mankind pharma ltd share price Management discussions

You should read the following discussion in conjunction with the Restated Consolidated Summary Statements included herein as of and for the Financial Years ended March 31, 2020, 2021 and 2022, including the related notes, schedules and annexures. The Restated Consolidated Summary Statements have been derived from our audited financial statements as at and for the years ended March 31, 2022, March 31, 2021 and March 31, 2020 prepared in accordance with Ind AS and restated by our Company in accordance with the requirements of Section 26 of Part I of Chapter III of the Companies Act, 2013, relevant provisions of the SEBI ICDR Regulations, and the Guidance Note on Reports on Company Prospectuses (Revised 2019) issued by the ICAI. Ind AS differs in certain material respects from IFRS and US GAAP. See

"Risk Factors External Risk Factors Risks Related to India Significant differences exist between Ind AS used to prepare our financial information and other accounting principles, such as US GAAP and

IFRS, which may affect investors assessments of our Companys financial condition." on page 116.

Our Financial Year commences on April 1 and ends on March 31 of the subsequent year, and references to a particular Financial Year are to the 12 months ended March 31 of that year. Unless otherwise stated, or the context otherwise requires, the financial information used in this section is derived from the "Restated Consolidated Summary Statements" beginning on page 294. We have also included other key performance indicators in this Draft Red Herring Prospectus which may not be derived from the Restated Consolidated Summary Statements. The manner in which such key performance indicators are calculated and presented, and the assumptions and estimates used in such calculations, may vary from that used by other companies in India and other jurisdictions. Investors are accordingly cautioned against placing undue reliance on such information in making an investment decision, and should consult their own advisors and evaluate such information in the context of the Restated Consolidated Summary Statements and other information relating to our business and operations included in this Draft Red Herring Prospectus.

Unless otherwise indicated, the industry-related information contained in this Draft Red Herring Prospectus is derived from

(i) the report titled "Industry Overview" dated September 12, 2022 (the "IQVIA Report") which has been commissioned and paid for by our Company for an agreed fee for the purposes of confirming our understanding of the industry exclusively in connection with the Offer; and (ii) the IQVIA dataset dated September 2022 (the "IQVIA Dataset") prepared for and provided to our Company by IQVIA for usage in this Draft Red Herring Prospectus. We engaged IQVIA in connection with the preparation of the IQVIA Report and the IQVIA Dataset on June 13, 2022 and May 31, 2022, respectively. The IQVIA Report and the IQVIA Dataset include information derived from market research information provided by IQVIA and its affiliated companies. IQVIA market research information is proprietary to IQVIA and available on a confidential basis. IQVIA market research information reflects estimates of marketplace activity and should be treated accordingly.

See "Risk Factors Internal Risk Factors Risks Related to Our Business Industry-related information included in this Draft Red Herring Prospectus has been derived from the IQVIA Report, which has been exclusively commissioned and paid for by our Company solely for the purposes of the Offer. This Draft Red Herring Prospectus also includes industry-related information derived from the IQVIA Dataset. The IQVIA Report and the IQVIA Dataset are subject to various limitations and are based upon certain assumptions that are subjective in nature." and "Industry Overview" on pages 87 and 167, respectively.

This discussion contains forward-looking statements that involve risks and uncertainties and reflects our current view with respect to future events and financial performance. Actual results may differ from those anticipated in these forward-looking statements as a result of factors such as those set forth under "Forward-looking Statements" and "Risk Factors" on pages 22 and 75, respectively.

Overview

We are Indias fourth largest pharmaceutical company in terms of Domestic Sales and second largest in terms of sales volume for the Financial Year 2022 (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). We are engaged in developing, manufacturing and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products. We are focused on the domestic market, as a result of which our revenue from operations in India contributed to 97.60% of our total revenue from operations for the Financial Year 2022, which was one of the highest among Peers Identified by IQVIA (Source: IQVIA Report). We have primarily grown organically and are the youngest company among the five largest pharmaceutical companies in India, in terms of Domestic Sales in the Financial Year 2022 (Source: IQVIA Dataset, Annual filings / company websites). We operate at the intersection of the Indian pharmaceutical formulations and consumer healthcare sectors with the aim of providing quality products at affordable prices, and have an established track record of building and scaling brands in-house. We have created 36 brands in our pharmaceutical business that have each achieved over 500.00 million in Domestic Sales in the Financial Year 2022 (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). We have one of the largest distribution networks of medical representatives in the IPM and over 80% of doctors in India prescribed our formulations during the Financial Year 2022 (Source: IQVIA Dataset, IQVIA Medical Audit MAT March 2022 for India), which has assisted us in establishing our brands in India. Our brands have enabled us to consistently generate the highest share of drug prescriptions in the IPM over the last five years (Source: IQVIA Dataset, IQVIA Medical Audit MAT Mar22). Further, in our Covered Markets, we were ranked second by market share for the Financial Year 2022 (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)).

We have experienced sustained growth and have consistently outperformed the growth of the IPM. Between the Financial Years 2020 and 2022, our Domestic Sales grew at a CAGR of approximately 16% from approximately 60,647 million to approximately 82,198 million, which is approximately 1.5 times that of the IPM, which grew at a CAGR of approximately 11% from approximately 1,503 billion to approximately 1,855 billion over the same period (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). Between the Financial Years 2020 and 2022, our Domestic Sales had the fastest growth (at a CAGR of approximately 16%) among the 10 largest corporates in the IPM by Domestic Sales (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). During the same period, the average growth for the 10 largest corporates in the IPM (excluding our Company) by Domestic Sales was approximately 11%, and the average growth for Peers Identified by IQVIA was approximately 11% (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). Our Domestic Sales ranking in the IPM improved from 8th in the Financial Year 2012 to 4th in the Financial Year 2022, and our domestic market share in the IPM increased from approximately 3.3% to approximately 4.4% over the same period (Source: IQVIA Dataset, IQVIA TSA MAT March 2014 Dataset for India (For FY12), IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). Between the Financial Years 2020 and 2022, our market share in terms of Domestic Sales in the IPM increased by 0.4% from 4.0% to 4.4%, which represents the fastest growth in market share among the 10 largest corporates in the IPM by Domestic Sales (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). During the same period, the average market share of the 10 largest corporates in IPM (excluding our Company) by Domestic Sales decreased by 0.01% whereas the average market share of Peers Identified by IQVIA decreased by 0.04% (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). Our consistent growth has been backed by our capital efficiency, and we had RoCE of 35.86%, 30.41% and 25.50% for the Financial Years 2020, 2021 and 2022, respectively.

We are present in several acute and chronic therapeutic areas in India, including anti-infectives, cardiovascular, gastrointestinal, anti-diabetic, neuro/CNS, vitamins/minerals/nutrients and respiratory. Our Covered Market presence in the IPM has increased from approximately 62% to approximately 64% between the Financial Years 2020 and 2022 (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). We have achieved this through our focus on increasing penetration in the chronic therapeutic areas and, in the past three Financial Years, we have launched new divisions across several chronic therapeutic areas including anti-diabetic, cardiovascular, neuro/CNS and respiratory. Following an increased focus on chronic therapeutic areas, Domestic Sales from our chronic therapeutic areas grew at a CAGR of approximately 18% between the Financial Years 2020 and 2022, outperforming the IPMs chronic therapeutic areas CAGR of approximately 11% over the same period, by approximately 1.7 times (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). Our Domestic Sales from chronic therapeutic areas as a proportion of our total Domestic Sales increased from approximately 28% in the Financial Year 2018 to approximately 32% in the Financial Year 2020, and further to approximately 33% in the Financial Year 2022 (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). We strategically launch multiple brands within the same therapeutic area and occasionally for the same molecule. We do this in order to cater to different kinds of patients and doctors based upon geographies and channels, which has contributed to our wide coverage and leading presence in several of our therapeutic areas. For details on our market share and ranking in certain of our key therapeutic areas, see the table under "Our Business Competitive Strengths Diversified portfolio with market leading rankings across key therapeutic areas" on page 203.

We entered the consumer healthcare industry in 2007 and have since established several differentiated brands in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin and mineral supplements and anti-acne preparations categories. Our total Covered Market for our consumer healthcare business amounted to 203.60 billion for the Financial Year 2022 (Source: IQVIA Report). We are the category leaders in (i) the male condom category, where our Manforce brand had Domestic Sales of approximately 4,511 million (representing a market share of approximately 30.2%), (ii) the pregnancy detection kit category, where our Prega News brand had Domestic Sales of approximately 1,529 million (representing a market share of approximately 80.1%), and (iii) the emergency contraceptives category, where our Unwanted-72 brand had Domestic Sales of approximately 904 million (representing a market share of approximately 59.2%), for the Financial Year 2022 (Source: IQVIA Dataset, IQVIA MAT March 2022 OTC Audits for India (For Condoms, Acne Preparations, Antacids); IQVIA TSA MAT March 2022 Dataset for India, IQVIA TSA MAT March 2020 Dataset for India (For VMS, Pregnancy Tests, Emergency Contraceptives)). Both of our Manforce and Prega News brands have grown faster than their respective product categories in the industry in terms of Domestic Sales between the Financial Years 2020 and 2022 (Source: IQVIA Dataset, IQVIA MAT March 2022 OTC Audits for India (For Condoms, Acne Preparations, Antacids); IQVIA TSA MAT March 2022 Dataset for India, IQVIA TSA MAT March 2020 Dataset for India (For VMS, Pregnancy Tests, Emergency Contraceptives)). This growth has been fueled by our product innovation, focused marketing campaigns and strategic selection of distribution channels, which have enabled us to build customer connect.

We have made efforts to establish "Mankind" as a well-recognized brand in India. We have a demonstrated track record of creating brands with Domestic Sales of over 1.00 billion, and had the third highest number of such brands for any company in the IPM as of March 31, 2022 (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). In terms of Domestic Sales in the Financial Year 2022, 18 brands out of our 20 highest selling brands are ranked among the three highest selling brands in their respective molecule groups and 18 of our brands are among the 300 highest selling brands of the IPM (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). In the Financial Year 2022, 18 of our brands had annual Domestic Sales of more than 1.00 billion, compared to approximately 14 brands on average among the 10 largest corporates in the IPM (excluding our Company) by Domestic Sales and approximately 12 brands on average among Peers Identified by IQVIA (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)). During the Financial Year 2022, we had 9 "brand families" (i.e., an aggregate of individual brand extension) with Domestic Sales exceeding 2.00 billion, 11 brand families with Domestic Sales between 1.00 billion and

2.00 billion, and 16 brand families with Domestic Sales between 500.00 million and 1.00 billion (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22)).

