Directors Report of Novartis India Ltd.

Mar 31, 2025

Your Directors’ are pleased to present the 77^th Annual Report along with the audited financial statement for the year ended March 31, 2025 (“year under review”).

Summary of Financial Results

Particulars	2024-25	(? in million) 2023-24
Revenue from Operations	3,562.7	3,350.7
Total Income	3,982.3	3,967.5
Profit/(Loss) Before Tax	1,304.2	1,228.4
Profit/(Loss) After tax	1,009.0	851.9
Other Comprehensive Income for the year Retained Earnings balance brought forward from previous year	9.7	12.1
available for appropriation The Directors have made the following appropriations:	7,288.4	7,597.2
Dividend	617.3	1,172.8
Carry forward	7,689.8	7,288.4

Dividend

We are pleased to inform our members that your Board of Directors has recommended a dividend for the reporting period, underscoring our steadfast commitment to delivering sustained value. This recommendation reflects the prudent management of our financial resources and the continued momentum in enhancing profitability. The Board has recommended a Dividend of ? 25/- per equity share of ? 5/- each to be appropriated from the profits of the year 2024-25 subject to the approval of the members at the ensuing Annual General Meeting (AGM). The dividend, if approved, will result in a cash outflow of ? 617.3 million. Dividend, if approved by the Members at the forthcoming Annual General Meeting, will be paid within 30 days from the date of declaration.

The Dividend Distribution Policy, approved by the board in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘SEBI Listing Regulations’) is available on the website of the Company at: https://www.novartis.com/in-en/sites/novartis_in/files/ Dividend%20Distribution%20policy_2025.pdf

Transfer to General Reserves

In accordance with the provisions of the Companies Act, 2013 (“the Act”), the Board of Directors does not propose to transfer any amount to the General Reserves for the year under review. The entire profit after tax shall be retained under ‘Retained Earnings’.

Management Discussion and Analysis

For the financial year under review, the Company operated solely within the Pharmaceuticals segment.

a. Economy, Industry and Development

The Global Pharmaceutical Market was valued at approximately USD 1.65 trillion in 2024 and is projected to grow at a Compound Annual Growth Rate (CAGR) of 6.12 per cent from 2025 to 2030, reaching an estimated USD 2.35 trillion by 2030. This growth is primarily driven by the increasing prevalence of chronic diseases such as diabetes, cancer, and cardiovascular disorders, along with aging populations globally, which are escalating

the demand for healthcare services and medications. Advancements in biotechnology and personalized medicine—particularly in biologics and RNA-based therapeutics—are also major factors contributing to market expansion. Technological innovations in drug delivery systems and the evolution of targeted therapies, such as CAR-T cell therapies for cancer, are transforming treatment paradigms and offering more effective solutions for complex conditions. The United States continues to be the largest pharmaceutical market, followed by Europe and the Asia-Pacific region. Emerging markets in Asia are witnessing rapid growth, propelled by enhanced access to healthcare and rising healthcare expenditures.¹â€™²³

The Indian Pharmaceutical Market generated revenue of USD 28.72 billion in 2024⁴ India remains a key global supplier of low-cost, high-quality medicines, including vaccines and generic drugs.⁵ The country has the largest number of USFDA-compliant pharmaceutical plants outside the United States and over 2,000 WHO-GMP approved facilities.⁵ India’s pharmaceutical industry benefits from a low cost of manufacturing, which is 30 per cent-35 per cent lower than in the US and Europe, and cost-efficient R&D, which is about 87 per cent less than in developed markets. The government has implemented several initiatives to support the sector, including the Production-Linked Incentive (PLI) scheme with a total outlay of USD 2.04 billion.⁵

The Indian Pharmaceutical Market in FY 2024-25 saw significant growth across various therapy areas. Chronic therapies, such as cardiac, antineoplastics (cancer treatments), and urology, outperformed compared to acute therapies. Among acute therapies, gastroenterology and dermatology led in growth.⁶

Enrolment under the AB-PMJAY health insurance scheme is accelerating, with extensions to senior citizens aged 70 and over and workers in the informal economy. Production-Linked Incentive (PLI) schemes targeting investment in the production of active pharmaceutical ingredients and finished drugs are gaining traction.⁴

References:

¹ https://senorespharma.com/wp-content/uploads/2024/12/10.-Frost-and-Sullivan-report-Overview-of-Global-Pharma-Market-July-24-2024.pdf

² https://www.grandviewresearch.com/industry-analysis/pharmaceutical-market-report

³ https://store.frost.com/global-pharmaceutical-industry-outlook-2024.html

⁴ IQVIA. (2025). Market Prognosis 2025-2029, India

⁵ https://www.ibef.org/industry/indian-pharmaceuticals-industry-analysis-presentation

⁶ https://www.iqvia.com/locations/india/library/presentations/indian-pharmaceutical-business-quarterly-insights-q3-2024

b. Performance

Revenue from operations for the financial year ended March 31, 2025 stood at ? 3,562.7 million, reflecting an increase of 6.3 per cent over the previous year. Profit before tax for the year amounted to ? 1,304.2 million as compared to ? 1,228.4 million in the previous year.

The National Organ & Tissue Transplant Organisation (NOTTO) continued its efforts to enhance awareness and improve monitoring of brain stem deaths.⁷ The annual number of organ transplants has more than tripled over the past decade, with kidney transplants comprising the majority.⁷

The inclusion of kidney, heart, lung and liver transplants under PM-JAY Ayushman Bharat and Rashtriya Arogya Nidhi, with financial assistance for Below Poverty Line (BPL) patients, highlights a commitment to making organ transplants more accessible in India.

References:

⁷ https://www.theweek.in/wire-updates/national/2024/08/03/des43-organ-transplants-notto.html

Novartis continued to engage physicians to strengthen brand recall and to disseminate key scientific messages. These efforts were carried out through differentiated campaigns delivered via RTEs (Rep Triggered Emails) and CMEs (Continuing Medical Education). During the year, Novartis partnered with the renowned European Renal Association to host a series of International Speaker Programs promoting scientific advocacy for transplantation therapies, attended by approximately 400 transplant physicians. We continue to drive strong differentiation for Novartis brands within the transplant maintenance portfolio.

During the financial year, the transplant portfolio recorded a robust 14 per cent growth, despite supply constraints related to Simulect®.

This growth was realized in a highly genericized and competitive market, by sharply focusing on individual brands in the transplant maintenance portfolio through high-impact share-of-voice campaigns such as ‘My Trust with Myfortic®’ and ‘Start Early with Certican®’.

The exclusive sales and distribution arrangement with Dr. Reddy’s Laboratories for the Established Medicines Brands—including the Voveran® range, the Calcium range, and Methergine® entered its third year of operations. The arrangement aims to broaden access to these medicines across wider geographies, reaching many more patients more efficiently through an expanded field force.

The Pain portfolio with its flagship brand Voveran® range, achieved internal growth of 6 per cent vs. FY 23-24. The team focused on reinforcing Voveran’s efficacy perception among Healthcare Professionals (HCPs), targeting both urban and rural markets with a strong in-clinic share-of-voice push driven by the ‘Stronger than Pain’ campaign. Within this, the Voveran SR range, which represents 91 per cent of the Voveran oral portfolio, exhibited a positive evolution index of 102 per cent on a MAT Dec’24 basis.

There is an increase in the share of voice and Voveran, gaining prescription share among doctor specialties in India. Strong hospital-focused initiatives and efforts to build reasons-to-believe among HCPs have contributed to significant uptake in Voveran AQ injections. Overall, the portfolio registered 10 per cent growth over FY 2023-24.

An estimated 8.8 million Indians are currently living with dementia, with a prevalence rate of 7.4 per cent among adults aged over 60.⁸ Nationwide initiatives are underway to improve awareness and promote early diagnosis through national health programs and collaborations with organizations such as the Alzheimer’s and Related Disorders Society of India (ARDSI).¹ Exelon® Patch, our innovative treatment for Alzheimer’s disease, offers convenience and safety, contributing to greater patient acceptance and portfolio growth.

The following brands hold key positions in major therapeutic areas such as:
Therapeutic Area	Therapeutic Area Product
Bone and Pain	Voveran®
Transplantation Immunology	Simulect®, Certican®, Sandimmun®, Neoral®, Myfortic®
Neurosciences	Tegrital®, Exelon®

References:

⁸ Lee J, et al. Prevalence of dementia in India: National and state estimates from a nationwide study. Alzheimers Dement. 2023 Jul;19(7):2898-2912. doi: 10.1002/alz.12928. Epub 2023 Jan 13. PMID: 36637034; PMCID: PMC10338640.

c. Key Financial Indicators Particulars	2024-25	2023-24
Operating profit margin (%)	25.0	18.7
Net profit margin (%)	28.3	25.4
Debtors’ turnover ratio	8.7	8.6
Current ratio	5.3	4.4
Return on Equity (%)	13.2	11.2
Inventory turnover ratio	8.3	6.7
Debt service coverage ratio	43.2	24.2
Debt equity ratio	0.01	0.01
Return on capital employed (%)	11.4	9.2
Return on Investment	6.7	6.4

Reasons for change compared to the previous financial year in key financial ratios are as follows:

Operating profit margin

Operating profit margin is a profitability or performance ratio used to calculate the percentage of profit of a company produces from its operations. It is calculated by dividing the operating earnings before interest and tax by turnover. Margins have improved because of operational efficiencies.

Net profit margin

The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing profit for the year by turnover. Net profit margin in the financial year 2024-25 has increased due to operational efficiencies. Current tax expense for the year ended March 31, 2025 and March 31, 2024 includes tax adjustments for earlier years of ^ 42.5 million) and ? 61.6 million respectively.

Debtors’ turnover ratio

It is calculated by dividing turnover by average trade receivables, to quantify a company’s effectiveness in collecting its receivables. No major movement compared to previous year.

Current ratio

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities. Current ratio has improved due to increase in cash and bank balance.

Return on Equity

Return on equity is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit for the year by average shareholder’s equity. Return on equity in the financial year 2024-25 has increased due to operational efficiencies compared to previous financial year 2023-24.

Inventory turnover ratio

Inventory turnover is the number of times a company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory. The movement in the inventory turnover ratio is mainly on account of reduction in inventory.

Debt service coverage ratio

The debt service coverage ratio measures how many times a company can cover its current interest payment with its available earnings. It is calculated by dividing earning available for debt service by lease payments. The ratio has been impacted positively due to significant reduction in lease liabilities on account of remeasurement.

Debt equity ratio

The debt equity ratio is used to evaluate a company’s financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. It is calculated by dividing lease liabilities by shareholders equity. This ratio has impacted positively on account of significant reduction in lease liabilities on account of remeasurement.

Return on Capital employed

Return on capital employed is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit before interest and tax for the year by capital employed. Return on capital employed has improved due to operational efficiencies.

Return on Investment

Return on investment is defined as return earned on the investment done. It is calculated by dividing weighted average interest income on bank deposit by weighted average bank deposits. There is no major movement compared to previous year.

d. Risks, Threats, and Concerns

There is significant uncertainty regarding the imposition of trade tariffs by the US and counter-tariffs by other countries, which present downside risks. Recruitment and retention of staff, as along with shortages of equipment and inadequate infrastructure, remain challenges in parts of the Health and Wellness Centres (HWCs) network.

Low budget utilization is slowing progress in improving public hospital infrastructure, and staff recruitment continues to be a challenge. Profit-driven substitution is increasing in private hospital chains, where centralized procurement increasingly dictates prescribing and dispensing choices. In August 2024, The Ministry of Health and Family Welfare (MOHFW) announced a ban on 156 fixed-dose combinations (FDCs) including products containing antibiotics, painkillers, multivitamins, and drugs for fever and hypertension. This ban is facing challenges in court.

Compliance costs may lead to the closure of many smaller domestic producers due to the alignment of India’s good manufacturing practice (GMP) standards with WHO GMP Trade generics have emerged as a growing threat to the traditional branded generics market, slowing overall market growth.

The regulation of promotional practices has been updated, leading to more restrictive approaches to receiving representatives by both government and private hospitals. Plans to impose trade margin caps on more non-scheduled drugs remain a risk.¹

Reference :

¹ IQVIA. (2024). Market Prognosis 2024-2028, India.

e. Outlook

The Indian Pharmaceutical Market is projected to grow at a CAGR of 8.0 per cent (±2.0 per cent) between 2024 and 2029, reaching 3,529 billion by 2029. Real GDP growth is expected to improve marginally to 6.5 per cent in 2025-26, supported by a recovery in rural consumption. Consumer price inflation is anticipated to moderate to 4.3 per cent in 2025 and is projected to average 4.5 per cent annually over the period 2026-2029. The Indian rupee is forecast to depreciate gradually during the forecast period, averaging ? 89.70 per US$1 by 2029.

Health policy will continue to be guided by the Ayushman Bharat (‘Healthy India’- AB) initiatives. The Union Budget of February 2025 allocated ? 998.6 billion to the MOHFW, reflecting an 11 per cent increase over the previous year’s revised estimate. Health insurance coverage is expected to rise further, with accelerated enrolment under the AB-PMJAY scheme. The government is also targeting further improvements in public primary healthcare, with over 188,000 Health and Wellness Centres operational by the end of 2024. Concurrently, demand for private hospital services is increasing significantly, attracting substantial private equity and venture capital investments.

The government is intensifying efforts to curb the over prescription of antibiotics and continues to promote generic prescribing. Rapid expansion and consolidation within the private hospital sector are increasing the strategic importance of securing formulary listings. The fast-paced growth of the trade generics segment is beginning to impact dispensing patterns. Meanwhile, the government has indicated a possible overhaul of the existing drug price control regime.

The Union Budget 2025-26 broadened the list of medicines exempted from Basic Customs Duty (BCD), adding 36 life-saving drugs to the fully exempt category and reducing customs duty to 5 per cent on six additional medicines. The annual increases in the maximum retail price of scheduled drugs, approved by the National Pharmaceutical Pricing Authority (NPPA) in March 2025, remained relatively modest. Regulatory efficiency is expected to improve under the proposed Drugs, Medical Devices and Cosmetics Bill. The number of global clinical trials involving Indian sites is on the rise.

India’s Good Manufacturing Practice (GMP) standards were harmonised with WHO-GMP guidelines in December 2023. Furthermore, amendments to India’s patent rules in March 2024 aim to streamline and expedite the processes for patent application, examination, and management.

Deal-making activity in the pharmaceutical sector remains robust. Continued growth in the trade generics market is anticipated. The expansion of organised pharmacy chains is accelerating. Regulation of promotional practices has been updated with the implementation of the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) in March 2024⁴

f. Details in respect of adequacy of internal financial controls with reference to the Financial Statements

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorised use or disposal. Company policies, guidelines and procedures provide for adequate checks and balances and are intended to ensure that all transactions are authorised, recorded and reported correctly.

The Internal Auditor reviews the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis, and significant deviations are brought to the notice of the Audit Committee of the Board of Directors, following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems, evaluated the internal financial control systems with the Audit Committee and discussed relevant issues with internal and statutory auditors. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that the Company followed proper internal financial controls and that such internal financial controls are adequate and were operating effectively.

Particulars of Employees

The Company regards its employees as a valuable asset and accords high priority to training and development of employees.

The number of employees in the Company as at March 31, 2025, was 56.

Disclosures pertaining to remuneration and other details, as required under Section 197(12) of the Companies Act, 2013 (‘the Act’), read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as Annexure A.

In terms of the provisions of Section 197(12) of the Act, read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this Report. However, in terms of first provision of Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. If any member is interested in obtaining a copy thereof, such members may write to the Company Secretary & Compliance Officer, whereupon a copy would be sent.

Share Capital

The equity shares issued by the Company during the year under review, are listed at BSE Limited (BSE) as on the date of this report and the securities of the Company are not suspended from trading during the reporting period.

During the year under review, there was no change in the authorized, issued and paid-up share capital of the Company than that of the previous year ended March 31, 2024.

Corporate Social Responsibility

The Company continues to support various initiatives in the areas of health. The CSR Policy adopted by the Board of Directors is available on the Company’s website at: https://www. novartis.com/in-en/investors/novartis-india-corporate-policies

Health: The Government of India announced its commitment to eradicate leprosy from the country by year 2030. Aligned with this vision, the Company reinforced its commitment to leprosy as part of its CSR work in India. The Company continued its support to a non-profit organization with projects based in Tamil Nadu and Maharashtra. The project gives people affected by leprosy the ability to get jobs through vocational training and build a community of empowered young people who can further empower their families and communities.

The Annual Report on Corporate Social Responsibility Activities, in terms of Section 135 of the Act and Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended by Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, (effective January 22, 2021) read with Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022, (effective September 20, 2022) (hereinafter referred to as ‘CSR Rules’), is annexed herewith as an Annexure B.

Contracts or Arrangements with Related Parties

All contracts, arrangements and transactions entered by the Company during the year under review with Related Parties were in ordinary course of business and on arm’s length basis, in accordance with the provisions of the Act.

Your Company has formulated a policy on Related Party Transactions which has been uploaded on the website of the Company at https://www.novartis.com/in-en/sites/novartis_in/files/ Policy%20for%20dealing%20with%20Related%20Party%20Transactions%20NIL.pdf

All transactions with related parties during the year were in accordance with the Policy on Related Party Transactions, formulated and adopted by the Company, and were reviewed and approved by the Independent Directors who are members of the Audit Committee, in accordance with the SEBI Listing Regulations. Prior omnibus approval of the Independent Directors who are members of the Audit Committee is obtained on a yearly basis for the transactions that are foreseen and of a repetitive nature. A statement giving details of all Related Party Transactions is placed before the Audit Committee for their review on a quarterly basis.

The details of the related party transactions as per Indian Accounting Standards (IND AS) - 24 are set out in Note No. 30 to the Financial Statements of the Company. The Company, in terms of Regulation 23 of the SEBI Listing Regulations, submits disclosures of all related party transactions to the Stock Exchange within the time stipulated and in the format stipulated under the said SEBI Listing Regulations.

Particulars of contracts or arrangements with related parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, are provided in AnnexureC in Form AOC-2 and forms part of this report. The transactions disclosed in the said Annexure relate to material RPTs with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services and other obligations as approved by members under erstwhile Clause 49(VII)(E) of the Listing Agreement at the 67^th AGM of the Company held on July 23, 2015.

Risk Management

Pursuant to Regulation 21 of the SEBI Listing Regulations, your Company has constituted a Risk Management Committee (‘RMC’) to identify elements of risk in different areas of operations and to develop a policy for actions associated to mitigate the risks.

The RMC is supported by the Internal Risk Steering Committee, risk champions, and on some occasions, by an external risk advisory firm. The teams undertake assessments of internal and external risks, adopt the risk mitigation plan, and regularly monitor them in a structured and controlled environment. The Committee provides updates on risk management to the Risk Committee of the Board of Directors of the Company on a regular basis. There are no risks which, in the opinion of the Board, threaten the existence of your Company.

Details of the composition of the RMC and the Risk Management Policy, adopted by the Board, are provided in the Report on Corporate Governance, which forms part of this Report.

Deposits

During the year under review, your Company neither accepted nor renewed any deposits from the public, in terms of the provisions of Section 73 of the Companies Act, 2013, read with Chapter V of the Act and the Companies (Acceptance of Deposits) Rules, 2014.

Insurance

The Company’s properties, including buildings, plant and machinery, stocks, stores, etc., have been adequately insured against major risks.

Directors and Officers Insurance (D&O)

As per the requirements of Regulation 25(10) of the SEBI Listing Regulations, the Company has obtained Directors and Officers (D&O) Insurance for all its directors and members of senior management.

Particulars of Loans, Guarantees or Investments

As on March 31, 2025, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act.

Transfer to Investor Education and Protection Fund (IEPF)

Pursuant to the provisions of Section 124 of the Act read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘IEPF Rules’), (including any statutory modification(s)/ re-enactment(s)/ amendment(s) thereof for the time being in force), the dividend which remains unclaimed or unpaid for a period of seven consecutive years from the date of transfer to the unpaid dividend account of the Company, is required to be transferred to the Investor Education and Protection Fund (‘IEPF’) established by the Central Government. As per the IEPF Rules, the corresponding shares in respect of which dividend has not been paid or claimed by the members for seven (7) consecutive years or more shall also be transferred to the dematerialised account created by the IEPF authority within a period of thirty days of such shares becoming due to be so transferred. Upon transfer of such shares, all benefits (such as bonus, etc.), if any, accruing on such shares shall also be credited to such demat account and the voting rights on such shares shall remain frozen until the rightful owner claims the shares. Shares which are transferred to the Demat Account of IEPF authority can be claimed back by the member from IEPF authority by following the procedure prescribed under the aforesaid rules. Therefore, it is in the interest of members to regularly claim the dividends declared by the Company.

The said requirement does not apply to shares in respect of which there is a specific order of a court, tribunal or statutory authority, restraining any transfer of the shares.

During the year under review, the Company had transferred a sum of ? 25,64,060.00/-(Rupees Twenty-Five Lakh Sixty-Four Thousand Sixty Only) lying in the unpaid/ unclaimed dividend for the financial year 2016-17, to the Investor Education and Protection Fund (IEPF) established by the Central Government. Further, in compliance with the provisions laid down in IEPF Rules, the Company sent individual notices and also advertised in the newspapers seeking action from the members who had not claimed their dividends for seven (7) consecutive years or more and transferred all corresponding shares and dividend amounts remaining unclaimed for a period of seven (7) consecutive years till 2016-17 to the Demat Account of the IEPF

It may please be noted that no claim shall lie against the Company in respect of share(s) transferred to IEPF pursuant to the said Rules. Members or claimants whose shares, unclaimed dividends, have been transferred to the IEPF demat account of the fund, as the case may be, may claim the shares or apply for a refund by making an application to IEPF Authority in form I EPF-5 (available on www.iepf.gov.in). The statement containing details of name, address, folio number, demat account number and number of shares transferred to IEPF demat account is made available on our website https://www.novartis.com/in-en/investors-corporate-governance/transfer-shares-iepf-demat-account

The members are encouraged to verify their records and claim their dividends for the preceding seven years, if not claimed.

Board of Directors and Key Managerial Personnel

Appointment of Director

The Board of Directors of the Company at its meeting held on June 28, 2024, based on the recommendation of the Nomination and Remuneration Committee, approved the appointment of Mr. Falin Ishwarlal Majmudar (DIN: 10681030) as Additional Director (designated as Whole-Time Director) of the Company for a period of five (5) years, with effect from June 28, 2024 and shall be liable to retire by rotation.

The members approved the appointment of Mr. Falin Ishwarlal Majmudar as Whole-Time Director vide a Special Resolution passed at the 76^th Annual General Meeting of the Company held on July 31, 2024.

Re-Appointment of Independent Director

Mr. Sanker Parameswaran was appointed as Independent Director on June 22, 2020 for a period of Five (5) years, from June 22, 2020 to June 21, 2025. As his tenure was due for completion as on June 21, 2025, it was proposed to re-appoint Mr. Sanker Parameswaran for the further period of Five (5) years from June 22, 2025 to June 21, 2030 and the approval of Members shall be obtained by way of Postal Ballot.

The Board of Directors, considering the recommendation of Nomination and Remuneration Committee approved his appointment at their meeting held on May 09, 2025 for the further period of Five (5) years from June 22, 2025 to June 21, 2030 subject to the approval of the members.

Re-Appointment of Director retiring by rotation

Mr. Falin Majmudar, Whole-Time Director, retires by rotation and being eligible, offers himself for re-appointment. The Board recommends his re-appointment subject to the approval of Members at the ensuing Annual General Meeting. His brief resume, nature of expertise, details of directorships held in other companies along with his shareholding in the Company, if any, as stipulated under Secretarial Standard-2 and Regulation 36 of the SEBI Listing Regulations, form part of the Notice of the ensuing AGM.

Cessation and Resignation of Managing Director

Mr. Sanjay Murdeshwar, Vice Chairman and Managing Director of the Company ceased to be the Vice Chairman and Managing Director with effect from close of business hours of April 02, 2024.

The Board places on record its immense appreciation for his contribution to the Company. Appointment of Company Secretary and Compliance Officer

Ms. Chandni Maru, Company Secretary and Compliance Officer was appointed to the said position by the Board of Directors at their meeting held on May 08, 2024.

Resignation of Company Secretary and Compliance Officer

Mr. Nikhil Malpani, Company Secretary and Compliance Officer of the Company ceased to be the Company Secretary and Compliance Officer with effect from the close of business hours of April 30, 2024.

Declarations by Independent Directors

The Company has received the necessary declarations from all the Independent Directors of the Company confirming that they continue to meet the criteria of independence, as prescribed under Section 149(6) of the Act, read with Regulations 25(8) and 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. The Independent Directors have also confirmed that they have complied with Schedule IV to the Act and the Company’s Code of Conduct/ Ethics.

