

From a therapeutic area (TA) perspective, Cipla outperformed the market in ARVs and Oncology therapies, while gaining market shares; growth in other therapies was consistent with the market in secondary terms. Cipla maintained leading positions in six therapeutic areas and retained the number 2 or 3 position in five other therapies out of a total 14 therapeutic areas offered in the South Africa private market.

Therapy Market Rank Market Share
ARVs 4 18.2%
Oncology 7 5.7%
Respiratory 3 12.2%
Cardiology 5 7.1%
CNS 4 10.4%
Alimentary tract & metabolism 5 4.9%
Systemic anti-infectives 4 7.8%
Source: IQVIA MAT March 2021

Top OTC brands in South Africa Private

Brand YoY Revenue* Growth (%) Therapy
Airmune 139% Vitamins
Actin 37% Anti-allergic
Asthavent 11% Respiratory
Acurate 18% Pain
Fexo 12% Anti-allergic

Note: *reported revenue growth in ZAR terms

Continuing the strategy on expansion of product portfolio with innovative life-saving medications, Cipla entered into a strategic partnership with Alvogen for four oncology products and Alvotech for five biosimilars in the immunology and oncology space. This partnership is expected to significantly enhance Ciplas presence in the oncology segment. Cipla also launched its first biosimilar Trastuzumab (Trastuzumab 440), the largest product for the treatment of HER2 positive breast cancer globally.

Cipla also supported the fight against COVID-19 pandemic by supplying Remdesivir to select geographies under the in-licensing agreement; the contribution to overall business was marginal.

Mirren

Acquired in 2018, Mirren continues to be a strategic asset for Cipla as a key driver for its wellness business, while promoting the South African governments policy for local manufacturing in the pharmaceutical industry. Mirren continues to enhance its product manufacturing basket through various technology transfers, including an immune portfolio to complement its existing cold and flu portfolio. Mirren successfully completed productivity improvements through the introduction of a 3-shift process and is committed to creating improved efficiencies, capacity upgrades and expansions.

BrandMed

In 2019, Cipla Medpro South Africa (Pty) Limited acquired a 30% stake in BrandMed, a company with a vision to achieve better patient outcomes for non-communicable diseases (NCDs) through digital monitoring of a patients healthcare journey. The COVID-19 pandemic has evidenced the importance of digital healthcare solutions, bringing BrandMed solutions into sharp focus. In FY 2020-21, the Company focused on developing a proof- of-concept by establishing a network of the marquee BrandMed SyntroP Centres of Excellence (COEs).

The strategic cross-collaboration between Cipla and BrandMed is focused on optimising BrandMed to drive increased commercial business acumen and accelerate its growth journey in FY 2021-22.

Cipla Global Access (CGA)

Since 2001, Ciplas pioneering efforts and long-standing partnerships with global funding organisations have been at the forefront of expanding access to affordable care for HIV/AIDS patients. In FY 2020-21, the CGA business delivered a stellar performance with a revenue growth of 38% on a YoY basis to USD 80 million, driven by strong growth in antimalarial portfolio.

Sub-Saharan Africa (SSA)

Ciplas remains committed to expanding our portfolio in strategic DTM markets of Kenya, Tanzania and Uganda, by developing synergies with the South African business to drive profitable growth. A joint venture, Cipla Quality Chemical Industries Limited (CQCIL), was established to support Ciplas aspiration of In Africa, For Africa. The CQCIL plant is a state-of-the-art manufacturing facility in Uganda with focus on antiretroviral (ARV), antimalarial (artemisinin-based combination therapy; ACT) and Hepatitis B medicines, and supplies to the Ugandan markets as well as exports to other African countries.

In FY 2020-21, the Sub-Saharan Africa business grew by 13% to USD 74 million. During the year, the business focused on generating savings through manufacturing efficiency, market expansion, building strong brands and improving collections across operating geographies. During the year, the business expanded its presence to new markets of Malawi and Nigeria. The business now caters to 10 markets in the SSA region. Moreover, the route to market was changed in Mauritius, Madagascar, Zambia and Angola. The business model was changed in Tanzania to improve future performance.