We have a pan-India marketing presence, with a field force of 11,196 medical representatives and 3,195 field managers, as of March 31, 2022. We have also established a significant distribution network in India and, during the Financial Year 2022, we sold our products to over 11,000 stockists and engaged with 75 C&F agents. As a result, we have an established presence in the IPM with pan-India coverage. During the Financial Year 2022, our Domestic Sales in the North India, South India, East India and West India regions amounted to approximately

28,733 million, 19,070 million, 15,659 million and 18,737 million, respectively, contributing to approximately 35%, 23%, 19% and 23%, respectively, of our total Domestic Sales (Source: IQVIA Dataset, IQVIA Townclass Audit MAT March 2022 Dataset for India (For FY20-22)). We have a large share of Domestic Sales in Class II-IV cities and rural markets, and our Domestic Sales from Class II-IV cities and rural markets contributed to approximately 47% of our total Domestic Sales in the Financial Year 2022 (Source: IQVIA Dataset, IQVIA Townclass Audit MAT March 2022 Dataset for India (For FY20-22)), higher than approximately 37% recorded for the IPM, indicating our established presence across high-growth markets in India (Source: IQVIA Report). Between the Financial Years 2020 and 2022, the IPMs Domestic Sales in Class II-IV cities and rural markets grew at a CAGR of 13%, compared to a CAGR of 10% in metro and Class I cities over the same period (Source: IQVIA Dataset, IQVIA Townclass Audit MAT March 2022 Dataset for India (For FY20-22)).

We operate 23 manufacturing facilities across India and had 2,181 manufacturing personnel as of March 31, 2022. Our formulations manufacturing facilities have a total installed capacity of 40.77 billion units across a wide range of dosage forms including tablets, capsules, syrups, vials, ampoules, blow fill seal, soft and hard gels, eye drops, creams, contraceptives and other over-the-counter products, as of March 31, 2022. Several of our facilities have obtained approvals or certifications from, and are subject to inspections and audits by, a range of regulatory bodies including the CDSCO and the USFDA. Additionally, certain of our facilities have obtained certificates under the WHO and PIC/S good manufacturing practices and guidelines, among others. Our focus on process excellence and improvement has earned us awards from organizations such as Frost & Sullivan (India Manufacturing Excellence Awards), International Research Institute for Manufacturing (National Award for Manufacturing Competitiveness), Institute of Directors (Golden Peacock Occupational Health and Safety Award 2020 at the Golden Peacock Awards), Confederation of Indian Industry, and Quality Circle Forum of India, among others. We have established an independent quality assurance function, comprising 805 personnel as of March 31, 2022.

Through our R&D capabilities, we have developed a portfolio of differentiated products across several therapeutic areas. As of March 31, 2022, our Company had a team of over 600 scientists and a dedicated in-house R&D center with three units located in IMT Manesar, Gurugram, Haryana. One unit of this R&D center is recognized by the DSIR, and one unit is in compliance with WHO GMP and has been inspected by the USFDA. Our R&D operations comprise several divisions including for drug discovery, generic APIs, formulations and biotechnology, and are also supported by dedicated intellectual property, global regulatory compliance, clinical research and biopharmaceutical teams. As of March 31, 2022, we were the second pharmaceutical company to launch the synthetic hormonal API, "Dydrogesterone", in India (Source: IQVIA Dataset, IQVIA TSA MAT March 2022 Dataset for India (For FY20-22), IQVIA TSA MAT March 2020 Dataset for India (For FY18-19)). Further, on July 29, 2022, we had filed one INDA for a novel G protein-coupled receptor target for the treatment of type 2 diabetics and obesity, GPR119, an NCE anti-diabetic molecule, which is in phase I clinical trials. We benefit from the industry experience and business acumen of our individual Promoters, and are driven by the three core values of quality, affordability and accessibility. Our professional and experienced management team has been critical in building our brands, growing our operations and maintaining capital efficiency despite our emphasis on affordable product offerings. We have benefitted from the support and experience of private equity investors, which include affiliates of Capital International Group and ChrysCapital. We strive to maintain corporate governance standards. We are also focused on sustainability in our operations as well as on the health and safety of our workforce, and have undertaken initiatives relating to optimizing energy usage and minimizing dependence on conventional sources of energy to reduce our carbon footprint.

The following table sets forth certain of our key financial and operational metrics as of and for the years indicated:

	As of and for the Financial Year ended March 31,
	2020	2021	2022
	( in millions, except percentages and the number of days)
Revenue from operations	58,652.34	62,144.31	77, 815.55
Revenue from operations within India as a percentage of revenue from operations…….	98.70%	97.01%	97.60%
Total assets	50,732.85	63,726.32	91,477.40
Restated profit before tax	14,377.35	16,916.11	19,745.99
Restated profit for the year	10,561.48	12,930.34	14,529.56
Total equity	36,715.70	48,628.89	63,163.08
PAT margin(1)	18.01%	20.81%	18.67%
EBITDA(2)	14,483.46	16,597.80	20,038.00
EBITDA margin(2)	24.69%	26.71%	25.75%
RoCE(3)	35.86%	30.41%	25.50%
RoE(4)	31.75%	30.30%	25.99%
Net working capital days(5)	34.12	39.72	48.53

Notes:

(1) "PAT margin" means profit after tax margin, which represents restated profit for the year as a percentage of revenue from operations for the relevant year. (2) "EBITDA" and "EBITDA margin" are Non-GAAP financial measures. EBITDA refers to our restated profit for the year, as adjusted to exclude (i) other income, (ii) depreciation and amortization expenses, (iii) finance costs and (iv) total tax expense. EBITDA Margin refers to the percentage margin derived by dividing EBITDA by revenue from operations. For information on how EBITDA and EBITDA margin are calculated and reconciliations to our most directly comparable GAAP measures, see "Other Financial Information Reconciliation of Non-GAAP financial measures". (3) "RoCE" means return on capital employed, which represents EBIT (Earnings before Interest and Tax) during the relevant year as a percentage of capital employed. Capital employed is the total of all types of capital, other equity, total borrowings, total lease liabilities and deferred tax liabilities (net) less deferred tax assets (net) as of the end of the relevant year. For information on how RoCE is calculated and a reconciliation to our most directly comparable

GAAP financial measures, see "Other Financial Information Reconciliation of Non-GAAP financial measures". (4) "RoE" means return on equity, which represents restated profit for the year divided by average total equity. (5) "Net working capital days" represents the average of working capital divided by revenue from operations for the relevant year multiplied by 365 days. Working capital is the sum of inventories, trade receivables, loans (current), other financial assets (current) and other current assets, less the sum of trade payables, other financial liabilities (current), provisions (current) and other current liabilities as of the end of the relevant year.

Significant Factors Affecting our Results of Operations

Our results of operations and financial condition are affected by a number of important factors including:

Product portfolio and product mix

We derive almost all our revenue from operations from the Indian market through our pharmaceuticals and consumer healthcare businesses. In our domestic pharmaceuticals business, our product portfolio comprises a broad range of formulations across various acute and chronic therapeutic areas including anti-infectives, cardiovascular, gastrointestinal, anti-diabetic, neuro/CNS, vitamins/minerals/nutrients and respiratory. In our consumer healthcare business, which we began in 2007, we have established several differentiated brands in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin and mineral supplements and anti-acne preparations categories. We leverage our brand and leadership positions in our key therapeutic areas to launch related products, thereby capturing a wider molecule coverage. A broad portfolio of products not only helps increase revenue from operations but also reduces dependency on a single product. We have also benefitted from synergies in brand awareness as well as marketing and distribution and optimized the use of resources that would otherwise be required in the launch of entirely new products. For example, in the anti-diabetic therapeutic area, we were able to leverage the market position of our SGLT-R brand, a Remogliflozin tablet which we launched in 2019, to launch our SGLT-RV brand, a Vildagliptin tablet which we launched in 2021, and our SGLT-D brand, a Dapagliflozin tablet which we launched in 2022.

In our domestic pharmaceuticals business, we have been increasing our focus on chronic therapeutic areas, which we believe are therapeutic areas with higher growth potential and stickiness in India. In the past three Financial Years, we have expanded our sales channels by introducing new divisions (including through new product launches and the expansion of our field force to target more doctors and increase our geographic reach) across several chronic therapeutic areas including anti-diabetic, cardiovascular, neuro/CNS and respiratory. We intend to continue to strengthen our position in the IPM and gain market share by expanding our product portfolio to increase sales, with a focus on chronic therapeutic areas. In particular, we plan to grow our market share in the following therapeutic areas: (i) anti-diabetic, where we plan to foray into SGLT2 inhibitors and new gliptin drugs, (ii) cardiovascular, where we plan to launch new formulations for the treatment of heart failure, (iii) neuro/CNS, where we will focus on introducing anti-epileptics, anti-depressants and anxiolytics, (iv) respiratory, where our prime focus will be inhalers, (v) critical care, where we plan to launch new anti-infectives, (vi) ophthalmology, where we will be introducing biologicals for anti-VEGF therapy (to slow down the growth of blood vessels in the eye) and new molecules for glaucoma treatment, and (vii) gynaecology, where we plan to focus on both male and female infertility care. The chronic segment in the IPM has grown at a relatively faster rate of approximately 12% CAGR compared to the overall IPM (approximately 11% CAGR) between the Financial Years 2018 and 2022 (Source: IQVIA Report), on account of an increase in prevalence and treatment of chronic lifestyle diseases (Source: IQVIA Report). The prevalence of cardiovascular diseases in India has increased from approximately 54 million cases in 2011 to approximately 77 million cases in 2021, and is expected to increase to approximately 91 million cases by 2030 (Source: IQVIA Report). Similarly, prevalence of diabetes has increased from approximately 53 million cases in 2011 to approximately 93 million cases in 2021, and is expected to increase to approximately 134 million cases by 2030. Further, patients of chronic therapeutic areas have a higher lifetime value (Source: IQVIA Report).

We also plan to continue to pursue strategic acquisitions of brands and companies across key markets as well as explore in-licensing and co-development opportunities with other companies for our focus therapeutic areas. We expect that this will deepen our presence in our existing markets and facilitate our entry into new markets. Toward this, we completed the acquisition of one dermatology brand (Daffy) and one respiratory brand

(Combihale) from Dr. Reddys Laboratories in February 2022, which we expect to further strengthen our presence in these therapeutic areas. Further, in February 2022, we entered into an asset purchase agreement with Panacea Biotec Pharma Limited and Panacea Biotec Limited to acquire their pharmaceutical formulations brands in India and Nepal, which we expect will enable us to explore new super-specialty therapeutic areas, such as transplant and oncology, and further drive growth.

