Ranbaxy Laboratories Limited ('the Company') together with its subsidiaries and associates, operates as an integrated international pharmaceutical organisation with businesses encompassing the entire value chain in the marketing, production and distribution of pharmaceutical products.

The Company's shares are listed for trading on the National Stock Exchange Limited ("NSE") and the Bombay Stock Exchange Limited ("BSE") in India. Its Global Depository Shares (representing equity shares of the Company) are listed on the Luxembourg Stock Exchange. The Company has also issued redeemable non-convertible debentures which are listed for trading on the NSE in India.

2. Employee share-based payment plans

The Company's Employee Stock Option Schemes ("ESOSs") provide for the grant of stock options to eligible employees and Directors of the Company and its subsidiaries. The ESOSs are administered by the Compensation Committee ("Committee") of the Board of Directors of the Company. Options are granted at the discretion of the committee to selected employees depending upon certain criterion. As at 31 March 2014, there were four ESOSs, namely, "ESOS I", "ESOSII", "ESOS 2005" and "ESOP 2011".

The ESOSs limits the maximum grant of options to an employee at 25,000 for ESOS I, 40,000 for ESOS II and 300,000 for ESOS 2005 in any given year. ESOS I and II provide that the grant price of options is to be determined at the average of the daily closing price of the Company's equity shares on the NSE during a period of 26 weeks preceding the date of the grant. ESOS 2005 provides that the grant price of options will be the latest available closing price on the stock exchange on which the shares of the Company are listed, prior to the date of the meeting of the Committee in which the options are granted. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered. The options vests evenly over a period of fve years from the date of grant. Options lapse, if they are not exercised prior to the expiry date, which is ten years from the date of grant.

During the year ended 31 December 2011, the Company had introduced a new ESOS scheme namely Ranbaxy Employees Stock Option Plan 2011 "ESOP - 2011" with effect from 1 July 2011. This scheme limits the maximum grant of options to an employee or a director at 30,000 in any given year. ESOP - 2011 provides that the grant price will be the face value of the equity share. The options vests evenly over a period of three years from the date of grant. Options lapse, if they are not exercised prior to the expiry date, which is three months from the date of the vesting. The Company has formed the ESOP Trust to administer ESOP - 2011 scheme. The Company will issue shares to the Trust which will allocate the shares to the respective employees upon exercise of stock options from time to time under ESOP - 2011.

3. Hedging and derivatives

a) The Company uses various forms of derivative instruments such as foreign exchange forward contracts (including instruments which are in substance forward contracts), options, currency swaps, currency cum interest rate swaps and interest rate swaps to hedge its exposure to movements in foreign exchange and interest rates. These derivatives are not used for trading or speculation purposes.

b) The Company classifes some of its derivative contracts that hedge foreign currency risk associated with highly probable forecasted transactions as cash fow hedges and measures them at fair value. As at 31 March 2014, there are no such derivative contracts which are classifed as cash fow hedges. As at 31 December 2012, these highly probable forecasted transactions were expected to occur over a period from January 2013 to July 2013 years which also approximated/ coincided with maturity of hedging instruments. The effective portion of such cash fow hedges was recorded as part of reserves and surplus within "hedging reserve" and re-classifed in the Statement of Proft and Loss in the period corresponding to the occurrence of the highly probable forecasted transactions. The ineffectiveness arising from cash fow hedges which was recognised in Statement of Proft and Loss was not material.

The following are the outstanding derivative contracts entered into by the Company:

4. Related party disclosures

A] Names of related parties

Related parties (where control exists) with whom no transactions have taken place during the current period or previous year:

i) Subsidiaries including step down subsidiaries

Vidyut Investments Limited, India

Ranbaxy Signature LLC, USA

Be-Tabs Investments (Proprietary) Ltd, South Africa

S.C. Terapia Distributie S.R.L., Romania (Merged with S.C. Terapia S.A., Romania w.e.f. 7 February 2012)

Offce Pharmaceutique Industriel et Hospitalier SARL, France

Ranbaxy Holdings (UK) Ltd., United Kingdom ('U.K.')

