sun pharmaceuticals industries ltd share price Auditors report


<dhhead>Independent Auditor’s Report</dhhead>

To the Members of Sun Pharmaceutical Industries Limited

 

Report on the Audit of the Standalone Ind AS financial statements Opinion

We have audited the accompanying standalone Ind AS financial statements of Sun Pharmaceutical Industries Limited (the "Company"), which comprise the Balance sheet as at March 31, 2023, the Statement of Profit and Loss, including the statement of Other Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone Ind AS financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Companies Act, 2013, as amended (the "Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, its profit including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

 

Basis for Opinion

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

 

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements for the financial year ended March 31, 2023. These matters were addressed in the context of our audit of the standalone Ind AS financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. For each key audit matter below, our description of how our audit addressed the matter is provided in that context.

We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the ‘Auditor’s responsibilities for the audit of the standalone Ind AS financial statements’ section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone Ind AS financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying standalone Ind AS financial statements.

Key audit matter

How our audit addressed the key audit matter

Litigations (as described in Note 39 of the standalone Ind AS financial statements)

Our audit procedures amongst others included the following:

The Company is involved in various legal proceedings including product liability, contracts, employment claims, Department of Justice (DOJ) investigations, anti-trust and other regulatory matters relating to conduct of its business.

• Evaluated the design and tested the operating effectiveness of controls in respect of the identification and evaluation of litigations, the recording / re-assessment of the related liabilities, provisions and disclosures.

. The eventual outcome of the litigations is uncertain and estimation at balance sheet date involves extensive judgement of management including input from legal counsel due to complexity of each litigation. Adverse outcomes could significantly impact the Company’s reported results and balance sheet position.

• Obtained a list of litigations from the Company’s in-house legal counsel; identified material litigations from the aforementioned list and performed inquiries with the said counsel; obtained and read the underlying documents to assess the assumptions used by management in arriving at the conclusions.

The Company assesses the need to make provision or to disclose a contingent liability on a case-to-case basis considering the underlying facts of each litigation

• Circulated, obtained and read legal confirmations from Company’s external legal counsels in respect of material litigations and considered that in our assessment.

Considering the judgement involved in determining the need to make a provision or disclose as contingent liability, the matter is considered a Key Audit Matter.

• Verified the disclosures related to provisions and contingent liabilities in the standalone Ind AS financial statements to assess consistency with underlying documents.

 

Key audit matter

How our audit addressed the key audit matter

Tax litigations and recognition of deferred tax assets (as described in Note 9 and 39 of the standalone Ind AS financial statements)

Our audit procedures amongst others included the following:

The Company has significant tax litigations for which the Company assesses the outcome on a case-to-case basis considering the underlying facts of each tax litigation. Adverse outcomes could significantly impact the Company’s reported results and balance sheet position.

• Evaluated the design and tested the operating effectiveness of controls in respect of the identification and evaluation of tax litigations/deferred tax and the recording and re-assessment of the related liabilities/assets and provisions and disclosures.

The assessment of outcome of litigations involves significant judgement which is dependent on the facts of each case, supporting judicial precedents and legal opinions of external and internal legal counsels and hence the matter has been considered as a Key Audit Matter.

• Obtained list of ongoing tax litigations from management along with their assessment of the cases based on past precedents, judgements and matters in the jurisdiction, legal opinions sought by management, correspondences with tax department etc.

Recognition of deferred tax assets involves the assessment of its recoverability within the allowed time frame requiring significant estimate of the financial projections, availability of sufficient taxable income in the future and also involving significant judgements in the interpretation of tax regulations and tax positions adopted by the Company. Considering the judgement involved in determining the recovery of deferred tax assets, the matter is considered a Key Audit Matter.

• Engaged tax experts, to evaluate management’s assessment of the outcome of these litigations. Our experts considered legal precedence and other rulings in evaluating managements position on these tax litigations.

• Tested management’s assumptions including forecasts and sensitivity analysis in respect of recoverability of deferred taxes on unabsorbed depreciation/carry forward losses/Minimum Alternate Tax (MAT) credit.

• Verified disclosures of the tax positions, tax loss carry forwards and tax litigations in the standalone Ind AS financial statements.

