(i) Term Loans from banks referred above to the extent of:

(a) H170.83 crores (Previous year H398.50 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) HNil (Previous year H71.87 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(c) H134.12 crores (Previous year H145.00 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(d) H657.34 crores (Previous year H732.31 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the Company including its future line extensions.

(ii) Non-convertible debentures referred above to the extent of:

(a) H142.67 crores (Previous year H285.28 crores) are secured by first pari-passu mortgage/charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) H500.00 crores (Previous year H500.00 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the Company including its future line extensions.

(iii) Secured working capital demand loans are secured by hypothecation of inventories and book debts.

(iv) Term loans carry interest rate in the range of 7.42% to 8.40% (previous year: 7.65% to 9.60%), working capital loans carry interest rate in the range of 7.10% to 7.55% (previous year: 7.27% to 8.04%) and Non convertible debentures carry interest rate in the range of 8.33% to 9.31% (previous year: 8.47% to 9.11%).

(i) Provision for compensated absences:

All eligible employees are entitled for compensated absences (leaves) while in service and are also eligible for encashment of such compensated absences on separation due to death, retirement, superannuation or termination.

(ii) Provision for sales returns:

The Company, as a trade practice, accepts returns from market which are primarily in the nature of expired or near expiry products. The provision for sales return is made on the basis of historical experience, market conditions and specific contractual terms. The timing of outflow will depend on the shelf life expiry and time taken by the customer to return the goods.

The Income Tax Act, 1961, provides an option to the Company for paying tax at reduced rates (lower tax rate) as per the provisions/conditions defined in the Income Tax Act, 1961 (Section 115BAA). With reference to the same, the Company had previously assessed the option of availing the lower tax rate under Section 115BAA, in future years, and accordingly applied a mixed tax rate of 25.17% for deferred tax items expected to reverse after transitioning into new regime and 34.94% for those expected to reverse before the transition. Based on the current-year evaluation of available MAT credits and deductions under Chapter VIA as at March 31,2025, the Company has now assessed that it will transition to the new tax regime from FY 2025-26. Consequently, deferred tax balances expected to reverse in or after FY 2025-26 have been remeasured at 25.17%, resulting in a net reversal of deferred tax liabilities of H150.63 crores for the year ended March 31,2025.

39 Employee Benefits

A Defined Contribution Plan

The Company's contribution to provident fund and superannuation fund aggregating to H107.91 crores (Previous year H96.08 crores) has been recognised in the statement of profit and loss under the head employee benefits expenses (Refer note 31).

B Defined Benefit Plan

The accruing liability on account of retirement benefit plans (in the nature of defined benefits plan) is accounted as per Ind-AS 19 "Employee Benefits".

General description of the plan:

In accordance with Indian law, the Company operates a scheme of gratuity which is a defined benefit plan ('the Gratuity Plan') covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death and incapacitation while in employment, termination of employment. The level of benefits provided depends on the respective employees' tenure of employment and last drawn salary. The Company manages the plan through a trust. Trustees administer contributions made to the trust. The defined benefit plan exposes the Company to actuarial risks such as interest rate risk, investment risk and salary risk.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis:

Investment in mutual funds: The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which such units are redeemed.

Equity investments: Equity investments traded in an active market are determined by reference to their quoted market prices. Other equity investments where quoted prices are not available, fair values are determined by reference to the expected discounted cash flows from the underlying net assets or current market value of net assets.

The Company's activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Company's overall risk management programme seeks to minimise potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk:

Market risk refers to the possibility that changes in the market rates may have impact on the Company's profits or the value of its holding of financial instruments. The Company is exposed to market risks on account of foreign exchange rates, interest rates and underlying equity prices.

(a1) Foreign currency exchange rate risk:

The Company's foreign currency risk arises from its foreign operations, investments in foreign subsidiaries, foreign currency transactions and foreign currency borrowings. The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.

Since a major part of the Company's revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Company's performance. Consequently, the overall objective of the foreign currency risk management is to minimise the short-term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows up to a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The foreign exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1 based on management's current assessment. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.

With respect to the Company's derivative financial instruments which are in the form of forward contracts, a 5% increase/decrease in relation to USD & EURO of each of the currencies underlying such contracts would have resulted in increase/decrease of H97.87 crores and H85.23 crores in the Company's pre-tax profit or loss and H166.08 crores and H148.03 crores in pre-tax cash flow hedge reserve from such contracts as at March 31,2025 and March 31,2024 respectively.

With respect to the Company's non-derivative financial instruments (as given above), a 5% increase/decrease in relation to USD & EURO on the underlying would have resulted in increase/decrease of H71.95 crores and H51.56 crores in the Company's net profit for the year ended March 31,2025 and March 31, 2024 respectively.

(a2) Interest rate risk:

Interest rate risk refers to the possibility that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Company is exposed to fluctuations in interest rates in respect of foreign currency borrowings and rupee borrowings. The company manages its interest rate risk by closely monitoring the movements in the market interest rates.

As at March 31, 2025, the Company has outstanding rupee borrowings of H1,605.89 crores with variable rate of interest and H941.88 crores with fixed rate of interest.

Cash flow risk in respect of variable rate instruments:

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increase/ (decrease) pre-tax profit or loss and pre-tax equity by H16.06 crores. This analysis assumes that all other variables remains constant and change occurs on reporting date. The year end balances are not representative of the average borrowings during the year.

Fair value risk in respect of fixed rate instruments:

The Company carries borrowings at amortised cost and hence, change in the interest rate at reporting date does not affect statement of profit and loss.

(b) Credit risk:

Credit risk is the risk of financial loss arising from counter party failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of the direct risk of default, the risk of deterioration of creditworthiness as well as concentration of risks. Financial instruments that are subject to concentrations of credit risk materially consists of trade receivables, investments and derivative financial instruments.