From a portfolio perspective, the business received WHO prequalification within three weeks for Tenofovir-Lamivudine-Dolutegravir (TLD) demonstrating strong collaboration with regulatory authorities for faster access to new first line ARVs fixed combinations. The Company also completed the tech transfer for TLD (South Africa), TLD(WHO), Tenofovir-Lamivudine- Emtricitabine 400 & Hydroxychloroquine (NMS) and Tenofovir-Lamivudine (Mono-Layer) for WHO & NMS. Product registrations were harmonised across regulatory authorities through ZAZIBONA (9), ECOWAS (15) & WHO-CRP (8) during the year. These portfolio developments will drive strong revenue traction in FY 2021-22 and beyond.

Outlook FY 2021-22

In FY 2021-22, Cipla will continue to focus on maintaining strong market position in private and OTC markets, enhance private market presence via organic launches and deepen footprint via partnerships with innovators. The SSA business has embarked on a new strategy targeting 5% market share across five key primary care therapeutic areas over the next five years. Furthermore, there are 14 new launches in the pipeline from CQCIL that will constitute a strong visibility for FY 2021-22.

Emerging Markets & Europe (EMEU)

Overall, the EMEU business delivered strong profitable growth and improved health metrics, driven by strong governance on collections.

In FY 2020-21, the Emerging market operations contributed 10% to the Companys overall revenue. The business grew by a solid 21% in FY 2020-21 to revenue of ~USD 250 million. The revenue growth was driven by a robust DTM & B2B performance, backed by seamless supply chain operations. This enabled Cipla to emerge as the largest Indian exporter to the emerging markets in FY 2020-21 as per IntelliMax Finished Formulation Export Data. Cipla continued to be the largest player in Sri Lanka, Morocco and Nepal; maintained top-3 position in other focus markets in volume as well as value terms, as per IQVIA MAT September 2020. Cipla also supported the fight against COVID-19 pandemic in these markets by supplying Remdesivir to select geographies under the in-licensing agreement.

In FY 2020-21, the European operations contributed 5% to the Companys overall revenue. The business grew by a solid 17% in FY 2020-21 to revenue of USD 133 million. The revenue growth was driven by strong in-market performance of flagship products like Dymista and FPSM in key DTMs. The Companys Fluticasone Propionate Salmeterol (FPSM) pMDI market share is 20.8% and Beclomethasone is 14% in UK in March 2021. The business continued to demonstrate launch and commercial excellence during the year. New launches contributed ~3% of overall EMEU revenue while recording a 75% YoY growth, driven by strong coordination between supply chain and distribution.

During the year, the EMEU business made 177 dossier filings and created a solid pipeline for FY 2021-22 and beyond. Cipla forayed into new markets with first-time filings and tender bids across Mexico, Saudi Arabia, Indonesia and Argentina. On the back of digital augmentation, significant progress was made to increase physician coverage through the launch of healthcare superstars, a knowledge sharing platform for physicians across 30 countries. To de-risk the geo-political volatility associated with operations in the emerging markets and to boost revenue growth, several localisation deals were entered into in middle-eastern countries.

Key launches in FY 2020-21 across Europe and Emerging Markets

Product Therapy Geography
Ambrisentan Cardiac Australia
Posaconazole Anti-fungal United Kingdom
Abiraterone Oncology Malaysia
FPSM DPI Ciphaler Respiratory Colombia
Lenalidomide CNS Colombia
Foracort Respiratory Morocco

Cipla continued to forge strong partnerships with MNCs to enrich portfolio depth and breadth across strategic geographies.

Partner Portfolio additions Markets
Novartis Innovative triplecombo inhaler Australia
Ferring Urology-Oncology portfolio Australia

On the biosimilar front, critical filings were done under partnerships with global pharmaceutical companies, which will translate into portfolio and geographic diversification over the medium to long term. Cipla entered into partnership with Alvotech for marketing and distribution of four patented biosimilars in the fast growing markets of Australia and New Zealand.