In our consumer healthcare business, certain of our key brands have grown faster than their respective product categories in the industry in terms of Domestic Sales. For example, Domestic Sales of our Manforce condoms and Prega News products have each outpaced the growth of their respective segments in the industry (Source: IQVIA Dataset, IQVIA MAT March 2022 OTC Audits for India (For Condoms, Acne Preparations, Antacids); IQVIA TSA MAT March 2022 Dataset for India, IQVIA TSA MAT March 2020 Dataset for India (For VMS, Pregnancy Tests, Emergency Contraceptives)). We plan to further grow our consumer healthcare business by leveraging our existing brand equity to launch brand extensions. For instance, we recently launched "PregaNews Advance", an advanced version of our Prega News detection kit which aims to improve user convenience as the urine stream can be directed straight onto the device (rather than being collected in a container first). We also plan to launch a new pre-conception and pre-natal care range of products as brand extensions under our existing Prega News brand.

We rely on our diverse product portfolio to continue to drive our results of operations. Further, we expect that certain new products or therapeutic areas may in the future account for significant portions of our revenue from operations. However, such growth requires managing complexities across all aspects of our business, including those associated with increased headcount, expansion of manufacturing and R&D facilities, execution of new product lines, integration of acquisitions and implementations of appropriate systems and controls. The success in the growth of our product portfolio and the implementation of a calibrated product mix will affect our results of operations and cash flows.

Marketing initiatives and pan-India presence

A key growth driver for the increase in our revenue from operations has been the volume growth of our pharmaceutical and consumer healthcare products in India. This growth has been largely led by our brand building efforts and focused marketing campaigns, coupled with the efforts of our pan-India sales, marketing and distribution infrastructure. For the Financial Years 2020, 2021 and 2022, we incurred advertising and sales promotion expenses of 2,553.27 million, 3,857.48 million and 4,515.67 million, respectively, representing 5.61%, 8.20% and 7.50% of our total expenses for such years, respectively.

Our sales and marketing focus is on developing and growing our engagement with medical practitioners within our various therapeutic areas. Marketing activities in India include participating in various pharmaceutical and medical conferences and exhibitions through promotional stalls, and engaging with retailers through retail summits. We actively engage with key opinion leaders in the healthcare industry through round table discussions and seminars on existing treatment gaps. We have also selected and onboarded both national and regional brand ambassadors for the marketing of our consumer healthcare products. For example, we have undertaken brand specific campaigns such as "#PreganewsMeansGoodNews" and "Good News to Motherhood" for our Prega News brand, "Ultrafeel" for our Manforce condom brand, and "365 Days of Improved Energy" for our Health

Ok tablets. In addition, we have developed digital platforms to improve doctor engagement, such as our DrOnA Health, a virtual-consultation platform that enables doctor-patient interaction across various technology channels, and Docflix, an OTT platform that provides doctors with reliable, authentic and engaging content on various medical fields. We expect that these digital platforms will enable us to maintain consistent interactions and facilitate strong relationships with doctors and other healthcare providers, growing their familiarity and loyalty to our brands.

As of March 31, 2022, we had a sales and marketing team of 426 personnel in India Further, we had one of the largest distribution networks in the IPM with 11,196 medical representatives and 3,195 field managers, as of March 31, 2022, and over 80% of doctors in India prescribed our formulations during the Financial Year 2022 (Source: IQVIA Medical Audit MAT Mar 2022). Our medical representatives frequently visit prescribers across medical specialties to market our product portfolio and also visit pharmacies and distributors to ensure that our brands are adequately stocked. Our field force is complemented with our distribution network across India and, during the Financial Year 2022, we sold our products to over 11,000 stockists and engaged with 75 C&F agents. During the Financial Year 2022, our sales in the North India, South India, East India and West India regions contributed to approximately 35%, 23%, 19% and 23%, respectively, of our total Domestic Sales (Source: IQVIA

Analysis Manager, IQVIA TSA MAT Mar22).

Further, we have entered into in-licensing agreements with other pharmaceutical companies to launch differentiated molecules with growth potential in the domestic market, including in the anti-diabetic and cardiovascular therapeutic areas. Toward this, we have obtained in-licensing rights for the distribution of (i) the Remogliflozin Etabonate tablet (SGLT-R), a novel SGLT2 inhibitor for the treatment of type 2 diabetes, from Glenmark Pharmaceuticals Limited, and (ii) the Sacubitril/Valsartan tablet (Neptaz), a novel neprilysin inhibitor used to treat chronic heart failure, from Novartis Healthcare Private Limited.

Our brands are well recognized in their respective therapeutic areas, and 18 of our brands were among the 300 highest selling brands in the IPM in terms of Domestic Sales during the Financial Year 2022 (Source: IQVIA TSA MAT Mar22). We aim to continue to invest in our marketing initiatives and distribution reach to build the strength of our brands and further drive growth. Our investments in marketing our brands may not be successful, and our results of operations may be affected if such investments and initiatives are not appropriately timed with market opportunities or are not effectively brought to market. We anticipate that, as our business continues to expand through entering new markets, and as the market becomes increasingly competitive, maintaining and enhancing our brands may continue to take significant effort and incur significant costs for us.

Manufacturing and R&D costs

Our business significantly depends on our ability to manufacture our products cost efficiently and to successfully conduct R&D with respect to our products.

We operate 23 manufacturing facilities across India, including in the states of Himachal Pradesh, Sikkim, Rajasthan, Andhra Pradesh and Uttarakhand, of which two were built in the last three Financial Years. We also outsource the manufacturing of certain of our products, see " Availability and cost of raw materials and third-party manufacturing" on page 426. Our formulations manufacturing facilities have a total installed capacity of 40.77 billion units across a wide range of dosage forms, including tablets, capsules, syrups, vials, ampoules, blow fill seal, soft and hard gels, eye drops, creams, contraceptives and other over-the-counter products, as of March 31, 2022. In order to maximize our profits, we must maintain adequate capacity utilization at our manufacturing facilities and an appropriate standard of quality in our manufacturing processes, equipment and machinery, including compliance with the requirements of the CDSCO, the USFDA and WHO GMP guidelines and other authorities or regulatory standards. Attaining and maintaining an adequate level of capacity utilization and quality in our manufacturing processes and facilities requires considerable planning and expense, and has an effect on our business, results of operations and financial condition. For further details on our manufacturing facilities, see

"Our Business Description of Our Business Manufacturing Facilities" on page 218.

Our Company has a dedicated R&D center with three units located in IMT Manesar, Gurugram, Haryana. One unit of this R&D center is recognized by the DSIR, and one unit is in compliance with WHO GMP and has been inspected by the USFDA. Our R&D operations are supported by a team of over 600 scientists, including approximately 40 scientists who hold Ph.Ds, and are focused on the development of niche APIs and complex generic formations, as well as product and process improvements to achieve better quality and efficacy for our existing products. We believe that our continuing R&D initiatives have strengthened our product offerings in India and our overseas markets. However, R&D is both time consuming and costly, and involves a high degree of business risk. To develop our product pipeline, we commit substantial time, funds and other resources. In addition, our research staff are critical to the success of our research and development efforts. Our investments in R&D for future products and in R&D manpower could result in higher costs without a proportionate increase in revenues. For the Financial Years 2020, 2021 and 2022, we spent 1,414.91 million, 1,707.88 million and

2,134.49 million on R&D, respectively, representing 2.41%, 2.75% and 2.74%, respectively, of our total revenue from operations for such years. For further details on our R&D operations, see "Our Business Description of Our Business Research and Development" on page 227.

In addition, we must adapt to rapid changes in our industry due to scientific discoveries and technological advances, including in relation to the equipment and machinery we utilize at our manufacturing facilities and R&D centers. If our existing products become obsolete in the future, and we are unable to effectively introduce new products, our business and results of operations could be adversely affected. Any technological developments which increase efficiency or reduce costs, may positively affect our results of operations. Although we strive to keep our technology, facilities and machinery current with the latest international standards, they may become obsolete over time. The cost of implementing new technologies, upgrading our manufacturing facilities and retaining our research staff could be significant and could affect our results of operations.

Availability and cost of raw materials and third-party manufacturing

We depend on third-party suppliers for the supply of certain raw materials. We also rely on third parties for manufacturing some of our finished formulations. The availability of key raw materials and third-party manufacturing at competitive prices is critical and price fluctuations or delays in procurement may affect our margins and, as a result, our results of operations.

Our cost of raw materials and components consumed amounted to 12,973.21 million, 13,731.78 million and

20,575.62 million for the Financial Years 2020, 2021 and 2022, representing 28.52%, 29.18% and 34.19% of our total expenses for such years, respectively, which constitutes one of the most significant components of our total expenses. The key raw materials that we use for our manufacturing operations include APIs for our formulations, key starting materials and intermediaries for APIs we manufacture and other materials such as excipients, manufacturing consumables, lab chemicals and packaging materials. We identify and approve multiple suppliers to source our key raw materials and we place purchase orders with them in advance to reduce our commodity risk, in terms of both price and quantity. Our major raw material suppliers are located in India and China. For the Financial Years 2020, 2021 and 2022, amounts paid to our largest raw material supplier amounted to 730.64 million, 853.85 million and 1,220.45 million, respectively, and no single supplier accounted for more than 5.00% of our total expenses for such years.

In addition to our own manufacturing facilities, we enter into arrangements with third-party manufacturers for certain finished formulations. Costs incurred for the purchase of finished formulations from third-party manufacturers are captured in the Restated Consolidated Summary Statements under expenses as purchases of stock-in-trade, which constitutes one of the largest components of our total expenses. Our purchases of stock-in-trade amounted to 5,912.05 million, 6,548.25 million and 8,137.54 million for the Financial Years 2020, 2021 and 2022, respectively, representing 13.00%, 13.92% and 13.52% of our total expenses for such years, respectively. As of March 31, 2022, we used approximately 100 third-party manufacturers in India for manufacturing formulations such as Entromax Suspension, Electrokind-L Liquid, Flora-SB Sachet, Racigyl-SB Sachet and Calcimust Gel. Any change in the quantity of products manufactured at our own manufacturing facilities as compared to products manufactured through third party manufacturers, affects our expenses. We typically enter into third-party manufacturing agreements for periods ranging up to five years. For the Financial Years 2020, 2021 and 2022, products manufactured through third-party manufacturing arrangements contributed to 24.79%, 27.15% and 25.63% of our total revenue from operations for such years, respectively.