 

Identification and disclosures of Related Parties (as described in Note 50 of the standalone Ind AS financial statements)
The Company has related party transactions which include, amongst others, sale and purchase of goods/services to its subsidiaries, associates, joint ventures and other related parties and lending, investment and borrowing to/from its subsidiaries, associates and joint ventures.

Our audit procedures amongst others included the following:

• Evaluated the design and tested the operating effectiveness of controls over identification and disclosure of related party transactions.

• Obtained a list of related parties from the Company’s management and traced the related parties to declarations given by directors, where applicable, and to Note 50 of the standalone Ind AS financial statements.

Identification and disclosure of related parties was a significant area of focus and hence is considered a Key Audit Matter.

• Read minutes of the meetings of the Board of Directors and Audit Committee and traced related party transactions with limits approved by Audit Committee / Board.

• Read declarations of related party transactions given to the Board of Directors and Audit Committee.

• Verified the disclosures in the standalone Ind AS financial statements for compliance with Ind AS 24.

 

Assessment of recoverable amount of Investment in Sun Pharma Holdings, Mauritius (as described in Note 55(2a) of the standalone Ind AS financial statements)
The Company has total investments in subsidiaries of

Our audit procedures amongst others included the following:

1,53,395.3 Million for which it conducted an annual impairment test. During the year ended March 31, 2023, the Company considered an impairment allowance of 29,377.9 Million based on its assessment of the recoverable amount of Investment in Sun Pharma Holdings, Mauritius. The net value of investment in Sun Pharma Holdings, Mauritius after considering this allowance is 66,705.8 Million.

• Evaluated the design and tested the operating effectiveness of controls over impairment assessment of investments.

Due to the significance of the balances involved and significant estimates and judgements concerning the estimated future cash flows, associated discount rates and growth rates based on management’s view of future business prospects, changes to which could lead to material changes in the estimated recoverable amount, this has been considered as a Key Audit Matter.

• Obtained the Company’s computation of recoverable amount and tested the mathematical accuracy and reasonableness of key assumptions.

• Evaluated the objectivity, competency and independence of the experts engaged by the Company and reviewed the valuation reports issued by such experts.

• Assessed the cash flow forecasts through analysis of actual past performance, and comparison to previous forecasts.

• With the involvement of our experts, assessed the assumptions around the key drivers of the cash flow forecasts and methodologies used by Management and experts to determine the recoverable amount.

• Assessed the conclusions reached by management and those charged with governance on account of various estimates and judgements.

• Evaluated the disclosures in the standalone Ind AS financial statements.

 

Other intangible assets (as described in Note 4 of the standalone Ind AS financial statements)
The Company has significant intangible assets, comprising product intangibles and acquired trademarks. The Company conducts an annual impairment testing of intangible assets.

Our audit procedures amongst others included the following:

Significant judgements are used to estimate the recoverable amount of these intangible assets and hence is considered as a Key Audit Matter.

• Evaluated the design and tested the operating effectiveness of management’s controls in assessing the carrying value of intangible assets.

• Obtained the Company’s computation of recoverable amount and tested the mathematical accuracy and reasonableness of key assumptions.

• Obtained and evaluated management’s sensitivity analysis to ascertain the impact of changes in key assumptions.

• Evaluated the disclosures in the standalone Ind AS financial statements.

 

Key audit matter

How our audit addressed the key audit matter

Information security incident (as described in Note 55(11) of the standalone Ind AS financial statements)

Our audit procedures amongst others included the following:

On March 1, 2023, the Company experienced an Information

• Made inquiries with the Company’s Chief Information Officer and Chief Financial Officer to understand their assessment of the Incident and the measures in place to mitigate this risk, focusing on the principal financial systems used in the preparation of the Financial Statements.

security incident related to ransomware wherein certain IT systems and data contained therein were impacted ("Incident").

• Read the reports of the external consultants, engaged by management, to gain an understanding of the cause of the Incident and its impact on IT systems including financial systems.

In response to this incident, the Company engaged external consultants to analyse the Incident and restore the IT systems.

• Inquired into the measures taken by management to restore the systems and augment the existing security controls across the organization.

The Company also assessed the compliance requirements arising due to this Incident including inputs from internal legal counsel.

• Obtained a representation from Management in consultation with the Company’s internal legal counsel to determine whether Incident resulted in any violation of laws/regulations applicable in jurisdictions where Company operates.

The Company took certain measures to protect its core operational and financial systems which resulted into modifications in the internal control systems and processes including those relating to financial reporting.