Generic Name Biologic Brand Name Therapy
Aflibercept Eylea Oncology
Ustekimumab Stelara Dermatology
Denosumab Prolia, Xgeva Osteoporosis
Golimumab Simponi Immunology

Ciplas growth plans in China continue to be on track with manpower additions and equipment being installed at the construction site during the year. A strong respiratory pipeline is under development for the market and the facility is nearly ready for inviting inspection for qualification purposes. Cipla also plans to enter two new front-end markets - Brazil and Spain - to serve unmet needs with its robust portfolio and on-ground capabilities.

Outlook FY 2021-22

In FY 2021-22, Cipla will continue to maintain supply consistency across key DTMs, track portfolio filings and execute new launches to drive growth and create a strong future pipeline for Emerging Markets and Europe.

Active Pharmaceutical Ingredients (API)

With an experience of over 50 years in manufacturing APIs, Cipla has produced more than 200 generics and complex APIs. Our APIs are supplied to 63 countries across the globe helping local pharmaceutical companies to serve the needs of their patients. The Company continues to be a preferred partner to many large generic pharmaceutical companies globally due to our prowess in niche molecules and our high-quality offerings. Ciplas dedicated 300+ strong team of scientists enable the Company to capably handle a wide range of chemistries and complex molecules. Cipla covers a vast array of therapies with over 1,280 Drug Master Files (DMFs) filed till date. Within FY 2020-21, Cipla made 31 DMF filings in various countries. The Company has a robust pipeline of over 75+ APIs across regulated markets in varying stages of development.

Cipla has four cGMP compliant sites, approved by the major international regulatory agencies, including the USFDA, EDQM (Europe), PMDA (Japan)

WHO, TGA (Australia), and KFDA (Korea).

These sites include dedicated facilities for oncology, hormones and corticosteroid APIs. Cipla offers a total API manufacturing capacity of over 1,000 MT, with competency in handling broader range of batch sizes and expertise in micronisation to meet required particle sizes for Respiratory APIs. The Company has three API R&D Centres, two pilot plants and two process safety screening labs. All facilities and Ciplas plants have wastewater treatment facilities that include ETP with Multi Effect Evaporators (MEE), Agitated Thin Film Dryer (ATFD), Vertical Thin Film Dryer (VTFD) and Reverse Osmosis (RO) facilities.

The API business reported revenue of USD 108 million, registering a growth of 2% in USD terms, by maintaining uninterrupted supplies to support customers with their critical launches, including ARV and respiratory products in the US.

In FY 2020-21, 43% of the revenue was contributed by Europe and Global Key Accounts (EU&GA), followed by 28% from Emerging Markets (EM), 22% from North America (NA) and balance from India. The key therapy segments that contributed to these were Respiratory (25%), Gastrointestinal (15%), Antiretroviral (10%) and Central Nervous System (CNS) (10%). Successful delivery of differentiated product mix, improved traction in seeding and lock-ins, and products launched with key accounts were the key drivers for the API business.

Cipla is exploring new partnerships with leading generic companies for our new products to expand our presence in markets such as Belarus, Japan, Korea and the Commonwealth of Independent States (CIS) countries. The Company aspires to be a preferred supplier to companies working on 505(b)(2) projects. Additionally, Cipla aims to support higher number of seeding and lock-ins that help in achieving sustainable growth, even as it expands the customer base across markets globally. The Company plans to enhance its API R&D and manufacturing capacities in therapeutic areas such as Respiratory, Gastrointestinal and Oncology, and conduct backward integration for manufacturing of Key Starting Material and critical API intermediates to have a tighter control on the supply chain.

The Company is focused on productivity and achieving cost optimisation through continuous process and yield improvements.

