ACCOUNTING FOR MANAGERS PROJECT

RANBAXY LABORATORIES Ltd.

Annual Report - 2008 1. Directors Report 2. Management Discussion and Analysis 3. Auditors Report 4. Accounting Policies ( apart from what have already been covered in class ) 5. Personal analysis 6. Five new accounting terms learned

Learning Facilitator:
Dr. Kanwal Anil Maam Jaypee Business School Noida

Submitted By:
Akchhat Misra 05101089 DDM 2005-10 Noida

Directors Report
1. Directors report on operations and dividend: Operations: The directors reported that the company had a very successful year and registered an improved performance on some key parameters: a. Consolidated net sales at Rs. 66,927 million grew by 10.3% in 2008 as compared to 60,652.24 million in 2007. b. PAT registered a growth of 53% over the previous year. They gave some important drivers of increasing the performance of the company. a. By growth in sales of dosage forms across developed and emerging markets. b. Increased operating efficiencies. c. Continuing focus on cost optimization and better management of working capital. Dividends: dividend of Rs 2.50 per share was paid in November 2008 but directors now recommend a final of Rs 6 per share for the year ended Dec 2008.

2. Directors report on mergers and acquisitions: a. Board of directors approved a scheme of arrangement for demerger of new drug discovery research unit of company into Ranbaxy life sciences. b. Company also increased its equity stake on zenotech laboratories ltd. Hyderabad from 6.74 to 46.54 percent. c. Company also acquired a strategic stake of 14.9% in Jupiter biosciences Hyderabad. d. Company concluded the acquisition of Be-Tabs in south Africa through Ranbaxy Netherlands. 3. Directors report on research and development: Board of directors gave report on thr R&d activities carried out by the company. Some of the R&D activities carried out are as follows: a. Develop platform technologies and products in the areas of novel drug delivery system. b. Discovery of new drug molecules in selected areas such as infectious diseases, metabolic diseases, respiratory diseases. Benefits derived as a result of R&D activities were: a. Technology to manufacture APIs and dosage forms.

b. Improved productivity / process efficiencies. c. Internationally competitive process and quality. Expenditure incurred on R&D: Expenditure for the year ended dec 31st 2007 on capital was rs. 467.74 million and on revenue is rs. 4139.44 million

4. Directors Report on foreign exchange earnings and outgoings: Overseas sales were rs. 26,341.35 for the financial year December 31st 2008. a. 496 product dossiers were filed with various international regulatory authorities nad recived approvals included 430. b. Continued to receive income by way of royalty, technical and management service fee and dividend from overseas subsidiaries. c. Earnings for the year ended 31st dec 31st 2008 was Rs. 26,608.87 million.

Management discussion and Analysis

1. Management discussion and analysis on industry structure and development: The global pharma market audited sales grew by approx 6.1% to reach US$ 663.5 billion in 2008. The top 10 leading products contributed approximately 10% to global pharma sales in 2008. In order to optimize value at various points across the pharma value curve, innovator pharma and generic companies are exploring ways to move from a compelling business model to a collaborative business model. The 3 largest markets for Ranbaxy today are USA, Europe, and India. In US: in 2008 sales were driven by blockbuster products such as amlodopine and zolpidem. In Europe: relatively stable year but in central, eastern and southern Europe growth was led by higher per capita pharma expenditure and an increasing utilization of generic drugs. In India: market in 2008 was valued at Rs. 310 billion recording a growth of 13%

2. Management discussion and analysis on opportunities: Ranbaxy is today amongst the leading generic companies with a widespread across markets of north America, Europe and the Asia pacific region. The Company entered into settlements with innovator companies for 3 key FTF products. The settlements provide Certainty of revenue flows and enhances product visibility for the Company going forward. Outlook on the Indian pharma market continues to be good. It is expected that the growth in the market would be driven by higher volume consumption led by economic growth providing increased affordability of pharmaceutical products coupled with a rising awareness of modern medicine. a. Added to that, the emerging new market segments of rural and semi-urban areas b. Growing medical insurance c. With product patent regulation in force the India market has become an attractive option. 3. Management discussion and analysis on threats risks and concerns a. The global generics business remains challenging due to increased competition from companies in emerging markets b. Government led healthcare reforms that lead to short term fluctuations. c. The generic segment as such has inherent risks with regard to patent litigation, product liability, increasing regulations 4. Management discussion and analysis on Human Resourses Human Resources are a valuable asset for Ranbaxy and the Company seeks to attract and retain the best talent available.Human Resource management incorporates a process driven approach that invests regularly in the training and development needs of employees through succession planning, job rotation, on the job training and extensive training workshops and programs.

