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Notes to Accounts of Claris Lifesciences Ltd.

Mar 31, 2015

1. Contingent Liabilities (Rupees in Lacs)

As at As at 31-03-2015 31-12-2013

a. Claim against the company not acknowledge as debts 908.38 1,909.37

b. Disputed demand under :

(i) Income Tax 391.43 534.98

(ii) Sales Tax 17.85 8.93

(iii)Excise Duty 92.19 85.74

(iv) Regulatory 10,400.00 10,400.00

(v) Customs Duty Draw back 271.71 -

c. Guarantees given by the bankers on behalf of the company - 600.55

d. Bills discounted 4,271.11 3,275.94

e. Gurantees given by the Company 61,454.90 -

f. Letters of credit outstanding - 161.12

2. Commitments & Obligations (Rupees in Lacs)

As at As at 31-03-2015 31-12-2013

a. Estimated amount of contracts remaining to be executed on capital account and not 167.04 17,971.87 provided for; (net of capital advances)

b. Outstanding obligation to export goods worth Rs. 7,076.07Lacs 2041.27 1,860.45 (Previous year Rs. 6,692.54 Lacs) within the stipulated period as per Export Promotional Capital Goods Scheme, failing which additional custom duty payable would amount to

3. PT Claris Lifesciences Indonesia (CLI), a wholly owned subsidiary of the Company in Indonesia, has been incurring losses which has resulted in complete erosion of the networth of CLI. The changes in import regulations in Indonesia have given rise to uncertainties with respect to recoverability of the value of the long term investments in foreseeable future. In view of this, considering accounting prudence, an amount of Rs. 45.10 Lacs had been recognized towards diminution in value of the long term investments in the financial statements for the year ended 31st Dec 2012.

4. Capital Work In Progress includes preoperative expenditure pending allocation to projects under implementation, the breakup of which is as under:

5. (a)The provision for current tax has been made as per the provisions of the Income Tax Act, 1961. The tax year for the Company being the year ending 31st March, the provision for current tax for the period is the aggregate of the provision required for the three months ended 31st March 2014 and the provision required for the remaining twelve months ended on 31st March,2015. Further, based on legal opinion obtained from eminent legal counsel, the management of the company is of the opinion that no tax provision is required in respect of capital gain on slump sales of injectable business to its wholly owned subsidiary company named Claris Injectables Ltd. (Formerly known as Claris Lifesciences International Limited). b) On the basis of estimates and judgments of the company''s management, the company believes that the differed tax liability as shown in Note-5 of Rs. 272.57 lacs as at 31st March, 2015 reflects a fair and correct position in compliance of the applicable Accounting Standards and principles.

6. Pursuant to notification dated 29th December, 2011 issued by Central Government under Companies (Accounting Standard) Amendment Rules, 2009; with effect from April 1, 2011, the Company exercised the option whereby, the exchange differences arising on settlement or on translation of long-term foreign currency monetary items, so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset.

7. Segment Information

I) Primary Segment:

In accordance with the requirements of Accounting Standard –17 on Segment Reporting, the Company has determined its business segment as "Drugs & Pharmaceuticals". Since all of the Company''s business is from "Drugs and Pharmaceuticals'', there are no other primary reportable segments. Thus the segment revenue, segment result, total carrying amount of segment liabilities, total cost incurred to acquire segment assets, the total amount of charge for depreciation during the year are all reflected in the financial statements as of and for the period ended 31st March, 2015.

8. Disclosure for operating leases under Accounting Standard 19 – "Accounting for Leases"

The Company has entered into agreements for taking on leave and license basis residential / office premises including furniture and fittings therein, as applicable, for a period ranging from 11 to 60 months. The specified disclosure in respect of these agreements is given below:

9. Discontinuing operations

On receipt of necessary approvals from Board of Directors and Shareholders of the Company at their meetings held on July 4, 2014 and September 3, 2014 respectively in respect of transfer of its Injectables Business (previous year Infusion Business) on Slump Sale basis, the Company has transferred its Injectables Business to its wholly owned subsidiary namely Claris Injectables Limited (formerly known as Claris Lifesciences International Limited) on October 31st, 2014 (previous year Infusion Business to Claris Otsuka Limited on July 31st,2013). The business transfer involved transfer of relevant assets and liabilities as stated in the Business Transfer Agreement of Injectables Business (previous year Infusion Business) on slump sale basis" for an agreed cash consideration of Rs. 55,400 lacs (previous year Rs,1,03,182.42 lacs for Infusion Business). As per the terms of the agreement, the company have transferred business for Rs. 55,400 lacs (previous year Rs,1,03,182.42 lacs for Infusion Business) as consideration for the net assets of the Injectables Business (previous year Infusion Business) transferred.

