BSE:500420 NSE:TORNTPHARMEQ 58888:toac IND:Pharmaceuticals ISIN code:INE685A01028 SECT:Pharmaceuticals and health care

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To

The Shareholders

The Directors have the pleasure of presenting the Forty Fifth Annual Report of your Company together with the Audited Financial

Statement for the year ended 31^st March, 2018.

HIGHLIGHTS

- Torrent becomes the 8^th largest Company in the Indian Pharmaceutical Market with the acquisition of branded business of Unichem Laboratories Limited (“Unichem”) for India and Nepal, including its Sikkim manufacturing facility. The acquisition included portfolio of more than 120 brands including one brand of Rs.200 crores (Losar) & three brands of more than Rs.50 crores (Ampoxin, Unienzyme & Telsar).

- India Business registered 9% growth as compared to 6% growth ofthe market.

- Continued to experience sharp price reductions in US - partially compensated with higher market shares and volumes. 13 (thirteen) ANDAs filed during the year.

- Acquired Bio Pharm Inc. (“Biopharm”), a US based liquids and suppositories company along with a manufacturing facility.

- Torrent becomes 4^th largest generic Company in Germany with continued good performance.

- Brazil registered value growth of 14% in covered market and having unit market share of 25% of covered market without generics.

- All plants fully compliant with the respective regulatory requirements. Current USFDA Establishment Inspection Report for Indrad, Dahej, Pithampur and Vizag plants.

- Sikkim capacity expansion including from new facility completed - increasing the capacity to 700 crores units. The Unichem manufacturing facility adds another 100 crores units to the capacity.

FINANCIAL RESULTS

The summary of Standalone (Company) and Consolidated (Company and its subsidiaries) operating results for the year and appropriation of divisible profit is given below:

(Rs. in crores except per share data)

*Includes final dividend of Rs.68 crores and dividend distribution tax of Rs.14 crores pertaining to FY 2016-17.

Consolidated Operating Results

The consolidated sales and operating income increased to Rs.6002 crores from Rs.5857 crores in the previous year showing a growth of 2.48%. The consolidated operating profit for the year was Rs.1648 crores as against Rs.1601 crores in the previous year registering growth of 2.94%. The consolidated net profit decreased to Rs.678 crores from Rs.934 crores in the previous year registering a degrowth of 27.41%. Current year’s profits have been impacted by the acquisition related interest and amortization of Unichem and Biopharm, while the previous year included exceptional sales and profits on account of launch of new product in US which had limited competition.

Management Discussion and Analysis (MDA)

The details of operating performance of the Company for the year, the state of affairs and the key changes in the operating environment have been analysed in the Management Discussion and Analysis section which forms a part of the Annual Report.

Dividend

The Company endeavours to distribute 30% of its annual consolidated net profit after tax without taking into account non-cash charges relating to the business acquisitions as dividend, in accordance with the revised dividend policy, copy of which is attached as Annexure-A.

Pursuant to this, Interim dividend of Rs.9/- per equity share of face value of Rs.5/- amounting to Rs.152 crores was paid to the shareholders during the year under review. Further, the Board has recommended a final dividend of Rs.5/- per equity share amounting to Rs.85 crores for approval to shareholders at the 45^th Annual General Meeting (AGM) of the Company. The aggregate distribution amount including tax on distributed profits works out to be Rs.286 crores (previous year Rs.286 crores).

HUMAN RESOURCES

Innovation in Human Resource practices is one of the key integral facet of an organization’s growth, for it to be ahead of the curve. At Torrent, it is derived from a diverse workforce, an inclusive culture and people-first approach that encourages new perspectives and novel ideas.

The Human Resource department through its various initiatives and advance programs has kept pace with the fluctuating economic dynamics and the environmental changes.

Training is an integral part of the skill development program initiated for the employees.

The Human Resource department has organized training and development programs which has helped to nurture talent. Managers from field and corporate offices are trained to sharpen and understand new management skills.

The Company also has taken several other initiatives to help employees maintain a work life balance, thereby enabling them to excel in every phase of life. Women friendly facilities like creche and flexi-work timings at workplace has provided much needed care to them. Also, continuous efforts were taken to implement Gender Diversity initiatives, in various areas to ensure enhanced representation of women employees.