• Considered information from our internal experts and evidence from our other audit procedures, in order to assess whether any contradictory evidence exists which suggests the financial systems have been compromised.

The Company has taken certain immediate steps and is also implementing certain long-term measures to augment its security controls systems across the organization.

• Performed following procedures considering the facts above:

We have identified this as a key audit matter as it was an area of significant auditor attention which included critical assessment of the principal financial systems and internal controls used in /relied on for the preparation of the Standalone Ind AS financial statements.

- Tested alternate internal controls over financial reporting implemented by Management during the period of breach.

- Revisited and extended the nature, timing and extent of the planned substantive procedures arising out of the Incident.

- Obtained management’s assessment of the impact on internal controls over financial reporting pertaining to this Incident.

• Assessed the related disclosures to the financial statements.

 

Other Information

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

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

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

 

Responsibilities of Management for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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

Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.

 

Auditor’s Responsibilities for the Audit of the Standalone Ind AS Financial Statements

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

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone Ind AS financial statements for the financial year ended March 31, 2023 and are therefore key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2020 (the "Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the "Annexure 1" a statement on the matters specified in paragraphs 3 and 4 of the Order.

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

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

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

(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended;

(e) On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) With respect to the adequacy of the internal financial controls with reference to these standalone Ind AS financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure 2" to this report;

(g) In our opinion, the managerial remuneration for the year ended March 31, 2023 has been paid / provided by the Company to its directors in accordance with the provisions of section 197 read with Schedule V to the Act;

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

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements – Refer Note 39 to the standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts – Refer Note 25 and 29 to the standalone Ind AS financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company, except a sum of 1.4 Million which has been kept in abeyance due to pending legal cases.

iv. (a) The management has represented that, to the best of its knowledge and belief and read with note 55(21) to the standalone Ind AS financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented that, to the best of its knowledge and belief and read with note 55(21) to the standalone Ind AS financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on such audit procedures that were considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b) contain any material misstatement.

v. The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with section 123 of the Act to the extent it applies to payment of dividend.

The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with section 123 of the Act.

As stated in note 43 to the standalone Ind AS financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.

vi. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company only w.e.f. April 1, 2023, reporting under this clause is not applicable.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003 per Paul Alvares

Partner

Membership Number: 105754 UDIN: 23105754BGQUOQ4724 Place of Signature: Mumbai Date: May 26, 2023

 

Annexure 1 referred to in paragraph 1 of our report of even date under the heading "Report on Other Legal and Regulatory Requirements"

Re: Sun Pharmaceutical Industries Limited (the "Company")

In terms of the information and explanations sought by us and given by the company and the books of account and records examined by us in the normal course of audit and to the best of our knowledge and belief, we state that:

i. (a) (A) The Company has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment.

(B) The Company has maintained proper records, where relevant, showing full particulars of intangible assets.

(b) All Property, Plant and Equipment have not been physically verified by management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.

(c) The title deeds of immovable properties (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in note 3(a) to the standalone Ind AS financial statements included in property, plant and equipment are held in the name of the Company, except for the following immovable properties for which registration of title deeds is in process:

Description

Held in name of

Gross Carrying value ( Millions)

Whether promoter, director or their relative or employee

Period held – (In Years)

Reason for not being held in name of company*

Freehold Land

Ranbaxy Drugs Limited

2.7

8

The title deeds are in the name

Freehold Land

Ranbaxy Laboratories Limited

123.1

8

of erstwhile companies that were merged with the Company

Leasehold Land

Ranbaxy Laboratories Limited

2.9

8

under relevant provisions of

Freehold Land including

Solrex Pharmaceuticals

95.9

No

6

the Companies Act, 1956/2013

building located thereon

Company

in terms of approval of the

Freehold Land including building located thereon

Tamilnadu Dadha Pharmaceuticals Limited

3.6

26

Honorable High Courts of respective states.

Building

Various

4.1

No

6

The title deeds are in the name of erstwhile company that was merged with the Company in

Building

Sun Pharma Global FZE

89.9

2

terms of approval of National Company Law Tribunal (NCLT).

 

* In respect of building where the Company is entitled to the right of occupancy and use and disclosed as property, plant and equipment in the standalone Ind AS financial statements, we report that the instrument entitling the right of occupancy and use of building, are in the name of the Company as at the balance sheet date.