Ranbaxy Do Brazil Ltda., Brazil (Liquidated on 7 November 2012)

Ranbaxy Pharma AB, Sweden (Liquidated on 2 January 2014)

Ranbaxy GmbH, Germany (from 9 November 2012)

Ranbaxy Laboratories Inc., USA

Ranbaxy (Thailand) Co., Limited (from 20 February 2013)

Related parties with whom transactions have taken place during the current period or previous year:

i) Holding company (also being the ultimate holding company)

Daiichi Sankyo Company Limited, Japan

ii) Fellow subsidiaries

Daiichi Sankyo India Pharma Private Limited, India Daiichi Sankyo Development Limited, U.K. Daiichi Sankyo Propharma Co., Ltd., Japan Daiichi Sankyo Espha Co. Ltd., Japan Daiichi Sankyo, Inc., USA Daiichi Sankyo Venezuela S.A., Venezuela Daiichi Sankyo Chemical Pharma Co., Ltd., Japan Ranbaxy Mexico S.A.de C.V, Mexico Daiichi Sankyo Europe GmbH, Germany

iii) Subsidiaries including step down subsidiaries / partnership frms

Ranbaxy Drugs and Chemicals Company, India (Company with unlimited liability) #

Solus Pharmaceuticals Limited, India #

Ranbaxy SEZ Limited, India #

Rexcel Pharmaceuticals Limited, India #

Ranbaxy Life Sciences Research Limited, India #

Gufc Pharma Limited, India

Ranbaxy Drugs Limited, India

Solrex Pharmaceuticals Company, India (a Partnership frm)

Ranbaxy (Hong Kong) Limited, Hong Kong @

Ranbaxy Inc., USA

Ranbaxy USA, Inc., USA

Ranbaxy Egypt (L.L.C.), Egypt

Ranbaxy Farmaceutica Ltda., Brazil

Ranbaxy PRP (Peru) SAC, Peru

Ranbaxy Australia Proprietary Ltd., Australia

Daiichi Sankyo (Thailand) Limited, Thailand [formerly known as Ranbaxy Unichem Co. Ltd., Thailand (subsidiary upto 30 September 2013)] $

Ranbaxy Italia S.p.A, Italy

Ranbaxy Malaysia Sdn. Bhd., Malaysia

Ranbaxy Poland S.P. Zoo, Poland

Ranbaxy Nigeria Limited, Nigeria

Ranbaxy Europe Limited, U.K.

Ranbaxy (UK) Limited, U.K.

Basics GmbH, Germany

ZAO Ranbaxy, Russia

S.C. Terapia S.A., Romania

Ranbaxy Pharmaceuticals, Inc., USA

Ohm Laboratories, Inc., USA

Ranbaxy Ireland Limited, Ireland

Ranbaxy South Africa Proprietary Limited, South Africa

Laboratorios Ranbaxy S.L., Spain

Ranbaxy Pharmacie Generiques SAS, France

Ranbaxy Pharmaceuticals Canada Inc., Canada

Sonke Pharmaceuticals (Proprietary) Ltd, South Africa

Ranbaxy Portugal - Com E Desenvolv DeProd Farmaceuticos Unipessoal Lda, Portugal

Ranbaxy Belgium N.V., Belgium

Be-Tabs Pharmaceuticals (Proprietary) Ltd, South Africa

Rexcel Egypt (L.L.C.), Egypt

Ranbaxy Morocco LLC, Morocco

Ranbaxy Pharmaceuticals Ukraine LLC, Ukraine (from 13 June 2012)

Ranbaxy (Netherlands) B.V., The Netherlands

iv) Associate company

Zenotech Laboratories Limited, India

Daiichi Sankyo (Thailand) Limited, Thailand [formerly known as Ranbaxy Unichem Co. Ltd., Thailand, (an associate w.e.f. 1 October 2013)] $

v) Key management personnel

Mr. Arun Sawhney, CEO and Managing Director

# Refer to note 14 for details on merger of these subsidiaries with RDL

@ Refer to note 18 for details of liquidation of the entity during the current period

$ Refer to note 14 for details on business integration with Daiichi Sankyo (Thailand) Ltd.

