Notes to Accounts of Dr. Datsons Labs Ltd.

Mar 31, 2014

1.1 Fixed assets / Capital Work- in- progress:-

The company is undertaking capital expenditure program at its Mahad and Pune Plants. An advance payment of Rs. 1,492.13 Lacs towards capital assets have been made in current year. The same is included in capital WIP. The Capital WIP stands at Rs. 17,901.22 Lacs as on 31st March 2014.

1.2 Investments:-

Long Term Investments are stated at cost less provision, if any, for diminution which is other than temporary in nature. Current investments are valued at lower of cost and net realizable value.

1.3 Leases:

The company has operating lease agreements, primarily for leasing office space and residential premises for it employees. Most of these lease agreements provide for cancellation by either party with a notice period ranging from 30 days to 120 days and contain a clause for renewal of lease agreement at the option of the company. There are no non-cancellable operating leases. There are no assets taken on finance lease.

1.4 Subsidiary and Associate Company:-

The Company is no longer an associate of Finaventure Capital Limited (formerly known as Aasda Lifecare Limited) during the year under report. Finaventure Capital Limited holds only 2.84 % shares of the company as at 31st March, 2014.

The Company had made investments in Eros Pharmaceuticals Pte. Ltd. (Singapore), Fair Success (Hong Kong ) Ltd and DR. Datsons Labs (UK) Ltd as also in Aanj Pharmalabs Ltd FZE Dubai thereby making these companies wholly owned Subsidiary.

1.5 Leases:

The company has operating lease agreements, primarily for leasing office space and residential premises for it employees. Most of these lease agreements provide for cancellation by either party with a notice period ranging from 30 days to 120 days and contain a clause for renewal of lease agreement at the option of the company. There are no non-cancellable operating leases. There are no assets taken on finance lease.

1.6 Research & Development:-

The costs are expensed when incurred. Capital expenditure when incurred for acquisition or construction of equipment and facilities for R&D and having alternate future uses will be capitalized.

1.7 Default in repayment of Loans from Banks and payment of Statutory Dues:-

As reported in Pt. No. ix (b) and Pt. No. xi in Annexure to the Independent Auditors Report, it may be noted that the business of our company is growing at rapid pace. Consequently, there is substantial increase in requirement of funds for working capital. However, during past few years, our bankers have not carried out fresh appraisal/ Assessment of our Working Capital requirement. Due to non-revision of credit facilities by our bankers, there is always financial pressure on the working capital. As a result of the same, there were defaults in repayment of Borrowed Funds from banks as well as payment of Statutory Dues. However, the Management has been continuously putting its efforts in raising funds from various sources both internal as well as external and is expecting to regularize the defaults in the next financial years.

1.8 Contingent Liabilities:- (Rs. In Lacs) Particulars As at As at 31st March 2014 31st March 2013

Service Tax liability (excluding Penalties) that may arise.

The Company has been legally advised that the demand is likely to be either deleted or substantially reduced and accordingly no provision has been made. 82.09 NIL

1.9 No commission on profits is paid at any time during the year to any of the directors of the Company.

1.10 Derivative Instruments:-

Company has not entered into any Forex Derivative Contracts at any time during the year.

During the year ended 31st March 2014 foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

a) Amount receivable in foreign currency on account of export of goods- USD 302.87 Lacs (Previous Year USD 149.95 Lacs) INR 18,202.43 Lacs (Previous Year INR 8155.72 Lacs), GBP 0.10 Lacs (Previous Year GBP 0.10 Lacs) INR 9.99 Lacs (Previous Year INR 8.23 Lacs).

b) Amount paid in foreign currency on account of import of goods-USD 74 Lacs (Previous Year USD 1.28 Lacs) INR 4,604.85 Lacs (Previous Year INR 72.31 Lacs).

c) Amount payable in foreign currency on account of import of goods- USD 35.74 Lacs (Previous Year USD 2.02 Lacs) INR 2,147.74 Lacs (Previous Year INR 110 Lacs.

