Mar 31, 2023
Summary of Significant Accounting Policies
Panacea Biotec Limited (Corporate identification number: L33117PB1984PLC022350) (''PBL'' or the ''Company'') is a public company incorporated and domiciled in India. The Company has its registered office at Ambala-Chandigarh Highway, Lalru-140501, Punjab, India. The Company has been incorporated under the provisions of Indian Companies Act 1956 and its equity shares are listed with BSE Limited and National Stock Exchange of India Limited.
Company overview
The Company is one of India''s leading research-based biotechnology companies engaged in the business of research, development, manufacture and marketing of vaccines in India and international markets. The Company''s wholly owned subsidiary company viz. Panacea Biotec Pharma Ltd. is engaged in the business of research, development, manufacture and marketing of branded pharmaceutical formulations in India and international markets.
a. Statement of compliance
The standalone financial statements have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 (the "Act") read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time.
These standalone financial statements have been prepared for the Company as a going concern on the basis of relevant Ind AS that are effective at the Company''s annual reporting date, viz March 31,2023. These standalone financial statements were authorized for issuance by the Board of Directors of the Company on May 30, 2023. The Board of Directors can permit revision to the standalone financial statements after obtaining necessary approvals or at the instance of regulatory authorities as per provisions of the Act.
b. Basis of measurement
The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
⢠Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments); and
⢠Defined benefit plans - plan assets measured at fair value.
1.2 Use of estimates and judgements
The preparation of the standalone financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the standalone financial statements.
Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in note 1.4.
1.3 Significant accounting policies
The significant accounting policies that are used in the preparation of these financial statements are summarised below. These accounting policies are consistently used throughout the periods presented in the standalone financial statements. a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in normal operating cycle*
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle*
⢠It is held primarily for the purpose of trading
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
* Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
b. Inventories
Inventories are valued as follows:
Raw material, stores and spares
Raw materials (including packing materials), stores and spares are valued at lower of cost or net realisable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a weighted average basis. Stores and spares having useful life of more than twelve months are capitalised as "Property, plant and equipment" and are depreciated prospectively over their remaining useful lives in accordance with Ind AS 16.
Work in progress and finished goods
Work in progress and finished goods are valued at lower of cost or net realisable value. Cost includes raw material cost and a proportion of direct and indirect overheads up to estimated stage of completion. Cost is determined on a weighted average basis.
Traded goods
Traded goods are valued at lower of cost or net realisable value. Cost includes cost of purchase and other cost incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
c. Property, plant and equipment Recognition and initial measurement
All items of property, plant and equipment are initially measured at cost. The cost comprises purchase price, borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent to initial recognition, property, plant and equipment other than freehold land are measured at cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits attributable to such subsequent cost associated with the item will flow to the Company. All other repair and maintenance costs are recognised in statement of profit and loss as incurred.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognised in the statement of profit and loss as incurred.
Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date is disclosed as capital advances under non-current assets.
Capital work-in-progress included in property, plant and equipment are not depreciated as these assets are not yet available for use.
Subsequent measurement (depreciation and useful lives)
Depreciation on property, plant and equipment is provided on the straight-line method arrived on the basis of the useful life prescribed under Schedule II of the Act. The following useful life of assets has been determined by the Company:
Particulars |
Useful life |
Building - Factory |
30 years |
Building - Non-factory |
60 years |
Plant and Equipment |
15 years and 20 years |
Furniture and fixtures |
10 years |
Vehicles |
8 years |
Office equipment |
5 years |
Computer equipment |
3 years and 6 years |
i) Freehold land has an unlimited useful life and therefore is not depreciated.
ii) Leasehold land is amortised over the period of lease.
iii) Leasehold improvements are amortised over the initial period of lease or useful life, whichever is shorter.
The residual values, useful lives and method of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or significant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specific useful life from the month of such addition or, as the case may be, up to the month on which such asset has been sold, discarded, demolished or destroyed or replaced.
De-recognition
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
d. Intangible assets
Recognition and initial measurement
Research and development costs
Expenditure on the research phase of projects is recognised as an expense as incurred. Costs that are directly attributable to a project''s development phase are recognised as intangible assets, provided the Company can demonstrate the following:
⢠the technical feasibility of completing the intangible asset so that it will be available for use.