On the Statutory front, during the year under review, there was no case received pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The year also saw reinforcement of the already existing “Whistle Blower Policy” in order to emphasize and encourage reporting of any wrongdoing or any unethical practice.

The Human Resource department is in the process of integrating the Human Resources acquired from Unichem. This includes not only the manpower integration but also the cultural integration of both the entities. Impactful bridge building activity between Torrentians and the erstwhile Unichemites was organized for them to gain knowledge about the values and the good practices adopted by Torrent in various functionalities.

On the Industrial front, the Company continued to foster cordial Industrial Relations with its workforce during the year.

The Company has a diverse workforce of 14700 employees as on 31^st March, 2018 vis-a-vis 11781 employees as on 31^st March, 2017. Going forward, the Company will continue to focus on nurturing the right talent to achieve the business goal.

VIGIL MECHANISM

The Company believes in the conduct of its affairs in a fair and transparent manner to foster professionalism, honesty, integrity and ethical behavior in its employees & stakeholders. The Company has adopted a Whistle Blower Policy as a part of vigil mechanism, details of the same is explained in the Report of Corporate Governance.

Also, the Code of Business Conduct (“Code”) lays down important corporate ethical practices that shape the Company’s value system and business functions and represents cherished values of the Company.

The Code provides guidance to employees in recognizing and dealing with important ethical and legal issues and fosters a culture of honesty and accountability. The code of conducts includes Integrity, Gifts, Conflict of Interest, Legal compliance, Respect for people, Environmental commitment, Safety, Confidential & Proprietary Information, Financial Information, Company assets, Computer Network use & Security, Records maintenance and Management.

CORPORATE SOCIAL RESPONSIBILITY

Following the path shown by its founder Shri U N Mehta, Torrent Group believes in the well being of the society at large and understands its responsibilities as a Corporate Citizen. The Company, as a part of its Corporate Social Responsibility, made focused efforts in the fields of Community Healthcare, Sanitation & Hygiene, Education & Knowledge Enhancement and Social Care & Concern. These efforts are all driven by the Founder’s philosophy of “Think of others also when you think about yourself”

In line with the provisions of the Companies Act, 2013 and Rules made thereunder, a Corporate Social Responsibility (CSR) Committee has been formed by the Board of Directors. The Composition of the CSR Committee is as under:

During FY 2017-18, the key CSR programs and activities undertaken at Group level are described hereunder:

1. REACH:

‘Children are the future of our nation and this future must be well preserved’. Echoing this philosophy, in January 2016, Torrent Pharmaceuticals Limited and Torrent Power Limited jointly initiated a Child Centric Health Care Program - REACH - Reach EAch CHild under the aegis of Tornascent Care Institute (Section 8 company of Torrent Group). The program encompasses three major pillars: (a) SHAISHAV for Grass root intervention; (b) JATAN for greenfield action; and (c) MUSKAN for other allied initiatives. This Paediatric Health Care program has progressed significantly in the current year at all the four centres viz. Sugen (near Surat), Dahej, Indrad and Nadiad / Balasinor and across all the three pillars, with increase in the reach and scope.

- Under the first pillar of the program SHAISHAV, so far 266 paediatric camps covering 341 villages and 51,000 underserved children (in the age group of 6 months to 6 years) were conducted; to obtain their base line health status, identify and treat anaemia and malnutrition and provide specialised treatment to those identified with cardiac, neurological, respiratory and the like disorders. Periodic assessments and follow up actions for all such cases are being undertaken under the supervision of qualified Paediatricians. As a result of thorough follow up activities, more than 83% of children are cured of their anaemic condition and around 73% of children pulled out of severe malnourishment. Of all the children provided specialised treatment for specific ailments mentioned above, 670 cases have been successfully treated. SHAISHAV expanded the coverage of children to include those beyond the age group of 6 years through mobile OPDs. Till March, 2018, 39,000 children were provided free of cost treatment including the operative and consultation costs at referral hospitals under this expanded coverage.

- JATAN, the second pillar of the program, focuses on providing the care needed to alleviate the problem identified in SHAISHAV through Paediatric centres. 4 Paediatric centres at Sugen, Dahej, Balasinor and Indrad are operational and are additionally supporting the basic medical needs of the villages close to these four areas. Treatment by Paediatricians / doctors, medicines & basic laboratory tests are provided free of cost to children in the age group of 0-18 years. 54,500 children have benefitted so far till 31^st March, 2018.