1.11 Cenvat:-

No Cenvat credit is availed in respect of finished goods manufactured and sold by the company which are exempt or free of Central Excise Consequently duty paid on these inputs is expensed during the year. Where finished goods manufactured and sold by the company are excisable, Cenvat credit is availed on inputs used in the manufacture of such excisable goods

1.12 Related Party Disclosures:-

Name of the Key Managerial Personnel Relationship

Kannan K. Vishwanath Managing Director

Relatives of the Key Managerial Personnel Relationship

Divya K. Vishwanath Wife of Kannan K.Vishwanath

Companies / Firms in which the Key Managerial Personnel & their relatives are interested

Eros Pharmaceuticals Pte. Ltd. Subsidiary Company

AANJ Pharmalabs Limited FZE Subsidiary Company

Finventure Capital Ltd (Aasda Life Care Limited) *

Fair Success (H.K.) Limited Subsidiary Company

DR. Datsons Labs Limited Subsidiary Company

The Company has entered into the following related party transactions. As on March 31, 2014 such parties and transactions are identified as per Accounting Standard 18 issued by the ''The Institute of Chartered Accountants of India.''

1.13 Disclosures pursuant to Accounting Standard - 15 "Employee Benefits":- Defined Contribution Plan

The company has made payments to the Government Provident Fund amounting to 14.18 Lacs and the same is expensed during the year ended 31st March, 2014.

Defined Benefit Plan

The following disclosures are made in accordance with AS 15 (Revised) pertaining to defined benefit plans regarding Gratuity.

1.14 FCCB-Foreign Currency Convertible Bonds:-

The company had issued Foreign Currency Convertible Bond (FCCB) aggregating to US $ 40 Million during the last financial year for acquisition of company overseas. During the current financial year under report FCCB aggregating to US $ 18 Million were converted into 1,77,68,124 equity shares at conversion price of Rs. 55/- per share. Further on 15th May 2014 the company had converted FCCB amounting to US $ 11.20 million into equity shares at conversion price of Rs. 55/- per share. Balance FCCB aggregating to US $ 10.80 Million is included in unsecured loans under current liabilities.

1.15 Micro Small & Medium Enterprises Development Act 2006. {MSMED Act 2006}:-

The company is outside the purview of MSMED Act 2006 as the investment in Plant & Machinery is greater than 10 crores as at the end of the year.

1.16 The previous year figures have been recast / regrouped whenever necessary in order to confirm to current year''s presentation.

1.17 Prior Period expenses of Rs. 17.75 lacs pertains to Interest payable for FY 2012-13. It also includes Rs. 0.5 Lacs as Website Development Expenses for FY 2011-12.

1.18 Segment Information:-

The company has only one reportable segment and that is the business segment and there are no geographical segments. Segment information disclosure is made in accordance with Accounting standard (AS) -17 "Segment Reporting". It is identified based on products, organization structure, risk return profile and the reporting systems of the company. The business segment is organized into API manufacturing and Formulation manufacturing. Formulation manufacturing business has commenced only from 1st April 2010 and onwards.

Information about Business Segments

Note: For API''s, the reactors installed are to be of larger capacity so as to accommodate herbal based raw material inputs whose yield can vary from crop to crop. The reactors are also multipurpose in nature. Hence there is no direct correlation between installed capacity and actual production. During FY 12-13 the value of manufacturing API is high although quantity less.

Note:

(i) The Formulations business commenced only from 1st April 2010.

(ii) In terms of press Note no. 4 (1994 series) dated October 25, 1994 issued by the department of Industrial Development, Ministry of Industry, Government of India and Notification no. S.O. 137 (E) dated March 01, 1999 issued by the Department of Industrial Policy and Promotion, Ministry of Industry, Government of India, Industrial licencing has been abolished in respect of bulk drugs and formulations. Hence there are no registered / Licensed capacities for these bulk drugs and formulation

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Mar 31, 2013

1.1 Fixed assets / Capital Work-in-progress:- The Company is undertaking capital expenditure program at its Mahad and Pune Plants. An advance payment of Rs.340.91 Millions towards capital assets have been made in current year. The same is included in capital WIP. The Capital WIP stands at Rs.1,640.90 Millions as on 31st March 2013.

1.2 Investments:- Long Term Investments are stated at cost less provision, if any, for diminution which is other than temporary in nature. Current investments are valued at lower of cost and net realisable value.