They have further confirmed that they are not aware of any circumstance or situation which exists, or may reasonably be anticipated, that could impair or impact their ability to discharge their duties. Furthermore, the Independent Directors have submitted their declaration in compliance with the provisions of Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014, which mandate the inclusion of an Independent Director’s name in the data bank of Indian Institute of Corporate Affairs (‘IICA’) for a period of one year, or five years or lifetime till they continue to hold the office of an Independent Director.

Committees of Board; Meetings of the Board of Directors and Board Committees

The Board currently has five (5) Committees, namely: the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, and the Risk Management Committee.

During the year under review, the Board of Directors met six (6) times to transact various affairs of the Company. A detailed update on the Board, its composition, including a synopsis of terms of reference of various Board Committees, number of Board and Committee meetings held during the financial year 2024-25, and attendance of the Directors at each meeting is provided in the Report on Corporate Governance, which forms part of this Report.

Key Managerial Personnel (KMP):

In terms of the provisions of Section 203 of the Act, the following are the KMP of the Company as at the date hereof:

Ms. Shilpa Joshi - Whole-Time Director and Chief Financial Officer

Mr. Falin Majmudar - Whole-Time Director (Appointed with effect from June 28, 2024)

Ms. Chandni Maru - Company Secretary and Compliance Officer (Appointed with effect from May 08, 2024)

The Company has in place a Nomination and Remuneration Policy (‘Policy’), which provides guidance on selection and nomination of Directors to the Board of the Company; appointment of the Senior Management Personnel of the Company; and remuneration of Directors, KMP and other employees. The said Policy is also provided in the Report on Corporate Governance, which forms part of this Report, and is available on the website of the Company and can be accessed at: https://www.novartis.com/sites/novartis_in/files/NRC%20Policy.pdf

Performance Evaluation of the Board

Pursuant to the provisions of Section 178 read with Schedule IV of the Act and Regulation 17, read with Part D of Schedule II to the SEBI Listing Regulations, the Board of Directors has carried out the annual performance evaluation of its own performance, that of the Directors individually as well as working of its Audit, Nomination and Remuneration, Stakeholders Relationship, Risk Management and Corporate Social Responsibility Committees.

A structured questionnaire was prepared for the Board evaluation process for the financial year 2024-25, covering various aspects of the Board’s functioning, such as proper mix of competencies, sufficient diversity and review of the Company’s business, financial performance, governance and compliance etc.

A separate exercise was carried out to evaluate the performance of individual Directors, who were assessed on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of the stakeholders of the Company etc.

The Independent Directors of the Company met on April 10, 2025, without the presence of Non-Independent Directors and members of the management to review the performance of Non-Independent Directors and the Board of Directors as a whole; to review the performance of the Chairperson, and Whole-Time Directors of the Company; and to assess the quality, quantity and timeliness of flow of information between the management and the Board of Directors for the financial year 2024-25. The performance evaluation of the Independent Directors was carried out by the entire Board.

The final outcome of the Board evaluation process for the financial year 2024-25 was placed before the Board of Directors at its meeting held on May 09, 2025, and the Directors expressed their satisfaction with the evaluation process carried out.

Directors’ Responsibility Statement

The audited financial statements of your Company for the year under review (‘financial statements) are in conformity with the requirements of the Act, read with the Rules made thereunder (‘Act’), and the applicable Accounting Standards. The financial statements fairly reflects the form and substance of transactions carried out during the year under review and reasonably present your Company’s financial condition and results of operations.

Pursuant to Section 134(3)(c) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that:

(a) i n the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, if any;

(b) appropriate accounting policies have been selected and applied consistently, and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2025, and of the profit of the Company for the year ended March 31, 2025;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the annual accounts have been prepared on a going concern basis;

(e) proper internal financial controls were laid down and followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Familiarization programme for Independent Directors

The Company keeps its directors informed of the activities of the Company, its management and operations and provides an overall industry perspective on issues being faced by industry, including changes in regulatory landscape, in a proactive manner. Details of familiarization programme provided to the Directors of the Company are available on the website of the Company at: https://www.novartis.com/in-en/media/document/10731

Auditors and auditors report

(i) Statutory Auditors, Auditors Report and Statutory Audit Fees:

Pursuant to the provisions of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, M/s. B S R & Co. LLP Chartered Accountants (Firm Registration No. 101248W/ W100022), were appointed as Statutory Auditors of the Company at the AGM held on July 29, 2022, for a term of five (5) years to hold office from the conclusion of the 74^th AGM till the conclusion of the 79^th AGM of the Company.

The Auditors’ Report issued by M/s. B S R & Co. LLP to the members on the Financial Statement of the Company for the year ended March 31, 2025, does not contain any qualification, reservation or adverse remark. The said Report for the financial year ended March 31, 2025, read with the explanatory notes therein are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3) of the Act. The Auditors’ Report is enclosed with the Financial Statement in this Annual Report.

During the financial year 2024-25, the total fees for the statutory audit rendered by the Statutory Auditors are given below:
Auditors’ Remuneration	(? in million)
(Excluding GST, where applicable)
	2024-25	2023-24
	BSR& Co LLP	BSR & Co LLP
Period	April 24 - March 25	April 23 - March 24
Audit Fees	7.1	6.9
Reimbursement of expenses	0.8	0.9
Total	7.9	7.8

(ii) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed Saraf & Associates, Company Secretaries, to conduct Secretarial Audit of the Company for the financial year 2024-25. The Secretarial Audit Report is annexed herewith as an Annexure D. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Further, as per the recent amendments in SEBI LODR Regulations, 2015 it is prescribed that the term for the appointment of Secretarial Auditor shall not exceed one term of five (5) consecutive years in case of an individual practicing Company Secretary, and for not more than two terms of five (5) consecutive years in case of a firm of Secretarial Auditors.

In this regard, it is proposed to appoint M K Saraf & Associates LLP Company Secretaries (Firm Registration No. L2025MH018600 and Peer Review Certificate No. 6694/2025) for a period of five (5) consecutive years commencing from April 01, 2025, till March 31, 2030, at the Board Meeting held on May 09, 2025, subject to the approval of members at the ensuing Annual General Meeting.

The Board has received the consent and eligibility letter confirming their willingness to act as Secretarial Auditor and affirming that they are not disqualified from being appointed for the aforesaid term.

(iii) Cost records and Cost Audit:

Maintenance of cost records and the requirement of cost audit, as prescribed under the provisions of Section 148(1) of the Act, are not applicable for the business activities carried out by the Company for the financial year 2024-25.

During the year under review, neither the Statutory Auditors nor the Secretarial Auditor has reported to the Audit Committee or the Board, under Section 143(12) of the Act, any instances of fraud committed against the Company by its officers or employees.

Compliance with Secretarial Standards

During the financial year 2024-25, the Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Annual Secretarial Compliance Report

The Company has conducted an examination of all applicable compliances as per SEBI Listing Regulations and the Circulars/Guidelines issued thereunder, for the financial year 2024-25.

The Annual Secretarial Compliance Report, issued by Saraf & Associates, Company Secretaries, is required to be submitted to the Stock Exchange within 60 days of the end of the financial year. The Report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption, and foreign exchange earnings/outgo, is included in Annexure E, annexed herewith.

Corporate Governance

Your Company has consistently adhered to the corporate governance guidelines and best practices to boost long-term shareholder value and to uphold minority rights. The Company considers it an inherent responsibility to disclose in a timely and accurate manner, all information regarding its operations and performance, as well as regarding leadership and governance within the Company.

Pursuant to Regulation 34 read with Schedule V of SEBI Listing Regulations, the Report on Corporate Governance for the year under review is presented in a separate section and forms a part of this Annual Report. A certificate from Saraf and Associates, Practicing Company Secretaries, confirming compliance with the conditions of Corporate Governance as stipulated under the SEBI Listing Regulations, also forms part of the Report on Corporate Governance.

Prohibition of Insider Trading

Pursuant to provisions of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, as amended (“PIT Regulations”), the Company has adopted Insider Trading Code to regulate, monitor and report trading by insiders. This Code applies to Promoters, all Directors, Designated Persons and Connected Persons and their immediate relatives, who are likely to have access to Unpublished Price Sensitive Information (“UPSI”) relating to the Company.

The Company has also formulated a ‘Code of Practices and Procedures for Fair Disclosure of UPSI’ in compliance with the PIT Regulations. The aforesaid Codes are available on the website of the Company at https://www.novartis.com/in-en/sites/novartis_in/files/2022-02/code-of-practices-and-procedures-for-fair-disclosure-of-unpublished-price-sensitive-information.pdf

Business Responsibility and Sustainability Reporting (‘BRSR’)

In terms of amendment to regulation 34(2)(f) of the SEBI Listing Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021/22 dated May 05, 2021, as amended from time to time, SEBI has mandated top 1000 listed companies by market capitalization to publish Business Responsibility and Sustainability Report (‘BRSR’) based on nine (9) ESG principles. As Novartis India is amongst the top 1000 listed companies, it has prepared the BRSR, which is enclosed as Annexure F to this Annual Report.

Whistle-Blower Policy: Vigil Mechanism

Pursuant to Section 177 of the Act, read with Regulation 22 of the SEBI Listing Regulations, it is mandatory for every listed entity to formulate Vigil Mechanism (‘Whistle-Blower Policy’) to enable the Directors and employees to report genuine concerns. The Company has implemented a Vigil Mechanism and Whistle-Blower Policy that provides for (a) adequate safeguards against victimization of people who avail the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism and Whistle-Blower Policy are made available on the website of the Company at: https://www.novartis.com/sites/novartis_in/files/Vigil%20Mechanism%20 %26%20Whistle%20Blower%20Policy_. pdf

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013, and Rules framed thereunder. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All persons whether employed as permanent, contractual, temporary or trainees are covered under this Policy.

During the financial year 2024-25, no complaint was received by the Company related to sexual harassment. As on March 31, 2025 there are no complaints to be resolved.

Annual Return

Pursuant to the provisions of Sections 92(3) and 134(3)(a) of the Act, read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the draft Annual Return of the Company for the financial year ended March 31, 2025, is available on the website of the Company at: https://www.novartis.com/in-en/investors/novartis-india-financials

Significant and material orders passed by the Regulators or Court

There are no significant material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Other Disclosures

• There were no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report.

• The Company has not issued any shares with differential voting rights/ sweat equity shares.

• There was no revision in the Financial Statements.

• There has been no change in the nature of business of the Company as on the date of this Report.

• No application has been made under the Insolvency and Bankruptcy Code; hence, the requirement to disclose the details of any application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

• The requirement to disclose the details of difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking loans from the Banks or Financial Institutions, along with the reasons thereof, is not applicable; and

• The Company does not have any subsidiaries, associate companies and joint ventures for the year ended March 31, 2025.

Green Initiative

We request all the members to support the ‘Green Initiative’ of the Ministry of Corporate Affairs and Company’s ongoing commitment to a greener environment by consenting to receive the Annual Report, AGM Notice and other documents electronically to your email address registered with your Depository Participant/ RTA.

Cautionary Note

The statements forming part of the Board’s Report may contain certain forward-looking remarks within the meaning of applicable securities laws and regulations. Various factors could cause the actual results, performances, or achievements of the Company to materially differ from any future results, performances, or achievements expressed or implied by such forward-looking statements.

Acknowledgement

The Board expresses its appreciation and places on record the contributions made by all stakeholders particularly employees, shareholders, customers, the medical fraternity, and all business partners, during the year under review. It also acknowledges the support received from the parent Company, Novartis AG.

1

https://www.alz.org/in/dementia-alzheimers-en.asp

---

Mar 31, 2024

Your Directors are pleased to present the 76^th Annual Report along with the audited financial statement for the year ended March 31, 2024 (“year under review”).

Summary of Financial Results

Particulars	2023-24	2022-23
Revenue from Operations	3,350.7	3,787.4
Total Income	3,967.5	4,368.5
Profit/(Loss) before Tax	1,228.4	1,153.8
Profit/(Loss) after tax	851.9	1,033.6
Other Comprehensive Income for the year	12.1	31.1
Retained Earnings balance brought forward from previous year	7,597.2	6,779.4
Available for appropriation The Directors have made the following appropriations:	8,461.2	7,844.1
Dividend	1,172.8	246.9
Retained Earnings balance carried forward	7,288.4	7,597.2

Dividend

We are pleased to inform our shareholders that your Board of Directors have recommended a dividend for the reporting period, reflecting our commitment to delivering value to our shareholders. We have diligently managed our financial resources and have continued momentum of the improved profitability. The Board has recommended a Dividend of '' 25 per equity share of '' 5 each to be apportioned out of the profits for the financial year 2023-24 subject to the approval of the shareholders at the ensuing Annual General Meeting (AGM). The dividend, if approved, will result in cash outflow of '' 617.3 million.

The Dividend Distribution Policy, approved by the board in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘SEBI Listing Regulations’) is available on the website of the Company at: https://www.novartis.com/sites/novartis_in/files/Dividend%20Distribution%20policy.pdf

The Dividend will be paid to members whose names appear in the register of members as on record date and in respect of shares held in dematerialized form, it will be paid to the members whose names are furnished by NSDL and CDSL as beneficial owners as on that date.

Transfer to General Reserves

Your Company does not propose to transfer any amount to the General Reserves for the financial year ended March 31, 2024.

Management Discussion and Analysis

For the financial year under review, the business operations of the Company comprise Pharmaceuticals.

a. Economy, Industry and Development

The global medicine market is expected to grow at 3 - 6 per cent CAGR through 2026, touching close to USD 1.8 trillion in total market size by 2026.ⁱ Several countries are presently looking at healthcare reforms. Drug manufacturers face stricter access and pricing environments as we go into 2024. Governments across various jurisdictions including the US, EU, Germany, Japan, China, etc. are introducing reforms aimed at controlling healthcare spending/drug costs. Such initiatives are likely to place significant pressure on the industry’s revenue model.

Reference:

¹ https://www.iqvia.com/newsroom/2021/12/global-medicine-spending-to-reach-18-trillion-in-2026-including-spending-on-covid-19-vaccines-accord#:~:text=Press%20Release-,Global%20Medicine%20Spending%20 to%20Reach%20%241.8%20Trillion%20in%202026%2C%20Including,Institute%20for%20Human%20

Data%20Science&text=The%20global%20medicine%20market%20%E2%80%94%20based,%2D6%25%20

CAGR%20through%202026.

The Indian Pharmaceutical Industry is currently valued at USD 50 billion and is expected to reach USD 65 billion by 2024, and thereafter USD 120 - 130 billion by 2030." Indian pharma exports witnessed a growth of 103% between 2013 and 2022.ⁱⁱⁱ During FY18 to FY23, the Indian Pharmaceutical Industry logged a compound annual growth rate of 6 - 8 per cent. The domestic formulations market is projected to grow at an 8-10 per cent CAGR (reaching USD 20-22 billion in FY24), slightly below pre-pandemic growth rates, with export growth forecasted at 10 per cent (reaching USD 22-24 billion) compared to the historical long-term 15 per cent CAGR pre-COVID.^iv

Concerns about regulatory compliance, increased competition, and pricing pressures in the US market will likely pose challenges to pharma export growth; nevertheless, Indian manufacturers are expected to focus on diverse product offerings including complex generics, biosimilars, and new branded products. Research and development will prioritize innovations in delivery systems for generics, with limited emphasis on new chemical entity (NCE) introductions/ Encouraged by the Government, the industry is looking at moving from volume to value-led growth. The shift aims to position India as a hub for drug discovery, development, and innovation. A collaborative mindset is emerging, with regulatory support, digital adoption, sustainability, and academia-industry collaborations driving the transformation. Indian pharma companies are expanding their global footprint by exporting to over 200 countries. Additionally, Efforts to enhance the quality standards within the domestic pharmaceutical industry have been underway through regulatory improvements.

The Government is expected to remain committed to universal healthcare and ensuring access and affordability. The AB-PMJAY scheme has received an increased allocation in the Interim Budget and may be extended to other vulnerable sections of the population, beyond its current scope. Regarding upcoming significant reforms, the legal framework governing the pharmaceutical sector, namely the pre-independence Drugs and Cosmetics Act, 1940 is expected to undergo a long-overdue update through the Drugs, Medical Devices and Cosmetics Bill, 2023 (‘Bill’). The pricing framework is also expected to undergo a significant revamp following the constitution of the Committee for Reforms in the Pricing Framework for Drugs and Medical Devices by the Department of Pharmaceuticals.^vi The new Uniform Code of Pharmaceutical Marketing Practices, 2024 (‘Code’) shows a shift away from the Government’s earlier light touch regulatory approach wherein the Government will be able to take cognizance of any violations taking place under other laws and regulations by pharmaceutical companies as part of their marketing practices.

References:

" https://www. investindia.gov. in/sect or/pharmaceuti cals#: ~:text=The%20 pharmaceuti cal %20 in dust ry%20 in%20India,served%20by%20Indian%20pharma%20exports.

¹¹¹ https://pib.gov.in/PressReleasePage.aspx?PRID=1821747

^lv https://www.pharmaindustrial-india.com/articles-interviews-online-watch/pharma-trends-in-2024-key-trends-and-future-projections#:~:text=An%200verview%20of%20the%20Indian%20Pharma%20Industry%20in%20 2023&text=The%20domestic%20formulations%20market%20is,in%20the%20pre%2Dpandemic%20era.

^v ibid

^vi https://pharmaceuticals.gov.in/sites/default/files/Reforms%20in%20the%20Pricing%20Framework_0.pdf

b. Performance

Revenue from operations for the financial year ended March 31, 2024 was '' 3,350.7 million illustrating a decrease of 11.5 per cent over the previous year. The Profit before tax for the year stood at '' 1,228.4 million indicating increase of 6.5 per cent over the previous year. Profit before Tax for year 2022-23 was '' 1,153.8 million.

The Ministry of Health and Family Welfare, Government of India, released the revised National List of Essential Medicines (NLEM), 2022. The revised list of NLEM impacted 9 (Nine) brands marketed by the Company. These brands are majorly in the areas of Oncology and Neurology.

Organ transplant procedures are projected to grow at 11 per cent in year 2024 primarily contributed by increased medical tourism supported by budget-friendly packages, advancement in surgical techniques, and government initiatives like the “Angdaan Mahotsav” awareness campaign¹.

The incorporation of kidney, heart, lung, and liver transplants under PM-JAY Ayushman Bharat and Rashtriya Arogya Nidhi with financial support for BPL (Below Poverty Line) patients demonstrates a commitment to accessibility of Organ transplants in India.

Novartis continues to engage Physicians for high brand recall and for dissemination of key scientific messages. This is done through differentiated campaigns channelized through RTEs (Rep Triggered Emails) and CMEs (Continuing Medical Education). We continue to create high differentiation for Novartis brands in the Transplant maintenance portfolio. Physicians have adapted well to digital engagements, and we continue to implement them.

During the Financial Year 2023-24, the Transplant Maintenance portfolio grew by 11 per cent, which helped the organization to offset the impact on the sales due to shortage of Simulect. This growth was achieved despite a highly cluttered genericized market, by bringing in sharp focus on individual brands in Transplant Maintenance portfolio with high-pitch share of voice campaigns coupled with the innovative TRIO campaign aimed at driving a portfolio-based approach.

It has been 2 years of the exclusive sales and distribution arrangement entered into with Dr. Reddy’s Laboratories (Dr. Reddy’s) for a number of our Established Medicines which include the Voveran range, the Calcium range and Methergine. The arrangement aimed to broaden access of these medicines to larger geographies to benefit many more patients, more efficiently through an expanded field force.

Pain portfolio with its flagship brand Voveran range grew by 6 per cent in MAT Mar’24 vs MAT Mar’23. The team worked towards leveraging the efficacy perception of Voveran among HCPs and focus on urban and rural markets with a high in-clinic share of voice drive with the ‘Zindagi se milao kadam’ campaign. Voveran orals range has overall grown by 28 per cent for YTD February 2024 vs. YTD Feb 2023³ with a 10 per cent increased prescription response in the November to February 2024 vs. November to February 2023 period⁴.

There is an increase in the share of voice and Voveran gaining prescription share among doctor specialties across India. The team continued exhibiting success with ‘The Cool Movement’ demonstration campaign to create a strong differentiation for Voveran Emulgel in a cluttered counter-irritant market. This has resulted in Voveran gels range overall growth by 18 per cent for YTD February 2024 vs YTD February 2023³.‘Awareness for life’ initiative focused on improving bone & joint health conditions reached to people working in more than 100 corporates across India⁵.

References:

¹ SAI market research on Transplant Procedure Market Overview - March 2024

² IQVIA MAT Mar 2024

³ IQVIA MAT February 2024

⁴ SMSRC November-February 2024 report

⁵ Dr Reddy’s reported information

The Indian population currently has a very high burden of vascular risk factors, such as diabetes, hypertension, and obesity, which can adversely impact the onset and progression of dementia⁶. An estimated 8.8 million Indians older than 60 years have dementia⁷. Offering great convenience and safety, our Neurosciences’ innovative medicine for Alzheimer’s disease dementia, Exelon Patch has seen greater patient acceptance and usability which is reflecting in the growth numbers⁶.

The following brands hold key positions in major therapeutic areas such as:

Therapeutic Area	Therapeutic Area Product
Bone and Pain	Voveran®
Transplantation Immunology	Simulect®, Certican®, Sandimmun®, Neoral®, Myfortic®
Neurosciences	Tegrital®, Exelon®

References:

⁶ Vijayalakshmi et al. Changing demography and the challenge of dementia in India. Nature Reviews Neurology 17, 747-758 2021

⁷ Lee J, et al. Prevalence of dementia in India: National and state estimates from a nationwide study. Alzheimers Dement. 2023 Jul;19(7):2898-2912. doi: 10.1002/alz.12928. Epub 2023 Jan 13. PMID: 36637034; PMCID: PMC10338640.

Key Financial Indicators

Particulars 2023-24 2022-23

Operating profit margin (%)	18.7	15.6
Net profit margin (%)	25.4	27.3
Debtors’ turnover ratio	8.6	9.4
Current ratio	4.4	4.2
Return on Equity (%)	11.2	14.1
Inventory turnover ratio	6.7	6.6
Debt service coverage ratio	24.2	19.4
Debt equity ratio	0.01	0.03
Return on capital employed (%)	9.2	7.9
Return on Investment	6.4	5.2

Reasons for change compared to the previous financial year in key financial ratios are as follows:

Operating profit margin

Operating profit margin is a profitability or performance ratio used to calculate the percentage of profit of a company produced from its operations. It is calculated by dividing the operating earnings before interest and tax by turnover. Margins have improved because of operational efficiencies.

Net profit margin

The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing profit for the year by turnover. Net profit margin in the financial year 2023-24 has decreased due to higher tax expenses compared to previous financial year 2022-23. Current tax expense for the year ended March 31, 2024 and March 31, 2023 includes tax adjustments for earlier years of '' 61.6 million and ('' 194.0 million) respectively.

Debtors’ turnover ratio

It is calculated by dividing turnover by average trade receivables, to quantify a company’s effectiveness in collecting its receivables. No major movement compared to previous year.

Current ratio

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities. No major movement compared to previous year.

Return on Equity

Return on equity is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit for the year by average shareholder’s equity. Return on equity in the financial year 2023-24 has decreased due to higher tax expenses compared to previous financial year 2022-23.

Inventory turnover ratio

I nventory turnover is the number of times a company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory. No major movement compared to previous year.

Debt service coverage ratio

The debt service coverage ratio measures how many times a company can cover its current interest payment with its available earnings. It is calculated by dividing earning available for debt service by lease payments. The ratio has been impacted positively due to significant reduction in lease liabilities on account of remeasurement.

Debt equity ratio

The ratio is used to evaluate a company’s financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. It is calculated by dividing lease liabilities by shareholders equity. The ratio has been improved due to significant reduction in lease liabilities on account of remeasurement.

Return on Capital employed

Return on equity is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit before interest and tax for the year by capital employed. Return on capital employed has improved due to operational efficiencies.

Return on Investment

Return on investment is defined as return earned on the investment done. It is calculated by dividing weighted average interest income on bank deposit by weighted average bank deposits. Return on investment has improved due to operational efficiencies.

c. Risks, Threats, and Concerns

Supply continuity, quality of drugs, increasing cost pressure, inflation, high price elasticity, control of prices of certain drugs under the Drug Price Control Order (‘DPCO’), including regulations to cap trade margins on non-scheduled products, continue to affect the profitability of the industry. The central government has been inclined to introduce Trade Margin Rationalisation (TMR) in furtherance of its effort to bring transparency and consistency to the pricing structure and to ultimately make medicine more affordable. The tilt towards domestic industry, in line with Atmanirbhar Bharat and ‘Make in India,’ will likely affect policies and incentives and may adversely impact competition.

d. Outlook

Medicine spending in India is projected to grow 9 - 12 percent over the next five years, leading India to become one of the top 10 countries in terms of medicine spending™.