- Under MUSKAAN, counselling and support is being provided to the adolescent girls at the Sugen centre for menstrual hygiene and sanitation by giving them free health and hygiene kits which include sanitary pads, soap, shampoo, etc. 4000 adolescent girls of 70 villages between 11-18 years of age are provided kits on monthly basis. This activity has also been replicated at Pakhajan & Indrad Centres. As an impact of these activities, there has been gradual eradication of physiological and social taboos and increased confidence and self-esteem amongst them.

2. SHIKSHA SETU

The Teaching and Learning Program being conducted through UNM Foundation, completed second year of Phase II of the program. This program covers 13 schools located at Sugen, Chhatral, Chappi, Memadpur and Ahmedabad locations and about 4,300 students and 150 teachers in such schools. In the first year i.e FY 2016-17, focus was on setting the new technology based infrastructure and software in the schools and training the students and teachers on the same. During FY 2017-18, 3,370 (84%) students from standard 3-8 have started working regularly on Tablets while above 90% teachers are confidently teaching their subjects through smart boards. This year, for the first time, 5,281 students from 3-8 standards participated in technology based assessment on Tablets. For Teachers, 496 subject workshops were organized at all locations and more than 2,000 students were provided academic & behavioral inputs during school visits. About 1,000 parents attended parents’ sensitization meetings at schools and were elated to see their children studying through tablets and smart boards in classrooms. School Principals expressed their views that technology based classrooms have immensely helped teachers in making teaching interesting, while tablets provided to students is helpful in bringing irregular students to school.

3. PUBLIC PARK DEVELOPMENT:

A city that has good public parks and gardens expresses the level of social and cultural health of a city. The Company along with M/s. Prabhakar B. Bhagwat, which is one of India’s best known landscape design firm, developed a detailed process that is an exemplar on how public projects should be undertaken and embarked upon. Six other firms in the city, namely Arya Architects, Earthscapes, Arianee Landscapes, Design Module, Shared Ground and Studio 603, have joined hands under LEAF (Landscape Environment and Advancement Foundation) to undertake this work, that focuses on transparency, communicating and working on design and ideas with local communities and keeping them informed at all times.

Over a period of 12 months, many parks in the city have been visited and studied for their usage patterns. 15 parks with differing sizes, which were equally distributed in the city, were chosen for development. Many studies were carried out to better express the idea of the park, from its relation to mental health, to bio diversity, to safe playgrounds, to water harvesting, to art in parks, to appropriate lighting, to using this initiative to develop new ways of designing parks. This rigorous exercise culminated in the finalization of 6 parks measuring 32,000 Sqmt under Phase I. The development of such 6 parks / gardens is under progress. The Design of the Other Parks of Phase II is under development.

The Annual Report on CSR Activities (Annexure C to this Report) indicates that the Company has spent Rs.27.70 crores in this regard.

Other CSR initiatives undertaken by the Company during FY 2017-18 include:

- The Company has contributed Rs.0.12 crores during FY 2017-18 towards reparing and maintenance of Sharda Mandir Primary School at Indrad along with the donation towards Medical OPD at Village - Indrad.

- The Company has contributed an amount of Rs.0.34 crores towards the Community Development Park and other community development work in Baddi. Further, the Company has been supporting the School situated near Company’s plant at Baddi to ensure personality development of the students by conducting various programmes through involvement of employees and provides other support with respect to extra curricular activities and academics.

- The Company also made donations to various organisations involved in activities related to education, health, socio-economic development, culture, integrated development of tribes, relief to disaster victims, promotion of social welfare, etc.

ENVIRONMENT, HEALTH & SAFETY

The Company is committed in cultivating a proactive safety culture across the group. We are in pursuit of a safe & secure workplace for our employees as well as all stakeholders engaged in our business operations.

We strive proactively to prevent or minimize all possible causes of injury and ill health of our employees as well as our stakeholders, prevent environmental pollution, reduction in waste generation and utilization of waste as an alternative fuel, conserve energy, enhance safety awareness, prepare for emergencies and to reduce environmental impact arising from the workplace.