1.3 Subsidiary and Associate Company:- The Company is an associate of Finaventure Capital Limited (formerly known as Aasda Lifecare Limited) during the year under report. Finaventure Capital Limited holds 24.86 % shares of the Company as at 31st March, 2013.

The Company had made investments in Eros Pharmachem Pte. Ltd, Singapore in last fnancial year 2011-12 to the extent of 90% and has increased its stake to 100% during the Current Financial Year. The Company has also made Fresh Investment of AED 1.00 Million in AANJ Pharmalabs FZE, Dubai during the current fnancial year thereby making the Company wholly owned Subsidiary. Additionally the Company has opened a Branch in Singapore and expended Rs.0.79 Million towards Registration and other expenses.

1.4 Research & Development:- The costs are expensed when incurred. Capital expenditure when incurred for acquisition or construction of equipment and facilities for R&D and having alternate future uses will be capitalised under Plants and Machinery. The addition to Assets in current year pertaining to R&D and included in Fixed Assets are Lab Equipments and Pilot Plant of Rs.15.77 million, Civil Works & others of Rs.17.73 Million. The Revenue expenditure on R&D is as follows: - R&D Expense Rs.3.58 million; Product development Rs.4.22 million; Salary of R&D personnel Rs.3.24 million.

1.5 Share Capital:- The paid up share capital of the Company is Rs.138.87 millions. The Company has not made any fresh issue during the current fnancial year. Authorised capital of the Company has been increased from Rs.300.00 million to Rs.500.00 million.

1.6 No commission on profts is paid at any time during the year to any of the directors of the Company.

1.7 Derivative Instruments:- Company has not entered into any Forex Derivative Contracts at any time during the year.

During the year ended 31st March 2013 foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

a) Amount receivable in foreign currency on account of export of goods- USD 15 Million (Previous Year USD 4.92 Million) INR 815.57 Million (Previous Year INR 251.55 Millions, GBP 0.01 Million (Previous Year GBP 0.01 Million) INR 0.82 Million (Previous Year INR 0.82 Million).

b) Amount paid in foreign currency on account of import of goods-USD 0.13 Million (Previous Year USD 1.1 Million) INR 7.23 Million (Previous Year INR 51.83 Million).

c) Amount payable in foreign currency on account of import of goods- USD 0.20 Millions (Previous Year USD 0.06 Million) INR 11 Million (Previous Year INR 3.30 Million.

1.8 Cenvat:- No Cenvat credit is availed in respect of fnished goods manufactured and sold by the Company which are exempt or free of Central Excise .Consequently duty paid on these inputs is expensed during the year. Where fnished goods manufactured and sold by the Company are excisable, Cenvat credit is availed on inputs used in the manufacture of such excisable goods.

1.9 Exceptional Items

During the audit conducted by the internal auditors, it was discovered with the concurrence with Quality Assurance Team that there were errors in calculation of Inventory pertaining to FY 2011-12. This error has been rectifed in the current year by revaluing Opening Stock & Opening balance of Proft & Loss of Current Year as per the recommendations of the Audit

Committee and Management of the Company. Details of reduction in Opening Stock are as follows:

The resultant excess provision for taxation for earlier FY 2011-12 amounting to Rs.110.6 Million has been reversed accordingly in the opening balance of Proft & Loss account of current year.

Further by the recommendation of Audit committee the Management has decided to write of Rs.448.60 Millions as bad debts during the current fnancial year despite strenuous eforts made by Company to recover the same. As a result the outstanding receivables had to be characterised as bad debts written of and classifed under Exceptional Items due to its non- recurring nature in the Statement of Proft & Loss thereby reducing the proftability for the current Financial Year. The Company is initiating legal action to recover the dues.

1.10 FCCB-Foreign Currency Convertible Bonds:-

The Company had issued Foreign Currency Convertible Bond (FCCB) aggregating to US $ 40 Million on 21st March,2013. However, the said amount net of expenses is lying in an account with overseas bank pending utilisation as per the object mentioned in Ofering Circular.

Consequently, the funds have not been infused into the Company on the date of this Report and cannot be utilised by the Company. The Principal value of the FCCB bonds is included in Unsecured Loan under non current liabilities whilst the amount lying in an account with overseas bank is shown in Cash & bank balances under current assets in the Balance sheet as on 31.03.2013.