The Budget allocation for the Department of Pharmaceuticals (DoP) is estimated to go up by 29.4 per cent to '' 4,089.95 crore during the FY 2024-25, as compared to the '' 3,160.06 crore outlay estimated for the FY 2023-24, backed by a 78.6 per cent increase in allocation towards the production linked incentive (PLI) schemes''"".

The ability of companies to orient their product portfolio towards chronic therapies for diseases like cardiovascular, anti-diabetes, anti-depressants, and anti-cancers, which are on the rise, will also play a role in future domestic sales growth, according to observers. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit Indian pharmaceutical companies, it is opined. Successful companies’ businesses will focus on specialty products and therapies. The move from volume to value led growth will drive innovation within the pharmaceutical sector.

In addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies.

References:

^v" A focus on progress of pharmaceutical industry of India (indiatimes.com) ^vl" https://www. pharmabiz.com/ArticleDetails. a spx?aid=166149&sid=1

e. Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorised use or disposal. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorised, recorded and reported correctly.

The Internal Auditor reviews the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems, evaluated the internal financial control systems with the Audit Committee and discussed relevant issues with internal and statutory auditors. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that the Company followed proper internal financial controls and that such internal financial controls are adequate and were operating effectively.

f. Personnel

The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of employees in the Company as on March 31, 2024 was 62.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 (‘the Act’) read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as an Annexure A.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this Report. However, in terms of first provision of Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary & Compliance Officer, whereupon a copy would be sent.

Corporate Social Responsibility

The Company continues to support various initiatives in the areas of health. These activities are in accordance with Schedule VII of the Act. The Board of Directors and CSR Committee review and monitor from time to time all the CSR activities being undertaken by the Company. The CSR Policy adopted by the Board of Directors is available on the Company’s website at: novartis.com/sites/novartis_in/files/NIL CSR Policy Final_0_0.pdf

Health: The Government of India announced its commitment to eradicate leprosy from the country by year 2030. Aligned with this vision, the Company reinforced its commitment to leprosy as part of its CSR work in India. The Company continued its support to a non-profit organization with projects based in Andhra Pradesh and Maharashtra. The project gives students affected by leprosy the ability to get jobs through vocational training and build a community of empowered young people who can further empower their families and communities.

The Annual Report on Corporate Social Responsibility Activities in terms of Section 135 of the Act and Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended by Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, effective January 22, 2021 read with Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022, effective September 20, 2022 (hereinafter referred to as ‘CSR Rules’) is annexed herewith as an Annexure B.

Related Party Transactions

The Audit Committee approved all the Related Party Transactions (‘RPTs’) entered into during the year under review, from time to time.

The Audit Committee granted omnibus approval for RPTs as per the provisions and restrictions contained under the Act read with SEBI Listing Regulations. A statement giving details of all Related Party Transactions is placed before the Audit Committee for their review on a quarterly basis.

The Company has formulated a ‘Policy for dealing with Related Party Transactions’ (‘Policy’) which includes dealing with material RPTs. The Board at its meeting held on May 19, 2022, as recommended by the Audit Committee, considered and approved amendments to the said Policy in line with the amendments in the SEBI Listing Regulations vide SEBI Notification (SEBI/LAD-NRO/GN/2021/55) dated November 09, 2021 and Circular (SEBI/HO/CFD/ CMD1/CIR/P/2021/662) dated November 22, 2021 read with clarificatory SEBI Circular (SEBI/HO/CFD/CMD1/CIR/P/2022/40) dated March 30, 2022. The updated Policy is available on the website of the Company at: https://www.novartis.com/in-en/sites/novartis_ in/files/Policy%20for%20dealing%20with%20Related%20Party%20Transactions.pdf

Further, in terms of the provisions of Sections 177 and 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all the requisite approvals were taken for the contracts/arrangements/ transactions entered into by the Company with its related parties, during the year under review.

All transactions with related parties were in accordance with the Policy formulated by the Company.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Act including certain arm’s length transactions under third proviso thereto are required to be disclosed in Form AOC-2. Form AOC-2 envisages disclosure of material contracts or arrangements or transactions on an arm’s length basis.

Details of the material RPTs in the financial year 2023-24, as per the Policy adopted by the Company, is disclosed as an Annexure C. The transactions disclosed in the said Annexure relates to material RPTs with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services and other obligations as approved by members under erstwhile Clause 49(VII)(E) of the Listing Agreement at the

The details of the related party transactions as per Indian Accounting Standards (IND AS) - 24 are set out in Note No. 31 to the Financial Statements of the Company. The Company in terms of Regulation 23 of the SEBI Listing Regulations, submits disclosures of all related party transactions to the stock exchanges, within time stipulated and in the format stipulated under the said SEBI Listing Regulations.

Risk Management

Pursuant to the Regulation 21 of the SEBI Listing Regulations, your Company has constituted a Risk Management Committee (‘RMC’) to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks.

The RMC is supported by Internal Risk Steering Committee, risk champions and on some occasions supported by an external risk advisory firm. The teams undertake assessment of internal and external risks, adopts the risk mitigation plan and regularly monitors them in a structured and controlled environment. The Committee provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis. There are no risks, which in the opinion of the Board, threaten the existence of your Company.

Details of composition of the RMC and the Risk Management Policy, adopted by the Board, is provided in the Report on Corporate Governance, which forms part of this Report.

Deposits

The Company has not accepted any deposits within the ambit of Section 73 of the Act and the Rules framed thereunder during the financial year 2023-24. Hence, no further disclosure is required.

Particulars of Loans, Guarantees or Investments

As on March 31, 2024, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act.

Board of Directors and Key Managerial Personnel Appointment of Director

The Board of Directors of the Company at its meeting held on February 17, 2024, based on the recommendation of the Nomination and Remuneration Committee, approved the appointment of Ms. Gira Sardesai (DIN: 02610502) as Independent Director (designated as Non-Executive and Independent Director) of the Company effective March 31, 2024.

Ms. Gira Sardesai, aged about 64 years, is a Chartered Accountant and Certified Public Accountant (CPA). Ms. Sardesai was earlier associated with companies like Pidilite Industries Limited, ICICI Bank, British Petroleum and Johnson & Johnson.

She is a dynamic and result oriented finance professional with more than 35 years of experience across different industries and multiple geographies. She holds extensive hands-on experience in management and business leadership, with an established record of success in significantly growing enterprise value.

Ms. Sardesai is proven ‘People’s leader’, holds the skills to effectively manage a large group of people and build highly competent teams to drive result delivery. She also exercises a high degree of discretion, mature judgment, and tact in handling issues of a sensitive nature. Ms. Sardesai also has extensively travelled across the world. She is currently involved in philanthropic activities.

The shareholders approved the appointment of Ms. Gira Sardesai as Independent Director through Postal Ballot conducted in accordance with Sections 108 and 110 and other applicable provisions of the Act read with the applicable Rules, Secretarial Standards and the SEBI Listing Regulations on February 21, 2024 with requisite majority.

Cessation and Resignation of Director

Mr. Jai Hiremath, Independent Director of the Company ceased/ retired from the said position from close of business hours of March 31, 2024.

Further, Mr. Sanjay Murdeshwar, Vice Chairman and Managing Director of the Company resigned from the said position from close of business hours of April 02, 2024.

The Board places on record its immense appreciation for their contribution to the Company.

Continuation of appointment of Mr. Christopher Snook as Non-Executive and Non-Independent Director. Pursuant to the SEBI''s amendment in the regulations dated July 15, 2023 applicable w.e.f April 01, 2024 read with Regulation 17(1D) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the appointment of Mr. Christopher Snook was approved by shareholders through postal ballot held on February 21, 2024 with requisite majority for a period of 4 (four) consecutive years with effect from March 31, 2024 till March 30, 2028 and that he shall not be liable to retire by rotation.

Resignation of Company Secretary and Compliance Officer

Mr. Nikhil Malpani, Company Secretary and Compliance Officer of the Company resigned from the said position from close of business hours of April 30, 2024.

Appointment of Company Secretary and Compliance Officer.

Ms. Chandni Maru, Company Secretary and Compliance Officer of the Company was appointed with effect from May 08, 2024.

Re-appointment of Director retiring by rotation

Ms. Shilpa Joshi, Whole-Time Director and Chief Financial Officer, retires by rotation and being eligible, offers herself for re-appointment. The Board recommends her re-appointment. Her brief resume, nature of expertise, details of directorships held in other companies along with her shareholding in the Company, if any, as stipulated under Secretarial Standard-2 and Regulation 36 of the SEBI Listing Regulations are forming part of the Notice of the ensuing AGM.

Declarations by Independent Directors

The Company has received necessary declarations from all the Independent Directors of the Company confirming that they continue to meet the criteria of independence, as prescribed under Section 149(6) of the Act read with Regulations 25(8) and 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. The Independent Directors have also confirmed that they have complied with Schedule IV to the Act and the Company’s Code of Conduct.

They have further confirmed that they are not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties. Further, the Independent Directors have also submitted their declaration in compliance with the provision of Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014 which mandated the inclusion of an Independent Director’s name in the data bank of Indian Institute of Corporate Affairs (‘IICA’) for a period of one year or five years or lifetime till they continue to hold the office of an Independent Director.

Committees of Board; Meetings of the Board of Directors and Board Committees

The Board currently has 5 (five) Committees, namely, the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, and the Risk Management Committee.

During the year under review, the Board of Directors met 5 (five) times to transact various affairs of the Company. A detailed update on the Board, its composition, including synopsis of terms of reference of various Board Committees, number of Board and Committee meetings held during the financial year 2023-24 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance, which forms part of this Report.

Key Managerial Personnel (KMP)

In terms of provisions of Section 203 of the Act, the following are the KMP of the Company as on date:

Ms. Shilpa Joshi - Whole Time Director and Chief Financial Officer

Ms. Chandni Maru - Company Secretary and Compliance Officer (Appointed w.e.f. May 08, 2024) Nomination and Remuneration Policy

The Company has in place a Nomination and Remuneration Policy (‘Policy’) which provides guidance on selection and nomination of Directors to the Board of the Company; appointment of the Senior Management Personnel of the Company; and remuneration of Directors, KMP and other employees. The said Policy is also provided in the Report on Corporate Governance which forms part of this Report and is also available on the website of the Company and can be accessed at: https://www.novartis.com/sites/novartis_in/files/NRC%20Policy.pdf

Performance Evaluation of Board

Pursuant to the provisions of Section 178 read with Schedule IV of the Act and Regulation 17 read with Part D of Schedule II to the SEBI Listing Regulations, your Company has in place a Board Evaluation process for the Board of Directors as a whole, Board Committees and also for the Directors (Executive and Non-Executive) individually by seeking responses/inputs from all the Directors to an assessment questionnaire.

A structured questionnaire was prepared for the Board evaluation process for the financial year 2023-24, covering various aspects of the Board’s functioning such as proper mix of competencies, sufficient diversity and reviewing of Company’s business, financial performance, governance and compliance etc.

A separate exercise was carried out to evaluate the performance of individual Directors, who were evaluated on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of the stakeholders of the Company etc.

The Independent Directors of the Company met on April 03, 2024, without the presence of Non-Independent Directors and members of the management to review the performance of Non-Independent Directors and the Board of Directors as a whole, to review the performance of the Chairperson, Managing Director and Whole-Time Director of the Company, and to assess the quality, quantity and timeliness of flow of information between the management and the Board of Directors for the financial year 2023-24. The performance evaluation of the Independent Directors was carried out by the entire Board.

The final outcome of the Board evaluation process for the financial year 2023-24 was placed before the Board of Directors at its meeting held on May 10, 2024 and the Directors expressed their satisfaction with the evaluation process carried out.

Directors’ Responsibility Statement

The Audited Financial Statement of your Company for the year under review (‘financial statement’) are in conformity with the requirements of the Act read with the Rules made thereunder (‘Act’) and the Accounting Standards. The financial statement fairly reflects the form and substance of transactions carried out during the year under review and reasonably

Pursuant to Section 134(3)(c) of the Act, the Board of Directors, to the best of its knowledge and ability confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any

(b) appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on March 31, 2024 and of the profit of the Company for the year ended March 31, 2024

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(d) the annual accounts have been prepared on a going concern basis.

(e) proper internal financial controls were laid down and followed by the Company and such internal financial controls are adequate and were operating effectively.

(f) proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Familiarization programme for Independent Directors

The Company keeps its directors informed of the activities of the Company, its management and operations and provides an overall industry perspective on issues being faced by the industry including changes in regulatory landscape, in a proactive manner. Details of familiarisation programme provided to the Directors of the Company are available on the website of the Company at: https://www.novartis.com/sites/novartis_in/files/Familiarization%20Program%20for%20 independent%20Directors_0.pdf

Auditors and auditors report

(i) Statutory Auditors, Auditors Report and Statutory Audit Fees:

Pursuant to the provisions of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, M/s B S R & Co. LLP Chartered Accountants (Firm Registration No. 101248W/ W100022), were appointed as Statutory Auditors of the Company at the AGM held on July 29, 2022 for a term of 5 (five) years to hold office from the conclusion of the 74^th AGM till the conclusion of the 79^th AGM of the Company.

The Auditors’ Report issued by M/s. B S R & Co. LLP to the shareholders on the Financial Statement of the Company for the year ended March 31, 2024 does not contain any qualification, reservation or adverse remark. The said Report for the financial year ended March 31, 2024 read with the explanatory notes therein are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3) of the Act. The Auditors’ Report is enclosed with the Financial Statement in this Annual Report.

During the financial year 2023-24, the total fees for the statutory audit rendered by the Statutory Auditors are given below:

Auditors’ Remuneration (Excluding GST where applicable)			('' in million)
	2023-24 BSR & Co LLP	2022-23 Deloitte Haskins & Sells LLP*	2022-23 BSR & Co LLP	2022-23 Total
Period	April 23-March 24	April 22-June 22	July 22-March 23	FY 22-23
Audit Fees	6.9	0.7	5.6	6.3
Reimbursement of expenses	0.9	-	0.5	0.5
Total	7.8	0.7	6.1	6.8

* The tenure of M/s Deloitte Haskins & Sells LLP expired at the conclusion of the 74th AGM of the Company

(ii) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed Saraf & Associates, Company Secretaries, for conducting Secretarial Audit of the Company for the financial year 2023-24. The Secretarial Audit Report is annexed herewith as an Annexure D. The Secretarial Audit Report does not contain any qualification, reservation, or adverse remark.

The Board has re-appointed Saraf & Associates, Company Secretaries, to conduct the Secretarial Audit of the Company for the financial year 2024-25. They have confirmed their eligibility for the said re-appointment.

(iii) Cost records and Cost Audit:

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Act are not applicable for the business activities carried out by the Company for the Financial Year 2023-24.

During the year under review, neither the Statutory Auditors nor the Secretarial Auditor has reported to the Audit Committee or the Board, under Section 143(12) of the Act, any instances of fraud committed against the Company by its officers or employees.

Compliance with Secretarial Standards

During the financial year 2023-24, the Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Annual Secretarial Compliance Report

The Company has undertaken an examination of all applicable compliances as per SEBI Listing Regulations and Circulars/Guidelines issued thereunder, for the Financial Year 2023-24.

The Annual Secretarial Compliance Report as issued by Saraf & Associates, Company Secretaries, is required to be submitted to the Stock Exchanges within 60 days of the end of the financial year. The Report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure E, annexed herewith.

Corporate Governance

The Company is committed to follow best practices of Corporate Governance and is in compliance with the provisions on Corporate Governance specified in the SEBI Listing Regulations and Novartis Group Corporate Governance norms.

Pursuant to the SEBI Listing Regulations, the Report on Corporate Governance for the year under review, presented in a separate section, is forming part of the Annual Report. A certificate from Dr. K. R. Chandratre, Practicing Company Secretary, confirming compliance of conditions of Corporate Governance, as stipulated under the SEBI Listing Regulations, also forms part of the Report on Corporate Governance.

Business Responsibility and Sustainability Reporting (‘BRSR’)

In terms of amendment to regulation 34(2)(f) of the SEBI Listing Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021/22 dated May 05, 2021 as amended from time to time, SEBI has mandated to 1000 companies by market capitalization to publish Business Responsibility and Sustainability Report (‘BRSR’) based on 9 ESG principles. Since Novartis India is amongst the top 1000 companies, it has prepared BRSR which is enclosed as Annexure F.

Whistle Blower Policy: Vigil Mechanism

Pursuant to Section 177 of the Act read with Regulation 22 of the SEBI Listing Regulations, it is mandated for every listed entity to formulate Vigil Mechanism (‘Whistle Blower Policy’) for Directors and employees to report genuine concerns. The Company has established a Vigil Mechanism and Whistleblower Policy which provides for (a) adequate safeguards against victimisation of persons who avail the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism and Whistleblower Policy are made available on the website of the Company at: https://www.novartis.com/sites/novartis_in/files/Vigil%20Mechanism%20 %26%20Whistle%20Blower%20Policy_.pdf

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All persons whether employed as permanent, contractual, temporary or trainees are covered under this Policy.

During the Financial Year 2023-24, no complaint was received by the Company related to sexual harassment. There are no pending complaints to be resolved.

Annual Return

Pursuant to the provisions of Sections 92(3) and 134(3)(a) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the draft Annual Return of the Company for the Financial Year ended March 31, 2024 is available on the website of the Company at: https://www.novartis.com/in-en/investors/novartis-india-financials

Significant and material orders passed by the Regulators or Court

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Other Disclosures

• There were no material changes and commitments affecting the financial position of the Company between the end of the Financial Year 2023-24 and the date of this Report.

• There is no change in the capital structure of the Company during the financial year 2023-24.

• The Company has not issued any shares with differential voting rights/sweat equity shares.

• There was no revision in the financial statement.

• There has been no change in the nature of business of the Company as on the date of this Report.

• No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable.

• The requirement to disclose the details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable; and

• The Company does not have any subsidiary, associate companies and joint ventures for the year ended March 31, 2024.

Green Initiative

We request all the shareholder to support the ‘Green Initiative’ of the Ministry of Corporate Affairs and Company’s continuance towards greener environment by enabling the service of Annual Report, AGM Notice and other documents electronically to your email address registered with your Depository Participant/ RTA.

Cautionary Note

The statements forming part of the Board’s Report may contain certain forward-looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

Acknowledgement

The Board appreciates and places on record the contribution made by all stakeholders, particularly employees, shareholders, customers, the medical fraternity and all business partners, during the year under review and acknowledges the support received from the parent Company, Novartis AG.

On behalf of the Board of Directors

CHRISTOPHER SNOOK Chairman

Date: May 10, 2024 DIN: 00369790

Place: Mumbai

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Mar 31, 2023

The Directors are pleased to present the 75^th Annual Report along with the audited financial statement for the year ended March 31, 2023 (“year under review”).

Summary of Financial Results

Particulars	2022-23	(Rs. in Million) 2021-22
Revenue from Operations	3,787.4	3,998.7
Total Income	4,368.5	4,330.6
Profit/(Loss) before Tax	1,153.8	(38.2)
Profit/(Loss) after tax	1,033.6	(37.2)
Other Comprehensive Income for the year	31.1	81.9
Retained Earnings balance brought forward from previous year Available for appropriation The Directors have made the following appropriations:	6,779.4	6,981.6
Dividend	246.9	246.9
Carry forward	7,597.2	6,779.4

Dividend

Your Board of Directors has recommended payment of dividend of '' 10 (Rupees Ten Only) per equity share of '' 5 (Rupees Five Only) each as final dividend (200%) and '' 37.50 (Rupees Thirty-Seven and Paise Fifty) per equity share of '' 5 (Rupees Five Only) each as a one-time special dividend on occasion of Company’s 75^th Anniversary (750%) for the financial year ended March 31, 2023. The total dividend amounts to '' 47.50 (Rupees Forty-Seven and Paise Fifty Only) per equity share of the face value of '' 5 (Rupees Five Only) each. The said dividend, if approved by the members at the Annual General Meeting (hereinafter referred to as ‘AGM’), will result in a cash outflow of '' 1,172.8 million.

The Board continues to support a steady dividend policy and the recommended dividend is in accordance with the Dividend Distribution Policy of the Company. The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘SEBI Listing Regulations’) is available on the website of the Company at: https://www.novartis.com/sites/novartis_in/files/Dividend%20Distribution%20policy.pdf

Transfer to General Reserves

Your Company does not propose to transfer any amount to the General Reserves for the financial year ended March 31, 2023.

Management Discussion and Analysis

For the financial year under review, the business operations of the Company comprise Pharmaceuticals.

a. Economy, Industry and Development

The COVID-19 pandemic has been the most impactful global public health crisis in decades, and yet it has illustrated the resilience of global health systems as they have readily adapted to peaks in demand.

The outlook is uncertain again amid financial sector turmoil, high inflation, ongoing effects of Russia’s invasion of Ukraine, and three years of COVID¹. However, the Indian Economy continues to show resilience amid global uncertainties, it is expected to be 6.7 percent in FY 2022-23².

Structural changes in policy, centered around financial inclusion, has created a solid foundation for long term growth in India.

Trends in medicine use and spending have been impacted by the immediate effects of COVID-19, with a seven-year cumulative reduction in spending of USD 175 billion through 2026 compared to the pre-pandemic outlook. Spending on COVID-19 vaccines and novel therapeutics are expected to generate more than USD 300 billion in spending over the same period, and the outlook is a cumulative USD 133 billion higher than projected prior to the pandemic³.

The global medicine market is expected to grow at 3 - 6 percent CAGR through 2026, reaching about USD 1.8 trillion in total market size in 2026, including spending on COVID-19 vaccines⁴. This will be supported by strong growth in pharmerging markets and new brands in developed markets will contribute to global spending through 20 26³.

The Indian Pharmaceutical Industry is currently valued at USD 42 billion and is expected to reach USD 65 billion by 2024 and ~USD 120 - 130 billion by 2030. Indian pharma exports witnessed a growth of 103 percent since 2013 to 2022. Exports achieved in 2021-22 is the Pharma Sector’s best export performance ever. It is a remarkable growth with exports growing by almost USD 10 billion in 8 years⁵. Indian drugs are exported to more than 200 countries in the world, with the US being the key market⁶.

The Prime Minister of India announced the pilot project of the National Digital Health Mission (‘NDHM’) on August 15, 2021, and launched the project on September 27, 2021⁷. It will also aim to digitally reconcile the gap among different stakeholders in India’s healthcare sector. NDHM comprises of five key components such as Health ID, Patient Health Record, Electronic Medical Record, Digi Doctor Platform, and Health Facility Registry. At a later stage, NDHM will also include e-pharmacy and telemedicine services⁸.

According to NDHM, individuals will get a health card (ABHA: Ayushman Bharat Health Account) containing personal details and current health record of the cardholder. This mission will connect medical practitioners and patients digitally. Additionally, it will promote stable and well-structured healthcare across the nation. The ABHA number will be used for the purposes of uniquely identifying persons, authenticate and threading their health records across multiple healthcare systems and stakeholders with a consent from patient⁸.

The health-tech start-up space in India is witnessing an exponential growth since COVID-19 pandemic. Pandemic has opened many opportunities for start-ups in the areas of online video consultations, ordering medicines online, managing chronic conditions using technology. The start-up ecosystem is well supported by start-up India, is an initiative of the Government of India.

References

¹ https://www.imf. org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023

² https://www.worldbank.org/en/news/press-release/2023/04/04/indian-economy-continues-to-show-resilience-amid-global-uncertainties#:~:text=The%20overall%20growth%20remains%20robust,half%20of%20 FY%2022%2F23

³ The Global Use of Medicines 2022, IQVIA Institute for Human data Science

⁴ https://www.iqvia.com/newsroom

⁵ https://pib.gov.in/PressReleasePage.aspx?PRID=1821747

⁶ Indian Pharmaceuticals Industry Analysis Presentation | IBEF

⁷ https://www.thehealthsite.com/diseases-conditions/national-digital-health-mission-what-changes-industry-experts-expect-from-this-pilot-project 884076/

⁸ Ayushman Bharat Digital Mission: https://ndhm.gov.in/abdm-components

b. Performance

Revenue from operations for the financial year ended March 31, 2023 was '' 3,787.4 million illustrating a decrease of 5.3 percent over the previous year.

The Profit/ (Loss) before tax for the year stood at '' 1,153.8 million versus '' (38.2) million in the previous year which is net of exceptional item.

Year 2022-23 witnessed the third wave of COVID-19 pandemic along with sporadic increase in cases across geographies. However, having learnt from the previous two waves, business was equipped to navigate this and ensure business continuity keeping in mind employee safety.