We have adopted a well-defined strategy for waste management that focusses on reduction in waste generation and alternative utilization of waste as energy. We have disposed off 50% high calorific value hazardous waste for co-processing in cement industry (alternate fuel) instead of incineration. We have targeted to dispose off 90% of total such waste generation for co-processing in the coming year.

Most of our facilities have achieved various recognitions / certifications such as ISO-14001:2015 & OHSAS-18001:2007. Regular audits of our operational units by our cross functional teams, global customers and regulators, help in achieving benchmark / highest levels of compliance. Further to these, Company has initiated drive to implement upgraded standard of OHSAS-18001:2007 to ISO-45001:2015.

During the year, all our manufacturing units remained compliant with applicable regulatory and other Environment, Health & Safety requirements to which we subscribe.

We strive to build a strong Health, Safety and Environment culture at each of our units. Environment, Health & Safety is not just something we do as part of our regular jobs but is something different in which we believe, we value & act upon.

Moreover, the Company has in place the “Conviction of Safety Policy, which provides for substantial compensation to the personnel (Employees as well as Contractors) and their families, who are adversely affected by accidents.

FINANCE

(a) Share Capital

During the year, the Authorised Capital of the Company was increased from Rs.125 crores, divided into 20 crores Equity Shares of Rs.5/- each and 25 lacs Preference Shares of Rs.100/- each, to Rs.150 crores, divided into 25 crores Equity Shares of Rs.5/- each and 25 lacs Preference Shares of Rs.100/- each, by creation of 5 crores Equity Shares of Rs.5/- each ranking pari passu with the existing Equity Shares.

(b) Deposits

The Company has neither accepted nor renewed any deposits. None of the deposits earlier accepted by the Company remained outstanding, unpaid or unclaimed as on 31^st March, 2018.

(c) Loans, Guarantees and Investments

Details of Loans, Guarantees and Investments by Company under the provisions of Section 186 of the Companies Act, 2013, during the year, are provided in Note 9 and 10 to the Financial Statements.

(d) Debentures and other debt instruments

The Company has raised an amount of Rs.1500 crores by way of issue of Non-Convertible Debentures on private placement basis during the year. The said Non-Convertible Debentures are listed on the National Stock Exchange of India Ltd. The outstanding amount of Non-Convertible Debentures issued by the Company is Rs.2,898.80 crores as on 31^st March, 2018.

During the year the Company issued Commercial Papers (CPs) aggregating to Rs.300 crores on private placement basis.

(e) Contracts or Arrangements with Related Parties

All Related Party transactions during the year were in ordinary course of business and were on arm’s length basis and were entered with the approval of Audit and Risk Management Committee, Board and Shareholders if and as applicable. The particulars of material contracts and arrangements entered into with the related parties in accordance with the Related Party Policy of the Company and pursuant to the provisions of Section 188(1) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B.

(f) Internal Financial Control System

The Companies Act, 2013 has mandated the Company to have a formal framework of Internal Financial Controls (IFC) and has also laid down specific responsibilities on the Board, Audit Committee, Independent Directors and Statutory Auditors with regard to IFC.

The financial control system and framework is required to ensure:

- The orderly and efficient conduct of its business,

- Safeguarding of its assets,

- The prevention and detection of frauds and errors,

- The accuracy and completeness of the accounting records and

- The timely preparation of reliable financial information.

The Board reviews the effectiveness of controls documented as part of IFC framework, and take necessary corrective actions where weaknesses are identified as a result of such reviews. This review covers entity level controls, process level controls, fraud risk controls and Information Technology environment.

Based on this evaluation, no significant events had come to notice during the year that have materially affected, or are reasonably likely to materially affect, our IFC. The management has also come to a conclusion that the IFC and other financial reporting was effective during the year and is adequate considering the business operations of the Company.

The Statutory Auditors of the Company has audited the IFC over Financial Reporting and their Audit Report is annexed as Annexure A to the Independent Auditors’ Report under Standalone Financial Statements and Consolidated Financial Statements.

INSURANCE

The Company’s plants, properties, equipment and stocks are adequately insured against major risks. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors’ and Officers’ Liability Policy to provide coverage against the liabilities arising on them.