As we continue to grow our product portfolio and increase our production capacities, we believe we will benefit from increasing economics of scale. However, as our business grows, we will also need to procure higher volumes of raw materials and may require additional third-party manufacturing services. We are exposed to fluctuations in availability and prices of raw materials and third-manufacturing services, including on account of exchange rate fluctuations. In the event of an increase in the price of raw materials and finished products, or related shipping costs, our product costs will also correspondingly increase. We seek to diversify our procurement base, reduce the import of materials, and procure more materials from Indian suppliers. We have actively switched the sourcing of certain raw materials from overseas suppliers to Indian suppliers to reduce our dependency on imports. Our ability to contain costs as our business grows will largely depend on the extent to which we achieve further integration of our operations, manage the costs of procuring raw materials and third-party manufacturing, and diversify our procurement base of key starting materials and finished products. Further, any significant changes in GST and other commercial taxes levied on our manufacturing operations, raw materials, packaging materials and finished products may affect our financial condition and results of operations.

See also "Risk Factors Internal Risk Factors Risks Related to Our Business Any delay, interruption or reduction in the supply of our raw materials or finished formulations from our third-party suppliers and manufacturers, or an increase in the costs of such raw materials and finished formulations, may adversely impact the pricing and supply of our products and have an adverse effect on our business, financial condition, cash flows and results of operations." on page 79.

Changes in regulatory framework and statutory incentives

We operate in a highly regulated industry and our operations, including our development, testing, manufacturing, marketing and sales activities, are subject to extensive laws and regulations in India and other countries. We are required to obtain and maintain a number of statutory and regulatory permits and approvals under central, state and local government rules in India, including those required by pharmaceutical industry regulators for carrying out our business and for each of our manufacturing facilities and R&D centers. We are also subject to various laws and regulations, including WHO GMP guidelines, in the overseas markets, where we market and sell our products and have ongoing obligations to regulatory authorities in these markets, such as the USFDA, MHRA (United Kingdom) and Health Canada, among others, both before and after a products commercial release.

Changes in the laws and regulations applicable to our business may increase our compliance costs and adversely affect our business, prospects, results of operations and financial condition. See also "Risk Factors Internal Risk Factors Risks Related to Our Business We are subject to extensive government regulations which are also subject to change. If we fail to comply with the applicable regulations prescribed by the governments and the relevant regulatory agencies, our business, financial condition, cash flows and results of operations will be adversely affected." on page 75.

Further, most of our manufacturing facilities have received several major regulatory approvals and accreditations which enable us to supply our products in regulated and other markets. Our manufacturing facilities have obtained approvals or certifications from, and are subject to inspections and audits by, a range of regulatory bodies including the CDSCO and the USFDA. Additionally, certain of our facilities have obtained certificates under the WHO and PIC/S good manufacturing practices guidelines, among others. We continuously invest in the improvement of our manufacturing facilities to ensure they remain in compliance with the relevant regulations and have teams dedicated to addressing improvement areas in our facilities. Our manufacturing facilities and products are subject to periodic inspection/audit by regulatory agencies. See also "Risk Factors Internal Risk Factors Risks Related to Our Business Any problems in our quality control or manufacturing processes may damage our reputation, subject us to regulatory action and expose us to litigation or other liabilities." on page 83.

In addition, we benefit from certain tax regulations, incentives and export promotion schemes that accord favorable treatment to certain of our manufacturing and R&D facilities. For example, we are entitled to a 100% deduction on the profits and gains from an eligible undertaking located in any North-eastern state of India subject to the fulfilment of the conditions laid out in Section 80-IE of the Income Tax Act, 1961. This deduction is available for 10 consecutive assessment years beginning from the year the undertaking commences its eligible business or completes specified substantial expansion and is applicable only to those eligible undertakings which have commenced operations between April 1, 2007 and April 1, 2017. We have an eligible undertaking in Sikkim, which has been availing itself to the deduction under Section 80-IE of the Act since assessment year 2017-18. This tax benefit is expected to be available until assessment year 2026. These tax benefits and incentives contribute to our results of operations and cash flows and a change in tax benefits and incentives available to us would likely affect our profitability. See also "Risk Factors Internal Risk Factors Risks Related to Our Business We are currently entitled to certain tax incentives and export promotion schemes. Any decrease in or discontinuation in policies relating to tax, duties or other such levies applicable to us may affect our results of operations." on page 104.

Recent developments

We have not yet prepared or published consolidated financial statements as of and for the three months ended June 30, 2021 and 2022. However, as a pharmaceuticals company, we benefited from strong demand for pharmaceutical products during the three months ended June 30, 2021 due to the rise in the number of COVID-19 cases and hospital admissions. As a result, our sales volumes may be lower for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

We are also likely to derive lower operating margins from our sales during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This is primarily as a result of a higher mix of COVID-19 related products sold and lower expenses incurred relating to R&D, sales and marketing, and travelling due to partial lockdowns across India, during the three months ended June 30, 2021. The higher volume of sales during the three months ended June 30, 2021 are likely to lead to higher operating leverage in fixed expenses and, correspondingly, higher operating margins. For the three months ended June 30, 2022, our product mix stabilized in line with the normalization of COVID-19 cases. In addition, expenses relating to R&D, sales and marketing, and travelling also normalized with the easing of the lockdowns across India, during the three months ended June 30, 2022. We are also likely to incur higher expenses relating to raw materials and employees during the three months ended June 30, 2022 as compared to three months ended June 30, 2021, due to the expansion of our business operations and field force in line with our growth plans.

Significant Accounting Policies

The notes to the Restated Consolidated Summary Statements included in this Draft Red Herring Prospectus contain a summary of our significant accounting policies. Set forth below is a summary of our most significant accounting policies adopted in preparation of the Restated Consolidated Summary Statements.

Basis of preparation

The Restated Consolidated Summary Statements have been prepared for the purpose of inclusion in this Draft Red Herring Prospectus in connection with the Offer. The Restated Consolidated Summary Statements have been prepared in accordance with Ind AS, Section 26 of Part I of Chapter III of the Companies Act, 2013, the SEBI ICDR Regulations and the ICAI Guidance Note.

The preparation of the Restated Consolidated Summary Statements requires our management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these judgements, assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Basis of consolidation

The Restated Consolidated Summary Statements comprise the summary statements of our Company, and our subsidiaries, associates and joint ventures. Control is achieved when we are exposed, or have rights, to variable returns from our involvement with the investee and have the ability to affect those returns through our power over the investee. Specifically, we control an investee if and only if we have: (i) power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect its returns. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when we have less than a majority of the voting or similar rights of an investee, we consider all relevant facts and circumstances in assessing whether we have power over an investee. We reassess whether or not we control an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when we obtain control over the subsidiary and ceases when we lose control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Restated Consolidated Summary Statements from the date we gain control until the date we cease to control the subsidiary.

The Restated Consolidated Summary Statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If an entity uses accounting policies other than those adopted in the Restated Consolidated Summary Statements for like transactions and events in similar circumstances, appropriate adjustments are made to that entitys summary statements in preparing the Restated

Consolidated Summary Statements to ensure conformity with our accounting policies.

Revenue from contracts with customers

We manufacture, trade and sell a range of pharmaceutical and consumer healthcare products. Revenue from contracts with customers involving sale of these products is recognized at a point in time when control of the product has been transferred, and there are no unfulfilled obligation that could affect the customers acceptance of the products. Delivery occurs when the products are shipped to specific location and control has been transferred to the customers, such that we have objective evidence that all criterion for acceptance has been satisfied.

Sale of goods

Revenue from sale of goods is recognized at the point in time when control of the goods is transferred to the customer, generally on delivery of the goods and there are no unfulfilled obligations. We consider whether there are other promises in the contract in which there are separate performance obligations, to which a portion of the transaction price needs to be allocated.

Sale of services

Revenues from services are recognized as and when services are rendered and on the basis of contractual terms with the parties. The performance obligation in respect of professional services is satisfied over a period of time and acceptance of the customer. In respect of these services, payment is generally due upon completion of services.

Sale of development rights

Sale of development rights is recognized in the financial year in which the agreements of sale are executed and there exists no uncertainty in the ultimate collection of consideration from buyers.

Other operating revenues

Rental income

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in other income in the restated consolidated statement of profit or loss due to its non-operating nature.

Interest income

For all debt instruments measured either at amortized cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate ("EIR") method. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the EIR, we estimate the expected cash flows by considering all the contractual terms of the financial instrument (e.g., prepayment, extension, call and similar options) but we do not consider the expected credit losses. Interest income is included in other income in the restated consolidated statement of profit and loss.

Export benefit

Revenue from export benefits arising from the duty entitlement pass book scheme, duty drawback scheme and merchandize export incentive scheme are recognized on the export of goods in accordance with the respective underlying scheme at fair value of consideration received or receivable.

Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses, if any. Capital work in progress is stated at cost, net of accumulated impairment loss, if any. The cost comprises of purchase price, taxes, duties, freight and other incidental expenses directly attributable and related to acquisition and installation of the concerned assets and are further adjusted by the amount of input tax credit availed wherever applicable.

Depreciation on property, plant and equipment is calculated on a pro-rata basis on straight-line method using the useful lives of the assets estimated by management. The estimate useful life of our property, plant and equipment assets are as follows:

Asset	Useful life (in years)
Building	30 and 60
Plant and equipment	10 15
Furniture and fixtures	10
Vehicles	8 and 10
Office equipments	5
Mobile phones	2
Mobile tablets	1
Computers	3
Servers and networks	6

Leasehold improvements are depreciated on straight line basis over shorter of the assets useful life and their initial agreement period.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Cost of intangible assets acquired in business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalized development cost, are not capitalized and the related expenditure is reflected in statement of profit and loss in the period in which the expenditure is incurred. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash- generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from disposal of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets are disposed of. The estimate useful life of our intangible assets are as follows:

Asset	Useful life (in years)
Computer software	3
Trademarks and copyrights	2 15
Patents	6
Technical know-how	5 7
Non-compete fee	5

Research and development costs

Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when we can demonstrate all the following: (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (ii) our intention to complete the asset; (iii) our ability to use or sale the asset; (iv) how the asset will generate future economic benefits; (v) the availability of adequate resources to complete the development and to use or sell the asset; and (vi) the ability to measure reliably the expenditure attributable to the intangible asset during development.

Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized on straight line basis over the estimated useful life. During the period of development, the asset is tested for impairment annually.

Inventories

Inventories are valued at lower of cost and net realizable value after providing cost of obsolescence, if any. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. The comparison of cost and net realizable value is made on an item-by-item basis.

Cost of raw materials is determined by using the moving weighted average cost method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.

Cost of finished goods and work-in-progress includes direct labor and an appropriate share of fixed and variable production overheads and excise duty as applicable. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Cost is determined on moving weighted average basis.

Cost of traded goods is determined by using moving the weighted average cost method and comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventories to their present location and condition.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

Development rights represent actual amount paid under an agreement towards purchase of land/development rights for acquiring irrevocable and exclusive licenses/development rights in identified land or constructed properties valued at cost and net realizable value, whichever is lower.