Novartis continues to engage Physicians for high brand recall and for dissemination of key scientific messages. This is done through differentiated campaigns channelized through RTEs (Rep Triggered Emails) and CMEs (Continuing Medical Education). We continue to create high differentiation for Novartis brands in a cluttered market for Transplant maintenance portfolio. Physicians have adapted well to digital engagements and we continue to implement them.

The Ministry of Health and Family Welfare, Government of India, has released the revised National List of Essential Medicines (NLEM), 2022. The revised list of NLEM has impacted 9 (Nine) brands marketed by the Company. These brands are majorly in the areas of Oncology and Neurology.

The Indian population currently has a very high burden of vascular risk factors, such as diabetes, hypertension and obesity, which can adversely impact the onset and progression of dementia¹. Offering great convenience and safety, our Neurosciences’ innovative medicine for Alzheimer’s disease dementia, Exelon Patch has seen greater patient acceptance and usability which is reflecting in the growth numbers.

¹ Vijayalakshmi et al. Changing demography and the challenge of dementia in India. Nature Reviews Neurology 17, 747-758 2021

c. Operational performance

The Pharmaceuticals business registered Net Revenue from Operations of '' 3,787.4 million representing a decrease of 5.3 percent over the previous year.

Transplant business observed gradual recovery in the number of transplants done throughout the year post COVID-19. Transplant business growth was driven by the gain in induction therapy patient share where Simulect became a preferred choice of induction therapy especially in low to moderate risk patients. This was achieved by continuing to drive innovative medico-marketing initiatives focusing on ‘Prevention of Infection’. The innovative ‘TRIO’ campaign aimed at driving a portfolio-based approach, has led to the revival of the maintenance portfolio.

It has been a year of the exclusive sales and distribution arrangement entered into with Dr. Reddy’s Laboratories (Dr. Reddy’s) for the Established Medicines Brand which include the Voveran range, the Calcium range and Methergine. The arrangement aimed to broaden access of these medicines to larger geographies to benefit many more patients, more efficiently through an expanded field force.

Pain portfolio with its flagship brand Voveran range rank improved by 2 points from April, 2022 to February 2023¹ and a 2.9 percent market share gain for Voveran range in February, 2023 vs October, 2022². There is an increase in share of voice and Voveran gaining prescription share among doctor specialties across India. This was an outcome of strong differentiation for Voveran Emulgel in a cluttered counter-irritant market with the ‘The Cool Movement’ demonstration campaign.

A high-pitched campaign contributing to better management of joint pain and stiffness by driving patient awareness programs, ‘Zindagi Se Milao Kadam’ further extended to enable patients to move beyond pain and stiffness through simple and handy exercise education tool. ‘Awareness for Life’ Corporate Awareness talks were conducted across India to raise awareness for joint pain at workplace. The premise is that 72 percent office workers experience joint pain at workplace³.

The following brands hold key positions in major therapeutic areas such as:
Therapeutic Area	Therapeutic Area Product
Bone and Pain	Voveran®
Transplantation Immunology	Simulect®, Certican®, Sandimmun®, Neoral®, Myfortic®
Neurosciences	Tegrital®, Exelon®

References:

¹ IQVIA MAT Feb''23

² Healthplix report Feb''23

³ Dr. Reddy''s reported information

d. Key Financial Indicators

Particulars	2022-23	2021-22
Operating profit margin (%)	15.6	4.4
Net profit margin (%)	27.3	-0.9
Debtors’ turnover ratio	9.4	9.6
Current ratio	4.2	3.3
Return on Equity (%)	14.1	-0.5
Inventory turnover ratio	6.6	7.1
Debt service coverage ratio	19.4	1.0
Debt equity ratio	0.03	0.03
Return on capital employed (%)	7.9	-2.8
Return on Investment	5.2	3.2

Reasons for change compared to the previous financial year in key financial ratios are as follows:

Operating profit margin

Operating profit margin is a profitability or performance ratio used to calculate the percentage of profit of a company produces from its operations. It is calculated by dividing the operating earnings before interest and tax by turnover. Margins have improved because of operational efficiencies.

Net profit margin

The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing profit for the year by turnover. Net profit margin in the financial year 2022-23 has improved due to operational efficiencies, interest on income tax refund and an exceptional item relating to business transactions towards its erstwhile associates of Established Medicines Brand (‘EMB’) under employee separation scheme in previous year 2021-22.

Debtors’ turnover ratio

It is calculated by dividing turnover by average trade receivables, to quantify a company’s effectiveness in collecting its receivables. No major movement compared to previous year.

Current ratio

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities. Current ratio has improved due to decrease in current liabilities due to inclusion of liability pertaining to exceptional item relating to business transaction towards its erstwhile associates of EMB under employee separation scheme in previous year.

Return on Equity

Return on equity is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit for the year by average shareholder’s equity. Return on equity has improved due to operational efficiencies, interest on income tax refund in year 2022-23 and an exceptional item relating to business transactions towards its erstwhile associates of EMB under employee separation scheme in previous year.

Inventory turnover ratio

I nventory turnover is the number of times a company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory. No major movement compared to previous year.

Debt service coverage ratio

The debt service coverage ratio measures how many times a company can cover its current interest payment with its available earnings. It is calculated by dividing earning available for debt service by lease payments. The ratio has been impacted positively due to exceptional item relating to business transactions towards its erstwhile associates of EMB under employee separation scheme in previous year.

Debt equity ratio

The ratio is used to evaluate a company’s financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. It is calculated by dividing lease liabilities by shareholders equity. No major movement compared to previous year.

Return on Capital employed

Return on equity is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit before interest and tax for the year by capital employed. Return on capital employed has improved due to operational efficiencies, interest on income tax refund in year 2022-23 and an exceptional item relating to business transactions towards its erstwhile associates of EMB under employee separation scheme in previous year.

Return on Investment

Return on investment is defined as return earned on the investment done. It is calculated by dividing weighted average interest income on bank deposit by weighted average bank deposits. Return on investment has improved due to operational efficiencies.

e. Risks, Threats, and Concerns

Supply continuity, quality of drugs, increasing cost pressure, inflation, high price elasticity (especially in Transplant products), control of prices of certain drugs under the Drug Price Control Order (‘DPCO’) continues to affect the profitability of the Pharmaceutical Industry. Revision of NLEM in September, 2022 has resulted in revision of ceiling prices, which would put further downward pressure on drug prices. Building investments in non-traditional opportunities, coupled with heightened competition and a rising cost of talent, will result in margin pressures.

The Indian Pharmaceutical Market (‘IPM’) is dominated by generic formulations and these drugs account for nearly 75 percent of the pharma industry. Prescription by generic names could also have an impact on pharma companies and it could necessitate a change in the Company’s promotional strategies.

Regulations to cap trade margins on non-scheduled products, could impact the business model for trade generics.

f. Outlook

Medicine spending in India is projected to grow 9-12 percent over the next five years, leading India to become one of the top 10 countries in terms of medicine spending¹.

The last two years have been difficult for the world economy on account of the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and more recently, global inflation have created particularly challenging times for policy making. While government spending on healthcare has accelerated, the upward trend has been gradual rather than transformative, and medium-term targets - which envisage that public health expenditure will reach 2.5 percent of GDP by 2025² - are unlikely to be met. However, macroeconomic stability indicators suggest that the Indian economy is well placed to take on the challenges of the financial year 2023-24.

We are witnessing, Tier 2 and 3 towns are playing a pivotal role in India’s flourishing economy. As per the National Council of Applied Economic Research’s (NCAER) estimation by 2025, the contribution of Tier 2 and 3 cities will escalate to 45 percent by 2025, proving that even the underdogs can triumph against all odds³.

We have the optimism that with increased focus and harnessing the potential of the ecosystem, coupled with innovative lifecycle management, leveraging technology, capability building in the space of Health Technology Assessment and meaningful partnerships, we are poised to benefit and expand access for many more patients in India.

¹ Indian Pharmaceuticals Industry Analysis Presentation | IBEF

² https://pib.gov.in/PressReleasePage.aspx?PRID=1793820#:~:text=The National Health Policy%2C2017,1.3%25 in 2019-20

³ https://www.outlookindia.com/business-spotlight/breaking-the-mold-the-vital-role-of-tier-2-and-3-towns-in-india-s-flourishing-economy-news-267790

g. Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorised use or disposal. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorised, recorded and reported correctly.

The Internal Auditor reviews the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems, evaluated the internal financial control systems with the Audit Committee and discussed relevant issues with internal and statutory auditors. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that the Company followed proper internal financial controls and that such internal financial controls are adequate and were operating effectively.

h. Personnel

The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of permanent employees in the Company as on March 31, 2023 was 67.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 (hereinafter referred to as ‘the Act’) read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as an Annexure A.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this Report. However, in terms of first provision of Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary & Compliance Officer, stating their Folio No./ DP ID and Client ID, whereupon a copy would be sent.

Corporate Social Responsibility

The Company continues to support various initiatives in the areas of health. The CSR Policy adopted by the Board of Directors is available on the Company’s website at: https://www.novartis.in/investors/novartis-india-corporate-policies

Health: The Government of India announced its commitment to eradicate leprosy from the country by year 2030. Aligned with this vision, the Company reinforced its commitment to leprosy as part of its CSR work in India. The Company continued its support to a non-profit organization with projects based in Andhra Pradesh and Maharashtra. The project gives students affected with leprosy the ability to get jobs through vocational training and build a community of empowered young people who can further empower their families and communities.

The Annual Report on Corporate Social Responsibility Activities in terms of Section 135 of the Act and Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended by Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, effective January 22, 2021 read with Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022, effective September 20, 2022 (hereinafter referred to as ‘CSR Rules’) is annexed herewith as an Annexure B.

Related Party Transactions

The Audit Committee approved all the Related Party Transactions (‘RPTs’) entered into during the year under review, from time to time.

The Audit Committee granted omnibus approval for RPTs as per the provisions and restrictions contained under the Act read with SEBI Listing Regulations.

The Company has formulated a ‘Policy for dealing with Related Party Transactions’ (‘Policy’) which includes dealing with material RPTs. The Board at its meeting held on May 19, 2022, as recommended by the Audit Committee, considered and approved amendments to the said Policy in line with the amendments in the SEBI Listing Regulations vide SEBI Notification (SEBI/LAD-NRO/GN/2021/55) dated November 09, 2021 and Circular (SEBI/HO/CFD/ CMD1/CIR/P/2021/662) dated November 22, 2021 read with clarificatory SEBI Circular (SEBI/HO/CFD/CMD1/CIR/P/2022/40) dated March 30, 2022. The updated Policy is available on the website of the Company at: https://www.novartis.com/in-en/sites/novartis_ in/files/Policy%20for%20dealing%20with%20Related%20Party%20Transactions.pdf

Further, in terms of the provisions of Sections 177 and 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all the requisite approvals were taken for the contracts/arrangements/ transactions entered into by the Company with its related parties, during the year under review.

All transactions with related parties were in accordance with the Policy formulated by the Company.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Act including certain arm’s length transactions under third proviso thereto are required to be disclosed in Form AOC-2. Form AOC-2 envisages disclosure of material contracts or arrangements or transactions on an arm’s length basis.

Details of the material RPTs in the financial year 2022-23, as per the Policy adopted by the Company, is disclosed as an Annexure C. The transactions disclosed in the said Annexure relates to material RPTs with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services and other obligations as approved by members under erstwhile Clause 49(VII)(E) of the Listing Agreement at the 67^th AGM of the Company held on July 23, 2015.

Risk Management

Pursuant to the Regulation 21 of the SEBI Listing Regulations, your Company has constituted a Risk Management Committee (‘RMC’) to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks.

The RMC is supported by Internal Risk Steering Committee, risk champions and on some occasions supported by an external risk advisory firm. The teams undertake assessment of internal and external risks, adopts the risk mitigation plan and regularly monitors them in a structured and controlled environment. The Committee provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis. There are no risks, which in the opinion of the Board, threaten the existence of your Company.

Details of composition of the RMC and the Risk Management Policy, adopted by the Board, is provided in the Report on Corporate Governance, which forms part of this Report.

Fixed Deposits

The Company has not accepted any deposits within the ambit of Section 73 of the Act and the Rules framed thereunder during the financial year 2022-23.

Particulars of Loans, Guarantees or Investments

As on March 31, 2023, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act.

Board of Directors and Key Managerial Personnel Board of Directors:

Appointment of Director

The Board of Directors of the Company at its meeting held on November 09, 2022, based on the recommendation of the Nomination and Remuneration Committee, approved the appointment of Ms. Shilpa Joshi (DIN: 09775615) as Whole-Time Director (designated as Whole-Time Director and Chief Financial Officer) of the Company w.e.f. November 22, 2022. Ms. Joshi, aged about 53 years, is Cost and Management Accountant with an extensive and noteworthy career in the healthcare industry spanning over 30 years with an exposure to international and in-country roles. Out of her 30-year remarkable journey, Ms. Joshi has been associated with Novartis for the past 20 years, wherein she has shouldered various roles of increasing responsibilities and impact. In her last role, Ms. Joshi headed the finance and commercial excellence functions for India Oncology. In addition, she was also responsible for leading the commercial operations for Sri-Lanka & Maldives.

Ms. Joshi has also played an integral part in providing strategic direction in her brief stint as Franchise Head for Breast Cancer. She is the recipient of several Global & Regional Oncology awards recognizing her efforts and contributions on projects aimed at improving cost efficiencies. Her greatest strengths have been driving simplification of processes through digitization, designing astute insight-driven integrated strategies and bring them alive through robust planning and execution.

The shareholders approved the appointment of Ms. Shilpa Joshi as Director and Whole-Time Director through Postal Ballot conducted in accordance with Sections 108 and 110 and other applicable provisions of the Act read with the applicable Rules, Secretarial Standards and the SEBI Listing Regulations on December 23, 2022 with requisite majority.

Cessation of Director

Ms. Monaz Noble (DIN: 03086192) ceased to be Director (Non-Executive and Non-Independent) of the Company w.e.f. close of business hours of November 21, 2022. The Board places on record its immense appreciation for her contribution to the Company.

Re-appointment of Director retiring by rotation

Ms. Shilpa Joshi has been functioning on the Board of the Company as a Whole-Time Director and Chief Financial Officer capacity w.e.f. November 22, 2022. Ms. Joshi retires by rotation and being eligible, offers herself for re-appointment. The Board recommends her re-appointment. Her brief resume, nature of expertise, details of directorships held in other companies along with her shareholding in the Company, if any, as stipulated under Secretarial Standard-2 and Regulation 36 of the SEBI Listing Regulations are forming part of the Notice of the ensuing AGM.

Declarations by Independent Directors

The Company has received necessary declarations from all the Independent Directors of the Company confirming that they continue to meet the criteria of independence, as prescribed under Section 149(6) of the Act read with Regulations 25(8) and 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. The Independent Directors have also confirmed that they have complied with Schedule IV to the Act and the Company’s Code of Conduct.

They have further confirmed that they are not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties. Further, the Independent Directors have also submitted their declaration in compliance with the provision of Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014 which mandated the inclusion of an Independent Director’s name in the data bank of Indian Institute of Corporate Affairs (‘IICA’) for a period of one year or five years or lifetime till they continue to hold the office of an Independent Director.

Committees of Board; Meetings of the Board of Directors and Board Committees

The Board currently has 5 (five) Committees, namely, the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, and the Risk Management Committee.

During the year under review, the Board of Directors met 5 (five) times to transact various affairs of the Company. A detailed update on the Board, its composition, including synopsis of terms of reference of various Board Committees, number of Board and Committee meetings held during the financial year 2022-23 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance, which forms part of this Report.

Key Managerial Personnel (KMP):

In terms of provisions of Section 203 of the Act, the following are the KMP of the Company as on date:

i. Mr. Sanjay Murdeshwar - Vice Chairman and Managing Director

ii. Ms. Shilpa Joshi - Whole-Time Director and Chief Financial Officer

iii. Mr. Nikhil Malpani - Company Secretary and Compliance Officer There has been no change in the KMP of the Company.

Nomination and Remuneration Policy

The Company has in place a Nomination and Remuneration Policy (‘Policy’) which provides guidance on selection and nomination of Directors to the Board of the Company; appointment of the Senior Management Personnel of the Company; and remuneration of Directors, KMP and other employees. The Board of Directors on April 18, 2023, as recommended by the Nomination and Remuneration Committee, considered and approved amendments to the said Policy. The updated Policy is also provided in the Report on Corporate Governance which forms part of this Report and is also available on the website of the Company and can be accessed at: https://www.novartis.com/sites/novartis_in/files/NRC%20Policy.pdf

Performance Evaluation of Board

Pursuant to the provisions of Section 178 read with Schedule IV of the Act and Regulation 17 read with Part D of Schedule II to the SEBI Listing Regulations, the Board of Directors have carried out the annual performance evaluation of its own performance, the Directors individually as well as working of its Audit, Nomination and Remuneration, Stakeholders Relationship, Risk Management and Corporate Social Responsibility Committees.

A structured questionnaire was prepared for the Board evaluation process for the financial year 2022-23, covering various aspects of the Board’s functioning such as proper mix of competencies, sufficient diversity and reviewing of Company’s business, financial performance, governance and compliance etc.

A separate exercise was carried out to evaluate the performance of individual Directors, who were evaluated on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of the stakeholders of the Company etc.

The Independent Directors of the Company met on April 03, 2023, without the presence of Non-Independent Directors and members of the management to review the performance of Non-Independent Directors and the Board of Directors as a whole, to review the performance of the Chairperson, Managing Director and Whole-Time Director of the Company, and to assess the quality, quantity and timeliness of flow of information between the management and the Board of Directors for the financial year 2022-23. The performance evaluation of the Independent Directors was carried out by the entire Board.

The final outcome of the Board evaluation process for the financial year 2022-23 was placed before the Board of Directors at its meeting held on May 10, 2023 and the Directors expressed their satisfaction with the evaluation process carried out.

Directors’ Responsibility Statement

The Audited Financial Statement of your Company for the year under review (‘financial statement’) are in conformity with the requirements of the Act read with the Rules made thereunder (‘Act’) and the Accounting Standards. The financial statement fairly reflect the form and substance of transactions carried out during the year under review and reasonably present your Company’s financial condition and results of operations.

Pursuant to Section 134(3)(c) of the Act, the Board of Directors, to the best of its knowledge and ability confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any

(b) appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2023 and of the profit of the Company for the year ended March 31, 2023

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities

(d) the annual accounts have been prepared on a going concern basis

(e) proper internal financial controls were laid down and followed by the Company and such internal financial controls are adequate and were operating effectively

(f) proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively

Familiarisation programme for Independent Directors

The Company keeps its directors informed of the activities of the Company, its management and operations and provides an overall industry perspective on issues being faced by the industry including changes in regulatory landscape, in a proactive manner. Details of familiarisation programme provided to the Directors of the Company are available on the website of the Company at: https://www.novartis.com/in-en/investors/novartis-india-corporate-policies

Auditors and auditors report

(i) Statutory Auditors, Auditors Report and Statutory Audit Fees:

Pursuant to the provisions of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, M/s B S R & Co. LLP Chartered Accountants (Firm Registration No. 101248W/ W100022), were appointed as Statutory Auditors of the Company at the AGM held on July 29, 2022 for a term of 5 (five) years to hold office from the conclusion of the 74^th AGM till the conclusion of the 79^th AGM of the Company.

The Auditors’ Report issued by M/s. B S R & Co. LLP to the shareholders on the Financial Statement of the Company for the year ended March 31, 2023 does not contain any qualification, reservation or adverse remark. The said Report for the financial year ended March 31, 2023 read with the explanatory notes therein are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3) of the Act. The Auditors’ Report is enclosed with the Financial Statement in this Annual Report.

During the financial year 2022-23, the total fees for the statutory audit rendered by the Statutory Auditors are given below:

Auditors’ Remuneration (Excluding GST, where applicable)			('' in million)
	2022-23 Deloitte Haskins & Sells LLP*	2022-23 BSR & Co LLP	2022-23 Total	2021-22 Deloitte Haskins & Sells LLP
Period	April 22-June 22	July 22-March 23	FY 22-23	FY 21-22
Audit Fees	0.7	5.6	6.3	9.5
Tax Audit Fees	-	-	-	1.3
Reimbursement of expenses	-	0.5	0.5	-
Total	0.7	6.1	6.8	10.8
* The tenure of M/s Deloitte Haskins & Sells LLP expired at the conclusion of the 74th AGM of the Company

(ii) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed Saraf & Associates, Company Secretaries, for conducting Secretarial Audit of the Company for the financial year 2022-23. The Secretarial Audit Report is annexed herewith as an Annexure D. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Board has re-appointed Saraf & Associates, Company Secretaries, to conduct the Secretarial Audit of the Company for the financial year 2023-24. They have confirmed their eligibility for the said re-appointment.

(iii) Cost records and Cost Audit:

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Act are not applicable for the business activities carried out by the Company for the financial year 2022-23.

During the year under review, neither the Statutory Auditors nor the Secretarial Auditor has reported to the Audit Committee or the Board, under Section 143(12) of the Act, any instances of fraud committed against the Company by its officers or employees.

Compliance with Secretarial Standards

During the financial year 2022-23, the Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Annual Secretarial Compliance Report

The Company has undertaken an examination of all applicable compliances as per SEBI Listing Regulations and Circulars/Guidelines issued thereunder, for the financial year 2022-23.

The Annual Secretarial Compliance Report as issued by Saraf & Associates, Company Secretaries, is required to be submitted to the Stock Exchanges within 60 days of the end of the financial year. The Report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure E, annexed herewith.

Corporate Governance

The Company is committed to follow best practices of Corporate Governance and is in compliance with the provisions on Corporate Governance specified in the SEBI Listing Regulations and Novartis Group Corporate Governance norms.

Pursuant to the SEBI Listing Regulations, the Report on Corporate Governance for the year under review, presented in a separate section, is forming part of the Annual Report. A certificate from Dr. K. R. Chandratre, Practising Company Secretary, confirming compliance of conditions of Corporate Governance, as stipulated under the SEBI Listing Regulations, also forms part of the Report on Corporate Governance.

Business Responsibility and Sustainability Reporting (‘BRSR’)

In terms of amendment to regulation 34(2)(f) of the SEBI Listing Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021/22 dated May 05, 2021, SEBI has introduced new reporting requirements on ESG parameters called the Business Responsibility and Sustainability Report (‘BRSR’). SEBI further vide Circular SEBI/HO/CFD/CMD-2/P/CIR/2021/562 dated May 10, 2021 issued a guidance note on the new reporting requirements under BRSR. Per this circular, the BRSR seeks disclosures from listed entities on their performance against the nine principles of the ‘National Guidelines on Responsible Business Conduct’ (NGBRCs) and reporting under each principle is divided into essential and leadership indicators. In terms of the aforesaid amendment, with effect from the financial year 2022-2023, reporting of BRSR has been made mandatory for the top 1000 listed companies (by market capitalization) and shall replace the existing BRR. In view of the same, your Company has prepared the BRSR and the same forms part of the Annual Report.

Whistle Blower Policy: Vigil Mechanism

Pursuant to Section 177 of the Act read with Regulation 22 of the SEBI Listing Regulations, it is mandated for every listed entity to formulate Vigil Mechanism (‘Whistle Blower Policy’) for Directors and employees to report genuine concerns. The Company has established a Vigil Mechanism and Whistleblower Policy which provides for (a) adequate safeguards against victimisation of persons who avail the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism and Whistleblower Policy are made available on the website of the Company at: https://www.novartis.com/in-en/investors/novartis-india-corporate-policies

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All persons whether employed as permanent, contractual, temporary or trainees are covered under this Policy.

During the financial year 2022-23, no complaint was received by the Company related to sexual harassment. As on March 31, 2023, no compliant related to sexual harassment was pending for disposal.

Annual Return

Pursuant to the provisions of Sections 92(3) and 134(3)(a) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the draft Annual Return of the Company for the financial year ended March 31, 2023 is available on the website of the Company at: https://www.novartis.com/in-en/investors/novartis-india-financial-results

Significant and material orders passed by the Regulators or Court

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Other Disclosures

• There were no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report

• The Company has not issued any shares with differential voting rights/sweat equity shares

• There was no revision in the Financial Statement

• There has been no change in the nature of business of the Company as on the date of this Report

• No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable

• The requirement to disclose the details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable; and

• The Company does not have any subsidiary, associate companies and joint ventures for the year ended March 31, 2023

Green Initiative

We request all the shareholder to support the ‘Green Initiative’ of the Ministry of Corporate Affairs and Company’s continuance towards greener environment by enabling the service of Annual Report, AGM Notice and other documents electronically to your email address registered with your Depository Participant/ RTA.