The pre-tax gain on disposal of assets and settlement of liabilities attributable to the sale of Injectables business of Rs. 523.03 lacs (previous year Rs.1505.98 lacs) has been disclosed in the statement of profit and loss as an exceptional item, being profit on disposal of injectables business under slump sale.

b) The company operates under a single business segment i.e. ''Drugs & Pharmaceuticals'' as per the requirement of Accounting Standard – 17 ''Segment Reporting''. The transfer of the Injectable Business (previous year Infusion business) involved transfer of assets and liabilities related to the injectable business (previous year Infusion business)and as the same identified by the parties to the transaction. For this purpose, the products, employees, tangible and intangible assets, current assets, market territories, long term and short term borrowings, other liabilities etc. have been identified as are related to the Injectable Business (previous year Infusion business)and disclosed its income, expenditure, profitability, assets and liabilities.

In view of common employees, marketing expenses, logistics and distribution arrangements and general corporate overheads, which were not separately identifiable for identified products of the Injectable Business (previous year Infusion Business) being transferred, the company was unable to determine the income and expenses clearly attributable to the discontinued operations. Under the facts and circumstances, for the period from 1st January,2014 to 31st October,2014 (previous year for the period from 1st January 2013 to 31st July, 2013), the company has disclosed separately the figures for expenditure attributable to discontinuing operations, profit from the continuing and from the discontinuing operations, tax expense of discontinuing operations, profit from discontinuing operations (after tax) and cash flows from operating activities on best estimate basis. The auditors are relied upon and accepted the data submitted by the management.

c) In view of the above stated transfer of injectable business, the figures for the financial period reported in the statement of profit and loss and the cash flow statement do not include the figures of the injectable business for the period from 1st November, 2014 to 31st March 2015 (previous year Infusion business for 1st August,2013 to December 31st 2013) and the figures in the balance sheet as at 31st March 2015 (previous year 31st December,2013) do not include the figures pertaining to the injectable business (previous year Infusion business).

10. Current Assets, Loans and Advances as at 31st March 2015 have a value on realization in the ordinary course of business at least equal to the amount at which they are stated.

11. Pursuant to the resolution passed in the Board Meeting held on 8th November, 2014, the financial year of the company has been changed from 31st December to 31st March. Accordingly the Financial Statements for the current period is for Fifteen months period ending on 3st March, 2015 as against 12 months period ended on 31st December, 2013, hence, not comparable.

12. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Dec 31, 2012

(i) Rights, Preferences and Restrictions attached to equity shares

The Company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholder are eligible to receive the remaining assets of the company after distribution of all preferential amounts. in proportion to their shareholding

Notes :

a. Term loans in foreign currency and domestic currency are secured by first pari passu charge by hypothecation of specified movable fixed assets, mortgage over immovable fixed assets and second pari passu charge over stocks, receivables and specified immovable properties in favor of the lenders. The formalities of creating charges over specified securities in respect of loans aggregating to Rs. 14302.10 Lacs are in process.

b. Cash credit accounts & buyers'' credit are secured by first pari passu charge by hypothecation of all current assets of the company (present and future); second pari passu charge by hypothecation of movable fixed assets (present and future), by mortgage on specified immovable fixed assets of the Company (present and future) and by first pari passu charge through equitable mortgage on specified immovable property of the Company.

c. Vehicle loans from banks and finance companies are secured by hypothecation of respective vehicles.

d. The terms of repayment of term loans & other loans.

1. Contingent Liabilities (Rupees in Lacs)

As at As at 31-12-2012 31-12-2011

a. Claims against the Company not acknowledged as debts 1,626.64 312.31

b. Disputed demand under:

(I) Income tax 392.27 381.26

(ii) Sales Tax 8.93 8.93

(iii) Excise Duty 87.78 68.59

(iv) Regulatory 10,400.00 -

c. Guarantees given by the bankers on behalf of the Company 509.59 132.09

d. Bills discounted 3,905.61 2,686.34

e. Letters of credit outstanding 851.10 9,332.56

* The Shareholders on 24th September, 2011 approved a Special Resolution under section 61 of the Companies Act, 1956 for partial modification in the "Objects of the Issue" as mentioned in the prospectus dated 4th December, 2010.

2. PT Claris Lifesciences Indonesia (CLI), a wholly owned subsidiary of the Company in Indonesia, has incurred loss during the year. This and past accumulated losses have resulted in complete erosion of networth of CLI.The changes in import regulations in Indonesia have given rise to uncertainties with respect to recoverability of the value of the long term investments in foreseeable future. In view of this, considering accounting prudence, an amount of Rs. 45.10 Lacs is recognized towards diminution in value of the long term investment.

3. Excise duty shown as deduction from Sales represents the amount of excise duty collected on sales. Excise duty expenses under Note No 22, "Operating and Other Expense", represents the difference between excise duty element in the amounts of closing stocks and opening stocks and excise duty paid on materials manufactured for captive consumption.

4.The provision for current tax has been made as per the provisions of the Income Tax Act, 1961. The tax year for the Company being the year ending 31st March, the provision for current tax for the year is the aggregate of the provision required for the three months ended 31st March 2012 and the provision required for the remaining nine months up to 31st December 2012, the ultimate tax liability of which has been estimated on the basis of the actual / projected figures for the period from 1st April 2012 to 31st March 2013.