Impairment of non-financial assets

We assess, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, we estimate the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units ("CGU") fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

We classify our financial assets into the following measurement categories: (i) assets to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss); and (ii) assets to be measured at amortized cost. The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and our business model for managing them.

With the exception of trade receivables that do not contain a significant financing component or for which we have applied the practical expedient, we initially measure a financial asset at its fair value, and in the case of a financial asset not at fair value through profit or loss ("FVTPL"), at fair value plus transaction costs. Trade receivables that do not contain a significant financing component or for which we have applied the practical expedient and are measured at the transaction price determined under Ind AS 115.

A financial asset (or ,where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from our statement of financial position) when: (i) the rights to receive cash flows from the asset have expired; or (ii) we transferred our rights to receive cash flows from the asset or have assumed an obligation to pay the received cash flows in full without material delay to a third party under a

"pass through" arrangement and either (a) we have transferred substantially all the risks and rewards of the asset, or (b) we have neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

In accordance with IND AS 109, we apply the expected credit losses ("ECL") model for measurement and recognition of impairment loss on the financial assets measured at amortized cost and financial assets measured at fair value through other comprehensive income. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that we expect to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

Financial liabilities

Financial liabilities are classified at initial recognition as financial liabilities at FVTPL, loans and borrowings, and payables, net of directly attributable transaction costs. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Our financial liabilities include loans and borrowings, trade payables, trade deposits, retention money, liabilities towards services, sales incentive and other payables.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit and loss.

Offsetting of financial instruments

Financials assets and financial liabilities are offset and the net amount is reported in the statement of assets and liabilities if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

Retirement and other employee benefits

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service are recognized in respect of employee service up to the end of the reporting period and are measured at the amount expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the restated consolidated statement of assets and liabilities.

Other long-term employee benefit obligations

Gratuity

We have a defined benefit plan (the "Gratuity Plan"). The Gratuity Plan provides a lump sum payment to employees who have completed four years and 240 days or more of service at retirement, disability or termination of employment, being an amount based on the respective employees last drawn salary and the number of years of employment with us. The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the reporting date, based on which we contribute to the gratuity scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at the year end and the balance of funds is provided for as assets/(liability) in the books. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income and are never reclassified to statement of profit and loss. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in the statement of profit and loss as past service cost.

Provident fund

Retirement benefit in the form of provident fund is a defined contribution scheme. We have no obligation, other than the contribution payable to the provident fund. We recognize contribution payable through provident fund scheme as an expense, when an employee renders the related services. If the contribution payable to scheme for service received before the reporting date exceeds the contribution already paid, the deficit payable to the scheme is recognized as liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the reporting date, such excesses are recognized as an asset to the extent that the prepayment will lead to, for example, a reduction in future payment or a cash refund.

Other employee benefits

Compensated absences which are not expected to occur within 12 months after the end of the period in which the employee renders the related service are recognized as a liability at the present value of the defined benefit obligation as at the balance sheet date on the basis of actuarial valuation.

Leases

As a lessee

Our lease asset classes primarily comprise lease for land and building. We apply a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. We recognize lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use assets. We recognize right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight- line basis over the unexpired period of respective leases ranging from 33 years to 99 years. If ownership of the leased asset transfers to us at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment.

Lease liabilities. At the commencement date of the lease, we recognize lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. In calculating the present value of lease payments, we use our incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.

As a lessor

Leases for which we are a lessor are classified as finance or operating leases. Leases in which we do not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

Borrowing costs

Borrowing cost includes interest and other costs incurred in connection with the borrowing of funds and charged to the statement of profit and loss based on the EIR method. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing cost. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are recognized as expense in the period in which they occur.

Cash and cash equivalents

Cash and cash equivalents on the restated consolidated statement of assets and liabilities comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposit held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the restated consolidated statement of assets and liabilities.

Taxes

The income tax expense or credit for the period is the tax payable on the current periods taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax expense for the year comprises of current tax and deferred tax.

Current tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where our Company and its subsidiaries, joint ventures and associates operate and generate taxable income. Our management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. We measure our tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.

Deferred tax

Deferred tax is provided in full using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Restated Consolidated Summary Statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting profit nor taxable profit or loss.

Provisions and contingent liabilities

A provision is recognized when we have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non- occurrence of one or more uncertain future events beyond our control or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in rare cases, where there is a liability that cannot be recognized because it cannot be measured reliably. We do not recognize a contingent liability but discloses its existence in the Restated Consolidated Summary Statements unless the probability of outflow of resources is remote.

Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting date.

Foreign currency translation

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transaction, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rate, are generally recognized in the statement of profit and loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

Exchange differences arising on settlement or translation of monetary items are recognized as income or expense in the period in which they arise with the exception of exchange differences on gain or loss arising on translation of non-monetary items measured at fair value which is treated in line with the recognition of the gain or loss on the change in fair value of the item.

Key Components of our Statement of Profit and Loss

The following descriptions set forth information with respect to the key components of our profit and loss statements.

Income

Total income consists of revenue from operations and other income.

Revenue from operations. Revenue from operations comprises revenue from contracts with customers, which comprises revenue from sale of products and revenue from sale of services. Revenue from sale of products comprises revenue from the sale of our pharmaceutical formulations and consumer healthcare products. Revenue from sale of services comprises revenue from our hospitality business (which relates to one of our subsidiaries that operates a hotel) and the provision of dosage formulation testing services and calibration services.

Other income. Other income comprises interest income, revenue from export incentives, scrap sales, other non-operating income and other gains and losses. Interest income primarily relates to interest income earned on bank deposits and financial assets (at amortized cost). Other non-operating income primarily relates to rental income, insurance claims received and impairment reversal. Other gains and losses primarily relates to net gain on current investments measured at FVTPL, liabilities written back and government grant income.

Expenses

Expenses consist of cost of raw materials and components consumed, purchases of stock-in-trade, changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade, employee benefits expense, finance costs, depreciation and amortization expense, impairment of non-current assets, impairment losses on financial assets and other expenses.

Costs of raw materials and components consumed. Cost of raw materials and components consumed comprises costs from consumption of raw materials we use to manufacture our pharmaceutical formulations and consumer healthcare products and consumption of packing materials.

Purchases of stock-in-trade. Purchases of stock-in-trade relates to costs incurred for the manufacturing of our own finished formulations that we outsource to third-party manufacturers.

Changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade. Changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade comprise net increases or decreases in stock of finished goods, work in progress and stock in trade, and stock of development rights in housing projects.

Employee benefit expenses. Employee benefits expenses comprise salaries, wages and bonus, contribution to provident and other funds, gratuity expense and staff welfare expenses.

Finance costs. Finance costs comprise interest expense on financial liabilities and borrowing measured at amortized cost, interest on delayed deposit of income tax, interest on lease liabilities, interest on delay deposit of indirect taxes and other finance costs. Other finance costs primarily relate to interest paid in connection with litigation.

Depreciation and amortization expense. Depreciation and amortization expense relates to depreciation on property, plant and equipment, depreciation on investment properties, amortization of intangible assets, and depreciation of right-of-use assets. Intangible assets include our computer software, trademarks and copyrights, patents, technical know-how and non-compete fees.

Impairment of non-current assets. Impairment of non-current assets comprise impairment of investment in associates and joint ventures, impairment of intangible assets (right-of-use brands), and impairment of doubtful capital advances recorded for the Financial Year 2020, which related to investments made in manufacturing facilities which were subsequently impaired on account of change in demand-supply mix and macroeconomic factors resulting in impairment of intangible assets and doubtful advances.

Impairment losses on financial assets. Impairment losses on financial assets relate to impairment allowance for credit impaired loans.

Other expenses. The largest components of other expenses include advertising and sales promotion expenses, travelling and conveyance expenses, commission and brokerage expenses, power and fuel expenses, legal and professional charges, freight and cartage outward and other distribution cost, testing and inspection charges, rates and taxes, consumption of stores and spares, training and recruitment expenses and miscellaneous expenses. Other components of other expenses include rent, expenses relating to the repair and maintenance of machinery, building and others, insurance, communication expenses, printing and stationary expenses, corporate social responsibility expenditure, director sitting fees, payments to auditors, security expenses, sales support expenses, bank charges, loss on sale and write off of property, plant and equipment (net), assets written off, trade and other receivables written off, allowance for doubtful loans and advances, loss on foreign exchange fluctuation and allowance for expected credit loss on trade receivables.

Tax Expense

Tax expense consists of current tax, deferred tax and adjustment of tax relating to earlier periods.

Our Results of Operations

The following table sets forth our selected financial data from our restated consolidated statement of profit and loss for the Financial Years 2020, 2021 and 2022, the components of which are also expressed as a percentage of total income for such years:

	For the Financial Year ended March 31,
	2020		2021		2022
	( in millions, except for percentage)
Income:
Revenue from operations	58,652.34	98.15%	62,144.31	97.32%	77,815.55	97.54%
Other income	1,104.20	1.85%	1,709.49	2.68%	1,960.29	2.46%
Total income	59,756.54	100.00%	63,853.80	100.00%	79,775.84	100.00%
Expenses:
Cost of raw materials and components consumed	12,973.21	21.71%	13,731.78	21.50%	20,575.62	25.79%
Purchases of stock-in-trade	5,912.05	9.89%	6,548.25	10.25%	8,137.54	10.20%
Changes in inventories of finished goods, work-in-progress, development rights and stock-in- trade	(104.55)	(0.18)%	(2,473.95)	(3.87)%	(4,495.88)	(5.64)%
Employee benefits expense	13,355.26	22.35%	14,157.83	22.17%	16,205.94	20.31%
Finance costs	219.72	0.37%	201.47	0.32%	586.10	0.74%
Depreciation and amortization expense	990.59	1.66%	1,189.71	1.86%	1,666.20	2.09%
Impairment of non-current assets	905.84	1.52%
Impairment losses on financial assets			177.11	0.28%
Other expenses	11,242.42	18.81%	13,522.26	21.18%	17,498.81	21.94%
Total expenses	45,494.54	76.13%	47,054.46	73.69%	60,174.33	75.43%
Share of net profit/(loss) of associates and joint ventures (net of tax)	115.35	0.19%	116.77	0.18%	144.48	0.18%
Restated profit before tax	14,377.35	24.06%	16,916.11	26.49%	19,745.99	24.75%
Tax Expense:
Current tax	4,142.70	6.93%	3,961.66	6.20%	4,690.32	5.88%
Deferred tax charge/(credit)	(326.83)	(0.54)%	24.11	0.04%	526.11	0.66%
Total tax expense	3,815.87	6.39%	3,985.77	6.24%	5,216.43	6.54%
Restated profit for the year	10,561.48	17.67%	12,930.34	20.25%	14,529.56	18.21%

Financial Year 2022 compared to Financial Year 2021

Total income. Total income increased by 24.94% to 79,775.84 million for the Financial Year 2022 from

63,853.80 million for the Financial Year 2021 due to increases in revenue from operations and other income.