Cautionary Note

The statements forming part of the Board’s Report may contain certain forward-looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

Acknowledgement

The Board appreciates and places on record the contribution made by all stakeholders, particularly employees, shareholders, customers, the medical fraternity and all business partners, during the year under review and acknowledges the support received from the parent Company, Novartis AG.

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Mar 31, 2022

Your Directors are pleased to present the 74^th Annual Report along with the audited financial statement for the year ended March 31, 2022 (“year under review”).

Summary of Financial Results

Particulars	('' in million) 2021-22 2020-21
Revenue from Operations	3998.7	3813.5
Total Income	4330.6	4144.4
Profit/(Loss) before Tax	(38.2)	400.4
Profit/(Loss) after tax	(37.2)	209.0
Other Comprehensive Income for the year	81.9	(60.9)
Retained Earnings balance brought forward from previous year Available for appropriation The Directors have made the following appropriations:	6981.6	7080.4
Dividend	246.9	246.9
Carry forward	6779.4	6981.6

Dividend

Your Board of Directors have recommended payment of dividend of '' 10 (Rupees Ten Only) per equity share of '' 5 (Rupees Five Only) each (200%) for the financial year ended March 31, 2022. The said dividend, if approved by the members at the Annual General Meeting (hereinafter referred to as ‘AGM’), will result in a cash outflow of '' 246.9 million.

The Board continues to support a steady dividend policy and the recommended dividend is in accordance with the Dividend Distribution Policy of the Company. The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘SEBI Listing Regulations’) is available on the website of the Company at https://www.novartis.in/ investors/novartis-india-corporate-policies

Transfer to General Reserves

Your Company does not propose to transfer any amount to the General Reserves for the financial year ended March 31, 2022.

Management Discussion and Analysis

For the financial year under review, the business operations of the Company comprises Pharmaceuticals.

a. Economy, Industry and Development

The COVID-19 pandemic has been the most impactful global public health crisis in decades, and yet it has illustrated the resilience of global health systems as they have readily adapted to peaks in demand.

The global economy recovered strongly in CY 2021 even as new variants of the COVID-19 virus fueled additional waves of the pandemic. Robust policy support in advanced economies, availability of vaccines and relaxation of pandemic restrictions helped economies bounce back, collectively expanding world output by an estimated 6.1%L

Trends in medicine use and spending have been impacted by the immediate effects of COVID-19, with a seven-year cumulative reduction in spending of USD 175 billion through 2026 compared to the pre-pandemic outlook. Spending on COVID-19 vaccines and novel therapeutics are expected to generate more than USD 300 billion in spending over the same period, and the outlook is a cumulative USD 133 billion higher than projected prior to the pandemic.²

The global medicine market is expected to grow at 3 - 6% CAGR through 2026, reaching about USD 1.8 trillion in total market size in 2026, including spending on COVID-19 vaccines³. This will be supported by strong growth in pharmerging markets and new brands in developed markets will contribute to global spending through 20 26².

Due to economic disruptions caused by the third wave of the COVID-19 pandemic and spike in inflation due to Russia-Ukraine conflict, the Indian economy grew at 8.7% in FY 21-22⁴. India’s GDP is projected to grow between 8% to 8.5% in financial year 2022-23⁵.

The Indian Pharmaceutical Industry is currently valued at USD 42 billion and is expected to reach USD 65 billion by 2024 and ~USD 120-130 billion by 2030. Indian pharma exports witnessed a growth of 103% since 2013-14, from '' 90,415 crore in 2013-14 to '' 1,83,422 crores in 2021-22. Exports achieved in 2021-22 is the Pharma Sector’s best export performance ever. It is a remarkable growth with exports growing by almost USD 10 billion in 8 years⁶. Indian drugs are exported to more than 200 countries in the world, with the US being the key market⁷.

The Prime Minister of India announced the pilot project of the National Digital Health Mission (‘NDHM’) on August 15, 2021, and launched the project on September 27, 2021⁸. It will also aim to digitally reconcile the gap among different stakeholders in India’s healthcare sector. NDHM comprises of five key components such as Health ID, Patient Health Record, Electronic Medical Record, Digi Doctor Platform, and Health Facility Registry. At a later stage, NDHM will also include e-pharmacy and telemedicine services⁹.

According to NDHM, individuals will get a health card (ABHA: Ayushman Bharat Health Account) containing personal details and current health record of the cardholder. This mission will connect medical practitioners and patients digitally. Additionally, it will promote stable and well-structured healthcare across the nation. The ABHA number will be used for the purposes of uniquely identifying persons, authenticate and threading their health records across multiple healthcare systems and stakeholders with a consent from patient⁹.

The health-tech start-up space in India is witnessing an exponential growth since COVID-19 pandemic. Pandemic has opened many opportunities for start-ups in the areas of online video consultations, ordering medicines online, managing chronic conditions using technology etc.

References

¹ World Economic Outlook, IMF April 2022

² The Global Use of Medicines 2022, IQVIA Institute for Human data Science

³ https://www.iqvia.com/newsroom

⁴ https://pib.gov. in/PressReleasePage.aspx?PRID = 1829784#:~:text=The%20growth%20in%20GDP%20 during,growth%20rate%20of%2019.5%20percent

⁵ Economic Survey Report 2021-22

⁶ https://pib.gov. in/PressReleasePage.aspx?PRID=1821747

⁷ Indian Pharmaceuticals Industry Analysis Presentation | IBEF

^8. https://www.thehealthsite.com/diseases-conditions/national-digital-health-mission-what-changes-industry-experts-expect-from-this-pilot-project-884076/

^9. Ayushman Bharat Digital Mission: https://ndhm.gov.in/abdm-components

b. Performance

Revenue from operations for the financial year ended March 31, 2022 was '' 3,998.7 million illustrating an increase of 4.9% over the previous year.

The Profit/ (Loss) before tax for the year stood at '' (38.2) million signifying a decrease of 109.5% over the previous year mainly due to an exceptional expense of '' 496.4 million (net of re-evaluation of retirement obligations) towards its erstwhile associates of Established Medicines Division in this year under Employee Separation Scheme.

Year 2021-22 witnessed the second wave of COVID-19 pandemic along with sporadic increase in cases across geographies. However, having learnt from the first wave of COVID-19, businesses made efforts to ensure business continuity along with high employee engagement. These efforts helped the business to drive growth in spite of all the external challenges. Although, there were instances of delay in import clearances and in local supply chain activities in Q3, this was subsequently streamlined in the coming months. Due to limited supplies, there was also the challenge of product substitution at local pharmacy levels for a while, which was addressed and reversed. In the pain management category, many patients postponed their visits to the healthcare professionals resulting in reduced patient load at many OPDs/nursing homes during the financial year. These changes resulted in limited prescription generation specially for the topical portfolio.

Transplant business observed gradual recovery in the number of transplants done throughout the year. Most of the transplant centers were operating at almost 70-80% of the pre-COVID-19 periods.

Keeping in mind the safety of our employees, we advised our employees to take an informed decision while going back to the field. To minimize this impact on business, the Company amplified its innovative digital engagements for the Physicians to ensure high brand recall and for the dissemination of key scientific messages. This was done by developing innovative campaigns which were implemented by RTEs (Rep Triggered E-mails) and ENGAGE calls (using secure video call platforms). The incredible agility and resilience shown by our employees in driving new digital ways of working ensured that we could continue to increase our engagement levels with all the relevant stakeholders.

c. Operational performance

The Pharmaceuticals business registered Net Revenue from Operations of '' 3,998.7 million representing an increase of 4.9% over the previous year.

Pain portfolio recorded a growth during the year under review which is an outcome of few innovative campaigns that were launched in orals, injectables and topicals. These innovative campaigns helped the business to differentiate and increase SoV in the highly cluttered market.

Transplant business growth was driven by the gain in induction therapy patient share where Simulect® became a preferred choice of induction therapy especially in low to moderate risk patients. This was achieved by driving innovative medico-marketing initiatives focusing on ‘prevention of infection’.

During the year under review, the Company announced an exclusive sales and distribution arrangement entered by the Company with Dr. Reddy’s Laboratories (Dr. Reddy’s) for some of its Established Medicines brands which include the Voveran range®, the Calcium range and Methergine®. This arrangement aims to further broaden access of these medicines beyond the current geographies to benefit many more patients, more efficiently, by significantly extending the reach of healthcare professionals through an expanded field force. Barring unforeseen circumstances and given the sales and distribution strengths of Dr. Reddy’s, this has the potential to drive value for shareholders of the Company. Novartis AG will retain the Trademark ownership of these medicines.

The following brands hold key positions in major therapeutic areas such as:
	Therapeutic Area	Therapeutic Area Product
	Pain & Inflammation	Voveran®
	Transplantation/Immunology	Simulect®, Certican®, Sandimmun®, Neoral®, Myfortic®
	Central Nervous System	Tegrital® Exelon®
d.	Key Financial Indicators
Particulars			2021-22	2020-21
Operating profit margin (%)*			4.4	3.8
Net profit margin (%)*			8.4	5.5
Debtors’ turnover ratio			9.6	10.0
Current ratio*			4.3	4.5
Return on Equity*			4.8	2.9
Inventory turnover ratio			7.1	6.7
Debt service coverage ratio*			4.4	3.4
Debt equity ratio			0.03	0.09

* The results for the financial year 2021-22 are impacted with an exceptional item relating to a business transaction leading to a net expense of '' 496.4 million towards employee separation and current liability of '' 501.8 million. This has been excluded for the ratios above as applicable.

Reasons for change compared to the previous financial year in some of the key financial ratios are as follows:

Operating profit margin

Operating profit margin is a profitability or performance ratio used to calculate the percentage of profit a company produces from its operations. It is calculated by dividing the operating earnings before interest and tax by turnover. Margins have improved due to operational efficiencies.

Net profit margin

The net profit margin is equal to how much net income or profit is generated as a percentage of revenue excluding exceptional item. It is calculated by dividing profit for the year by turnover. Net profit margin in the financial year 2021-22 has improved due to operational efficiencies.

Debtors’ turnover ratio

It is calculated by dividing turnover by average trade receivables, to quantify a company’s effectiveness in collecting its receivables. No major movement compared to previous year.

Current ratio

The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities. No major movement compared to previous year.

Return on Net Worth

Return on Net Worth is a measure of profitability of a company expressed in percentage. It is calculated by dividing profit for the year by total equity. Return on net worth has improved due to operational efficiencies.

Inventory turnover ratio

I nventory turnover is the number of times a company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory. No major movement compared to previous year.

Debt service coverage ratio

The debt service coverage ratio measures how many times a company can cover its current interest payment with its available earnings. It is calculated by dividing earning available for debt service by lease payments. The ratio has been impacted positively due to reduction in lease liability on account of lease modification.

Debt equity ratio

The ratio is used to evaluate a company’s financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. It is calculated by dividing lease liabilities by shareholders equity. The ratio has been impacted due to reduction in lease liability on account of lease modification.

e. Risks, Threats, and Concerns

Supply continuity, increasing cost pressure, inflation, high price elasticity (especially in Transplant products), control of prices of certain drugs under the Drug Price Control Order (‘DPCO’) continues to affect the profitability of the Pharmaceutical Industry. Revision of the National List of Essential Medicines (‘NLEM’) could result in expansion of price controls under the DPCO, which would put further downward pressure on drug prices. Building investments in non-traditional opportunities, coupled with heightened competition and a rising cost of talent, will result in margin pressures.

The Indian Pharmaceutical Market (‘IPM’) is dominated by generic formulations and these drugs account for nearly 75% of the pharma industry. Prescription by generic names could also have an impact on pharma companies and it could necessitate a change in the Company’s promotional strategies.

Regulations to cap trade margins on non-scheduled products, could impact the business model for trade generics.

Novartis AG, which is the Company’s holding company, owns directly or indirectly several companies in Novartis Group worldwide including various brands and patents. Therefore, any merger, acquisition, divestment or restructuring by Novartis AG or its subsidiaries, would have an influence on the Company’s operations in India as well.

f. Outlook

Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending¹.

The last two years have been difficult for the world economy on account of the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and more recently, global inflation have created particularly challenging times for policy making. While government spending on healthcare has accelerated, the upward trend has been gradual rather than transformative, and medium-term targets - which envisage that public health expenditure will reach 2.5% of GDP by 2025² - are unlikely to be met. However, macroeconomic stability indicators suggest that the Indian Economy is well placed to take on the challenges of financial year 2022-23.

We have the optimism that with increased focus and harnessing the potential of the ecosystem, coupled with innovative lifecycle management, leveraging technology, capability building and meaningful partnerships, we are poised to benefit many more patients.

¹ Indian Pharmaceuticals Industry Analysis Presentation | IBEF

² https://pib.gov.in/PressReleasePage.aspx?PRID=1793820#:~:text=The National Health Policy%2C 2017,1.3%25 in 2019-20.

g. Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorised use or disposal. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorised, recorded and reported correctly.

The Head of Internal Audit together with external audit consultants reviews the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems, evaluated the internal financial control systems with the Audit Committee and discussed relevant issues with internal and statutory auditors. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that the Company followed proper internal financial controls and that such internal financial controls are adequate and were operating effectively.

h. Personnel

The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of employees in the Company as on March 31, 2022 was 81.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 (‘the Act’) read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as an Annexure A.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits set out in the said Rules forms part of this Report. However, in terms of first provision of Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary & Compliance Officer, whereupon a copy would be sent.

Corporate Social Responsibility

The Company continues to support various initiatives in the areas of health and environment. The CSR Policy adopted by the Board of Directors is available on the Company’s website at https://www.novartis.in/investors/novartis-india-corporate-policies

Health: The Government of India announced its commitment to eradicate leprosy from the country by 2030. Aligned with this vision, the Company reinforced its commitment to leprosy as part of its CSR work in India. The Company continued its support to a non-profit organisation in Telangana to set up an integrated health management system, which resulted in digitisation of leprosy records, with the aim that this data will eventually serve to drive early diagnosis of leprosy.

The Company’s Healthy Families Program, Arogya Parivar continued its health awareness programs reaching out to more than 5.86 million individuals across rural India and conducted 338,130 health education programs and 1,061 health camps in the year under review.

Environment: The Company supported the upkeep of a beautiful garden in the heart of the city for five months.

The Annual Report on Corporate Social Responsibility Activities in terms of Section 135 of the Act and Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended by Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, effective January 22, 2021 (hereinafter referred to as ‘CSR Rules’) is annexed herewith as an Annexure B.

Related Party Transactions

The Audit Committee approved all the Related Party Transactions (‘RPTs’) entered into during the year under review, from time to time.

The Audit Committee granted omnibus approval for RPTs as per the provisions and restrictions contained under the Act read with SEBI Listing Regulations.

The Company has formulated a ‘Policy for dealing with Related Party Transactions’ (‘Policy’) which includes dealing with material RPTs. The Board at its meeting held on May 19, 2022, as recommended by the Audit Committee, considered and approved amendments to the said Policy in line with the recent amendments in the SEBI Listing Regulations. The updated Policy is available on the website of the Company at https://www.novartis.in/investors/novartis-india-corporate-policies

Further, in terms of the provisions of Section 188(1) of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 23 of the SEBI Listing Regulations, all the requisite approvals were taken for the contracts/arrangements/ transactions entered into by the Company with its related parties, during the year under review.

All transactions with related parties were in accordance with the Policy formulated by the Company.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Act including certain arm’s length transactions under third proviso thereto are required to be disclosed in Form AOC-2. Form AOC-2 envisages disclosure of material contracts or arrangements or transactions on an arm’s length basis.

Details of the material RPTs in the financial year 2021-22, as per the Policy adopted by the Company is disclosed as an Annexure C. The transactions disclosed in the said Annexure relates to material RPTs with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations as approved by members under erstwhile Clause 49(VII)(E) of the Listing Agreement at the 67^th AGM of the Company held on July 23, 2015.

Risk Management

Pursuant to the Regulation 21 of the SEBI Listing Regulations, your Company has constituted a Risk Management Committee (‘RMC’) to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks.

The RMC is supported by Internal Risk Steering Committee, risk champions and on some occasions supported by an external risk advisory firm. The teams undertake assessment of internal and external risks, adopts the risk mitigation plan and regularly monitors them in a structured and controlled environment. The Committee provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis. There are no risks, which in the opinion of the Board, threaten the existence of your Company.

Details of composition of the RMC and the Risk Management Policy, adopted by the Board, is provided in the Report on Corporate Governance, which forms part of this Report.

Fixed Deposits

The Company has not accepted any deposits within the ambit of Section 73 of the Act and the Rules framed thereunder during the financial year 2021-22.

Particulars of Loans, Guarantees or Investments

As on March 31, 2022, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act.

Board of Directors and Key Managerial Personnel Board of Directors:

Re-appointment of Director retiring by rotation

Ms. Monaz Noble has been functioning on the Board of the Company as a Non-Executive and Non-Independent capacity effective June 1, 2019. Ms. Noble retires by rotation and being eligible, offers herself for re-appointment. The Board recommends her re-appointment. Her brief resume, nature of expertise, details of directorships held in other companies along with her shareholding in the Company, if any, as stipulated under Secretarial Standard-2 and Regulation 36 of the SEBI Listing Regulations are forming part of the Notice of the ensuing AGM.

Declarations by Independent Directors

The Company has received necessary declarations from all the Independent Directors of the Company confirming that they continue to meet the criteria of independence, as prescribed under Section 149(6) of the Act read with Regulations 25(8) and 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company. The Independent Directors have also confirmed that they have complied with Schedule IV to the Act and the Company’s Code of Conduct.

They have further confirmed that they are not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties. Further, the Independent Directors have also submitted their declaration in compliance with the provision of Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014 which mandated the inclusion of an Independent Director’s name in the data bank of Indian Institute of Corporate Affairs (‘IICA’) for a period of one year or five years or lifetime till they continue to hold the office of an Independent Director.

Committees of Board, Meetings of the Board of Directors and Board Committees

The Board currently has 5 (five) Committees, namely, the Audit Committee, the Nomination and Remuneration Committee, the Corporate Social Responsibility Committee, the Stakeholders Relationship Committee, and the Risk Management Committee.

During the year under review, the Board of Directors met 6 (six) times to transact various affairs of the Company. A detailed update on the Board, its composition, including synopsis of terms of reference of various Board Committees, number of Board and Committee meetings held during financial year 2021-22 and attendance of the Directors at each meeting is provided in the Report on Corporate Governance, which forms part of this Report.

Key Managerial Personnel (‘KMP’):

Resignation

During the year under review, Mr. Trivikram Guda and Mr. Felix Doss resigned from their respective positions of Company Secretary & Compliance Officer and Chief Financial Officer on November 30, 2021 and December 31, 2021 respectively and were subsequently relieved from their responsibilities.

Appointment

Mr. Nikhil Malpani was appointed as Company Secretary and Compliance Officer of the Company from the conclusion of the Board Meeting held on April 27, 2022 and Ms. Shilpa Joshi was appointed as Chief Financial Officer of the Company with effect from May 1, 2022.

By virtue of the above changes in KMP and in terms of provisions of Section 203 of the Act, the following are the KMP of the Company as on date :

i. Mr. Sanjay Murdeshwar - Vice Chairman and Managing Director

ii. Ms. Shilpa Joshi - Chief Financial Officer

iii. Mr. Nikhil Malpani - Company Secretary and Compliance Officer

Nomination and Remuneration Policy

The Company has in place a Nomination and Remuneration Policy (‘Policy’) which provides guidance on selection and nomination of Directors to the Board of the Company; appointment of the Senior Management Personnel of the Company; and remuneration of Directors, KMP and other employees. The Board at its meeting held on May 19, 2022, as recommended by the Nomination and Remuneration Committee, considered and approved amendments to the said Policy in line with the recent amendments in the SEBI Listing Regulations. The updated Policy is also provided in the Report on Corporate Governance which forms part of this Report and is also available on the website of the Company and can be accessed at https://www.novartis.in/investors/novartis-india-corporate-policies

Board Evaluation

Pursuant to the provisions of Section 178 read with Schedule IV of the Act and Regulation 17 read with Part D of Schedule II to the SEBI Listing Regulations, the Board of Directors have carried out the annual performance evaluation of its own performance, the Directors individually as well as working of its Audit, Nomination and Remuneration, Stakeholders Relationship, Risk Management and Corporate Social Responsibility Committees.

A structured questionnaire was prepared for the Board evaluation process for the financial year 2021-22, covering various aspects of the Board’s functioning such as proper mix of competencies, sufficient diversity and reviewing of Company’s business, financial performance, governance and compliance etc.

A separate exercise was carried out to evaluate the performance of individual Directors, who were evaluated on parameters such as level of engagement and contribution, independence of judgement, safeguarding the interest of the stakeholders of the Company etc.

The Independent Directors of the Company met on May 09, 2022, without the presence of Non-Independent Directors and members of the management to review the performance of Non-Independent Directors and the Board of Directors as a whole, to review the performance of the Chairperson and Managing Director of the Company, and to assess the quality, quantity and timeliness of flow of information between the management and the Board of Directors for the financial year 2021-22. The performance evaluation of the Independent Directors was carried out by the entire Board.

The final outcome of the Board evaluation process for the financial year 2021-22 was placed before the Board of Directors at its meeting held on May 19, 2022 and the Directors expressed their satisfaction with the evaluation process carried out.

Directors’ Responsibility Statement

The Audited Financial Statement of your Company for the year under review (‘financial statement’) are in conformity with the requirements of the Act read with the Rules made thereunder (‘Act’) and the Accounting Standards. The financial statement fairly reflect the form and substance of transactions carried out during the year under review and reasonably present your Company’s financial condition and results of operations.

Pursuant to Section 134(3)(c) of the Act, the Board of Directors, to the best of its knowledge and ability confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any

(b) appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2022 and of the loss of the Company for the year ended March 31, 2022

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities

(d) the annual accounts have been prepared on a going concern basis

(e) proper internal financial controls were laid down and followed by the Company and such internal financial controls are adequate and were operating effectively

(f) proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively

Familiarisation programme for Independent Directors

The Company keeps its directors informed of the activities of the Company, its management and operations and provides an overall industry perspective on issues being faced by the industry including changes in regulatory landscape, in a proactive manner. Details of familiarisation provided to the Directors of the Company are available on the website of the Company at https://www.novartis.in/investors/novartis-india-corporate-policies

Auditors and auditors report

(i) Statutory Auditors, Auditors Report and Statutory Audit Fees:

Pursuant to the provisions of Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, M/s. Deloitte Haskins & Sells LLP Chartered Accountants (Firm Registration No. 117366W/W-100018), were appointed as Statutory Auditors of the Company at the AGM held on July 28, 2017 for a term of 5 (five) years to hold office from the conclusion of the 69^th AGM till the conclusion of the 74^th AGM (i.e. the ensuing AGM) of the Company.

As the tenure of M/s. Deloitte Haskins & Sells LLP would expire at the conclusion of the 74^th AGM of the Company, it is recommended to appoint M/s B S R & Co. LLP Chartered Accountants (ICAI Firm Registration No. 101248W/W100022) for a period of 5 (five) years from the conclusion of 74^th AGM till the conclusion of 79^th AGM subject to the approval of the shareholders of the Company.

M/s B S R & Co. LLP Chartered Accountants, would be eligible for appointment at the conclusion of the forthcoming AGM in accordance with Section 139 of the Act. The Board of Directors, on the recommendation of the Audit Committee, has proposed the appointment of M/s B S R & Co. LLP Chartered Accountants. The appointment of the Statutory Auditors is proposed to the shareholders in the Notice of the forthcoming AGM.

The Auditors’ Report issued by M/s. Deloitte Haskins & Sells LLP to the shareholders on the Accounts of the Company for the financial year ended March 31, 2022 does not contain any qualification, reservation or adverse remark. The said Report for the financial year ended March 31, 2022 read with the explanatory notes therein are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3) of the Act. The Auditors’ Report is enclosed with the financial statement in this Annual Report.

During the financial year 2021-22, the total fees for the statutory audit rendered by the Statutory Auditors are given below:

Auditors’ Remuneration (Excluding GST where applicable)	('' in million) 2021-22 2020-21
Audit Fees	9.5	9.0
Tax Audit Fees	1.3	1.3
Reimbursement of Expenses	-	0.2
Total	10.8	10.5

(ii) Secretarial Auditor and Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had appointed Saraf & Associates, Company Secretaries, for conducting Secretarial Audit of the Company for the financial year 2021-22. The Secretarial Audit Report is annexed herewith as Annexure D. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

The Board has re-appointed Saraf & Associates, Company Secretaries, to conduct the Secretarial Audit of the Company for the financial year 2022-23. They have confirmed their eligibility for the said re-appointment.

(iii) Cost records and Cost Audit:

Maintenance of cost records and requirement of cost audit as prescribed under the provisions of Section 148(1) of the Act are not applicable for the business activities carried out by the Company.