5. Disclosures regarding Derivative Instruments:

a. The Company uses forward exchange contracts to hedge its exposure in foreign currency. There are no contracts entered into for the purpose of speculation.

b. The information on derivative instruments as on 31st December 2012 is as follows:

6. Pursuant to notification dated 29th December, 2011 issued by Central Government under Companies (Accounting Standard) Amendment Rules, 2009; with effect from April 1, 2011, the Company has exercised the option whereby, the exchange differences arising on settlement or on translation of long-term foreign currency monetary items, so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset.

b) Defined Contribution Plans

Rs. 134.33 Lacs (Previous Year Rs. 113.38 Lacs) recognized as an expense and included in the Note no 20 of Profit and Loss Account under the head "Contribution to Provident and other funds".

7. Segment Information i) Primary Segment:

In accordance with the requirements of Accounting Standard -17 on Segment Reporting, the Company has determined its business segment as "Drugs & Pharmaceuticals". Since all of the Company''s business is from "Drugs and Pharmaceuticals'', there are no other primary reportable segments. Thus the segment revenue, segment result, total carrying amount of segment liabilities, total cost incurred to acquire segment assets, the total amount of charge for depreciation during the year are all reflected in the financial statements as of and for the year ended 31st December, 2012.

8.Discontinuing operations

On December 7, 2012,the management of the Company has entered in to a set of agreements with Otsuka Pharmaceutical Factory, Inc., Japan (Otsuka) and Mitsui & Co. Ltd., Japan (Mitsui) for transfer of its Infusion Business to Claris Otsuka Limited, a wholly owned subsidiary of the Company on ''slump sale'' basis. The said infusion business includes identified products of Common Solutions, Anti Infective, Plasma Volume Expanders and Parenteral Nutrition in India and in Emerging markets (herein after referred to as ''the infusion business''). The transfer of the infusion business is subject to all necessary and applicable approvals of the regulatory authorities and subject to other closing formalities to be completed as may be agreed between the parties. Subject to such approvals and formalities, the Board of Directors of the Company, in its meeting held on December 7, 2012, has passed necessary resolutions approving the transfer of the infusion business to Claris Otsuka Limited. On 18th February, 2013 the shareholders of the Company, through postal ballot, have approved necessary resolutions for the said transfer of infusion business . It is expected that completion of the transaction will take place in financial year 2013, upon getting necessary approvals from regulatory authorities.

As per the terms of the agreements, the infusion business is valued at Rs. 131,300 Lacs and the Company is to receive Rs. 105,000 Lacs in cash over multiple agreements for the portion to be transferred in favor of Otsuka & Mitsui,who will subscribe Rs. 105,000 Lacs towards equity share capital and towards securities premium of Claris Otsuka Limited, pursuant to which Otsuka, Mitsui and the Company will respectively hold 60 %, 20% and 20% of the equity share capital of Claris Otsuka Limited..

a) Necessary disclosures of the details pertaining to the discontinuing operations in respect of the infusion business and the reorganization of the business, as required under the Accounting Standard - 24 ''Discontinuing Operations'' (AS-24) as notified by the Government of india under Section 211(3C) of the Companies Act, 1956, are as under:-

b) The Company operates under a single business segment i.e. ''Drugs & Pharmaceuticals'' as per the requirements of Accounting Standard - 17 ''Segment Reporting. The transfer of the infusion business would involve transfer of assets and liabilities as are related to the infusion business and as the same are identified by the parties to the transaction. For this purpose, the products, employees, tangible and intangible assets, current assets, market territories, long term and short term borrowings, other liabilities etc. are being identified as are related to the infusion business. In view of common employees, marketing expenses, logistics and distribution arrangements and general corporate overheads, which are not separately identifiable for identified products of the infusion business being transferred, the Company is unable to determine the income, expenses, assets and liabilities clearly attributable to the discontinued operations. As per the practice followed by the Company for preparation of its financial statements for financial reporting purposes, its present system of maintenance of books of account and other relevant records do not provide clearly identifiable details of income and expenditure as are related to the infusion business. Under the circumstances, the Company is unable to disclose the above stated details as are pertaining to the discontinuing operations. Under the facts and circumstances the Company is unable to disclose separately the profit from the continuing and from discontinuing operations, tax expense of discontinuing operations and profit from discontinuing operations (after tax).

9.Provision for loss due to product recall:

The Company had initiated a voluntary recall of certain products as a precautionary measure against possible contamination due to the packaging integrity of such recalled products. The provision for loss due to products recalled was based on estimates made by the management by applying principles laid down in Accounting Standard - 29 "Provisions, Contingent Liabilities and Contingent Assets". The company has reviewed the status as at the balance sheet date and considering no requirement of incurring such expenses, it has reversed the provision during the year, the movement in the provision during the year is as under: -

10.The Revised Schedule VI has become effective from the current financial year for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.

 
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