Revenue from operations. Revenue from operations increased by 25.22% to 77,815.55 million for the Financial Year 2022 from 62,144.31 million for the Financial Year 2021 primarily due to an increase in revenue from sale of products to 77,780.91 million for the Financial Year 2022 from 62,119.08 million for the Financial Year 2021, which was mainly attributable to the growth of our domestic business. Our sales in India increased to

75,947.48 million for the Financial Year 2022 from 60,285.34 million for the Financial Year 2021, which was primarily driven by (i) an increase in sales volumes of existing products in our acute therapeutic areas, including our Gudcef, Moxikind, Mahacef and Asthakind products, and (ii) an increase in sales volumes of Dydroboon, a synthetic hormone formulation which we developed in-house, (iii) growth in our consumer healthcare segment primarily due to the expansion of distribution channels for our PregaNews and Manforce products, (iv) the launch of certain non-branded generics, and (v) the launch of new divisions across certain of our chronic therapeutic areas including anti-diabetic, cardiovascular, neuro/CNS and respiratory.

Other income. Other income increased by 14.67% to 1,960.29 million for the Financial Year 2022 from

1,709.49 million for the Financial Year 2021 primarily due to increases in (i) realized gain on current investments measured at FVTPL to 477.72 million for the Financial Year 2022 from 34.94 million for the Financial Year 2021, which was mainly attributable to an increase in net sale of investments in mutual funds during the Financial Year 2022, (ii) gain on foreign currency transactions (net) to 88.45 million for the Financial Year 2022 from

5.03 million for the Financial Year 2021, which was mainly attributable to realization of receivables denominated in foreign currencies at higher exchange rates, and (iii) reversal of impairment allowance of financial assets of

175.13 million and reversal of impairment allowance on sale of an associate of 80.00 million recorded in the Financial Year 2022, which related to reversal of allowance for doubtful loans that were subsequently recovered as well as the reversal of impairment provisions on investments which were sold, while no such income was recorded in the Financial Year 2021. The increase in other income was partially offset by decreases in (i) interest income earned on bank deposits (at amortized cost) to 109.42 million for the Financial Year 2022 from 317.19 million for the Financial Year 2021, which was mainly attributable to redemption of bank deposits for asset acquisition purposes, (ii) unrealized gain on current investments measured at FVTPL to 396.61 million for the Financial Year 2022 from 593.71 million for the Financial Year 2021, which was mainly attributable to a decrease in current investments in mutual funds as a result of the utilization of proceeds for asset acquisition purposes, and (iii) government grant income to 384.29 million for the Financial Year 2022 from 501.85 million for the Financial Year 2021, which was mainly attributable to a reduction in our grant claim amount under certain export incentives as the corresponding plant and equipment were still undergoing installation and could not be utilized for export purposes.

Total expenses. Total expenses increased by 27.88% to 60,174.33 million for the Financial Year 2022 from

47,054.46 million for the Financial Year 2021 primarily due to increases in costs of raw materials and components consumed, other expenses, employee benefits expense and purchases of stock-in-trade, partially offset by changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade.

Cost of raw materials and components consumed. Cost of raw materials and components consumed increased by 49.84% to 20,575.62 million for the Financial Year 2022 from 13,731.78 million for the Financial Year 2021, primarily due to higher purchases of raw materials and packing materials during the year, which was mainly attributable to new product launches, an increase in the raw material prices and higher volumes of products manufactured due to higher sales.

Purchases of stock-in-trade. Purchases of stock-in-trade increased by 24.27% to 8,137.54 million for the Financial Year 2022 from 6,548.25 million for the Financial Year 2021 primarily due to higher purchases of finished formulations from third-party manufacturers, which was mainly attributable to changes in our product mix and higher volumes of products sold.

Changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade. Changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade increased by 4,495.88 million for the Financial Year 2022 as compared to an increase by 2,473.95 million for the Financial Year 2021. In relation to inventories of finished goods, work in progress and stock in trade, we had an opening stock of

8,446.38 million and a closing stock of 12,942.26 million for the Financial Year 2022, and an opening stock of

5,972.43 million and a closing stock of 8,446.38 million for the Financial Year 2021.

Employee benefits expense. Employee benefits expense increased by 14.47% to 16,205.94 million for the Financial Year 2022 from 14,157.83 million for the Financial Year 2021 primarily due to an increase in salaries, wages and bonus to 15,151.61 million for the Financial Year 2022 from 13,300.00 million for the Financial Year 2021, which was mainly attributable to (i) an increase in our permanent employee head count (comprising mainly sales employees and employees across various managerial functions) to 21,516 employees from 17,403 employees, and (ii) annual increments in employee salaries and wages.

Finance costs. Finance costs significantly increased to 586.10 million for the Financial Year 2022 from 201.47 million for the Financial Year 2021 primarily due to an increase in interest on delay deposit of indirect taxes to

293.11 million for the Financial Year 2022 from 0.67 million for the Financial Year 2021, which was mainly attributable to indirect taxes voluntarily deposited based on tax assessments conducted, and an increase in interest on delay deposit of income tax to 102.61 million for the Financial Year 2022 from 33.74 million for the Financial Year 2021, which was mainly attributable to disallowances of expenses in accordance with an amendment under Section 37(1) of the Income Tax Act that resulted in an enhanced scope of disallowances.

Depreciation and amortization expense. Depreciation and amortization expense increased by 40.05% to

1,666.20 million for the Financial Year 2022 from 1,189.71 million for the Financial Year 2021 primarily due to an increase in depreciation on property, plant and equipment to 1,384.66 million for the Financial Year 2022 from 1,028.74 million for the Financial Year 2021, which was mainly attributable to higher capitalization of fixed assets during the Financial Year 2022 on account of projects nearing completion, and an increase in amortization of intangible assets to 252.16 million for the Financial Year 2022 from 140.90 million the Financial Year 2021, which was mainly attributable to our acquisition of one dermatology brand and one respiratory brand from Dr.

Reddys Laboratories in February 2022 and our acquisition of Panacea Biotec Pharma Limited and Panacea Biotec Limiteds domestic formulations brand portfolio in February 2022.

Other expenses. Other expenses increased by 29.41% to 17,498.81 million for the Financial Year 2022 from

13,522.26 million for the Financial Year 2021 primarily due to increases in (i) travelling and conveyance expenses to 3,581.12 million for the Financial Year 2022 from 2,704.02 million for the Financial Year 2021, which was mainly attributable to an increase in our marketing and sales field force coupled with higher travelling activity due to the easing of COVID-19 related restrictions, (ii) advertising and sales promotion expenses to 4,515.67 million for the Financial Year 2022 from 3,857.48 million for the Financial Year 2021, which was mainly attributable to brand building initiatives undertaken for our corporate brand and certain products, (iii) legal and professional charges to 882.32 million for the Financial Year 2022 from 494.19 million for the Financial Year 2021, which was mainly attributable to the use of international consultants in connection with digitalization initiatives undertaken, (iv) commission and brokerage expenses to 1,742.78 million for the Financial Year 2022 from 1,402.86 million for the Financial Year 2021, due to higher commissions paid to our distributors in line with higher product sales (as commission payouts are directly linked to sales), (v) training and recruitment expenses to 473.11 million for the Financial Year 2022 from 157.43 million for the Financial Year 2021, which was mainly attributable to an increase in our marketing and sales force, learning and development programs undertaken as well as higher recruitment activity, (vi) rates and taxes to 626.80 million for the Financial Year 2022 from 406.38 million for the Financial Year 2021, which was mainly attributable to an increase in ANDA filings, (vii) power and fuel expenses to 1,031.30 million for the Financial Year 2022 from 825.26 million for the Financial Year 2021, which as mainly attributable to an increase in electricity and fuel costs as well as higher production volumes, (viii) freight and cartage outward and other distribution cost to 821.09 million for the Financial Year 2022 from 614.96 million for the Financial Year 2021, which was mainly attributable to higher product sales as well as an increase in transportation costs, and (ix) miscellaneous expenses to 692.15 million for the Financial Year 2022 from 505.84 million for the Financial Year 2021, which was mainly attributable to an increase in product development expenses.

Tax expenses. Our total tax expense increased by 30.88% to 5,216.43 million for the Financial Year 2022 from 3,985.77 million for the Financial Year 2021. Current tax expense increased to 4,690.32 million for the Financial Year 2022 from 3,961.66 million for the Financial Year 2021 primarily due to an increase in our restated profit before tax. Deferred tax expense increased to 526.11 million for the Financial Year 2022 from 24.11 million for the Financial Year 2021 primarily due to deferred tax liability created on account of capitalization of certain property, plant and equipment and acquired intangible assets. Our effective tax rate (which represents total tax expense expressed as a percentage of restated profit before tax for the relevant year) was 26.42% and 23.56% for the Financial Years 2022 and 2021, respectively.

Restated profit for the year. As a result of the foregoing, our restated profit for the year increased by 12.37% to 14,529.56 million for the Financial Year 2022 from 12,930.34 million for the Financial Year 2021.

Financial Year 2021 compared to Financial Year 2020

Total income. Total income increased by 6.86% to 63,853.80 million for the Financial Year 2021 from 59,756.54 million for the Financial Year 2020 due to increases in revenue from operations and other income.

Revenue from operations. Revenue from operations increased by 5.95% to 62,144.31 million for the Financial Year 2021 from 58,652.34 million for the Financial Year 2020 primarily due to an increase in revenue from sale of products to 62,119.08 million for the Financial Year 2021 from 58,636.79 million for the Financial Year 2020, which was mainly attributable to (i) the growth of our domestic business, where our sales in India increased to 60,285.34 million for the Financial Year 2021 from 57,888.32 million for the Financial Year 2020, primarily driven by increases in the sale prices of our formulations and raw materials in line with market price increases as well as higher product sales in our chronic therapeutic areas, including the cardiovascular and anti-diabetic therapeutic areas, and (ii) the growth of our export business, where our sales outside India increased to 1,858.97 million for the Financial Year 2021 from 764.02 million for the Financial Year 2020, driven by an overall increase in sales volumes in our overseas markets.