During the year under review, neither the Statutory Auditors nor the Secretarial Auditor has reported to the Audit Committee or the Board, under Section 143(12) of the Act, any instances of fraud committed against the Company by its officers or employees.

Compliance with Secretarial Standards

During the financial year 2021-22, the Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Annual Secretarial Compliance Report

The Company has undertaken an examination of all applicable compliances as per SEBI Listing Regulations and Circulars/Guidelines issued thereunder, for the financial year 2021-22.

The Annual Secretarial Compliance Report as issued by Saraf & Associates, Company Secretaries, is required to be submitted to the Stock Exchanges within 60 days of the end of the financial year. The Report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure E, annexed herewith.

Corporate Governance

The Company is committed to follow best practices of Corporate Governance and is in compliance with the provisions on Corporate Governance specified in the SEBI Listing Regulations and Novartis Group Corporate Governance norms.

Pursuant to the SEBI Listing Regulations, the Report on Corporate Governance for the year under review, presented in a separate section, is forming part of the Annual Report. A certificate from Dr. K. R. Chandratre, Practicing Company Secretary, confirming compliance of conditions of Corporate Governance, as stipulated under the SEBI Listing Regulations, also forms part of the Report on Corporate Governance.

Business Responsibility Report

As mandated by the Securities and Exchange Board of India, the Business Responsibility Report (‘BRR’) forms part of the Annual Report. The report on the nine principles of National Voluntary Guidelines on social, environmental and economic responsibilities of business as framed by the Ministry of Corporate Affairs is provided in relevant sections of the BRR.

Whistle Blower Policy: Vigil Mechanism

Pursuant to Section 177 of the Act read with Regulation 22 of the SEBI Listing Regulations, it is mandated for every listed entity to formulate Vigil Mechanism (‘Whistle Blower Policy’) for Directors and employees to report genuine concerns. The Company has established a Vigil Mechanism and Whistleblower Policy which provides for (a) adequate safeguards against victimisation of persons who avail the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism and Whistleblower Policy are made available on the website of the Company at https://www.novartis.in/investors/novartis-india-corporate-policies

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All persons whether employed as permanent, contractual, temporary or trainees are covered under this Policy.

During the financial year 2021-22, one complaint was received by the Company related to sexual harassment and the same was addressed and closed.

Annual Return

Pursuant to the provisions of Sections 92(3) and 134(3)(a) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 (as substituted by the Companies (Management and Administration) Amendment Rules, 2021 dated March 05, 2021), a copy of the Annual Return is available on the website of the Company at http://www.novartis.in/ investors/novartis-india-financial-results

Significant and material orders passed by the Regulators or Court

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Other Disclosures

• There were no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report

• The Company has not issued any shares with differential voting rights/sweat equity shares

• There was no revision in the financial statement

• There has been no change in the nature of business of the Company as on the date of this Report

• No application has been made under the Insolvency and Bankruptcy Code; hence the requirement to disclose the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year is not applicable;

• The requirement to disclose the details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof, is not applicable; and

• The Company does not have any subsidiary for the year ended March 31, 2022 Green Initiative

We request all the shareholder to support the ‘Green Initiative’ of the Ministry of Corporate Affairs and Company’s continuance towards greener environment by enabling the service of Annual Report, AGM Notice and other documents electronically to your email address registered with your Depository Participant/ RTA.

Cautionary Note

The statements forming part of the Board’s Report may contain certain forward-looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

Acknowledgement

The Board appreciates and places on record the contribution made by all stakeholders, particularly employees, shareholders, customers, the medical fraternity and all business partners, during the year under review and acknowledges the support received from the parent Company, Novartis AG.

On behalf of the Board of Directors

CHRISTOPHER SNOOK Chairman

Date: May 19, 2022 DIN: 00369790

Place: Singapore

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Mar 31, 2018

Directors'' Report

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2018.

Summary of the Financial Results

(Rs, in million)

	2017-18	2016-17
Revenue from Operations	5,638.9	6,562.3
Total Income	7357.2	7272.3
Profit before Tax	1,575.2	917.3
Profit for the year	783.6	572.2
Other Comprehensive Income for the year	12.0	5.0
Balance brought forward from previous year Available for appropriation The Directors have made the following appropriations:	8,336.2	8,143.7
Dividend	281.4	319.6
Dividend distribution tax	57.3	65.1
Buy-back of equity shares	1,537.4	0
Amount transferred to Capital Redemption Reserve	17.3	0
Carry forward	7,238.4	8,336.2

Dividend

The Board has recommended payment of dividend at Rs, 10 per equity share of Rs, 5 each for the financial year 2017-18. The dividend, if approved by the members at the Annual General Meeting (“AGM”), will result in a cash outflow of Rs, 297.7 million including dividend distribution tax.

Buyback of equity shares

During the year, the Company had bought back 34,50,000 equity shares from all existing shareholders/beneficial owners of equity shares, on a proportionate basis, through the Tender Offer route at a price of Rs, 670 (Rupees six hundred and seventy only) per equity share for an aggregate amount of Rs, 231,15,00,000 (Rupees two hundred and thirty one crore fifteen lakh only).

Management Discussion and Analysis

For the year under review, the business operations of the Company comprise of Pharmaceuticals.

a. Industry structure and developments

India’s economic growth in terms of GDP for Financial Year 2017-18, stood at 6.5 percent compared to 7.1 percent during the previous financial year, primarily due to poor performance of the agriculture and manufacturing sectors. While structural reforms like Goods and Service Tax (GST) were welcomed, the transition to GST encountered challenges of policy, law, and information technology systems affected many sectors.

However, Government’s continued commitment towards economic reforms and a slew of measures to support these like rationalizing GST rates on many common goods

& services, simplifying compliance burdens, solving problems associated with nonperforming assets of the banks, liberalizing foreign direct investment are improving growth prospects for the economy.

India’s healthcare system currently remains grossly inadequate to provide care to a population of 1.3 billion, especially in rural areas. With public spending on healthcare at 1.4 percent of GDP India is among the lowest in the world. Continuing challenges surrounding drug pricing and low health insurance are factors impacting the research based pharmaceutical industry. It is encouraging that the Government has come out with a National Health Policy 2017, which proposes to increase public health expenditure to 2.5% of the GDP in a time bound manner.

The Indian Pharma Market (“IPM”) is valued at Rs, 1184.86 billion (AIOCD, MAT FEB 2018) and forecasted to grow at a Compounded Annual Growth Rate (CAGR) of 9.7 percent* between 2017 and 2022, reaching Rs, 1967.6 billion by 2022. It continues to be a highly fragmented and competitive market with a large number of players spread across therapeutic segments.

b. Performance

Revenue from operations for the year ended March 31, 2018 was at Rs, 5638.9 million representing a decrease of 14.1 percent over the previous year.

Profit before tax for the year from continuing operations was at Rs, 1575.2 million representing an increase of 71.7 percent over the previous year. This is mainly on account of interest income of Rs, 981.3 million received on income tax refund of AY 1995-96 recognized as income in the accounts based on the management estimate of the amount the Company is entitled to receive in accordance with the provisions of the Income-tax Act, 1961.

c. Segment-wise operational performance

The Pharmaceuticals business registered Net Revenue from Operations of Rs, 5638.9 million representing a decrease of 14.1 percent over the previous year. Revenue from operations was impacted by the Goods and Service Tax roll-out and expansion of National List of Essential Medicines (NLEM) which led to increase in the scope of drugs subject to price control. Both these events had an adverse impact on the operating profits of the Pharmaceutical business.

Following brands hold key positions in major therapeutic areas such as:

Therapeutic Area	Product
Central Nervous System	Tegrital®
Pain & Inflammation	Voveran®
Transplantation/Immunology	Sandimmun® Neoral®

d. Risks

India is a self-pay market, which coupled with widespread low affordability poses a significant challenge to the pharmaceutical industry in general. Healthcare insurance in India has still not penetrated in a way so as to make a positive impact on affordability. Control of prices of certain drugs under the DPCO continues to affect the profitability of the pharmaceutical industry. Any attempt to expand the scope of the DPCO will pose additional challenges.

The Indian Pharma Market (IPM) is dominated by generic medicines and these drugs account for nearly 75% of the pharma industry. Therefore, any mandatory prescription of medicines by their generic name, without referring to the brand name, would necessitate a change in the Company’s promotional strategies and could affect product pricing.

Novartis AG, which is our holding company, owns directly or indirectly several companies in Novartis Group worldwide including various brands and patents. Therefore, any merger, acquisition, divestments or restructuring by Novartis AG or its subsidiaries would have an influence on Company’s operations in India as well.

e. Outlook

While the overall outlook for the economy looks promising, it is also dependent upon many macro-economic factors like increasing crude oil prices, problem of non-performing assets, agriculture distress etc. which could have a dampening effect on GDP growth in future.

However, it is encouraging for the Pharma industry to note that the Government is keen to implement two major healthcare programmes, first the National Health Protection Scheme, which is being projected as the world’s largest healthcare programme and the other is to create approximately 1.5 lakh health and wellness centers across the country, which will bring healthcare closer to home. A large and growing population, low healthcare penetration, Government’s commitment to increase healthcare spend, emerging digital technologies in the healthcare sector, growing preference towards private care, all present a growth opportunity for the pharmaceutical industry.

It is also imperative to note that, while government looks committed towards building the health infrastructure, the health delivery system continues to face severe challenges due to lack of appropriate and enough human resources deployed on the ground. The newly announced schemes will truly be a game changer towards universal health coverage, but, as with previous schemes, the key remains in the successful implementation of these programmes.

The IPM does face headwinds in the form of continuing price controls and mandatory prescription of medicines using their generic names. Despite the on-going efforts at driving productivity and various cost control measures, the severe price cuts continue to impact Company results.

f. Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorized use or disposition. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorized, recorded and reported correctly.

The Head of Internal Audit together with external audit consultants review the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an on-going basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems, evaluated the internal financial control systems with the Audit Committee and discussed relevant issues with internal and statutory auditors. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively.

g. Vigil Mechanism

The Company has established a Vigil Mechanism that enables the Directors and employees to report genuine concerns. The Vigil Mechanism provides for (a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism policy are made available on the Company’s website www.novartis.in

h. Personnel

The Industrial Relations scenario continued to be cordial. The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of employees as on March 31, 2018 was 668.

The information required pursuant to Section 197 of the Companies Act, 2013 (“the Act”) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the members and others entitled thereto, excluding the information on employees’ particulars, which is available for inspection by members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing AGM. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary & Compliance Officer of the Company in this regard.

Corporate Social Responsibility

The Company continues to actively support various initiatives in the areas of health, education, sports and environment. The CSR Policy adopted by the Board of Directors is available on the Company’s website www.novartis.in

Health: India has around 60 percent of the world’s leprosy case load and leprosy continues to be an area of focus for the Company’s CSR work in India. Leprosy Post Exposure Prophylaxis Project (LPEP) was launched in the union territory of Dadra & Nagar Haveli in March 2015 and continued during the financial year under review. During the year 2017-18 refresher training was conducted for 4 research assistants, 1 project supervisor, 7 doctors, 7 supervisors, 14 auxiliary nurse midwives (ANMs), 70 Accredited Social Health Activists (ASHAs) from general healthcare, who were trained in leprosy as well as in the LPEP project. The health awareness reach covered 350,000 people including school children. 9,553 people were screened for leprosy, with a prophylactic dose for prevention of transmission of leprosy being given to 5,828 eligible persons. 3 new cases of leprosy were detected.

The Company is a strong player in the oncology segment and furthered its commitment to children suffering from cancer by funding preventive healthcare and sanitation at various child care centers in Maharashtra.

Education: The poor in India continue to be heavily impacted by lack of education with children not being sent to school so that they can contribute to the family income or dropping out of school. The mid-day meal program, when run effectively, has helped bring and keep children in school. Recognizing this as an important role in education, the Company made significant investments in this area to provide less privileged children with a nutritious meal. More than 8,000 children in Mumbai, Vrindavan, Lucknow and Bhubaneshwar are beneficiaries under this programme.

Sports: India is yet to make a significant mark in the area of sports, particularly at the Olympic level. Focus by parents continues to be on academics for their children making sports a neglected area. The Company continues to support the medical, nutritional and training needs of promising Indian athletes who will participate in future Olympics.

Environment: The city of Mumbai is starved of open green spaces and the Company has contributed in a positive way by supporting the upkeep of two beautiful gardens close to its Mumbai office.

The Company continues to commemorate Community Partnership Week (“CPW”) each year encouraging employees to work on causes close to their heart. A pan India activity that has shown rising numbers is the blood donation drive for children suffering from thalassaemia, a hereditary blood disorder where the body makes an abnormal form of haemoglobin, the protein in red blood cells that carry oxygen. They need to get blood every two weeks. CPW continues to grow in stature with a rising number of associates participating in a broad range of activities covering the less fortunate.

The Annual Report on Corporate Social Responsibility Activities is annexed herewith as Annexure A.

Related Party Transactions

All Related Party Transactions that were entered into during the financial year were on arm’s length basis and in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for their approval. The Audit Committee has granted omnibus approval for Related Party Transactions as per the provisions and restrictions contained in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. (“Listing Regulations”).

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. The policy is available on the Company’s website www.novartis.in

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Act including certain arm’s length transactions under third proviso thereto are required to be disclosed in Form AOC-2. The Form AOC-2 envisages disclosure of material contracts or arrangement or transactions at arm’s length basis.

The details of the material Related Party Transactions in financial year 2017-18, as per the Policy on dealing with Related Parties adopted by the Company are disclosed in Annexure B.

The transactions disclosed in the Annexure relate to material Related Party Transactions with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations as approved by members under erstwhile Clause 49(VII)(E) of the listing agreement at the 67^th Annual General Meeting of the Company held on July 23, 2015.

Risk Management

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for constitution of a Risk Management Committee. The Committee has created a Risk Register and works towards review and identification of internal and external risks and implementation of risk mitigation steps. The Company provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis.

Fixed Deposits

The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the rules framed thereunder.

Particulars of Loans, Guarantees or Investments

As on March 31, 2018, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act. The Company has certain unquoted investments in co-operative housing societies for premises owned by the Company. The details of changes in the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Board of Directors

The Company has received declarations from all Independent Directors, that they meet the criteria of independence as laid down under Section 149(6) of the Act and the Listing Regulations.

Mr. Ranjit Shahani resigned from the Board as Vice Chairman & Managing Director of the Company w.e.f. February 28, 2018. Mr. Jawed Zia who was appointed as Vice Chairman & Managing Director effective March 1, 2018, resigned from office, effective May 31, 2018.

The Board of Directors, based on the recommendation of the Nomination & Remuneration Committee, appointed Mr. Milan Paleja as Vice Chairman & Managing Director of the Company w.e.f. June 1, 2018, subject to the approval of members at this AGM and approval of the Central Government.

Ms. Monaz Noble was appointed as Whole Time Director of the Company w.e.f. June 13, 2016. Ms. Noble retires at this AGM and being eligible offers herself for re-appointment.

Necessary resolutions for the appointment/re-appointment of Directors together with details for appointment/re-appointment have been included in the Notice convening the ensuing AGM.

Familiarization programme for Independent Directors

The Company keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective on issues being faced by the industry, in a proactive manner. Details of various familiarization programmes provided to the Directors of the Company are available on the Company’s website www.novartis.in

Auditors

The Board has recommended the re-appointment of M/s. Deloitte Haskins & Sells LLP (Firm Registration No. 117366W/W-100018) from the conclusion of the 70^th Annual General Meeting to the conclusion of the 71^st Annual General Meeting of the Company.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Mr. K. G. Saraf from Saraf & Associates, Practicing Company Secretary for conducting secretarial audit of the Company for the financial year 2017-18.

The Secretarial Audit Report is annexed herewith as Annexure C. The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure D.

Directors’ Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2018 and of the profit and loss of the Company for the year ended March 31, 2018;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Governance

The Company is committed to good corporate governance and is in compliance with the provisions on corporate governance specified in the Listing Regulations and Novartis Group corporate governance norms.

A certificate of compliance from Dr. K. R. Chandratre, Practicing Company Secretary and the report on Corporate Governance form part of this Directors’ Report.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Committee has been set up to redress complaints received regarding sexual harassment. All persons whether employed as permanent, contractual, temporary, trainees are covered under this policy.

During the year 2017-2018, no complaints were received by the Company related to sexual harassment.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 are placed on the website of the Company at www.novartis.in

Acknowledgement

The Board appreciates and places on record the contribution made by all stakeholders, particularly employees, shareholders, customers, the medical fraternity and all business partners, during the year under review and acknowledges the support received from the parent Company, Novartis AG.

Cautionary Note

The statements forming part of the Directors’ Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

On behalf of the Board of Directors

CHRISTOPHER SNOOK

Chairman

May 10, 2018

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Mar 31, 2017

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2017.

Summary of the Financial Results

(Rs. in million)

	2016-17	2015-16
Revenue from operations*	6,562.3	8,061.7
Operating Profits
Profit before tax*	917.3	2,716.7
Profit after tax*	572.2	1,982.9
Other Comprehensive Income for the year	5.0	2.9
Balance brought forward from previous year	8,143.7	6,542.6
Available for appropriation
The Directors have made the following appropriations:
Dividend	319.6	319.6
Tax on distributed profits	65.1	65.1
Carry forward	8,336.2	8,143.7

* Includes continuing as well as discontinued operations.

Dividend

The Board has recommended payment of dividend at Rs. 10 per equity share of Rs.5 each for the financial year 2016-17. The dividend, if approved by the members at the Annual General Meeting (“AGM”), will result in a cash outflow of '' 338.7 million including dividend tax.

Management Discussion and Analysis

For the year under review, the business operations of the Company comprise of Pharmaceuticals.

a. Industry structure and developments

India’s economic growth in terms of GDP for Financial Year 2016-17, stood at 7.1 percent compared to 7.6 percent during the previous financial year, primarily due to the impact of demonetization and slowdown in private investments. However, Government’s continued commitment towards economic reforms and a slew of measures to support these including the GST Bill and initiatives like ‘Make in India’, favoured the positioning of India as the fastest growing economy in the world.

India’s healthcare system remains grossly inadequate to provide care to a population of 1.3 billion, especially in rural areas. With public spending on healthcare at 1.4 percent of GDP India is among the lowest in the world. Continuing challenges surrounding drug pricing and low health insurance are factors impacting the research based pharmaceutical industry.

The Indian Pharma Market (“IPM”) is valued at Rs.1,011 billion (AIOCD, MAT FEB 2017) and forecasted to grow at a Compounded Annual Growth Rate (CAGR) of 11-14 percent* over the next four years. It continues to be a highly fragmented and competitive market with a large number of players spread across therapeutic segments.

b. Performance

Revenue from continuing operations for the year ended March 31, 2017 was at Rs.6,562.3 million representing a decrease of 4.9 percent over the previous year.

Profit before tax for the year from continuing operations was at Rs.917.3 million representing a decrease of 17.6 percent over the previous year.

*source: IMS Market Prognosis 2017-2021

c. Segment-wise operational performance

The Pharmaceuticals business registered Net Revenue from Operations of Rs.6,562.3 million representing a decrease of 4.9 percent over the previous year. Expansion of National List of Essential Medicines (NLEM) has led to increase in the scope of drugs subject to price control. Additionally there was a 2.71 percent reduction in prices from April 2016 following a reduction in the annual Wholesale Price Index (WPI) as per the Drugs Price Control Order, 2013 (“DPCO”). Both these events continue to have an adverse impact on the operating profits of the Pharmaceutical business. To mitigate the DPCO impact, cost containment measures were undertaken by the Company during the year to protect its operating profit.

Following brands hold key positions in major therapeutic areas such as:

Therapeutic Area	Product
Central Nervous System	Tegrital®
Pain & Inflammation	Voveran®
Transplantation/Immunology	Sandimmun® Neoral®

d. Concerns

India is a self-pay market, which coupled with widespread low affordability poses a significant challenge to the pharmaceutical industry in general. Healthcare insurance has still not penetrated in a way so as to make a positive impact on affordability. Control of prices of certain drugs under the DPCO continues to affect the profitability of the pharmaceutical industry. Any attempt to expand the scope of the DPCO will pose additional challenges. The unpredictability of the Patent environment prevalent in the country adds to concerns of the research-oriented pharmaceutical industry.

e. Outlook

India’s economy is well placed to grow at a robust pace over the next five years owing to strong domestic consumption and increase in government spending on infrastructure. Harmonization of the existing, complex tax regime, with proper implementation of Goods & Service Tax (GST) will simplify the supply chain and improve the operating environment and will act as an additional driver of consolidation at all levels of the pharmaceutical market.

A large and growing population, low health care penetration, Government’s commitment to increase healthcare spend, emerging digital technologies in the healthcare sector, growing preference towards private care all present a growth opportunity for the pharmaceutical industry.

There are however, headwinds faced by the Indian Pharma Market (IPM) in the form of continuing price controls and the impending impact if the government makes it mandatory for doctors to prescribe medicines using their generic names. Despite the continued effort at driving productivity and various cost control measures, the Company results continue to be impacted by the severe price cuts.

f. Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorized use or disposition. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorized, recorded and reported correctly.

The Head of Internal Audit together with external audit consultants review the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems, evaluated the internal financial control systems with the Audit Committee and discussed relevant issues with internal and statutory auditors. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively.

g. Vigil Mechanism

The Company has established a Vigil Mechanism that enables the Directors and employees to report genuine concerns. The Vigil Mechanism provides for (a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism policy are made available on the Company’s website www.novartis.in

h. Personnel

The Industrial Relations scenario continued to be cordial. The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of employees as on March 31, 2017 was 674.

The information required pursuant to Section 197 of the Companies Act, 2013 (“the Act”) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the members and others entitled thereto, excluding the information on employees’ particulars, which is available for inspection by the members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing AGM. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary of the Company in this regard.

Corporate Social Responsibility

The Company continues to actively support various initiatives in the areas of health, education, sports and environment. The CSR Policy adopted by the Board of Directors is available on the Company’s website www.novartis.in.

Health: India has around 60 percent of the world’s leprosy case load and leprosy continues to be an area of focus for the Company’s CSR work in India. Leprosy Post Exposure Prophylaxis Project (LPEP) project was launched in the union territory of Dadra & Nagar Haveli in March 2015 and continued during the financial year under review. Refresher training was conducted for 4 research assistants and 1 project supervisor. 13,470 people were screened for leprosy, with a prophylactic dose for prevention of transmission of leprosy being given 9,313 eligible persons. 2 new cases of leprosy were detected while 18 persons were suspected to have contracted TB and were referred to TB referral centres for further investigation and treatment.

To increase awareness of leprosy, a film titled ‘The Unwanted’, sponsored by the Company, was broadcast on a leading TV channel and screened for private audiences in the metros of Hyderabad, Delhi, and Mumbai with another one planned in Bengaluru.

The Company continued with its rural health initiative called Arogya Parivar, which is now in its tenth year. Focus continues to be on conducting health camps in 11 states in the country on various disease areas while also covering the importance of sanitation and hand washing.

The Company is a strong player in the oncology segment and furthered its commitment to children suffering from cancer by funding preventive healthcare and sanitation at various child care centers in Maharashtra.

Education: The poor in India continue to be heavily impacted by lack of education with children not being sent to school so that they can contribute to the family income or dropping out of school. The mid-day meal program, when run effectively, has helped bring and keep children in school. Recognizing this as an important role in education, the Company made significant investments in this area to provide less privileged children with a nutritious meal. Around 4,450 children in and around Bengaluru are being covered under this programme. The Company has also recognized the need for increasing engagement in the learning of the underprivileged and has contributed towards this by subscribing to educational magazines. Feedback from the recipients is encouraging with there being a marked improvement in spoken and written English, grammar and vocabulary among the students.

Sports: India is yet to make a significant mark in the area of sports, particularly at the Olympic level. Focus by parents continues to be on academics for their children making sports a neglected area. The Company continues to support the medical, nutritional and training needs of promising Indian athletes who will participate in future Olympics. Notable among those who fared well at the recently held Olympics supported by the program is badminton player PV. Sindhu.

Environment: The city of Mumbai is starved of open green spaces and the Company has contributed in a positive way by supporting the upkeep of two beautiful gardens close to its Mumbai office.

The Company continues to commemorate Community Partnership Week (“CPW”) each year encouraging employees to work on causes close to their heart. A pan India activity that has shown rising numbers is the blood donation drive for children suffering from thalassemia, a hereditary blood disorder where the body makes an abnormal form of hemoglobin, the protein in red blood cells that carry oxygen. They need to get blood every two weeks. CPW continues to grow in stature with a rising number of associates participating in a broad range of activities covering the less fortunate be they children, the sick or the elderly.

The Annual Report on Corporate Social Responsibility Activities is annexed herewith as Annexure A.