Outlook FY 2021-22

The API business will continue to work with a reimagined strategy to focus on its critical and high-demand APIs and to ensure uninterrupted supplies to key customers. With various customers shifting their dependency from China to India in wake of the COVID-19 disruptions, API business is expecting a growing trajectory in FY 2021-22. Cipla expects to continue growing in FY 2021-22, with a steady inflow of orders from customers across the globe.

FY 2021-22 Outlook: Developing re-imagined business models and investing for the future

The COVID-19 pandemic has significantly accelerated our business transformation and digital strategy to serve our stakeholders better in the new normal. In FY 2021-22, we will continue to focus on superior execution, core business growth across markets, productivity enhancement, continued cost discipline, prioritising critical launches and investments in value accretive opportunities to sustain the high-return trajectory amid a rapidly evolving post-pandemic environment.

Business Operations

• Maintaining an uninterrupted supply of COVID-19 and non-COVID-19 products

• De-risking manufacturing and superior internal coordination for maintaining optimum serviceability

• Strong cost-discipline and optimised spends, prudent management of working capital and liquidity

• Accelerating our digital transformation to capitalise on new growth opportunities across continents

One India

• Achieving market beating growth through core therapies and profitable consumer wellness portfolio

• Leveraging advanced analytics and digital technologies for engagement with physicians, patients and channel partners

North America

• Continued ramp-up in respiratory franchise to expand global lung leadership; track respiratory filings

• Maximising value opportunity in complex generics; prioritising critical launches in complex engine

• Evaluating partnership options for specialty assets

South Africa

• Continuing the growth momentum to outperform private market and sustain tender business traction

• Maintaining dominant position in the OTC space and augmenting franchises across categories

Europe & Emerging Markets

• Expand respiratory portfolio footprint across markets

• Focused on DTMs and new frontier markets (China & Brazil) for organic growth in Europe and Emerging Markets

• Expanding biosimilar partnerships in key markets

Talent Management

• Buildinging a sustainable talent pipeline for the Companys future plans over the next three to five years

Quality & compliance

• Comprehensively address observations at Goa plant

• Ensure operational excellence with the highest level of compliance and control at our facilities globally

• Embrace best-in-class globally benchmarked ESG practices

Potential developments and risks to the outlook

The Company continues to operate in a challenging and dynamic environment that is still rife with the uncertainties of the COVID-19 pandemic. The nature of the pharmaceutical business also exposes the Company to various competitive and regulatory risks (also refer ERM section on page 52 of this report) in the near term:

• Increasing pricing control in India and evolving channel landscape led by disruptive business models can potentially impact the branded generics business in India.

• Dependency on China for raw material and key starting material could impact the ability to maintain continuous supply in the event of disruptions.

• Consolidated customer base, high competition and regulatory requirements could impact product approvals, while continuing pricing pressure in the US.

• Increasing regulatory scrutiny could lead to delays in product approvals for the US markets, besides the potential delay in resolution of observations received for the Goa plant.

• Geo-political uncertainties in Middle Eastern markets could impact business growth opportunities in the emerging markets region.

• Shifts in drug usage and healthcare delivery in developed and developing markets on account of COVID-19 and associated supply chain disruptions could have a negative impact.

Human resource management and industrial relations

At Cipla, we are totally committed to providing a safe, secure and healthy work environment to our employees. We continuously strive to exceed the industry as well as our own internal benchmarks in workforce productivity and performance. The professional objectives for employees and teams across levels are directly linked with the organisations objectives and philosophy.

This conveys and provides a sense of purpose and direction to all employees. The key areas for driving HR initiatives at Cipla include a strong emphasis on building a culture of inclusion and respect, ensuring a safe work environment, focusing on building capabilities & careers, and protecting human rights.

We are committed to nurturing a culture of Inclusion & Diversity, which stems naturally from our inherent purpose of caring for everyone in our communities. Ciplas initiatives in diversity and inclusion are covered in pages 86 and 93 of the human capital section.