1.11 Micro Small & Medium Enterprises Development Act 2006. {MSMED Act 2006}:-

The Company is outside the purview of MSMED Act 2006 as the investment in Plant & Machinery is greater than 100 Millions as at the end of the year.

1.12 The previous year fgures have been recast / regrouped whenever necessary in order to confrm to current year''s presentation.

1.13 Prior Period expenses of Rs.0.4 millions pertains to Input service tax paid for FY 2011-12 supposed to be Cenvatable against Central Excise. But the amount could not be utilised for the payment of Excise as a result of which it had to be reversed to the respective Expense accounts during the current fnancial year as prior period Expenses. It also includes 0.04 Millions as professional charges in relation to Factoring.

1.14 Segment Information:- The Company has only one reportable segment and that is the business segment and there are no geographical segments. Segment information disclosure is made in accordance with Accounting standard (AS) -17 "Segment Reporting". It is identifed based on products, organisation structure, risk return profle and the reporting systems of the Company. The business segment is organised into API manufacturing and Formulation manufacturing. Formulation manufacturing business has commenced only from 1st April 2010 and onwards.

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Mar 31, 2012

1.1 Fixed assets / Capital Work-in-progress:-

The company is undertaking capital expenditure program at its Mahad and Pune Plants, Further in order to acquire Fixed assets of Apex drugs & Intermediates Limited Hyderabad, advance payment was partially made by issue of 13,10,484 equity shares of Rs. 10 each at a premium of Rs. 486 per share aggregating to Rs. 6500 lacs. Further an advance of Rs. 6500 lacs was made in cheque. The same is included in capital WIP. The Capital WIP on this count stands at Rs. 14423.83 lacs as on 31st March 2012.

1.2 Investments:-

Long Term Investments are stated at cost less provision, if any, for diminution which is other than temporary in nature. Current investments are valued at lower of cost and net realizable value.

1.3 Subsidiary and Associate Company:-

The Company is an associate of Fin venture Capital Limited (formerly Aasda Lifecare Limited)during the year under report. Fin venture Capital Limited holds 42.89% shares of the company as at 31st March, 2012.

The Company has made investments in Eros Pharmachem Pte. Ltd. Singapore thereby making it subsidiary of Aanjaneya Lifecare Limited

1.4 Research & Development:-

The costs are expensed when incurred. Capital expenditure when incurred for acquisition or construction of equipment and facilities for R&D and having alternate future uses will be capitalized under Plants and Machinery. The breakup of Assets pertaining to R&D and included in Fixed Assets is as follows - Equipments Rs. 1050.78 lacs. Building Rs. 1061.66 lacs. The Revenue expenditure on R&D is as follows :- R&D Expense Rs. 29.77 lacs; Product development Rs. 35.33 lacs ; Salary of R&D personnel Rs. 21.88 lacs. Revenue generated on account of R&D efforts Rs. 224.57 lacs. Same is included in Sales

1.5 Share Capital:-

The paid up share capital of the company has increased from Rs. 757.67 Lacs to Rs. 1388.72 Lacs .The company issued of 50 Lac equity shares of Rs. 10 each at a premium of Rs. 224 per share to the public in May 2011 aggregating to Rs. 11700 Lacs. The sum of Rs. 11200 lacs Lacs has been credited to share premium account. Also the company issued 1310484.00 equity shares of Rs. 10 each at a premium of Rs. 486 per share to Apex Drugs & Intermediates Hyderabad for consideration other than cash in March 2012 aggregating to Rs. 6500 Lacs. The sum of Rs. 6368.95 Lacs has been credited to share premium account

1.6 No commission on profits is paid at any time during the year to any of the directors of the Company.

1.7 Derivative Instruments:-

Company has not entered into any Forex Derivative Contracts at any time during the year.