Related Party Transactions

All Related Party Transactions that were entered into during the financial year were on arm’s length basis and in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for their approval. The Audit Committee has granted omnibus approval for Related Party Transactions as per the provisions and restrictions contained in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. (“Listing Regulations”).

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. The policy is available on the Company’s website www.novartis.in.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Act including certain arm’s length transactions under third proviso thereto are required to be disclosed in Form AOC-2. The Form AOC-2 envisages disclosure of material contracts or arrangement or transactions at arm’s length basis.

The details of the material Related Party Transactions in financial year 2016-17, as per the Policy on dealing with Related Parties adopted by the Company are disclosed in Annexure B.

The transactions disclosed in the Annexure relate to material Related Party Transactions with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations as approved by members under erstwhile Clause 49(VII)(E) of the listing agreement at the 67^th Annual General Meeting of the Company held on July 23, 2015.

Risk Management

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for constitution of a Risk Management Committee. The Committee has created a Risk Register and works towards review and identification of internal and external risks and implementation of risk mitigation steps. The Company provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis.

Fixed Deposits

The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the rules framed there under.

Particulars of Loans, Guarantees or Investments

As on March 31, 2017, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act. The Company has certain unquoted investments in co-operative housing societies for premises owned by the Company. The details of changes in the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Board of Directors

The Company has received declarations from all Independent Directors, that they meet the criteria of independence as laid down under Section 149(6) of the Act and the Listing Regulations.

Ms Sandra Martyres was appointed as an Independent Director of the Company at the previous Annual General Meeting of the Company, to hold office for a term up to April 18, 2021.

Mr Dinesh Charak resigned from the Board as Whole Time Director of the Company with effect from May 26, 2016. Ms Monaz Noble was appointed as Whole-Time Director of the Company w.e.f. June 13, 2016. Ms Noble retires at this AGM and has offered herself for re-appointment.

Necessary resolutions for the appointment/re-appointment of Ms Monaz Noble together with details for re-appointment have been included in the Notice convening the ensuing AGM.

Familiarization programme for Independent Directors

The Company keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective on issues being faced by the industry, in a proactive manner. Details of various familiarization programs provided to the Directors of the Company are available on the Company’s website www.novartis.in.

Auditors

The Board has recommended the appointment of M/s. Deloitte Haskins & Sells LLP (Firm Registration No. 117366W/W-100018) for a term of five years from the conclusion of the 69^th Annual General Meeting to the conclusion of the 74^th Annual General Meeting of the Company.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Mr K. G. Saraf from Saraf & Associates, Practicing Company Secretary for conducting secretarial audit of the Company for the financial year 2016-2017.

The Secretarial Audit Report is annexed herewith as Annexure C. The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure D.

Directors’ Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2017 and of the profit and loss of the Company for the year ended March 31, 2017;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Governance

The Company is committed to good corporate governance and is in compliance with the provisions on corporate governance specified in the Listing Regulations and Novartis Group corporate governance norms.

A certificate of compliance from Dr K. R. Chandratre, Practicing Company Secretary and the report on Corporate Governance form part of this Directors’ Report.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Committee has been set up to redress complaints received regarding sexual harassment. All persons whether employed as permanent, contractual, temporary, trainees are covered under this policy.

During the year 2016-2017, no complaints were received by the Company related to sexual harassment.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 are annexed herewith as Annexure E.

Acknowledgement

The Board appreciates and places on record the contribution made by all stakeholders, particularly employees, shareholders, customers, the medical fraternity and all business partners, during the year under review and acknowledges the support received from the parent Company, Novartis AG.

Cautionary Note

The statements forming part of the Directors’ Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

On behalf of the Board of Directors

CHRISTOPHER SNOOK

Chairman

May 23, 2017

---

Mar 31, 2016

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2016.

Summary of the Financial Results

Rs, million

2015-16 2014-15

Revenue from operations (Net)* 8,083.2 8,733.8

Profits

Profit before tax* 2,721.4 932.3

Profit after tax* 1,986.1 791.1

Balance brought forward from previous year 6,156.9 5,750.5

Available for appropriation 8,143.0 6,541.6

The Directors have made the following appropriations:

Dividend (Proposed) 319.6 319.6

Tax on distributed profits 65.1 65.1

General Reserve - -

Carry forward 7,758.3 6,156.9

8,143.0 6,541.6

* Includes continuing as well as discontinuing operations.

Dividend

The Board has recommended payment of dividend at Rs, 10 per equity share of Rs, 5 each for the financial year 2015-16. The dividend, if approved by the members at the Annual General Meeting ("AGM"), will result in a cash outflow of Rs, 384.7 million including dividend tax.

Management Discussion and Analysis For the year under review, the business operations of the Company comprise Pharmaceuticals, Generics, Over-The-Counter ("OTC") and Animal Health. This segmentation forms the basis for review of operational performance by the management.

a. Industry structure and developments

Pharmaceuticals and Generics

The overall economic environment has improved powered by lower oil prices, low inflation, a stable currency and the reforms agenda driven by the new Government at the centre. However, India''s public healthcare spend at less than 1 per cent of GDP continues to remain among the lowest in the world. Many challenges like low profitability due to price controls, low healthcare insurance penetration, uncertainty around enforcement of patents and the threat of compulsory licensing continue to dampen sentiments and negatively impact investments by the research based pharmaceutical industry.

The Indian Pharma Market ("IPM") is valued at Rs, 1,046 billion (IMS, MAT March 2016) and is expected to grow at a CAGR of 12-14 per cent* over the next four years. It continues to be a highly fragmented and competitive market with a large number of players spread across therapeutic segments.

b. Segment-wise operational performance

Pharmaceuticals

The Pharmaceuticals business registered Net Revenue from Operations of Rs, 6,532.4 million representing an increase of 8.9 per cent over the previous year. Reduction in selling prices arising out of the Drug Price Control Order, 2013 ("DPCO") continues to have an adverse impact on the operating profits of the Pharmaceutical business. To mitigate the DPCO impact, several cost containment measures were undertaken by the Company during the year, which resulted in an increase in the operating profit over the last year.

The business continues to hold leadership position in major therapeutic areas such as:

Therapeutic Area Rank Product

Central Nervous System 1 Tegrital®

Pain & Inflammation 2 Voveran®

Transplantation/Immunology 3 Sandimmun® Neoral®

Generics

The Generics business recorded Net Revenue from Operations of Rs, 388.1 million representing a decline of 19.9 per cent over the previous year, due to pruning of a few products and lower service income due to discontinuation of services.

c. Concerns

Pharmaceutical and Generics

India is a self-pay market, which coupled with widespread low affordability poses a significant challenge to the pharmaceutical industry in general. Healthcare insurance has still not penetrated in a way so as to make a positive impact on affordability. The DPCO in turn has adversely impacted the pharmaceutical industry. In 2016, the Government has further expanded the scope of DPCO which in all likelihood will pose further challenges for the already beleaguered pharmaceutical industry. The continued unpredictability of the Patent environment prevalent in the country adds to concerns of the research-oriented pharmaceutical industry.

d. Outlook

Pharmaceutical and Generics

A large and growing population, a favourable demographic and low healthcare penetration presents a growth opportunity for the pharmaceutical industry.

Notwithstanding the strong long-term potential of the IPM given the several factors in favour, investments in the sector and profitability could still be impeded in the short to medium term given the government''s propensity to resort to further price controls. The Company has taken steps to partially offset the severe negative impact of the price cuts and is continuing to drive operational excellence to increase productivity and profitability. In addition, the Company continues to work on innovative strategies to broaden access to its medicines and strives to identify new growth opportunities to deliver strong performance.

During the year under review, the Board of Directors of the Company approved divestment of the OTC and Animal Health businesses of the Company allowing the Company''s management to enhance focus on the Pharmaceuticals and Generics businesses.

e. Internal control systems and their adequacy

The Company maintains appropriate policies, procedures and systems to ensure orderly and efficient conduct of its business, including adherence to Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and the timely preparation of reliable financial information.

The Head of Internal Audit together with external audit consultants review the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. The Audit Committee of the Board of Directors approves and reviews audit plans for the year based on internal risk assessment. Audits are conducted on an ongoing basis and significant deviations are brought to the notice of the Audit Committee of the Board of Directors following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

During the year, the Company conducted a detailed review of its internal control systems and evaluated the internal financial control systems with the Audit Committee of the Board of Directors, discussed relevant issues with internal and external auditors and obtained external advice/expertise on these matters. Based on the recommendations of the Audit Committee, the Board has stated in its responsibility statement that proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively.

f. Vigil Mechanism

The Company has established a Vigil Mechanism that enables the Directors and Employees to report genuine concerns. The Vigil Mechanism provides for (a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of Directors of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism policy are made available on the Company''s website www.novartis.in

g. Personnel

The Industrial Relations scenario continued to be cordial. The Company regards its employees as a great asset and accords high priority to training and development of employees.

Number of employees as on March 31, 2016 was 752.

The information required pursuant to Section 197 of the Companies Act, 2013 ("the Act") read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the members and others entitled thereto, excluding the information on employees'' particulars which is available for inspection by the members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing AGM. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary of the Company in this regard.

Corporate Social Responsibility

The Company has actively supported various initiatives in the areas of health, education and environment over the years. With the introduction of Section 135 of the Act, the Company has constituted a Corporate Social Responsibility ("CSR") Committee. The CSR Policy adopted by the Board of Directors is available on the Company''s website, www.novartis.in. The CSR Committee decided to continue with the existing programs and increase focus on health and education in the years ahead.

Health: India has around 60% of the world''s leprosy case load and leprosy continues to be an area of focus for the Company''s CSR work in India. Leprosy Post Exposure Prophylaxis Project (LPEP) was launched in the union territory of Dadra & Nagar Haveli in March 2015 and continued during the financial year under review. Around 4 research assistants, 1 project supervisor for the project, 7 doctors, 7 supervisors, 14 Auxiliary Nurse Midwives (ANMs), 70 accredited Social Health Activists (ASHAs) from general health care were trained in leprosy as well as in the LPEP project. Awareness was generated in a population of around 350,000 including school children. 13,523 people were screened for leprosy, TB, renal and liver disorders, pregnancy etc. with a prophylactic dose for prevention of transmission of leprosy being given to 12,540 eligible persons. 18 new cases of leprosy were detected while 17 persons were suspected to have contracted TB and were referred to TB referral centres for further investigation and treatment.

The Company is a strong player in the oncology segment and furthered its commitment to patients by funding purchase of equipment to treat patients suffering from renal cancer and to manage hemodynamic in critically ill patients undergoing major lung and GI surgery.

In addition to this major project, the Company initiated associations with various NGOs in the areas of dementia, cancer and medical care to people living in urban slums.

Education: The poor in India are heavily impacted by lack of education owing to children not being sent to school or dropping out of school. The need to supplement the family income to provide food on the table is often a cause. The mid-day meal program, when run effectively, has helped bring and keep children in school. Recognizing this as an important role in education, the Company made significant investments in this area to provide less privileged children with a nutritious meal. The part scholarship to three meritorious, needy women at the Indian School of Business, Hyderabad continued.

Sports: A country of 1.2 billion people, India has as yet not been able to make a significant mark in the area of sports at the Olympic level except for sporadic wins in some sports. Greater focus on academics even among the educated makes sports a neglected field. The Company therefore chose to support the medical, nutritional and training needs of promising Indian athletes who could win medals at the forthcoming Olympics to be held in Rio through its association with an NGO working in the field.

Environment: The city of Mumbai is starved of open green spaces and the Company has contributed in a positive way by supporting the upkeep of two beautiful gardens close to its Mumbai office.

The Company commemorates Community Partnership Week ("CPW") each year encouraging employees to work on causes close to their heart. CPW continues to grow in stature with a rising number of associates participating in a broad range of activities covering the less fortunate be they children, the sick or the elderly.

The Annual Report on Corporate Social Responsibility Activities is annexed herewith as Annexure A.

Related Party Transactions

All Related Party Transactions that were entered into during the financial year were on arm''s length and were in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for their approval. The Audit Committee has granted omnibus approval for Related Party Transactions as per the provisions and restrictions contained in the erstwhile Listing Agreement and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations").

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. The policy is available on the Company''s website www.novartis.in.

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts/arrangements entered into by the Company with related parties referred to in sub section (1) of Section 188 of the Act including certain arm''s length transaction under third proviso thereto are required to be disclosed in Form AOC–2. The Form AOC–2 envisages disclosure of material contracts or arrangement or transactions at arm''s length basis.

The details of the material Related Party Transactions in financial year 2015-16, as per the Policy on dealing with Related Parties adopted of the Company are disclosed in Annexure B.

The transactions disclosed in Annexure B relate to material Related Party Transactions with Novartis Pharma AG for purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations as approved by members under erstwhile Clause 49(VII)(E) of the Listing Agreement at 67th Annual General Meeting of the Company held on July 23, 2015.

Risk Management

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for constitution of a Risk Committee of the Management. The Committee has created a Risk Register and works towards review and identification of internal and external risks and implementation of risk mitigation steps. The Company provides updates on risk management to the Audit Committee of the Board of Directors of the Company on a regular basis.

Fixed Deposits

The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Act and the rules framed there under .

Particulars of Loans, Guarantees or Investments

As on March 31, 2016, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act. The Company has certain unquoted investments in co-operative housing societies for premises owned by the Company. The details of changes in the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Board of Directors

The Company has received declarations from all Independent Directors, that they meet the criteria of independence as laid down under Section 149(6) of the Act and the Listing Regulations.

The members at its Meeting held on July 23, 2015 had approved re-appointment of Mr Ranjit Shahani as Vice Chairman and Managing Director for a period of 5 years commencing from November 1, 2015.

Ms Manisha Girotra resigned as Director of the Company with effect from February 11, 2016.

The Board of Directors appointed Ms Sandra Martyres as Additional Director of the Company at its meeting held on April 19, 2016. Ms Martyres holds office as Additional Director until the ensuing AGM of the Company and is eligible for re-appointment. It is also proposed to appoint Ms Martyres as Independent Director of the Company for a term up to April 18, 2021 at the forthcoming AGM.

Mr Dinesh Charak resigned as Director and Whole Time Director of the Company with effect from May 26, 2016.

Mr Ranjit Shahani retires at the AGM and has offered himself for re-appointment.

Subject to the approval of the members at AGM, Ms Monaz Noble was appointed as Additional Director and Whole Time Director of the Company with effect from June 13, 2016.

Necessary resolutions for the appointment and re-appointment of the aforesaid Directors have been included in the Notice convening the ensuing AGM and details of the proposal for appointment and re-appointment are mentioned in the Explanatory Statement to the Notice.

Familiarization programme for Independent Directors

The Company keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective as well as issues being faced by the industry in a proactive manner. The details of various familiarization programs provided to the Directors of the Company is available on the Company''s website www.novartis.in

Divestment of OTC and Animal Health divisions

During the year, the Company concluded the transactions relating to the slump sale of its OTC and Animal Health divisions.

The Company received the sale consideration in relation to the slump sale of the OTC Division to GlaxoSmithKline Consumer Private Limited amounting to Rs, 1,097.3 million and the same was accounted in the quarter ended September 30, 2015. The sale consideration for the slump sale of the Animal Health Division to Elanco India amounting to Rs, 866.8 million has been received and accounted in the quarter ended December 31, 2015.

The details of the slump sale are provided in Note 51 of the Accounts.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this AGM and, being eligible, offer themselves for re-appointment. The Board of Directors have recommended their re-appointment.

Cost Audit

The Board of Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2017.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors appointed Mr K G Saraf from Saraf & Associates, practicing Company Secretary for conducting secretarial audit of the Company for the financial year 2015-16.

The Secretarial Audit Report is annexed herewith as Annexure C. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure D.

Directors'' Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2016 and of the profit and loss of the Company for the year ended March 31, 2016;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Corporate Governance

The Company is committed to good corporate governance in line with the erstwhile Listing Agreement, Listing Regulations and Novartis Group corporate governance norms. The Company is in compliance with the provisions on corporate governance specified in the erstwhile Listing Agreement and Listing Regulations.

A certificate of compliance from Dr K. R. Chandratre, practicing Company Secretary and the report on Corporate Governance form part of this Directors'' Report.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year 2015-16, no complaints were received by the Company related to sexual harassment.

Auditors'' Comments

The Auditors in the Auditors'' Report dated May 26, 2016 have commented that the backup of the books of accounts and other books and papers are not maintained in electronic mode on servers physically located in India. The Company would like to clarify that the Company''s SAP ERP is centralized in Global Data Centres'' outside India where the backup storage is maintained. The Company is reviewing maintenance of backup of SAP data in India as required under Rule 3 of the Companies (Accounts) Rules, 2014.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure E.

Acknowledgement

The Board appreciates and places on record the contribution made by the employees during the year under review and the support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, medical fraternity and business partners.

Cautionary Note

The statements forming part of the Directors'' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

On behalf of the Board of Directors

CHRISTOPHER SNOOK

Chairman

June 13, 2016

---

Mar 31, 2015

Dear Members,

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2015.

Summary of the Financial Results

Rs. million

2014-15 2013-14

Revenue from operations (Net)* 8,733.8 8,622.3

Operating Profits

Profit before tax* 932.3 899.0

Profit after tax* 791.1 985.3

Balance brought forward from previous year 5,750.5 5,237.6

Available for appropriation 6,541.6 6,222.9

The Directors have made the following

appropriations:

Dividend (Proposed) 319.6 319.6

Tax on distributed profits 65.1 54.3

General Reserve - 98.5

Carry forward 6,156.9 5,750.5

6,541.6 6,222.9

* Includes continuing as well as discontinuing operations.

Dividend

The Board has recommended payment of dividend at Rs. 10 per equity share of Rs. 5 each for the financial year 2014-15. The dividend, if approved by the members at the Annual General Meeting ("AGM"), will result in a cash outflow of Rs. 384.7 million including dividend tax.

Corporate Social Responsibility

The Company has actively supported various initiatives in the areas of health, education and environment over the years. With the introduction of Section 135 of the Act, which came into effect during this financial year, the Company has constituted a Corporate Social Responsibility ("CSR") Committee. The CSR Policy adopted by the Board of Directors is available on the Company''s website www.novartis.in. The CSR Committee decided to continue with the existing programmes and increase focus on health and education in the years ahead.

Health: India lives in her villages and a large proportion of people who live there do not have access to quality healthcare. Health is a low priority for the rural poor and creating health awareness is critical in such a scenario. The Company has in place a rural health initiative called Arogya Parivar for several years now. During this financial year, Arogya Parivar held health camps in 11 states in India covering hand and foot disease, hypertension, diabetes, cancer and malaria. Health education camps were also held to increase health awareness and encourage people to seek medical care early on.

India has around 60% of the world''s leprosy case load and leprosy continues to be an area of focus for the Company''s CSR work in India. Comprehensive care programmes were held throughout the year for leprosy patients including providing them with Grip-aids to increase their level of independence and surgical and economic rehabilitation. A series of training programmes were organized for ASHAs (Accredited Social Health Activists) where they were also provided with literature and other educational material to help them identify suspected cases for further review.

These were the major initiatives. In addition, the Company initiated associations with various NGOs in the areas of epilepsy, cancer and medical care to people living in urban slums.

Education: The poor in India are heavily impacted by lack of education owing to children not being sent to school or dropping out of school. The need to supplement the family income to provide food on the table is often a cause. The mid-day meal programme, when run effectively, has helped bring and helped keep children in school. Recognizing this as an important role in education, the Company made significant investments in this area to provide less privileged children with a nutritious meal.

Unlike children who go to elite schools, children who go to government and charitable schools not only have no access to high quality education but they also suffer from lack of access to high quality study material. The Company endeavored to reduce this barrier by offering subscriptions to high quality study material for teachers and students across several such schools.

Sports: A country of 1.2 billion people, India has as yet not been able to make a significant mark in the area of sports at the Olympic level except for sporadic wins in some sports. Greater focus on academics even among the educated makes sports a neglected field in some sense. The Company therefore chose to support the medical, nutritional and training needs of promising Indian athletes who could win medals at the next Olympics through its association with an NGO working in the field.

The Company commemorates Community Partnership Week ("CPW") each year encouraging employees to work on causes close to their heart. CPW continues to grow in stature with a rising number of associates participating in a broad range of activities covering the less fortunate be they children, the sick or the elderly.

The Annual Report on Corporate Social Responsibility Activities is annexed herewith as Annexure A.

Related Party Transactions

All Related Party Transactions that were entered into during the financial year were on arm''s length and were in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee of the Board of Directors for their approval. The Audit Committee has granted omnibus approval for Related Party Transactions as per the provisions and restrictions contained in the Listing Agreement.

The Company has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions. The policy is available on the Company''s website www.novartis.in.

The Company in the ordinary course of its business, enters into transactions relating to purchase, transfer or receipt of products, goods, active pharmaceutical ingredients, materials, services, other obligations from Novartis Pharma AG, Basel, who is a ''Related Party'' within the meaning Section 2(76) of the Act and Clause 49(VII) of the Listing Agreement. The current and the future transactions are/will be deemed to be ''material'' in nature as defined in Clause 49(VII) of the Listing Agreement as they may exceed 10 per cent of the annual turnover of the Company based on future business projections. Thus, in terms of Clause 49(VII)(E) of the Listing Agreement, these transactions would require the approval of the members by way of a Special Resolution.

A resolution for approval of this Related Party Transaction has been included in the Notice convening the ensuing AGM of the Company.

Risk Management

The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for constitution of a Risk Committee, which will work towards creating a Risk Register, identifying internal and external risks and implementing risk mitigation steps. The Committee will, on a quarterly basis, provide status updates to the Board of Directors of the Company.

Fixed Deposits

The fixed deposits accepted by the Company as part of Voluntary Retirement Scheme, 1992, were repaid in full at the beginning of the year under review. No fresh deposits were accepted after April 1, 2014. The Company did not have any unclaimed or overdue deposits as on March 31, 2015.

Particulars of Loans, Guarantees or Investments

As on March 31, 2015, there were no outstanding loans or guarantees covered under the provisions of Section 186 of the Act. The Company has certain unquoted investments in co-operative housing societies for premises owned by the Company. The details of changes in the Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Directors and Key Managerial Personnel

The members at its Meeting held on July 25, 2014, had appointed Mr Jai Hiremath, Dr Rajendra Nath Mehrotra and Ms Manisha Girotra as Independent Directors of the Company for a term up to March 31, 2019. The Company has received declarations from all Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the Listing Agreement.

The members at its Meeting held on July 25, 2014, had appointed Mr Dinesh Charak as Additional Director and subsequently, as Whole Time Director and Key Managerial Personnel ("KMP") of the Company with effect from May 22, 2014.

Mr Dinesh Charak retires at the AGM and has offered himself for re-appointment.

The members had approved appointment of Mr Ranjit Shahani as Vice Chairman and Managing Director for a period of 5 years with effect from November 1, 2010. The term of appointment for Mr Ranjit Shahani ends on October 31, 2015. Subject to the approval of the members, the Board of Directors has re-appointed Mr Ranjit Shahani as Vice Chairman and Managing Director of the Company for a further period of 5 years with effect from November 1, 2015.

Necessary resolutions for the re-appointment of the aforesaid Directors have been included in the Notice convening the ensuing AGM and details of the proposal for re-appointment are mentioned in the Explanatory Statement to the Notice.

Mr Ranjit Shahani, Vice Chairman and Managing Director; Mr Dinesh Charak, Whole Time Director; Ms Monaz Noble, Chief Financial Officer and Mr Girish Tekchandani, Company Secretary are the KMPs of the Company as per the provisions of the Act.

Familiarization programme for Independent Directors

The Company proactively keeps its Directors informed of the activities of the Company, its management and operations and provides an overall industry perspective as well as issues being faced by the industry. The details of various familiarization programmes provided to the Directors of the Company is available on the Company''s website www.novartis.in.

Divestment of OTC and Animal Health divisions

On April 22, 2014, Novartis AG, Basel, Switzerland ("Novartis AG") entered into the following agreements with GlaxoSmithKline plc, UK ("GSK") and Eli Lilly and Company, USA ("Lilly"):

(a) Novartis AG and GSK have agreed to create a consumer healthcare business through a Joint Venture between Novartis AG OTC and GSK Consumer Healthcare. The transaction, except in respect of the Company''s OTC Division, closed on March 2, 2015.

In connection with the divestment of the Novartis AG OTC business to GSK, the Board of Directors of the Company at its meeting held on January 13, 2015 approved the slump sale of the Company''s OTC Division to GlaxoSmithKline Consumer Private Limited ("GSK CPL"), a private unlisted company incorporated under the Companies Act, 2013 (or another affiliate of GSK) for a consideration of Rs. 1,097.3 million. Closing of this slump sale is subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities. The Company had made a separate announcement on January 13, 2015 to Bombay Stock Exchange Limited ("BSE") in this regard.