5. The Board of Directors at their meeting held on 6 April 2014, approved the Scheme of Arrangement providing inter-alia reduction of capital and merger of the Company with M/s. Sun Pharmaceutical Industries Limited (SPIL) with effect from the appointed date of 1 April 2014. As per the Scheme, the share exchange ratio has been proposed as 0.8 share of SPIL for each share of the Company. The scheme is subject to requisite approvals from Hon'ble High Courts of Gujarat and Punjab & Haryana and various other statutory authorities, as may be required.

6. As at 31 March 2014, the accumulated losses of the Company have exceeded 50% of the peak net worth of the Company in the immediately preceding four fnancial years. Hence, the Company has become a potentially sick company in terms of the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and requisite compliances under this Act would be made by the Company.

7. During the previous year, the Company had made a voluntary recall of Atorvastatin Calcium Tablets from the USA market. The amount recognised in the Statement of Proft and Loss represents consequential cost (sales return, inventory write off and customer claim) recognised by the Company.

8. a) The Company has, during the ffteen months ended 31 March 2014, received an 'import alert' from the Food and Drug Administration of the USA ('US FDA') on its manufacturing facility located in Mohali consequent to their inspection in 2012, whereby US FDA regulated drugs could not be supplied there from. The US FDA also advised that the Mohali manufacturing facility will be subject to certain terms of the Consent Decree of permanent injunction entered into by the Company in January 2012 ('Consent Decree'). Consequently, stock write off and other costs of Rs. 695.14 has been recognised in these fnancial statements. It is expected that the concerns of US FDA would be resolved within a reasonable period leading resumption of supply to US market.

b) (i) The US FDA conducted an inspection at the Company's manufacturing facility located in Toansa in January 2014.

Consequent to the fndings of the inspection, on 23 January 2014, the US FDA invoked the Consent Decree prohibiting the Company from manufacturing and distributing APIs from its Toansa manufacturing facility and fnished drug products containing APIs manufactured at this facility into the US regulated market. The Company has since progressed in investigating the fndings of the US FDA (as contained in Form 483) and has submitted its response to the US FDA.

(ii) Subsequent to the imposition of the Consent Decree at the Toansa manufacturing facility as mentioned above, regulators in some jurisdictions including those of European Union ('EU') countries have sought clarifcations/ took actions in respect of shipments from Toansa manufacturing facility. The Company is in dialogue with these regulatory agencies and is addressing their concerns. The Company expects to resume API bulk shipments to EU countries from Toansa manufacturing facility upon receipt of clearances from relevant regulatory authorities.

(iii) The Department of Justice of the USA US DOJ'), United States Attorney's Offce for the District of New Jersey has issued an administrative subpoena dated 13 March 2014 to the Company seeking information primarily related to the Company's API Toansa manufacturing facility in India for which a Form 483 was issued by US FDA in January 2014 (as explained in (i) above). The Company is fully cooperating with this information request and is in dialogue with the US DOJ for submission of the requisite information.

(iv) During the quarter ended 31 March 2014, the Company has temporarily put on hold its operations from API manufacturing facilities at Toansa to examine the manufacturing and quality processes and controls, voluntarily as a precautionary measure. The same is expected to be resumed shortly.

(v) The management is taking all necessary steps to resolve the above matters to the satisfaction of the concerned authorities. However, considering the above matters relating to the Toansa manufacturing facility, provisions (primarily relating to inventories, trade commitments, sales return etc.), amounting to Rs. 2,862.78 have been recognised in these fnancial statements. In calculating these provisions, the management has used the best information and estimates, presently available. Since the matter involves signifcant judgement and in view of the inherent uncertainty of the present situation, the actual amounts may differ eventually.

c) During the quarter ended 31 March 2014, the Company has temporarily put on hold its operations from API manufacturing facility at Dewas to examine the manufacturing and quality processes and controls, consequent to receipt of certain internal information. Consequent to the fndings of the above exercise, the carrying amount of inventory has been written down by Rs. 424. The attribution of this amount to any particular period/ year is not possible. The Company expects to resume the operations shortly.