(d) The Company does not follow the revaluation model for subsequent measurement of its Property, Plant and Equipment (including Right of use assets) or intangible assets. Accordingly, the requirement to report on clause 3(i) (d) of the Order is not applicable to the Company and hence not reported upon.

(e) There are no proceedings initiated or pending against the Company for holding any benami property under the Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder. Accordingly, the requirement to report on clause 3(i)(e) of the Order is not applicable to the Company and hence not reported upon.

(ii) (a) Inventory has been physically verified by management during the year except for inventories lying with third parties which have been confirmed by them. In our opinion, the frequency of verification by management is reasonable and the coverage and procedure for such verification is appropriate. No discrepancies of 10% or more in aggregate for each class of inventory were noticed in respect such inventories.

(b) The Company has not been sanctioned working capital limits in excess of five crores in aggregate from banks or financial institutions during the year on the basis of security of current assets. Accordingly, the requirement to report on clause 3(ii)(b) of the Order is not applicable to the Company and hence not reported upon.

(iii) (a) During the year the Company has provided loan to subsidiaries and employees, the details of which are as follows:

Amount in

Particulars

Million

Aggregate amount provided during the year to –
– Subsidiaries

159.2

– Employees

211.5

Balance outstanding as at balance sheet date in respect of above cases
– Subsidiaries

159.2

– Employees

105.3

 

During the year the Company has not provided advances in the nature of loans, stood guarantee or provided security to any entity and hence not commented upon by us.

(b) During the year, the investments made and the terms and conditions of the grant of all loans to companies or any other parties are not prejudicial to the Company’s interest. The Company has not provided guarantees, given security or granted advances in nature of loans during the year and hence not commented upon by us.

(c) The Company has granted loans to subsidiaries where the schedule of repayment of principal and payment of interest has been stipulated and the repayment or receipts have been regular except in the following cases:

Name of the Entity (Wholly owned subsidiary)

Amount (in million)

Due date

Date of payment

Extent of delay

Remarks, if any

Sun Pharmaceutical Industries Inc.

32.2

22-05-2022

07-06-2022

17 days

Interest

Sun Pharmaceutical Industries Inc.

67.4

08-06-2022

13-06-2022

6 days

Interest

Sun Pharma Netherlands BV

10.2

21-05-2022

02-06-2022

13 days

Interest

 

(d) There are no loans granted which are overdue for more than ninety days as at March 31, 2023. Accordingly, we have not commented on the steps taken by the Company for recovery of the principal and interest.

(e) There were no loans granted to companies which had fallen due during the year. There were no advances in the nature of loan granted to companies, firms, Limited Liability Partnerships or any other parties and hence not commented upon by us.

(f) The Company has not granted any loans or advances in the nature of loans, either repayable on demand or without specifying any terms or period of repayment. Accordingly, the requirement to report on clause 3(iii)(f) of the Order is not applicable to the Company and hence not reported upon.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 186 of the Act in respect of loans, making investments and providing guarantees and securities as applicable. During the year, the Company has not granted any loans to parties covered under section 185 of the Act. Accordingly, the requirement to report on clause 3(iv) of the Order in respect of section 185 is not applicable to the Company and hence not reported upon.

(v) The Company has neither accepted any deposits from the public nor accepted any amounts which are deemed to be deposits within the meaning of sections 73 to 76 of the Companies Act and the rules made thereunder, to the extent applicable. Accordingly, the requirement to report on clause 3(v) of the Order is not applicable to the Company and hence not reported upon.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148(1) of the Companies Act, 2013, related to the manufacture of applicable pharmaceutical products and are of the opinion that prima facie, the specified accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(vii) (a) Undisputed statutory dues including goods and services tax, provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and other statutory dues have generally been regularly deposited with the appropriate authorities, where applicable, though there has been a slight delay in a few cases. According to the information and explanations given to us and based on audit procedures performed by us, no undisputed amounts payable in respect of these statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(b) The dues of goods and services tax, provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess, and other statutory dues that have not been deposited on account of any dispute, are as follows:

Name of the Statute

Nature of dues

Forum where the dispute is pending

Year to which it pertains

Amount ( million)*

Income Tax Act, 1961

Income taxes, interest, and penalty

Income Tax Appellate Tribunal (ITAT)