The commitment to gender diversity reflects in nearly 30% representation of women on the Companys Board and more than, one-third of the Management Council comprises of women leaders.

The Company continues to support capabilities of differently-abled employees. Cipla ensures strict adherence to its internal codes, and has a clearly defined zero-tolerance policy towards discrimination of any kind.

Ciplas structured talent management framework leads to cohesive talent actions across all levels, and ably supports the process of talent acquisition, onboarding, learning and development, performance management and succession planning. The Companys culture is centered on the five core pillars of Openness & Transparency, Accountability & Ownership, Result & Impact Orientation, Managing with Respect, and Engaging with Empathy. Periodic, regular performance conversations and real-time feedback form the backbone of the performance management process. Personnel capability building sessions are conducted regularly across levels, engaging talent across the board - right from trainees to senior leadership.

The Occupational Health and Safety (OHS) system at our manufacturing facilities has enabled Ciplas workers and employees to operate in a safe, audited and certified working environment. The technology-enabled incident tracking system, MySetu, acts as an effective interface for employees and workers in manufacturing facilities, while improving the awareness and reporting of workplace mishaps. This has helped in identification of associated risks and their timely mitigation. For more details on Ciplas approach towards Human Resources, refer to our Human Capital section on page 86.

Adherence to accounting standards

The Company continues to adhere to standard accounting policies under the Indian Accounting Standards (Ind AS), applicable since 1st April, 2016. IND AS 116 pertaining to Leases was the sole addition under Section 133 of the Companies Act, 2013. These policies are to be read along with the relevant applicable rules and accounting principles. Changes in policies, if any, are approved by the Audit Committee.

Threats, risks and concerns

The Cipla Enterprise Risk Management (ERM) programme covers the key risks across all business areas. The Investment & Risk Management Committee of the Board reviews and discusses the risk updates on a quarterly basis.

During the reporting period, the COVID-19 pandemic continued to pose challenges to business as usual, and aggravated existing risks, thereby mandating rapid risk responses from business teams. Please refer to Page 52 for risk management framework and key risks including the mitigation measures.

The Company effectively laid down risk mitigation measures to:

• Address business continuity challenges

• Overcome growth hurdles

• Tackle geopolitical developments

• Secure enterprise-wide cybersecurity and

• Adhere with applicable laws & regulations

During the reporting period, the Company worked towards our purpose of Caring for Life by expanding COVID-19 therapy and diagnostics portfolio, and striving to maintain seamless supply of critical life-saving medicines.

Internal control and its adequacy

Cipla has a robust and reliable system of internal controls commensurate with the nature of our business, and the scale and complexity of our operations. The Company has adopted policies and procedures covering all financial, operating and compliance functions. These controls have been designed to provide a reasonable assurance over:

• Effectiveness and efficiency of operations

• Prevention and detection of frauds and errors

• Safeguarding of assets from unauthorised use or losses

• Compliance with applicable laws and regulations

• Accuracy and completeness of the accounting records

• Timely preparation of reliable financial information

The current system of Internal Financial Controls (IFC) is aligned with the requirement of the Companies Act 2013, and is in line with globally accepted risk-based framework as issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

The Company has an Internal Audit function which functionally reports to the Chairperson of the Audit Committee, thereby maintaining its objectivity. The IA function is supported by a dedicated internal audit team and resources from external audit firms.

The annual internal audit plan is carved out from a comprehensively defined Audit Universe that encompasses all businesses, functions, risks, compliance requirements and maturity of

controls. The internal audit plan is approved by the Audit Committee at the beginning of every year. Each quarter, the Audit Committee of the Board is presented with key control issues and the actions taken on issues highlighted in the previous reports.

The Audit Committee deliberates with the management, considers the systems as laid down and meets the internal auditors and statutory auditor to ascertain their views on the internal control framework. The Company recognises the fact that any internal control framework would have some inherent limitations and hence has inculcated a process of periodic audits and reviews to ensure that such systems and controls are updated at regular intervals.