9. Contingent liabilities and commitments

(to the extent not provided for)

                                                   As at         As at
                                                31 March   31 December
                                                    2014          2012

i) Guarantees

(a) Letter of comfort on behalf of subsidiaries, to the extent of limits 6,443.81 3,470.41

(b) Corporate bank guarantee on behalf of 
an associate, to the extent of limits                  -        120.00

(a) DPCO *                                      3,052.88      2,290.41

(b) European Commission **                        843.57             - 

(c) Trade commitments                             582.61             -

(d) Service tax matters $                         156.00             -

(e) Octroi tax matters #                          171.00        171.00

(f) Other matters ##                              228.93        195.12

** Fine imposed on Ranbaxy Laboratories Limited, India and Ranbaxy (UK) Limited, U.K. for anti-competitive settlement agreement by European Commission. $ The Company has received show cause notice demanding service tax on certain services performed outside India

under reverse charge basis.

# The Company has been contesting a case with the Municipal Corporation of Mohali (MCM) under which MCM is contesting that Octroi has to be paid by the Company at 1% as against 0.5% being paid by the Company. The amount above represents the difference payable.

## These represent cases pending at various forums on account of employee / worker related cases, State electricity board, Punjab Land Preservation Act, Sales tax, Excise duty related matters etc.

iii) In respect of matters in ii) above, the amount represents the demands received under the respective demand/ show cause notices/ legal claims, wherever applicable.

iv) Based on direction received in relation to the draft assessment order of Assessment Year (AY) 2008-09, Dispute Resolution Panel ("DRP") under the provisions of section 144Cofthe Income Tax Act, 1961, had instructed the Assessing Offcer ("AO") to make additions/ disallowances on various issues including Transfer Pricing and deductions claimed under section 80-IB/IC of the Act to taxable income of the Company. The Company received the fnal assessment order from the AO in November 2012 whereby demand of Rs 443.39 has been raised against the Company, which has been paid by the Company under protest in full. The Company has challenged the order before the Hon'ble Income Tax Appellate Tribunal ("ITAT") and pending disposal of the matter, the management considers the amount of tax liability as unascertainable.

During January 2014, the Company has received assessment order for AY 2009-10 from the AO making certain additions/ disallowances on various issues including Transfer Pricing and deductions claimed under section 80-IB/IC of the Income Tax Act, 1961, which has the effect of reducing the business loss for the referred year. Since, these additions/disallowances have been made pursuant to directions received from DRP, the Company has challenged the order before the Hon'ble ITAT. Pending disposal of the matter, the management considers the impact as unascertainable. During March 2014, the Company has received a draft assessment order for AY 2010-11 from the AO proposing certain additions/ disallowances including deductions claimed under section 80-IB/IC of the Income Tax Act, 1961, to its taxable income for the referred year, which has the effect of reducing the carry forward accumulated tax losses. The Company has not accepted the same and has fled its objections before the DRP. Pending disposal of the matter, the management considers the impact as unascertainable.

v) The Company, directly or indirectly through its subsidiaries, severally or jointly is also involved in certain patents and product liability disputes as at the period end. Due to the nature of these disputes and also in view of signifcant uncertainty of outcome, the Company believes that the amount of exposure cannot be currently determinable.

Commitments

i) Estimated amount of contracts remaining to be executed on capital account and not 470.54 757.97 provided for (net of advances)

ii) Non cancellable lease commitments (Refer to note 30) 272.65 448.04

10. During the current period, the Company has transferred all signifcant risks and rewards of ownership of the Intellectual Property of its branded generic product 'Ketanov' (including technology/ know-how, brand, marketing, authorisations, dossiers etc.) to its subsidiary in Romania. The sales consideration of Rs. 4,327.69 has been determined by the management on the basis of a valuation report by an expert, using best estimates. Pursuant to the transaction, the Company has recorded a gain of Rs. 4,327.69 (previous year Nil), which has been disclosed as exceptional item in the Statement of Proft and Loss.

11. Segment information

In accordance with AS 17, "Segment Reporting", segment information has been given in the consolidated fnancial statements of the Company, and therefore, no separate disclosure on segment information is given in these fnancial statements.