AY 2011-12

9.1

Income Tax Act, 1961

Income taxes, Interest, and penalty

Commissioner of Income Tax (Appeals)

Various years from AY 2014-15 to AY 2015-16

68.0

Income Tax Act, 1961

Income taxes and Interest

High Court

AY 2007-08

4.7

The Central Excise Act, 1944

Excise Duty, Interest and Penalty

Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi

Various years from 2003-04 to 2016-17

903.7

The Central Excise Act, 1944

Excise Duty, Interest and Penalty

Commissioner (Appeals)

Various years from 2003-04 to 2017-18

11.0

Finance Act, 1994

Service Tax

COMMISSIONER (APPEALS)

Various years from 2015-16 to 2017-18

29.2

Finance Act, 1994

Service Tax

CESTAT

Various years from 2013-14 to 2017-18

7,011.7

The Goods and Service Tax Act

GST

COMMISSIONER (APPEALS)

2017-18 and 2021-22

206.1

The Goods and Service Tax Act

GST

Assistant Commissioner

2017-18

4.0

Sales Tax Act / VAT (Various States)

Sales Tax, Interest and Penalty

Assistant / Additional / Senior Joint Commissioner

Various years from 1999-00 to 2017-18

39.3

Sales Tax Act / VAT (Various States)

Sales Tax, Interest and Penalty

Appellate Authority

Various years from 1998-99 to 2017-18

10.7

Sales Tax Act / VAT (Various States)

Sales Tax, Interest and Penalty

Tribunal

Various years from 1998-99 to 2013-14

3.0

Sales Tax Act / VAT (Various States)

Sales Tax, Interest and Penalty

High Court

Various years from 1999-00 to 2017-18

53.5

Custom Act, 1962

Customs Duty, Penalty and Interest

Commissioner (Appeals)

Various years from 2010-11 to 2012-13

2.8

Custom Act, 1962

Customs Duty, Penalty and Interest

Deputy Commissioner

2019-20

183.6

Custom Act, 1962

Customs Duty, Penalty and Interest

CESTAT

Various years from 2010-11 to 2014-15

133.6

 

* Amount includes interest till the date of demand and are net of advances paid/adjusted under protest.

(viii) The Company has not surrendered or disclosed any transaction, previously not recorded in the books of account, in the tax assessments under the Income Tax Act, 1961 as income during the year. Accordingly, the requirement to report on clause 3(viii) of the Order is not applicable to the Company and hence not reported upon.

(ix) (a) The Company has not defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender.

(b) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

(c) Term loans were applied for the purpose for which the loans were obtained.

(d) On an overall examination of the standalone Ind AS financial statements of the Company, no funds raised on short-term basis have been used for long-term purposes by the Company.

(e) On an overall examination of the standalone Ind AS financial statements of the Company, the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures. Accordingly, the requirement to report on clause 3(ix)(e) of the Order is not applicable to the Company and hence not reported upon.

(f) The Company has not raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies. Hence, the requirement to report on clause 3(ix)(f) of the Order is not applicable to the Company and hence not reported upon.

(x) (a) The Company has not raised any money during the year by way of initial public offer/ further public offer (including debt instruments). Hence the requirement to report on clause 3(x)(a) of the Order is not applicable to the Company and hence not reported upon.

(b) The Company has not made any preferential allotment or private placement of shares /fully or partially or optionally convertible debentures during the year under audit and hence, the requirement to report on clause 3(x)(b) of the Order is not applicable to the Company and hence not reported upon.

(xi) (a) Other than the cyber security incident as explained in Note 55(11) of the standalone Ind AS financial statements, no material fraud on the Company has been noticed or reported during the year. Further, no fraud by the Company has been noticed or reported during the year.

(b) During the year, no report under sub-section 12 of section 143 of the Companies Act, 2013 has been filed by cost auditor/secretarial auditor or by us in Form ADT–4, as prescribed under Rule 13 of Companies (Audit and Auditors) Rules, 2014, with the Central Government.

(c) We have read the whistle blower complaints received by the Company during the year. Whilst, these complaints are substantially immaterial, the Company has a process of evaluation and redressal of all such complaints as required by applicable regulations. Post evaluation by the Company, we have considered these complaints in determining the nature, timing and extent of audit procedures.