Other income. Other income increased by 54.82% to 1,709.49 million for the Financial Year 2021 from 1,104.20 million for the Financial Year 2020 primarily due to increases in (i) unrealized gain on current investments measured at FVTPL to 593.71 million for the Financial Year 2021 from 255.56 million for the Financial Year 2020, which was mainly attributable to increases in unrealized gain on account of mark-to-market value of current investments, (ii) interest income earned on bank deposits (at amortized cost) to 317.19 million for the Financial Year 2021 from 87.31 million for the Financial Year 2020, which was mainly attributable to an increase in investment in bank deposits to 3,397.58 million for the Financial Year 2021 from 1,691.81 million for the Financial Year 2020, (iii) government grant income to 501.85 million for the Financial Year 2021 from 368.37 million for the Financial Year 2020, which was mainly attributable to export duty benefits availed on the fulfilment of export obligations. The increase in other income was also partially due to liabilities written back of 77.13 million recorded for the Financial Year 2021, which related to write backs of certain creditor balances. The increase in other income was partially offset by gain on sale of investment property of 90.16 million recorded for the Financial Year 2020, which related to the sale of property that we lease out, while no such income was recorded for the Financial Year 2021.

Total expenses. Total expenses increased by 3.43% to 47,054.46 million for the Financial Year 2021 from 45,494.54 million for the Financial Year 2020 primarily due to increases in other expenses, employee benefits expense, cost of raw materials and components consumed, and purchases of stock-in-trade, partially offset by changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade and a decrease in impairment of non-current assets.

Other expenses. Other expenses increased by 20.28% to 13,522.26 million for the Financial Year 2021 from 11,242.42 million for the Financial Year 2020 primarily due to increases in (i) advertising and sales promotion expenses to 3,857.48 million for the Financial Year 2021 from 2,553.27 million for the Financial Year 2020, which was mainly attributable to an increase in marketing and promotional activities, (ii) testing and inspection charges to 687.29 million for the Financial Year 2021 from 389.38 million for the Financial Year 2020, which was mainly attributable to increases in clinical testing expenses and use of lab consumables, (iii) legal and professional charges to 494.19 million for the Financial Year 2021 from 308.10 million for the Financial Year 2020, which was mainly attributable to the engagement of international consultants in connection with marketing strategies and benchmarking, (iv) commission and brokerage expenses to 1,402.86 million for the Financial Year 2021 from 1,243.61 million for the Financial Year 2020, due to higher commissions paid to our distributors in line with higher product sales (as commission payouts are directly linked to sales), (v) freight and cartage outward and other distribution cost to 614.96 million for the Financial Year 2021 from 470.34 million for the Financial Year 2020, which was mainly attributable to higher product sales as well as an increase in transportation costs, and (vi) miscellaneous expenses to 505.84 million for the Financial Year 2021 from 401.42 million for the Financial Year 2020, which was mainly attributable to an increase in charity and donation activities.

Employee benefits expense. Employee benefits expense increased by 6.01% to 14,157.83 million for the Financial Year 2021 from 13,355.26 million for the Financial Year 2020 primarily due to an increase in salaries, wages and bonus to 13,300.00 million for the Financial Year 2021 from 12,713.67 million for the Financial Year 2020, which was mainly attributable to (i) an increase in our permanent employee head count to 17,403 employees from 16,270 employees, and (ii) annual increments in employee salaries and wages.

Cost of raw materials and components consumed. Cost of raw materials and components consumed increased by 5.85% to 13,731.78 million for the Financial Year 2021 from 12,973.21 million for the Financial Year 2020, primarily due to higher purchases of raw materials and packing materials during the year, which was mainly attributable to changes in our product mix (as we manufactured and sold products that required higher priced raw materials) and higher prices resulting from inflation during the COVID-19 pandemic.

Purchases of stock-in-trade. Purchases of stock-in-trade increased by 10.76% to 6,548.25 million for the Financial Year 2021 from 5,912.05 million for the Financial Year 2020 primarily due to higher purchases of finished formulations from third-party manufacturers, which was mainly attributable to higher demand for our products in both our domestic and overseas markets.

Changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade. Changes in inventories of finished goods, work-in-progress, development rights and stock-in-trade increased by 2,473.95 million for the Financial Year 2021 as compared to an increase by 104.55 million for the Financial Year 2020. In relation to inventories of finished goods, work in progress and stock in trade, we had an opening stock of 5,972.43 million and a closing stock of 8,446.38 million for the Financial Year 2021, and an opening stock of 5,557.88 million and a closing stock of 5,972.43 million for the Financial Year 2020.

Finance costs. Finance costs decreased by 8.31% to 201.47 million for the Financial Year 2021 from 219.72 million for the Financial Year 2020 primarily due to a decrease in interest on delay deposit of income tax to 33.74 million for the Financial Year 2021 from 75.95 million for the Financial Year 2020, which was mainly attributable to lower variations in quarter on quarter tax forecast estimates in the Financial Year 2021 as compared to the Financial Year 2020 (as the tax is required to be deposited on a quarterly basis as per prescribed ratios and any deviations between forecasts and actual tax amount results in delayed interest). This was partially offset by an increase in interest expense on financial liabilities and borrowing measured at amortized cost to 155.35 million for the Financial Year 2021 from 137.02 million for the Financial Year 2020, which was mainly attributable to an increase in working capital loans in the Financial Year 2021.

Depreciation and amortization expense. Depreciation and amortization expense increased by 20.10% to 1,189.71 million primarily for the Financial Year 2021 from 990.59 million for the Financial Year 2020 due to an increase in depreciation on property, plant and equipment to 1,028.74 million for the Financial Year 2021 from 892.69 million for the Financial Year 2020, which was mainly attributable to higher capitalization of fixed assets during the Financial Year 2021 on account of the completion of certain projects in the Financial Year 2021, and an increase in amortization of intangible assets to 140.90 million for the Financial Year 2021 from 83.30 million for the Financial Year 2020, which was mainly attributable to the full-year depreciation impact on certain intellectual property rights licensed to our Company by a third-party manufacturer in the Financial Year 2020.

Impairment of non-current assets. We recorded impairment of non-current assets of 905.84 million for the Financial Year 2020, including impairment of investment in associates and joint ventures of 575.00 million, impairment of intangible assets of 207.70 million and impairment of doubtful capital advances of 123.14 million, which related to investments made in manufacturing facilities which were subsequently impaired on account of change in demand-supply mix and macroeconomic factors resulting in impairment of intangible assets and doubtful advances. No such impairments were recorded for the Financial Year 2021.

Tax expenses. Our total tax expense increased by 4.45% to 3,985.77 million for the Financial Year 2021 from 3,815.87 million for the Financial Year 2020. Current tax expense decreased to 3,961.66 million for the Financial Year 2021 from 4,142.70 million for the Financial Year 2020 primarily due to higher income tax deductions. We recorded deferred tax expense of 24.11 million for the Financial Year 2021 as compared to deferred tax credit of 326.83 million for the Financial Year 2020, primarily due to the creation of deferred tax assets relating to provisions for slow moving inventories and expected returns of products sold in the Financial Year 2020. Our effective tax rate (which represents total tax expense expressed as a percentage of restated profit before tax for the relevant year) was 23.56% and 26.54% for the Financial Years 2021 and 2020, respectively.

Restated profit for the year. As a result of the foregoing, our restated profit for the year increased by 22.43% to 12,930.34 million for the Financial Year 2021 from 10,561.48 million for the Financial Year 2020.

Liquidity and Capital Resources

Our primary sources of liquidity include cash generated from operations, from sale of securities, and from borrowings, both short-term and long-term, including cash credit, term and working capital facilities. As of March 31, 2022, we had cash and cash equivalents of 2,830.59 million.

Our financing requirements are primarily for working capital and investments in our business such as capital expenditures to upgrade and increase the capacities of our manufacturing and R&D facilities. We expect that cash flow from operations and net proceeds from sale of securities and borrowings will continue to be our principal sources of funds in the long-term. We evaluate our funding requirements periodically in light of our net cash flow from operating activities, the requirements of our business and operations, acquisition opportunities and market conditions.

Cash flows

The following table summarizes our cash flows data for the years indicated:

	For the Financial Year Ended March 31,
	2020	2021	2022
	( in millions)
Net cash inflow from operating activities	10,697.05	11,372.44	9,197.76
Net cash outflow from investing activities	(4,391.55)	(12,222.11)	(13,691.43)
Net cash inflow/(outflow) from financing activities	(5,307.38)	(78.11)	6,046.20
Net increase/ (decrease) in cash and cash equivalents	998.12	(927.78)	1,552.53
Net foreign exchange difference	36.04	3.75	4.78
Cash and cash equivalents at the beginning of the year	1,163.15	2,197.31	1,273.28
Cash and cash equivalent at the end of the year	2,197.31	1,273.28	2,830.59

Net cash generated from operating activities

Net cash generated from operating activities was 9,197.76 million for the Financial Year 2022. We had restated profit before tax of 19,745.99 million for the Financial Year 2022, which was primarily adjusted for depreciation and amortization expense of 1,666.20 million, realised gain on current investments measured at FVTPL of 477.72 million, unrealised gain on current investments measured at FVTPL of 396.61 million, government grant income of 384.29 million and finance costs of 185.58 million. This was further adjusted for working capital changes, which primarily consisted of an increase in other asset of 6,055.89 million, which mainly related to an increase in balances with government authorities on account of our availing of GST input credit paid on intangible assets relating to our acquisition of one dermatology brand and one respiratory brand from Dr.

Reddys Laboratories in February 2022 and our acquisition of Panacea Biotec Pharma Limited and Panacea Biotec Limiteds domestic formulations brand portfolio in February 2022, an increase in inventories of 5,767.00 million, an increase in trade payable of 4,198.19 million, and an increase in other liability of 1,730.20 million. As a result, cash generated from operations for the Financial Year 2022 was 14,192.85 million before adjusting for income tax paid (net) of 4,995.09 million.

Net cash generated from operating activities was 11,372.44 million for the Financial Year 2021. We had restated profit before tax of 16,916.11 million for the Financial Year 2021, which was primarily adjusted for depreciation and amortization expense of 1,189.71 million, unrealised gain on current investments measured at FVTPL of 593.71 million, government grant income of 501.85 million, interest income of 383.02 million and realised gain on current investments measured at FVTPL of 34.94 million. This was further adjusted for working capital changes, which primarily consisted of an increase in inventories of 2,844.03 million, a decrease in trade receivables of 2,002.30 million, an increase in other asset of 943.08 million, an increase in other liability of 800.11 million, a decrease in trade payable of 781.53 million and an increase in other financial liability of 490.61 million. As a result, cash generated from operations for the Financial Year 2021 was 15,913.19 million before adjusting for income tax paid (net) of 4,540.75 million.