During the year ended 31st March 2012 foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

a) Amount receivable in foreign currency on account of export of goods- USD 49.16 Lacs (Previous Year USD 2.06 Lacs) INR 2515.51 Lacs (Previous Year INR 91.47 Lacs), GBP 0.10 Lacs (Previous Year GBP 0.10 Lacs) INR 8.18 Lacs (Previous Year INR 7.12 Lacs) & EURO 0.07 Lacs INR 4.85 Lacs.

b) Amount paid in foreign currency on account of import of goods-USD 11.00 Lacs (Previous Year USD 1.11 Lacs) INR 518.33 Lacs (Previous Year INR 49.69 Lacs) & EURO 0.01 Lacs (Previous Year EURO NIL) INR 0.59 (Previous Year EURO NIL)

c) Amount payable in foreign currency on account of import of goods- USD 0.64 Lacs (Previous Year USD NIL) INR 33.03 Lacs (Previous Year INR NIL)

1.8 Cenvat:-

No cenvat credit is availed in respect of finished goods manufactured and sold by the company which are exempt or free of Central Excise Consequently duty paid on these inputs is expensed during the year. Where finished goods manufactured and sold by the company are excisable, cenvat credit is availed on inputs used in the manufacture of such excisable goods.

1.9 Disclosures pursuant to Accounting Standard - 15 "Employee Benefits":-

Defined Contribution Plan

The company has made payments to the Government Provident Fund amounting to Rs. 11.77 Lacs and the same is expensed during the year ended 31st March, 2012.

Defined Benefit Plan

The following disclosures are made in accordance with AS 15 (Revised) pertaining to defined benefit plans regarding Gratuity.

1.10 Event occurring after balance sheet date:-

1.11 Micro Small & Medium Enterprises Development Act 2006. {MSMED Act 2006}:-

The company is outside the purview of MSMED Act 2006 as the investment in Plant & Machinery is greater than 10 crores as at the end of the year.

1.12 The previous year figures have been recast / regrouped whenever necessary in order to confirm to current year's presentation.

1.13 Segment Information:-

The company has only one reportable segment and that is the business segment and there are no geographical segments. Segment information disclosure is made in accordance with Accounting standard (AS) -17 "Segment Reporting". It is identified based on products, organization structure, risk return profile and the reporting systems of the company. The business segment is organized into API manufacturing and Formulation manufacturing. Formulation manufacturing business has commenced only from 1st April 2010 and onwards.

Note:

(i) The Formulations business commenced only from 1st April 2010.

(ii) In terms of press Note no. 4 (1994 series) dated October 25, 1994 issued by the department of Industrial Development, Ministry of Industry, Government of India and Notification no. S.O. 137 (E) dated March 01, 1999 issued by the Department of Industrial Policy and Promotion, Ministry of Industry, Government of India, Industrial licensing has been abolished in respect of bulk drugs and formulations. Hence there are no registered / Licensed capacities for these bulk drugs and formulations.

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Mar 31, 2011

1.1 Fixed assets / Capital Work- in- progress:-

The company is undertaking capital expenditure program at its Mahad and Pune Plants. The Capital WIP on this account stands at Rs. 4,668.29 Lacs as on 31s' March 2011.

As regards assets purchased from Prophyla Biologicals Private Limited during the last fiscal ended 31st March 2010 for Rs. 2,742.20 Lacs (net of VAT Rs. 153.62 Lacs) totalling to Rs. 2,895.82 Lacs. The company had made part payment of Rs. 992.06 lacs during the year ended March 31, 2010. The balance payment of Rs. 1903.76 lacs has been made to the vendor during the period under report.

1.2 Investments:-

Long Term Investments are stated at cost less provision, if any, for diminution which is other than temporary in nature. Current investments are valued at lower of cost and net realizable value.

1.3 Holding Company:-

The Company is a subsidiary of Aasda Lifecare Limited (formerly Finaventure Capital Limited) during the year under report. The holding company holds 73.25% shares of the company as at 31st March, 2011. However effective 20th May 2011 the company ceases to be the subsidiary of Aasda Lifecare Limited. Please refer clause 2.15 (b) below under" Event occurring after balance sheet date". Name of Aasda Lifecare Limited has been changed to Finaventure Capital Limited w.e.f 7th June 2011.

1.4 Research & Development:-

The costs are expensed when incurred. Capital expenditure when incurred for acquisition or construction of equipment and facilities for R&D and having alternate future uses will be capitalized under Plants and Machinery.