(xii) The Company is not a Nidhi Company as per the provisions of the Companies Act, 2013. Therefore, the requirement to report on clause 3(xii)(a) to (c) of the Order is not applicable to the Company and hence not reported upon.

(xiii) Transactions with related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the notes to the standalone Ind AS financial statements, as required by the applicable accounting standards.

(xiv) (a) The Company has an internal audit system commensurate with the size and nature of its business.

(b) The internal audit reports of the Company issued till the date of the audit report, for the period under audit have been considered by us.

(xv) The Company has not entered into any non-cash transactions with its directors or persons connected with its directors and hence the requirement to report on clause 3(xv) of the Order is not applicable to the Company and hence not reported upon.

(xvi) (a) The provisions of section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934) are not applicable to the Company. Accordingly, the requirement to report on clause (xvi)(a) of the Order is not applicable to the Company and hence not reported upon.

(b) The Company is not engaged in any Non-Banking Financial or Housing Finance activities. Accordingly, the requirement to report on clause (xvi)(b) of the Order is not applicable to the Company and hence not reported upon.

(c) The Company is not a Core Investment Company as defined in the regulations made by Reserve Bank of India. Accordingly, the requirement to report on clause 3(xvi)(c) of the Order is not applicable to the Company and hence not reported upon.

(d) Based on the information and explanation provided by the management of the Company, there is no Core Investment Company as a part of the Group, hence, the requirement to report on clause 3(xvi)(d) of the Order is not applicable to the Company and hence not reported upon. We have not, however, separately evaluated whether the information provided by the management is accurate and complete.

(xvii) The Company has not incurred cash losses in the current year and in the immediately preceding financial year. Accordingly, the requirement to report on clause 3(xvii) of the Order is not applicable to the Company and hence not reported upon.

(xviii) There has been no resignation of the statutory auditors during the year. Accordingly, the requirement to report on clause 3(xviii) of the Order is not applicable to the Company and hence not reported upon.

(xix) According to the information and explanations given to us and on the basis of the financial ratios disclosed in note 55(14) to the standalone Ind AS financial statements, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the standalone Ind AS financial statements, our knowledge of the

Board of Directors and management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on the date of the audit report that Company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due within a period of one year from the balance sheet date, will get discharged by the Company as and when they fall due.

(xx) (a) In respect of other than ongoing projects, there are no unspent amounts that are required to be transferred to a Fund specified in Schedule VII to the Act, in compliance with second proviso to sub-section 5 of section 135 of the Act. This matter has been disclosed in note 55(10) to the standalone Ind AS financial statements.

(b) There are no unspent amounts in respect of ongoing projects, that are required to be transferred to a special account in compliance of provision of sub-section 6 of section 135 of the Act. This matter has been disclosed in note 55(10) to the standalone Ind AS financial statements.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003 per Paul Alvares

Partner

Membership Number: 105754 UDIN: 23105754BGQUOQ4724 Place of Signature: Mumbai Date: May 26, 2023

 

Annexure 2 to the Independent Auditor’s Report of even date on the Standalone Ind AS financial statements of Sun Pharmaceutical Industries Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (the "Act")

We have audited the internal financial controls with reference to standalone Ind AS financial statements of Sun Pharmaceutical Industries Limited (the "Company") as of March 31, 2023 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

 

Management’s Responsibility for Internal Financial Controls

The Company’s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India ("ICAI"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

 

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls with reference to these standalone Ind AS financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") and the Standards on Auditing, as specified under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both issued by ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to these standalone Ind AS financial statements was established and maintained and if such controls operated effectively in all material respects.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls with reference to these standalone Ind AS financial statements.

 

Meaning of Internal Financial Controls With Reference to these Standalone Ind AS financial statements

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

 

Inherent Limitations of Internal Financial Controls With Reference to Standalone Ind AS financial statements

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

 

Opinion

In our opinion, the Company has, in all material respects, adequate internal financial controls with reference to standalone Ind AS financial statements and such internal financial controls with reference to standalone Ind AS financial statements were operating effectively as at March 31, 2023, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI.

For S R B C & CO LLP

Chartered Accountants

ICAI Firm Registration Number: 324982E/E300003 per Paul Alvares

Partner

Membership Number: 105754 UDIN: 23105754BGQUOQ4724 Place of Signature: Mumbai Date: May 26, 2023