(b) As part of its global portfolio transformation, Novartis AG, agreed on April 22, 2014 to divest its global Animal Health business to Lilly. Closing of this global transaction was subject to receipt of applicable anti-trust and regulatory approvals, as well as the satisfaction or waiver (as applicable) of various other conditions (the "Global Animal Health Transaction").

In connection with the Global Animal Health Transaction, the Board of Directors of the Company considered and approved on November 7, 2014, the transfer of the Company''s Animal Health Division as a going concern by way of a ''slump sale'' to Elanco India Private Limited ("Elanco India"), or another affiliate of Lilly, for a consideration of Rs. 866.8 million, on or before July 22, 2015, subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities, as well as closing of the Global Animal Health Transaction (the "Animal Health Transaction"). This approval of the Company''s Board of Directors was disclosed to BSE Limited on November 7, 2014. The Global Animal Health Transaction closed globally (but not with respect to India, as explained below) on January 1, 2015.

Closing of the Animal Health Transaction in India is conditional upon the receipt by Elanco India of the written approval of the Foreign Investment and Promotion Board, Government of India (the "FIPB"). Further to the FIPB''s response to Elanco India''s application that it would not approve the Animal Health Transaction due to the existence of the restrictions on competition explained below, and at Elanco India''s request, the Company and Elanco India have executed a letter which records the parties'' agreement that the terms of the Global Animal Health Transaction agreed between Novartis AG and Lilly restricting the competition by the Novartis AG group of companies in connection with animal health activities will not apply with respect to the Company vis-a-vis Elanco India in India (the "Non-Compete Amendment Letter"). The Non- Compete Amendment Letter will be submitted by Elanco India to the FIPB, together with a representation against the FIPB''s non-approval of Elanco India''s application for the Animal Health Transaction. The Company will continue to co-operate with Elanco India, to the extent necessary, and monitor the FIPB process in this matter and will provide further updates if and when required.

The consideration to be received by the Company in relation to the slump sales of the Animal Health business to Elanco India Private Limited (or another affiliate of Lilly) and the OTC business to GSK CPL (or another affiliate of GSK) totalling to Rs. 1,964.1 million has not been accounted in the results for the twelve months ended March 31, 2015 because the transactions are subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from the concerned authorities. Costs incurred by the Company in relation to the transactions have been shown under Extraordinary Items.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this AGM and, being eligible, offer themselves for re-appointment. The Board has recommended their re-appointment.

Cost Audit

The Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2016.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors has appointed Mr K G Saraf from Saraf & Associates, practicing Company Secretary for conducting secretarial audit of the Company for the financial year 2014-2015.

The Secretarial Audit Report is annexed herewith as Annexure B. The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexure C.

Directors'' Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit and loss of the Company for the year ended March 31, 2015;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group corporate governance norms. The Company is in compliance with the provisions on corporate governance specified in the Listing Agreement with BSE.

A certificate of compliance from Dr K. R. Chandratre, a practicing Company Secretary and the report on Corporate Governance form part of this Directors'' Report.

Prevention of Sexual Harassment Policy

The Company has in place a Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the year 2014-2015, no complaints were received by the Company related to sexual harassment.

Auditors'' Comments

The Auditors in the Auditors'' Report dated May 27, 2015 have commented that the backup of the books of accounts and other books and papers are not maintained in electronic mode on servers physically located in India. The Company would like to clarify that the Company''s SAP ERP is centralized in Global Data Centers. The backup storage is maintained at Global Data Centers outside India. The Company is reviewing maintenance of backup of SAP data in India as required under Rule 3 of the Companies (Accounts) Rules, 2014.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure D.

Acknowledgement

The Board appreciates and places on record the contribution made by the employees during the year under review and the support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, medical fraternity and business partners.

Cautionary Note

The statements forming part of the Directors'' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.



On behalf of the Board of Directors

CHRISTOPHER SNOOK Chairman

Mumbai, May 27, 2015

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Mar 31, 2013

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2013.

Summary of the Financial Results Rs. million

2012-2013 2011-2012

Revenue from operations (Net) 9,033.6 8,442.9

Operating Profits

Profit before tax 1,694.2 2,246.9

Profit after tax 1,197.3 1,520.2

Balance brought forward from previous year 4,533.9 3,537.1

Available for appropriation 5,731.2 5,057.3

The Directors have made the following appropriations:

Dividend (Proposed) 319.6 319.6

Tax on distributed profits 54.3 51.8

General Reserve 119.7 152.0

Carry forward 5,237.6 4,533.9

5,731.2 5,057.3

Dividend

The Board has recommended payment of dividend at Rs. 10 per equity share of Rs. 5 each for the financial year 2012-13. The dividend, if approved by the members at the Annual General Meeting, will result in a cash outflow ofRs. 373.9 million including dividend tax.

Number of employees as on March 31, 2013 was 1,378.

Information as per Section 217(2A) of the Companies Act, 1956 ("the Act"), read with the Companies (Particulars of Employees) Rules, 1975, and Companies (Particulars of Employees) Amendment Rules, 2011 can be obtained by an interested shareholder by submitting a written request to the Company Secretary. This practice is followed as per the provisions of Section 219(1) (b) (iv) of the Act. Thus, the Report and the Accounts are being sent to all shareholders, excluding the Statement of Particulars under Section 217(2A).

Corporate Social Responsibility

The Company continues to focus its attention on health and education of the underprivileged through its association with various non-government organisations. During the year under review, the Company maintained its support to the NGO Akanksha, which works with slum children. A scholarship to three deserving women at the Indian School of Business, Hyderabad continues.

The Company continues to grow the Biotechnology Leadership Camp ("BioCamp") for students in Hyderabad and nominated three students to attend the Novartis International Biotechnology Leadership Camp in Basel, Switzerland.

Community Partnership Week continues to attract a rising number of associates who participate in a range of activities including spending time with abandoned children, the sick, the differently- abled and the elderly.

The Company''s commitment to Health, Safety and Environment ("HSE") Protection continues to be an integral dimension of its overall corporate social responsibility and includes occupational safety and health protection; building safety; process safety; product stewardship; environmental protection and conservation of natural resources and energy. Managerial and operational responsibility for alf HSE aspects lies with the businesses.

Fixed Deposits

No fresh fixed deposits were accepted from the public during the year. However, deposits under the Voluntary Retirement Scheme 1992, continued to be accepted. Total deposits as at March 31, 2013 stood at Rs. 1.8 million. The Company does not have any unclaimed or overdue deposits as of date.

Directors

Mr J. Hiremath retires at the end of this Annual General Meeting and has offered himself for re-appointment.

Mr Hiremath is a Chartered Accountant from England and has completed the ''Owner President Management Program'' at Harvard University, Boston, USA. He is the Chairman & Managing Director of Hikal Limited and on the Board of the National Safety Council of India. He was the President of Indian Chemical Council from 2009 to 2010 and Chairman of the Chemicals Committee of Federation of Indian Chambers of Commerce & Industry ("FICCI") from 2009 to 2011. He is currently on the Executive Committee of Indian Chemical Council ("ICC"). He is also a member of the National Committee on Chemicals of Confederation of Indian Industries ("CII"), and National Chemicals Committee of FICCI. He was nominated finalist for the Ernst & Young Entrepreneur of the year in 2000. In April 2005 he was awarded the prestigious ChemTech Award for ''Business Leader of the Year - Chemicals''.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this Annual General Meeting and, being eligible, offer themselves for re-appointment. The Board has recommended their re-appointment.

Cost Audit

The Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2014.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 217(l)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is included in Annexures A and B.

Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Act, the Directors confirm that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profit of the Company for the year ended March 31, 2013;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis.

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group corporate governance norms. The Company is in compliance with the provisions on corporate governance specified in the Listing Agreement with the Bombay Stock Exchange Limited.

A certificate of compliance from Dr K. R. Chandratre, a practicing Company Secretary and the report on Corporate Governance form part of this Directors'' Report.

Acknowledgement

The Board places on record the contribution made by employees to the continued satisfactory business performance during the period under review and the sustained management support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, the medical fraternity and business partners, all of whom have contributed to the Company''s success.

Cautionary Note

The statements forming part of the Directors'' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements. On behalf of the Board of Directors

CHRISTOPHER SNOOK

Mumbai, May 14, 2013 Chairman

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Mar 31, 2012

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2012.

Summary of the Financial Results in Rs million

2011-2012 2010-2011

Revenue from operations (Net) 8,442.9 7,512.1

Operating Profits

Profit before tax 2,246.9 2,189.1

Profit after tax 1,520.2 1,466.7

Balance brought forward from previous year 3,537.1 2,588.5

Available for appropriation 5,057.3 4,055.2

The Directors have made the following appropriations:

Dividend (Proposed) 319.6 319.6

Tax on proposed dividend 51.8 51.8

General Reserve 152.0 146.7

Carry forward 4,533.9 3,537.1

5,057.3 4,055.2

Dividend

The Board has recommended payment of dividend at Rs 10 per equity share of Rs 5 each for the financial year 2011-12. The dividend, if approved by the members at the Annual General Meeting, will result in a cash outflow of Rs 371.4 million including dividend tax.

Number of employees as on March 31, 2012 was 1,359.

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, and Companies (Particulars of Employees) Amendment Rules, 2011 can be obtained by an interested shareholder, by submitting a written request to the Company Secretary. This practice is followed as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956. Thus, the Report and the Accounts are being sent to all shareholders, excluding the Statement of Particulars under Section 217(2A).

Corporate Responsibility

The Company continues to focus its attention on health and education of the underprivileged through its association with various non-government organisations. During the year under review, the Company continued its support to the NGO Akanksha, which works with slum children. A scholarship to three deserving women at the Indian School of Business, Hyderabad continues.

The Company continues to grow the Biotechnology Leadership Camp (BioCamp) for students in Hyderabad and nominated three students to attend the Novartis International Biotechnology Leadership Camp in Basel, Switzerland.

Community Partnership Week continues to attract a rising number of associates who participate in a range of activities including spending time with abandoned children, the sick, the differently-abled and the elderly.

The Company's commitment to Health, Safety and Environment (HSE) Protection continues to be an integral dimension of its overall corporate responsibility and includes occupational safety and health protection; building safety; process safety; product stewardship; environmental protection and conservation of natural resources and energy. Managerial and operational responsibility for all HSE aspects lies with the businesses.

Dematerialisation of promoters shareholding

As per a requirement of the Securities and Exchange Board of India, the promoters of the Company dematerialized the remaining part of its total shareholding, earlier held in physical form. The entire promoters holding, being 76.42 per cent, is held in dematerialized form.

Fixed Deposits

No fresh fixed deposits were accepted from the public during the year. However, deposits under the Voluntary Retirement Scheme, 1992, continued to be accepted. Total deposits as at March 31, 2012 stood atRs 1.9 million. The Company does not have any unclaimed or overdue deposits as of date.

Directors

Dr R. Mehrotra, who retires at the end of this Annual General Meeting, has been on the Board of the Company from May 30, 2000 and offers himself for re-appointment. Dr Mehrotra is an Electrical and Mechanical Engineer with a Masters and Doctorate in Management and possesses a rich experience across various sectors. He is on the Board of PAE Limited and has retired from the United Nations' International Labour Organisation (ILO) as Senior Specialist on Employees' activities for South Asia.

Auditors

M/s Lovelock & Lewes, Chartered Accountants, retire at the end of this Annual General Meeting and, being eligible, offer themselves for re-appointment. The Board recommends their re-appointment.

Cost Audit

The Directors have re-appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2013.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, with respect to conservation of energy, technology absorption and foreign exchange earnings/ outgo is included in Annexures A and B.

Directors' Responsibility Statement

Pursuant to Section 217(2AA) of the Act, the Directors confirm that:

(a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(b) Appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2012 and of the profit of the Company for the year ended March 31, 2012;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The Annual Accounts have been prepared on a going concern basis.

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group Corporate Governance norms. The Company is in compliance with the provisions on Corporate Governance specified in the Listing Agreement with the Bombay Stock Exchange Limited.

A certificate of compliance from Dr K. R. Chandratre, a practicing Company Secretary and the report on Corporate Governance form part of this Directors' Report.

Acknowledgement

The Board places on record the contribution made by employees to the continued satisfactory business performance during the period under review and the sustained management support received from the parent company, Novartis AG. The Board also places on record their appreciation of the support of all stakeholders particularly shareholders, customers, suppliers, the medical fraternity and business partners, all of whom have contributed to the Company's success.

On behalf of the Board of Directors

C. SNOOK

Mumbai, May 24, 2012 Chairman

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Mar 31, 2011

Dear Members,

The Directors are pleased to present the Annual Report and the Audited Accounts for the financial year ended March 31, 2011.

Summary of the Financial Results

Rs million 2010-2011 2009-2010

Net Sales 7086 6241

Operating Profits

Profit before tax 2189 1798

Profit after tax 1467 1160

Balance brought forward from previous year 2588 1917

Available for appropriation 4055 3077

The Directors have made the following appropriations:

Dividend (Proposed) 320 320

Tax on distributed profits 52 53

General Reserve 146 116

Carry forward 3537 2588

4055 3077

Dividend

The Board has recommended payment of dividend at Rs 10 per equity share of Rs 5 each for the financial year 2010-11. The dividend, if approved by the members at the Annual General Meeting, will result in a cash outflow of Rs 372 million including dividend tax.

Management Discussion and Analysis

The business operations of the company comprise Pharmaceuticals, Generics, Over-The- Counter (OTC) and Animal Health. This segmentation forms the basis for review of operational performance by the management.

a. Industry structure and developments

Pharmaceuticals and Generics

The Indian Pharmaceuticals market valued at around US $ 10.4 billion (IMS March 2011 SSA data) is the third largest market by volume and 13th largest in terms of value, growing at -15.3 per cent per annum. It is one of the fastest growing markets in the world and is expected to become US $ 20 billion by 2015 and US $ 50 billion by 2020, as per a report produced by McKinsey & Company.

It continues to be predominantly a "branded generics" market with more than 5,000 players and several thousand brands. The pharmact;utical industry is increasingly looking at innovative ways to broaden access and grow the market.

While key health indicators are still poor they have improved significantly over the past 10-15 years. Rising longevity, alongside lifestyle changes resulting from rapid urbanisation has however begun to present new healthcare challenges with chronic age-related conditions being reported more widely resulting in increasing demand for products to treat these conditions. Cardiovascular disease is now responsible for one-third of all deaths

with diabetes and cancer contributing significantly to overall mortality. Demographic and epidemiological trends will have major implications for the pharmaceutical industry in the long term.

Introduction of a product patent regime a few years ago was widely acclaimed by the industry but we need an ecosystem that encourages innovation for the research oriented pharmaceutical industry to grow and make its mark on global health.

OTC

The Indian market for OTC products, valued at over US$ 2.1 billion is the 12th largest in the world. It is the third fastest growing market (among top 20 markets) globally with a growth rate of nine per cent per annum with potential for further growth. The Cough, Cold and Allergy category was boosted by the removal of drugs dextromethorphan and chlorpheniramine from Rx Schedule H, which had restricted sale against doctor's prescription only, in August 2010.

Growth continues to be impeded by several factors including low OTC per capita spend due to low disposable income, regulatory restrictions, low spread of pharmacies in rural areas and presence of counterfeit products among others.

Animal Health

During this financial year, the Animal Health market is estimated to have grown by seven to eight per cent. Cross-breeding, artificial insemination and Government initiatives to increase milk production have continued to boost the growth of the cattle segment. Despite increased costs, the poultry segment has had another good year due to consolidation in the industry and increased demand for poultry produce.

b. Performance

Net Sales for the year ended March 31, 2011 were at Rs 7,086 million representing a growth of 13.6 per cent over the previous year.

Profit before tax for the year was at Rs 2,189 million representing a growth of 21.8 per cent over the previous year due to improved product mix and better price realizations.

After providing for income tax of Rs 722 million, profit after tax was Rs 1,467 million representing a growth of 26.5 per cent over the previous year.

c. Segment-wise operational performance

Pharmaceuticals

The Pharmaceuticals business registered sales of Rs 4,898 million representing a growth of 12.0 per cent over the previous year. Higher sales of its flagship brand Voveran continue to be the primary contributor of this growth.

New product introduced during the period under review was:

Therapeutic Area Product

Anti Infective Pactel™

The business continues to hold leadership position in major therapeutic areas such as:

Therapeutic Area Rank Product

Pain and Inflammation 1 Voveran®

Transplantation/Immunology 1 Sandimmun® Neoral®

Central Nervous System 3 Tegrital®

Generics

The Generics business recorded sales of Rs 473 million representing a growth of 18.6 per cent over the previous year. The growth was primarily driven by increased sales of Regestrone and PZA-Ciba Inspira.

OTC

During the year under review, the OTC business registered sales of Rs 1.009 million representing a growth of 17.3 per cent over the previous year. The improved performance can be attributed mainly to the strong performance of the Cough, Cold, and Allergy range of products driven by Otrivin® and T-minic®.

New line extensions introduced during the period under review was:

Market Segment Product

Nasal Decongestant Otrinoz® Saline

Animal Health

During the year under review, the Animal Health business achieved sales of Rs 707 million representing a growth of 16.0 per cent over the comparable previous period. Flagship brands of Denagard, Larvadex, Fasinex/Endex and Protexin along with the Calcium group of products were primary contributors to this growth. Successful implementation of Sales Force Optimisation Project and Amplified Rural Penetration Programs have also played a role.

New products introduced during the year were:

Market Segment Product

Poultry Multi-Vitamin Premix and AD3EC Oral

d. Concerns

Pharmaceuticals and Generics

India's health infrastructure remains largely inadequate to meet the needs of a population that now numbers almost 1.2 billion. Per capita health spend continues to be abysmally low with the Indian pharmaceutical market being largely a self-pay market and health insurance as yet being the preserve of the privileged few. This serves as an impediment for consumers/patients to resort to long-term treatment of chronic conditions regardless of the value proposition.

Government appears to be oriented towards higher levels of price control. Your company is hopeful that deregulation in the form of price monitoring becomes the norm.

While introduction of product patents in 2005 offered renewed hope to the pharmaceutical industry, the areas of concern such as lack of well defined criteria for patentability and the absence of Regulatory Data Protection still need to be addressed. Your company hopes that legitimate innovation will be respected and rewarded and that government will take cognizance of the various representations made to it on the subject by industry representatives.

OTC

The OTC business is subjected to challenges in the distribution system thus limiting its reach. Promotional costs continue to be high putting undue pressure on margins.

Animal Health

Generic competition, scare of outbreak of bird flu, increasing feed cost and inflationary pressures continue to be areas of concern. Inadequate infrastructure and cold storage facilities impact prospects for exports and cause price fluctuations in the poultry segment.

e. Outlook

Pharmaceuticals and Generics

India remains a market with a huge long-term potential. With the Indian Pharmaceuticals market growth set to remain at double-digits for the next five years at least, India is an important market for the pharmaceutical industry. Increasing literacy rates and access to information will contribute to the overall growth of the industry. A progressive trend is seen from a product centric approach to patient centric initiatives.

Rising incomes combined with constrained increase in drug prices will drive consumption. Market growth will also be driven partly by the efforts of more companies to broaden their geographic coverage.

OTC

The Indian economy is on the rise and greater health awareness coupled with increasing disposable incomes will result in higher spend on OTC products. Given this backdrop, the future of the OTC market looks promising.

Animal Health

The poultry segment is expected to continue to grow at previous year's levels while the livestock industry is expected to continue to be in the growth phase. Productivity in the dairy segment is likely to see good growth given the favourable government policies for the sector. Overall demand for animal health products is projected to grow at a healthy pace.

f. Internal control systems and their adequacy

The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorised use or disposition. Company policies, guidelines and procedures are in place to ensure that all transactions are authorised, recorded and reported correctly as well as provide for adequate checks and balances.

The internal audit department together with an independent firm of Chartered Accountants reviews the effectiveness and efficiency of these systems and procedures. Audits are finalised and conducted based on internal risk assessment. Significant deviations are brought to the notice of the Audit Committee of the Board periodically and corrective measures are recommended for implementation. All these steps facilitate timely detection of any irregularities and early remedial measures with no monetary loss.

g. Personnel

The Industrial Relations scenario continued to be amicable. People are the strength of your company and high priority is accorded to training and development of employees.

Number of employees as on March 31, 2011 was 1220.

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, and Companies (Particulars of Employees) Amendment Rules, 2011 can be obtained by an interested shareholder, by submitting a written request to the Company Secretary. This practice is followed as per the provisions of Section 219(l)(b)(iv) of the Companies Act, 1956. Thus, the Report and the Accounts are being sent to all shareholders, excluding the Statement of Particulars under Section 217(2A).

Corporate Citizenship

The Company continues to focus its attention on health and education of the underprivileged through various programs. During the year under review, the Company continued its support to the NGO Akanksha, which works with slum children. The scholarship to three deserving women at the Indian School of Business Hyderabad continues.

The Company successfully held its second Biotechnology Leadership Camp (BioCamp) in Hyderabad for students and nominated three participants to attend the Novartis International Biotechnology Leadership Camp in Basel, Switzerland, where two of the nominated students shone as individual and group winners respectively.

Community Partnership Week continues to draw an increasing number of associates participating in activities ranging from field visits for less privileged children to spending time with the sick, the differently-abled and the elderly.

The Company's commitment to Health, Safety and Environment (HSE) Protection continues to be a priority and includes occupational safety and health protection; building safety; process safety; product stewardship; environmental protection and conservation of natural resources and energy. Managerial and operational responsibility for all HSE aspects lies with the businesses.

Delisting of equity shares from Calcutta Stock Exchange Limited

The shareholders of the Company had approved delisting of the equity shares of the Company from Calcutta Stock Exchange Limited, Kolkata at the 62nd Annual General Meeting of the Company. After due compliance with the SEBI (Delisting of Equity Shares) Regulations, 2009, the equity shares of the Company were delisted from Calcutta Stock Exchange Limited with effect from January 11, 2011.

Fixed Deposits

No fresh fixed deposits were accepted from the public during the year. However, deposits under the Voluntary Retirement Scheme, 1992, continued to be accepted. Total deposits as at March 31, 2011 stood at Rs 1.97 million. The Company does not have any unclaimed or overdue deposits as of date.

Directors

Mr R. Shahani retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Mr R. Shahani has been on the Board of the Company from November 1, 2002. He is a mechanical engineer from IIT Kanpur and MBA from JBIMS, Mumbai. He started his career with ICI in India in their businesses of fibres and specialty chemicals. Later, he rose to the position of General Manager with ICI/Zeneca in the U.K., overseeing their Asia Pacific and LatAm operations for their petrochemicals and plastics division. This was followed by a period as CEO at Roche Products Limited after which he moved to Novartis India Limited in 1997. Mr R. Shahani is also President of the Organisation of Pharmaceuticals Producers of India and the Swiss Indian Chamber of Commerce India.

Auditors

M/s Price Waterhouse, Chartered Accountants (Firm Registration No. 007568S) have expressed their inability to be re-appointed as Statutory Auditors of the Company at the ensuing Annual General Meeting.

M/s Lovelock & Lewes, Chartered Accountants (Firm Registration No. 301056E) have signified their consent to act as Statutory Auditors of the Company and hold office from the conclusion of the ensuing Annual General Meeting to the conclusion of the next Annual General Meeting.

Cost Auditors

The Directors have appointed M/s N. I. Mehta and Co., Cost Accountants, as Cost Auditors to audit the accounts relating to drug formulations for the financial year ending March 31, 2012.

Energy, Technology Absorption and Foreign Exchange

Information required under Section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, with respect to conservation of energy, technology absorption and foreign exchange earnings/ outgo is included in Annexures A and B.

Directors' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that:

(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed;

(b) appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2011 and of the profit of the Company for the year ended March 31, 2011;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Annual Accounts have been prepared on a going concern basis.

Corporate Governance

The Company is committed to good corporate governance in line with the Listing Agreement and Novartis Group Corporate Governance norms. The Company is in compliance with the provisions on Corporate Governance specified in the Listing Agreement with the Bombay Stock Exchange Limited.

A certificate of compliance from Dr K. R. Chandratre, a practising Company Secretary and the report on Corporate Governance form part of this Directors' Report.

Acknowledgement

The Directors commend the contribution made by employees to the continued satisfactory business performance during the period under review and the unstinted management support received from the parent company, Novartis AG. The Board places on record its appreciation to all stakeholders particularly shareholders, customers, suppliers, the medical fraternity and business partners, who continue to contribute to the Company's success.

Cautionary Note

The statements forming part of the Directors' Report may contain certain forward looking remarks within the meaning of applicable securities laws and regulations. Many factors could cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements that may be expressed or implied by such forward looking statements.

On behalf of the Board of Directors

C. SNOOK Mumbai, May 24, 2011 Chairman