BUSINESS RISK MANAGEMENT

The Company has in place a Risk Management Framework for a systematic approach to control risks. The Risk Management process is reviewed and monitored by functional heads / business process owners. The Audit and Risk Management Committee (ARMC) discharges functions of Risk Management and Risk minimization and has designated Chief Financial Officer as the Chief Risk Officer (CRO) to assist the committee by presenting the details of the risk profile of the Company, coordinate with the functional heads who are the risk owners and monitor the status of the risk mitigation plan for the identified risks. The ARMC is periodically updated on key business risks including strategic and acquisition related risks along with their mitigation plan / strategy.

The Company in the Management and Discussion Analysis section of the Annual Report identifies the key risks which can affect the profitability of the Company. As on date, there is no risk envisaged which could threaten the existence of the Company.

SUBSIDIARIES & JOINT VENTURES

As of 31^st March, 2018, the Company has 17 subsidiaries, out of which 5 are step down subsidiaries.

Torrent Pharma Inc., USA, a wholly owned subsidiary of the Company has acquired 100% stake in Bio Pharm Inc., a generic pharmaceuticals and OTC Company based in USA.

The highlights of performance of major subsidiaries of the Company have been discussed and disclosed under the Management Discussion and Analysis section of the Annual Report. The contribution of each of the subsidiries in terms of the revenue and profit is provided in Form AOC-1, which forms part of Annual Report.

The details of two Joint Ventures of the Company is also shown in the AOC -1. These Joint Ventures are Section 8 companies and primarily floated with another company of the Torrent group to carry out the CSR activities.

The annual accounts of the subsidiary companies will be made available to any Member of the Company seeking such information at any point of time and are also available for inspection by any Member of the Company at the Registered Office of the Company on any working day during business hours up to the date of the AGM. The annual accounts of the subsidiary companies are also available on the website of the Company at www.torrentpharma.com.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

(a) Board of Directors

The Board of Directors of the Company is led by the Executive Chairman and comprises seven other Directors as on 31^st March, 2018, including one Whole Time Director, four Independent Directors which includes one Woman Director and two Non-Executive Directors (other than Independent Directors).

All the Independent Directors of the Company have furnished declarations that they meet the criteria of independence as prescribed under the Companies Act, 2013 and under Listing Regulations.

At the AGM of the Company held on 31^st July, 2017, the members approved the re-appointment of Dr. Chaitanya Dutt, Director (Research and Development) as the Whole time Director of the Company for a period of three years effective from 1^st January, 2018. He also retired by rotation and being eligible, was re-appointed as director in the said AGM.

Shri Ashish Nanda had resigned from the Board of Directors of the Company w.e.f. 21^st July, 2017. The Board placed on record its deep appreciation for the guidance & support provided by him for the overall growth of the Company during his association with the Company.

Shri Markand Bhatt, Director, has expressed his unwillingness to be re-appointed at the ensuing AGM.

Shri Bhatt has been on the Board of the Company since October, 2000. A post graduate of IIM, Ahmedabad, he has over 50 years of professional and managerial experience in multi-disciplinary areas across various businesses, dominated by more than three decades of involvement with Torrent group.

The Board and the Company has always been benefitting from his counsel and advice on key business and strategic matters emanating from his considerable wisdom and vast experience and places on record their profound appreciation for the same.

Smt. Renu Challu will be completing her tenure as an Independent Director of the Company on 26^th July, 2018. The Board places on record its deep appreciation for the guidance and support provided by Smt. Challu for the overall growth of the Company during her tenure as a member of the Board and its Committees.

The Board has recommended:

- the appointment of Ms. Ameera Shah as an independent Director to hold office for a term of 3 (three) consecutive years effective from the date of AGM;

- the re-appointment of Shri Shailesh Haribhakti and Shri Haigreve Khaitan as Independent Directors of the Company for a second term of 5 (five) consecutive years effective from 1^st April, 2019;

for the approval of shareholders at the ensuing AGM. The brief resume and other relevant details of Ms. Shah, Shri Haribhakti and Shri Khaitan are given in the Explanatory Statement to the Notice convening the AGM, for your perusal.

(b) Meetings of Board of Directors

Regular meetings of the Board are held to review performance of the Company, to discuss and decide on various business strategies, policies and other issues. A calendar of Board / Committee meetings for the year is prepared and circulated to the Directors well in advance to enable them to plan their schedule for effective participation in the meetings. During the year, six meetings of the Board of Directors were convened and held on 26^th May, 2017, 31^st July, 2017, 3^rd November, 2017, 18^th January, 2018, 25^th January, 2018, and 8^th February, 2018. The intervening gap between two consecutive meetings was not more than one hundred and twenty days. Detailed information on the meetings of the Board is included in the Corporate Governance Report which forms part of the Annual Report.