5. Management discussion and analysis on Financial Performance For the year, the Company recorded consolidated global sales of Rs. 66,927 Mn, 10% higher than prior year. Profit before tax at Rs. 9,985 Mn, was up by 53%. Profit after tax was Rs. 7,866 Mn, 53% higher than last year. While at the operating level,

Ranbaxy Laboratories Limited Annual Report 2008 Report of the Directors40 the Company recorded a strong performance, the foreign exchange gains on traslation arising out of significant rupee appreciation witnessed in 2008 added to the profits for the year.

AUDITORs REPORT
Reports audited by M/s walker, chandiok & Co. chartered accountants at Gurgaon on 28th March 2008. 1. Auditors report that company has maintained proper records ahowing full particulars including quantitative details and fixed assets dilution 2. The inventory which has been physicallyverified by the managementduring thre year is reasonable. 3. The company is regular in depositing the undisputed statuory dues including provident fund, investor education and protection fund, income tax, sales tax, wealth tax, service tax etc. 4. The company is neither a chit fund nor a mutual benefit fund/society. 5. Comapnay has not defaulted ion the repayment of dues to any financial institiutuon or bank 6. Company has neither issued nor had any outstanding debentures during the year 7. Company has not raised any money by a public issue during the year 8. Finally no fraud on or by the company had been noticed during the period covered.

SIGNIFICANT ACCOUNTING POLICIES (apart from the ones which were learned
in class) 1. Intangibles Computer software: Software which is not an integral part of the related hardware, is classified as an intangible asset and is being amortised over a period of 6 years, being its estimated useful life. 2. Product Development Cost incurred for acquiring rights for product under development are recognised as intangible assets and amortised on a straight-line basis over a period of five years from the date of regulatory approval. Subsequent expenditures on development of such products are also added to the cost of intangibles 3. Employee stock option plan The accounting value of stock options representing the excess of the market price on the date of grant over the exercise price of the shares granted under "Employees Stock Option Scheme" of the Company, is amortised as "Deferred employees compensation" on a straight-line basis over the vesting period in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and guidance note 18 "Share Based Payments" issued by Institute of Chartered Accountants of India 4. Impairment of assets The Company on an annual basis tests the carrying amount of assets for impairment so as to determine : a) the provision for impairment loss b) the reversal, if any, of impairment loss recognised in previous periods. Such impairment loss or reversal is recognised in the profit and loss account for the year 5. Export benefits/ incentives Export entitlements under the Duty Entitlement Pass Book ("DEPB") Scheme are recognised in the profit and loss account when the right to receive credit as per the terms of the scheme is established in respect of the exports made. Obligation / entitlements on account of Advance License Scheme for import of raw materials are accounted for on purchase of raw materials and / or export sales.

Personal Analysis
The company has tried its best to conserve the energy and it has shown very positive results also. It shows that the companys heavy investment in R&D and continous efforts undertaken to increase its efficiency. Ranbaxy division of various merger and acquisitions is a very significant step which enhance or focus for long term growth and it provides a strong platform in high growth areas like biologics and speciality injectibles and has resulted in making RANBAXY THE FIFTH LARGEST GENERIC COMPANY.

New Accounting terms Learned

1. Annuity due: A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity in advance. 2. Monetary asset: An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power. 3. Research and development costs: These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed immediately when the costs are incurred. 4. Retirement of assets: Usually means to scrap a long-term plant asset and receive no proceeds from its disposal. 5. Reversing entry: A journal entry made on the first day of a new accounting period to undo the accrual type adjusting entries made prior to the preparation of the financial statements dated one day earlier. Reversing entries allow for an effortless way to avoid double-counting revenues or expenses that were accrued at the end of an accounting period.

References
1. Annual report Ranbaxy 2008 2. www.ranbaxy.com 3. Accounting coach www.accountingcoach.com for understanding of the new terms encountered.