Net cash generated from operating activities was 10,697.05 million for the Financial Year 2020. We had restated profit before tax of 14,377.35 million for the Financial Year 2020, which was primarily adjusted for depreciation and amortization expense of 990.59 million, impairment of non-current assets of 905.84 million, government grant income of 368.37 million, unrealised gain on current investments measured at FVTPL of 255.56 million and realised gain on current investments measured at FVTPL of 95.03 million. This was further adjusted for working capital changes, which primarily consisted of an increase in trade receivables of 3,132.53 million, an increase in trade payable of 1,831.41 million, an increase in other asset of 1,308.95 million, an increase in provisions of 1,178.95 million and an increase in inventories of 781.49 million. As a result, cash generated from operations for the Financial Year 2020 was 14,006.17 million before adjusting for income tax paid (net) of 3,309.12 million.

Net cash used in investing activities

Net cash outflow from investing activities was 13,691.43 million for the Financial Year 2022. This was primarily due to purchase of property, plant and equipment of 4,648.66 million and purchase of intangible assets of

18,806.57 million, which mainly related to our acquisition of one dermatology brand and one respiratory brand from Dr. Reddys Laboratories in February 2022 and our acquisition of Panacea Biotec Pharma Limited and Panacea Biotec Limiteds domestic formulations brand portfolio in February 2022, partially offset by proceeds from sale of mutual funds of 16,779.00 million and bank deposit not considered as cash and cash equivalents (net) of 4,301.53 million.

Net cash outflow from investing activities was 12,222.11 million for the Financial Year 2021. This was primarily due to purchase of investment in mutual funds of 9,555.29 million, bank deposit not considered as cash and cash equivalents (net) of 3,397.58 million and purchase of property, plant and equipment, and investment property of 3,054.11 million.

Net cash outflow from investing activities was 4,391.55 million for the Financial Year 2020. This was primarily due to purchase of investment in mutual funds of 5,725.04 million, purchase of property, plant and equipment, and investment property of 2,028.09 million and bank deposit not considered as cash and cash equivalents (net) of 1,691.81 million.

Net cash generated from/(used in) from financing activities

Net cash inflow from financing activities was 6,046.20 million for the Financial Year 2022. This was primarily due to proceeds from non-current borrowings of 58.60 million and proceeds from current borrowings of 12,723.28 million, partially offset by repayment of current borrowings of 6,453.51 million and interest cost of 173.07 million.

Net cash outflow from financing activities was 78.11 million for the Financial Year 2021. This was primarily due to proceeds from non-current borrowings of 4,521.58 million and proceeds from current borrowings of

1,267.83 million, partially offset by repayment of non-current borrowings of 4,507.66 million.

Net cash outflow from financing activities was 5,307.38 million for the Financial Year 2020. This was primarily due to dividend and tax paid thereon to equity holders of parent company of 3,642.66 million, repayment of current borrowings of 2,110.62 million and interest cost of 219.72 million, partially offset by proceeds from non-current borrowings of 610.42 million.

Capital expenditures

Our historical capital expenditures have primarily related to the purchase of property, plant and equipment and intangible assets (including acquisitions of brands, technical know-how, intellectual property rights and other intangible assets). For the Financial Years 2020, 2021 and 2022, our capital expenditures amounted to 2,279.70 million, 3,123.16 million and 23,455.23 million, respectively, and was primarily used for the purchase of plant and equipment and intangible assets, as well as construction of buildings for our operations. For the Financial Year 2022, our capital expenditures mainly related to our acquisition of one dermatology brand and one respiratory brand from Dr. Reddys Laboratories in February 2022 and our acquisition of Panacea Biotec Pharma Limited and Panacea Biotec Limiteds domestic formulations brand portfolio in February 2022.

Financial indebtedness

As of March 31, 2022, we had total outstanding borrowings (current and non-current) amounting to 8,680.28 million, which primarily consisted of term loans from banks and working capital loans. For further details related to our indebtedness, see "Financial Indebtedness" beginning on page 417.

Capital and Other Commitments

As of March 31, 2022, our estimated amount of contracts remaining to be executed on capital account and not provided for was 1,467.90 million.

The following table sets forth a summary of the maturity profile of our contractual undiscounted cash obligations with definitive payment terms as of March 31, 2022:

		Payment due by period
	Total	Less than one year	More than one year
	( in millions)
Borrowings	8,764.20	8,237.38	526.82
Lease liabilities	67.22	23.87	43.35
Trade payables	10,763.77	10,763.77
Other financial liabilities	2,214.90	2,214.90
Total	21,810.09	21,239.92	570.17

Contingent Liabilities

The following table sets forth a breakdown of our contingent liabilities (as per Ind AS 37) as of March 31, 2022 derived from the Restated Consolidated Summary Statements:

Nature of Contingent Liabilities	As of March 31, 2022
	( in millions)
A. Claims against us not acknowledged as debts:
Sales tax including goods and services tax	29.16
Income tax demands on various items	493.52
Commercial taxes	1.81
B. Contingent in respect of input credit availed under GST Act:	80.45

Off-Balance Sheet Commitments and Arrangements

We do not have any off-balance sheet arrangements, derivative instruments, swap transactions or relationships with affiliates or other unconsolidated entities or financial partnerships that would have been established for the purpose of facilitating off-balance sheet arrangements.

Quantitative and Qualitative Analysis of Market Risks

We are exposed to various types of market risks during the normal course of business. The market risks we are exposed to include credit risk, liquidity risk, interest rate risk, commodity price risk and foreign currency risk.

Credit risk

Credit risk is the risk that the counter party will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities, primarily from trade receivables, and from our financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

We manage our credit risk through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which we grant credit terms in the normal course of business. We establish an allowance for doubtful debts and impairment that represents our estimate of incurred losses in respect of trade and other receivables and investments. The loans we advance carry interest and are granted after evaluating the purpose and credit worthiness of the counter party. The loans advanced are backed by personal guarantee of the director of the counter party. Moreover, given the diverse nature of our business, trade receivables are spread over a number of customers with no significant concentration of credit risk.

In addition, we hold bank balances with reputed and creditworthy banking institutions within the approved exposures limit of each bank. None of our cash equivalents, including time deposits with banks, are past due or impaired. Credit risk from balances with banks and financial institutions is managed by our treasury department in accordance with our policy. Investments of surplus funds are made in bank deposits and other risk free securities. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterpartys potential failure to make payments.

Liquidity risk

Liquidity risk is defined as the risk that we will not be able to settle or meet our obligations on time or at reasonable price. Our objective is to at all times maintain optimum levels of liquidity to meet our cash and liquidity requirements. We closely monitor our liquidity position and deploy a robust cash management system. We maintain adequate sources of financing through the use of short term bank deposits and cash credit facilities. Processes and policies related to such risks are overseen by senior management, who monitor our liquidity position through rolling forecasts on the basis of expected cash flows.

Interest rate risk

Interest rate is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We are exposed to market risk with respect to changes in interest rates related to our borrowings. Interest rate risk exists with respect to our indebtedness that bears interest at floating rates tied to certain benchmark rates as well as borrowings where the interest rate is reset based on changes in interest rates set by RBI. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the RBI, domestic and international economic and political conditions, inflation and other factors. Upward fluctuations in interest rates increase the cost of servicing existing and new debts, which adversely affects our results of operations and cash flows. As a part of our interest rate risk management policy, our treasury department closely tracks interest rate movements on a regular basis and determines investments of surplus funds.

Commodity price risk

Exposure to market risk with respect to commodity prices primarily arises from our purchases and sales of APIs, including the raw material components for such APIs. These are commodity products, the prices of which may fluctuate significantly over short periods of time. The prices of our raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in our API business are generally more volatile. Cost of raw materials forms the largest portion of the our cost of revenues. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies. As of March 31, 2022, March 31, 2021 and March 31, 2020, we had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to our operating activities (when revenue or expense is denominated in a foreign currency). Foreign currency exchange rate exposure is partly balanced by purchasing of goods from the respective countries. We evaluate our exchange rate exposure arising from foreign currency transactions and follow established risk management policies.

Unusual or Infrequent Events or Transactions

Except as disclosed in this Draft Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or transactions that have in the past or may in the future affect our business operations or future financial performance.

Known Trends or Uncertainties

Our business has been subject, and we expect it to continue to be subject, to the trends identified above in "

Significant Factors Affecting our Results of Operations" and " Recent Developments" and the uncertainties described in "Risk Factors", beginning on pages 423, 428 and 75, respectively. Except as disclosed in this Draft Red Herring Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

Significant Economic Changes

Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations. See "Risk Factors" and " Significant Factors Affecting our Results of Operations" on pages 75 and 423, respectively.

Future Relationship between Cost and Revenue

Other than as described in "Risk Factors", "Our Business" and above in " Significant Factors Affecting our Results of Operations" beginning on pages 75, 198 and 423, respectively, to our knowledge, there are no known factors that may adversely affect our business prospects, results of operations and financial condition.

New Products or Business Segments

Except as disclosed in this Draft Red Herring Prospectus, including as described in "Our Business" beginning on page 198, there are no new products or business segments that have or are expected to have a material impact on our business prospects, results of operations or financial condition.

Segment Reporting

Our Companys chief operating decision maker ("CODM") is the Managing Director of our Company. Our

CODM has identified pharmaceuticals and other related products as our only reportable segment, as our main business is manufacturing and trading of pharmaceutical and other healthcare products in India. As we have only one reportable segment, no further disclosures for business segments have been given in the Restated Consolidated Summary Statements as per Ind AS 108.

Supplier or Customer Concentration

We do not have any material dependence on a single or few suppliers. We have a wide customer base and do not have any material dependence on any particular customer.

Competitive Conditions

We operate in a highly competitive industry and we expect competition from existing and new competitors to intensify. For details, please refer to the discussions of our competition in the sections "Risk Factors", "Our Business" and "Industry Overview" beginning on pages 75, 198 and 167, respectively, of this Draft Red Herring Prospectus.

Seasonality

Our business is subject to seasonal variations. We typically experience higher sales (by approximately 10%) during the first half of the Financial Year as compared to the second half of the Financial Year due to changes in the climatic conditions prevailing in India. See "Risk Factors Internal Risk Factors Risks Related to Our Business The sale of our products may be affected by seasonal factors." on page 96.

Change in Accounting Policies

There have been no material changes in our accounting policies for the Financial Years 2020, 2021 and 2022.

Significant Developments Occurring after March 31, 2022

Except as disclosed in this Draft Red Herring Prospectus, there are no circumstances that have arisen since March 31, 2022, the date of the last financial statements included in this Draft Red Herring Prospectus, which materially and adversely affect or is likely to affect our operations or profitability, or the value of our assets or our ability to pay our material liabilities within the next twelve months.

Recent Accounting Pronouncements

As of the date of this Draft Red Herring Prospectus, there are no recent accounting pronouncements, which would have a material effect on our financial condition or results of operations.