(c) Committees of the Board of Directors

In compliance with the requirement of applicable laws and as part of best governance practices, the Company has following Committees of the Board as on 31^st March, 2018:

i. Audit and Risk Management Committee

ii. Securities Transfer and Stakeholders Relationship Committee

iii. Nomination and Remuneration Committee

iv. Corporate Social Responsibility Committee

The details with respect to the aforesaid Committees forms part of the Corporate Governance Report.

(d) Appointment of Directors

(i) Criteria for Appointment of Directors

The Board of Directors of the Company has identified following criteria for determining qualification, positive attributes and independence of Directors:

1) Proposed Director (“Person”) shall meet all statutory requirements and should:

- possess the highest ethics, integrity and values;

- not have direct I indirect conflict with present or potential business I operations of the Company;

- have the balance and maturity of judgment;

- be willing to devote sufficient time and energy;

- have demonstrated high level of leadership and vision, and the ability to articulate a clear direction for an organization;

- have relevant experience (In exceptional circumstances, specialization I expertise in unrelated areas may also be considered);

- have appropriate comprehension to understand or be able to acquire that understanding

- Relating to Corporate Functioning

- Involved in scale, complexity of business and specific market and environment factors affecting the functioning of the company.

2) The appointment shall be in compliance with the Board Diversity Policy of the Company.

(ii) Process for Identification / Appointment of Directors

- Board members may (formally or informally) suggest any potential person to the Chairman of the Company meeting the above criteria. If the Chairman deems fit, necessary recommendation shall be made by him to the Nomination and Remuneration Committee (NRC).

- Chairman of the Company can himself also refer any potential person meeting the above criteria to the NRC.

- NRC delibrates the matter and recommends such proposal to the Board.

Board considers such proposal on merit and decide suitably.

(e) Familiarisation Programme of Independent Directors

The Independent Directors have been updated with their roles, rights and responsibilities in the Company by specifying them in their appointment letter alongwith necessary documents, reports and internal policies to enable them to familiarise with the Company’s procedures and practices. The Company endeavours, through presentations at regular intervals, to familiarise the Independent Directors with the strategy, operations and functioning of the Company and also with changes in the regulatory environment having a significant impact on the operations of the Company and the pharmaceutical industry as a whole. Site visits to various plant locations and CSR sites are organized for the Directors to enable them to understand the operations of and CSR activities carried out by the Company. The Independent Directors also meet with senior management team of the Company in informal gatherings. During the FY 2017-18, the Company has conducted 9 programs for familiarising the Directors for a total duration of 9 hours and 25 minutes.

On cumulative basis since 1^st April, 2015, the Company has conducted 37 programs for familiarising the Directors for a total duration of 36 hours and 55 minutes.

The details of such familiarisation programs for Independent Directors are posted on the website of the Company and can be accessed at http://www.torrentpharma.com/pdf/cms/Familiarisation_Programme_2017-18.pdf

(f) Board Evaluation

The Evaluation of Board, its Committees, Individual Directors (Independent and Non Independent Directors) and Chairperson was carried out as per the process and criteria laid down by the Board of Directors based on the recommendation of the NRC:

- The obtaining and consolidation of feedback from all directors for the evaluation of the Board and its Committees, Individual Directors (i.e. Independent and Non Independent Directors), were co-ordinated by the Chairman of the Board. The feedback on evaluation of the Board and its Committees was discussed in their respective meetings and the feedback on the evaluation of Individual Directors was discussed individually with them.

- The evaluation of Chairperson was co-ordinated by the Chairman of the Independent Directors meeting.

- The Independent Directors met on 8^th February, 2018 with respect to the above.

(g) Key Managerial Personnel

There was no change in the Key Managerial Personnel during the year under review.

(h) Directors’ Responsibility Statement

In terms of Section134(3)(c) of the Companies Act, 2013, in relation to financial statements of the Company for the year ended 31^st March, 2018, the Board of Directors state that:

i. the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii. reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31^st March, 2018 and of the profit for the year ended on that date;

iii. proper and sufficient care has been taken for 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;

iv. the financial statements have been prepared on a going concern basis;

v. proper internal financial controls were in place and were adequate and operating effectively; proper systems to ensure compliance with the provisions of applicable laws were in place and were adequate and operating effectively.