1.5 Share Capital:-

The paid up share capital of the company has increased from Rs. 577.67 Lacs to Rs. 757.67 Lacs pursuant to issue of 18.00 Lacs equity shares of Rs. 10 each at a premium of Rs. 260 per share to Kannan Vishwanath in August 2010 aggregating to Rs. 4,860.00 Lacs. The sum of Rs. 4,680.00 Lacs has been credited to share premium account.

1.6 No commission on profits is paid at any time during the year to any of the directors of the Company.

1.7 Derivative Instruments:-

Company has not entered into any Forex Derivative Contracts at any time during the year.

During the year ended 31st March 2011 foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

a) Amount receivable in foreign currency on account of export of goods- USD 2.06 Lacs (Previous Year USD 3.12 Lacs) INR 91.47 Lacs (Previous Year INR 140.89 Lacs) & GBP0.10LacslNR7.12Lacs.

b) Amount paid in foreign currency on account of import of goods-USD 1.11 Lacs (Previous Year USD NIL) INR 49.69 Lacs (Previous Year INR NIL)

c) Amount payable in foreign currency on account of import of goods- EURO 0.01 Lacs (Previous Year EURO NIL) INR 0.59 Lacs (Previous Year INR NIL) & USD NIL (Previous Year USD 5.43 Lacs) INR NIL (Previous Year INR 244.96 Lacs)

1.8 Cenvat:-

No cenvat credit is availed in respect of finished goods manufactured and sold by the company which are exempt or free of Central Excise.Consequently duty paid on these inputs is expensed during the year. Where finished goods manufactured and sold by the company are excisable, cenvat credit is availed on inputs used in the manufacture of such excisable goods.

1.9 Disclosures pursuant to Accounting Standard-15 "Employee Benefits":-

Defined Contribution Plan

The company has made payments to the Government Provident Fund amounting to Rs. 10.42 Lacs and the same is expensed during the year ended as at 31st March, 2011.

Defined Benefit Plan

The following disclosures are made in accordance with AS 15 (Revised) pertaining to defined benefit plans regarding Gratuity.

1.10 Event occurring after balance sheet date:-

a. The company made an Initial Public Offering of shares (IPO) which opened for subscription on 9th May 2011 and closed on 12th May 2011 to QIB bidders, Retail individual bidders and Non-Institutional bidders of 50,00,000 Equity shares of the face value of Rs. 10/- each at a price of Rs. 234/- (including share premium of Rs. 224/) per Equity share aggregating to Rs. 11,700 Lacs constituting 39.76 % of the fully diluted post issue paid up capital of the company. The issue was fully subscribed and allotment to the respective applicants were made on 20th May 2011 in consultation with the authorized representatives of the designated stock exchange viz-Bombay Stock Exchange Limited. The entire issued, subscribed and fully paid up share capital comprising 1,25,76,667 equity shares of Rs. 10 each are listed on the National Stock Exchange of India Limited and The Bombay Stock Exchange Limited as per the in-principle approval dated 24th December 2010 and 28th October 2010 respectively received from the said stock exchanges.

b. Pursuant to the aforesaid IPO mentioned in clause 2.15 (a) above, Aasda Lifecare Limited (formerly Finaventure Capital Limited) ceases to be the holding company of Aanjaneya Lifecare Limited consequent to decrease in its shareholding to 44.13% of the post issue paid up capital of the company. Name of Aasda Lifecare Limited has been changed to Finaventure Capital Limited w.e.f 7th June 2011.

1.11 Micro Small & Medium Enterprises Development Act 2006. {MSMEDAct 2006}:-

The company is outside the purview of MSMED Act 2006 as the investment in Plant & Machinery is greater than 10 crores as at the end of the year.

1.12 The previous year figures have been recast/ regrouped whenever necessary in order to confirm to current years presentation.

1.13 Segment Information:-

The company has only one reportable segment and that is the business segment and there are no geographical segments. Segment information disclosure is made in accordance with Accounting standard (AS) -17 "Segment Reporting". It is identified based on products, organization structure, risk return profile and the reporting systems of the company. The business segment is organized into API manufacturing and Formulation manufacturing. Formulation manufacturing business has commenced only from 1st April 2010 and onwards. Hence this is the first reporting period for segment information.