All trade receivables are subject to credit risk exposure. The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through established policies, controls relating to credit approvals and procedures for continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

The Company has used expected credit loss (ECL) model for assessing the impairment loss. For the purpose, the Company uses a provision matrix to compute the expected credit loss amount. The provision matrix takes into account external and internal risk factors and historical data of credit losses. Refer note 15 for movement in expected credit loss and trade receivables aging.

The Company does not have significant concentration of credit risk related to trade receivables. No single third party customer contributes to more than 10 % of outstanding accounts receivable (excluding outstanding from subsidiaries) as at March 31, 2025 and March 31, 2024.

With respect to investments, the Company limits its exposure to credit risk by investing in liquid securities with counter parties depending on their Composite Performance Rankings (CPR) published by CRISIL. Bank deposits are placed with banks with high credit rating. The Company's investment policy lays down guidelines with respect to exposure per counterparty, credit rating, processes in terms of control and continuous monitoring. The Company therefore considers credit risks on such investments to be negligible.

With respect to derivatives, the Company's forex management policy lays down guidelines with respect to exposure per counter party i.e. with banks with high credit rating, processes in terms of control and continuous monitoring. The fair value of the derivatives are credit adjusted at the period end.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is H2,582.19 crores and H1,985.41 crores as at March 31,2025 and March 31,2024 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

(c) Liquidity risk:

Liquidity risk refers to the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company generates cash flows from operations to meet its financial obligations, maintains adequate liquid assets in the form of cash & cash equivalents and has undrawn short-term line of credits from banks to ensure necessary liquidity.

The capital structure of the Company consists of equity, debt, cash and cash equivalents. The Company's objective for capital management is to maintain the capital structure which will support the Company's strategy to maximise shareholder's value, safeguarding the business continuity and help in supporting the growth of the Company. The debt to equity ratio as at March 31, 2025 stands at 0.34 (Previous year 0.49).

(b) The Company and/or its subsidiaries ('Torrent') are involved in certain legal proceedings, including product liability matters wherein there are two Multi-District Litigations ('MDL') pending against Torrent and other manufacturers for Valsartan and Losartan and other commercial matters, that arise from time to time in the ordinary course of business. It is difficult to ascertain the financial effect, if any, of such proceedings that will result from its ultimate disposition due to involvement of complex issues with substantial uncertainties and without any precedents. Additionally, many factors like stage of the proceedings, overall length and extent of discovery process; the entitlement of the parties to an action to appeal a decision; the extent of the claims; the possible need for further legal proceedings to establish the appropriate amount of damages, if any; the settlement posture of the other parties to the litigation; uncertainty in timing of litigation and any other factors that may have an implication on the ultimate outcome of the ongoing litigations. The Company assesses likely outcome based on internal assessment as well as considers views of legal counsel representing the Company. Moreover, Company carries product liability insurance policy of amount which it believes to be sufficient for its needs.

(c) In view of amendment in Section 37(1) of Income Tax Act, 1961 introduced in Finance Act, 2022, it is possible that the Company may get involved in the litigation on allowability of certain expenses in relation to the years for which assessment proceedings have not commenced. It is difficult to ascertain the financial effects from such future proceedings, if any, that will result in to its ultimate disposition. The Company assesses likely outcome based on internal assessment as well as considers views of external consultants representing the Company.

Other Guarantees:

Guarantees of H898.60 crores and H875.43 crores are outstanding as at March 31, 2025 and March 31, 2024 respectively, which were issued to third parties on behalf of wholly owned subsidiaries for contractual obligations.

43 Segment Reporting

The Company has only one reportable segment namely ‘Generic Formulation Business'. In accordance with Ind AS 108 “Operating Segments”, segment information has been given in the consolidated financial statements, and therefore, no separate disclosure on segment information is given in these standalone financial statements.

I n most of the cases, the relevant authorities have raised demand or disallowed tax claims. The Company has preferred appeals and the outcome are awaited.

Against the claims not acknowledged as debts, the Company has paid H4.47 crores (previous year H3.94 crores). The expected outflow will be determined at the time of final outcome of the concerned matters. No amount is expected to be reimbursed.

Notes:

(1) Unspent amount as at March 31, 2025 of 710.78 crores (March 31,2024 711.30 crores) has been transferred to special bank account specified under Section 135 (6) of the Companies Act, 2013 for ongoing projects within stipulated timelines.

(2) Unspent amount of 711.30 crores as at March 31, 2024 deposited in special bank account (as per note (1)) has been fully spent during FY 2024-25 for ongoing projects.

(3) Refer note 41 for information about contribution to related parties towards CSR expenditures.

46 Registration of Charges

All the charges created or satisfied during the current year and previous year were registered with Registrar of Companies within statutory period.

47 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 lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries) other than in the ordinary course of business with its subsidiary companies. The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

49 Exceptional item

The exceptional item relates to a demand raised by the National Pharmaceutical Pricing Authority (NPPA) in 2017 concerning alleged overcharging, which was under judicial consideration before the Hon'ble Gujarat High Court. During the year, the Company submitted detailed representations, which were favourably considered by the NPPA. As a result, the Company's legal exposure was substantially reduced. Following the issuance of a revised demand by the NPPA, the Company opted to settle the litigation and bring the matter to a definitive close.

50 Proposed dividend

The Board of Directors of the Company, in its meeting held on May 20, 2025, has proposed a final dividend of 76 per equity share for the financial year ended March 31, 2025. The proposal is subject to the approval of the shareholders of the Company at the ensuing Annual General Meeting and if approved would result in a cash outflow of approximately 7203.07 crores.

51 The financial statements for the year ended March 31, 2025 were approved for issue by the Board of Directors on May 20, 2025.