REMUNERATION

(a) Remuneration Policy

The Company has formulated policy relating to the remuneration for the Directors, Key Managerial Personnel and other employees of the Company. The remuneration policy is available on the website of the Company www.torrentpharma.com. The salient features of this policy are as under:

1. Components of Remuneration

1.1. Fixed Pay comprising of Basic Salary, HRA, Car Allowance (applicable to General Manager and above employees), Conveyance Allowance / Reimbursement, Company’s Contribution to Provident Fund, Superannuation Fund, Gratuity, etc.

1.2. Variable Pay which is either in the form of:

(i) Commission to Managing Directors

(ii) Commission to Whole - time Directors

(iii) Performance Based Pay to General Managers and above [upto 20% of Cost to Company (CTC)], based on unit performance grades.

(iv) One time reward, given in exceptional cases to identified directors, employees who undertake tasks, which go beyond their normal call of duties and play a crucial role in success of an event.

1.3. Retention Pay: In case where stability is an issue, part of the CTC is kept as retention pay which is being paid after 3 years or more.

2. Annual Appraisal Process:

2.1. Annual Appraisals are conducted following which annual increments and promotions in deserving cases are decided once in a year based on:

(i) Employees Self-Assessment

(ii) Assessment of Immediate Superior and

(iii) Assessment of Head of Department

2.2. The increments as decided for a particular financial year are paid during the subsequent financial year. e.g. the performance appraisal of an employee for the FY 2016-17 is conducted in FY 2017-18 and his / her salary rise in FY 2017-18 reflects his performance for FY 2016-17.

Kid ink up and away album. 2.3. Performance Based Pay is also based on annual appraisal process.

2.4. Annual increment consist of -

i. Economic Rise: Based on All India Consumer Price Index published by the Government of India or Internal survey wherein inflation on commonly used items is calculated; and

ii. Performance Rise: Based on Industry and overall business scenario and factoring the following aspects:

1) Company’s performance vis-a-vis the industry

2) Unit Performance* (Grades ranging from A to C-)

3) Individual Performance / track record including care for health / balance between quality of work and family life.

*Unit Performance is carried out based on various financial and non-financial parameters (also used for working out overall ceiling at unit level and performance based pay) such as -

a) Comparison of Company’s Revenue and Profit growth with competition

b) Employee Cost

c) Return on Equity

d) Production, Quality and Regulatory compliance

Unit: Domestic and International Operations, Manufacturing, Research & Development and Corporate.

2.5. Promotion Rise (Other than Executive Directors and Directors)

(b) Criteria for Remuneration to Non-Executive Directors (NEDs):

1. T he payment of commission to the Directors of the Company who are neither in the whole time employment nor Managing Director(s) (NEDs) is approved by the shareholders of the Company and is subject to the condition that total commission paid to the NEDs shall not exceed the limit of 1% of net profit in a financial year as per the provisions of Section 197(1) of the Companies Act, 2013 read with Section 198 of the said Act.

2. The Board or its Committee specifically authorised for this purpose, determines the manner and extent upto which the commission is paid to the NEDs in accordance with the shareholders’ approval. The commission is determined based on the participation of the Directors in the meetings of Board and / or Committees thereof, as well as on industry practice, performance of the Company and contribution by the Directors, etc.

3. Payment of Commission is made annually on determination of profit.

4. Sitting fees of Rs.1 lac is paid for each meeting of the Board or any Committee thereof attended by them.

5. Independent Directors are reimbursed for all the expenses incurred for attending any meeting of the Board or Committees thereof, and which may arise from performance of any special assignments given by the Board.

(c) Information as required pursuant to Section 197 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

1. the ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

$ Remuneration does not include premium for group personal accident and group mediclaim policy.

# No remuneration has been paid during the year 2017-18 and hence ratio has not been calculated.

* Prof. Ashish Nanda resigned w.e.f. 21^st July, 2017.

2. the percentage increase in remuneration of each Director, Chief Financial Officer and Company Secretary:

No remuneration has been paid in 2016-17 and 2017-18 to Shri Markand Bhatt and hence % increase has not been calculated.

^A Prof. Ashish Nanda resigned w.e.f. 21^st July, 2017.

* The percentage change in remuneration is excluding onetime reward and performance pay.

# Remuneration does not include premium for group personal accident and group mediclaim policy.

3. The percentage increase in the median remuneration of employees in the financial year under review is 8.82%. The employees whose remuneration is determined based on negotiations and the employees at representative offices of the Company abroad have been excluded for this purpose.

4. The Company has 14,700 employees on the rolls of Company as on 31^st March, 2018.

5. The increase made in the salaries of employees other than managerial personnel in the last financial year, based on the performance of the Company for 2016-17, was 11.16% while the increase in managerial remuneration was 4.70%. There was no change in salary of Shri Samir Mehta.

During the year under review, profits were impacted by the interest and amortization of Unichem and Biopharm acquisitions. The Company has been making significant investments targeted to maintain a steady growth in future by strengthening its position in its largest market, i.e. India. After the Elder investment in 2014-15, the Unichem acquisition in India was accomplished in a record time during the year, which has helped the Company to leapfrog to 8^th position in the Indian Pharma Market. In addition, Bio-pharm acquisition in US was concluded providing a foothold in the niche liquids and suppository market including a manufacturing facility - the first one overseas by the Company.

6. The remuneration paid is as per the Remuneration Policy of the Company.

(d) Remuneration to Managerial Personnel

The details of remuneration paid to the Managerial Personnel forms part of the Corporate Governance Report.

(e) Particulars of Employees

The information required under Section 134(3)(q) and 197(12) of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report as Annexure-D. However, as per the provisions of Section 134 and Section 136 of the Companies Act, 2013, the Reports and Accounts are being sent to the Members excluding the information on employees’ particular which are 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 ensuing AGM. Any Member interested in obtaining a copy of such statement may write to the Company Secretary at the Registered Office of the Company.

AUDITORS

(a) Statutory Auditors

B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/W-100022), were appointed as the Statutory Auditors of the Company to hold office for five years from the conclusion of Forty Fourth AGM held in the FY 2016-17, up to the conclusion of the Forty Ninth AGM to be held in the FY 2021-22.

(b) Cost Auditors

The Company has appointed M/s. Kirit Mehta & Co., Cost Accountants, Mumbai (Firm Registration No. 000353) as the Cost Auditors of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year ended 31^st March, 2018. The Cost Audit Report to the Central Government for the financial year ended 31^st March, 2017 was filed on 28^th August, 2017, within the statutory timeline. Further, the Board of Directors has, appointed M/s. Kirit Mehta & Co. as the Cost Auditor of the Company for the financial year 2018-19 and has also fixed their remuneration. The Board has recommended the remuneration approved in its meeting, for ratification by the shareholders in the ensuing AGM of the Company.

(c) Secretarial Auditor

The Board, pursuant to Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, including any statutory modification(s) or re-enactment thereof, had appointed M/s. M. C. Gupta & Co., Company Secretaries, as the Secretarial Auditors of the Company to conduct the Secretarial Audit as per the provisions of the Companies Act, 2013 for the year 2017-18 (Apr-17 to Mar-18).

M/s. M. C. Gupta & Co., Company Secretaries have carried out the Secretarial Audit of the Company for FY 2017-18 and the Report of Secretarial Auditors in Form MR-3, is annexed with this Report as Annexure-E. There were no qualification / observations in the report.

CORPORATE GOVERNANCE

As required by Regulation 34 read with Schedule V of the Listing Regulations, a separate Report on Corporate Governance forms part of the Annual Report. The report on Corporate Governance also contains certain disclosures required under the Companies Act, 2013. A certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause E of Schedule V of the Listing Regulations forms part of this report as Annexure - F.

EXTRACT OF ANNUAL RETURN

As required under the provisions of Section 134(3)(a) and of Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extracts of annual return in Form No. MGT-9 forms part of this report as Annexure-G.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information on Conservation of energy, Technology absorption and Foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed to this report as Annexure-H.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Governments of Gujarat, Himachal Pradesh, Sikkim, Madhya Pradesh and Andhra Pradesh, Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and the commitment shown by the employees of the Company.

For and on behalf of the Board

Ahmedabad Samir Mehta

30^th May, 2018 Executive Chairman