⢠the management''s intention is to complete the intangible asset and use or sell it
⢠its ability to use or sell the intangible asset
⢠how the intangible asset will generate probable future economic benefits
⢠the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
⢠its ability to measure reliably the expenditure attributable to the intangible asset during its development Development costs not meeting these criteria for capitalisation are expensed as and when incurred.
Directly attributable costs include employee costs incurred on development of prototypes along with an appropriate portion of relevant overheads and borrowing costs.
Other intangibles
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding product development costs, are not capitalised and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Intangible assets under development are not amortized as these assets are not yet available for use. These assets are evaluated for potential impairment on an annual basis or when there are indications that the carrying value is not recoverable. Subsequent measurement (Amortisation and useful lives)
All finite-lived intangible assets, including internally developed intangible assets, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date and any change in the same is accounted for prospectively. The following useful lives are applied:
Particulars |
Useful life |
Patents, trademarks and designs |
7 years |
Product development |
5 years |
Technical know-how |
5 years |
Software |
5 years |
Websites |
2 years |
De-recognition
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
e. Investment properties Recognition and initial measurement
Investment properties are properties held to earn rentals or for capital appreciation, or both. Investment properties are measured initially at their cost of acquisition, including transaction costs. Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Company. All other repair and maintenance costs are recognised in statement of profit and loss as incurred.
Properties held under leases are classified as investment properties when it is held to earn rentals or for capital appreciation or for both, rather than for sale in the ordinary course of business or for use in production or administrative functions.
Subsequent measurement (depreciation and useful lives)
Investment properties are subsequently measured at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation on investment properties is provided on the straight-line method over the lease period of the right-of-use assets.
Though, the Company measures investment properties using cost-based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer applying a valuation model acceptable internationally.
De-recognition
Investment properties are de-recognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds, if any, and the carrying amount of the asset is recognised in the statement of profit and loss in the period of de-recognition.
f. Assets classified as held for sale
Assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell.
Assets classified as held for sale are not depreciated or amortised. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Assets classified as held-for-sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held-for-sale are presented separately from other liabilities in the balance sheet.
g. Impairment of non-financial assets
The carrying amounts of the Company''s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated. Goodwill and intangible assets that have indefinite lives or that are not yet available for use are tested for impairment annually; their recoverable amount is estimated annually each year at the reporting date.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ''cashgenerating unit''). The recoverable amount of an asset or cash-generating unit is the greater of its value in use or its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to benefit from the synergies of the combination. Intangibles with indefinite useful lives are tested for impairment individually.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. Impairment losses are recognised in the statement of profit and loss.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
During the current financial year, the Company has considered it appropriate to undertake the impairment assessment based on certain indicators. With reference to the latest business plan, the decline in operating profits is considered temporary.
Based on management''s impairment assessment, recoverable amount is higher than the carrying amount of property, plant and equipment and hence, no impairment is recognized.
h. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing cost consists of interest, ancillary costs and other costs in connection with the borrowing and also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
i. Foreign and presentation currency
The financial statements are presented in Indian Rupees (INR), which is also the Company''s functional and presentation currency.
Foreign currencies Transactions and balances Initial recognition
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition.
Subsequent measurement
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in the statement of profit and loss in the year in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income ("OCI") or profit or loss are also recognised in OCI or profit or loss, respectively).
Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortised over the remaining life of the concerned monetary item.
All other exchange differences are charged to the statement of profit and loss.
j. Leases
Effective from April 1,2019, the Company has applied Ind AS 116 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under Ind AS 17.
As a lessee
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, Company''s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
- Fixed payments, including in-substance fixed payments;
- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
- Amounts expected to be payable under a residual value guarantee; and
- The exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company''s estimate of the amount expected to be payable under a residual value guarantee, or if Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Company presents right-of-use assets that do not meet the definition of investment property in ''Property, plant and equipment'' and lease liabilities in ''loans and borrowings'' in the statement of financial position.
Short-term leases and leases of low-value assets The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
k. Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial results are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period or each case.
l. Revenue recognition
Revenue is measured at fair value of the consideration received or receivable, exclusive of any trade discounts, volume rebates and any taxes or duties collected on behalf of the government which are levied on sales such as GST etc. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
The Company applies the revenue recognition criteria to each separately identifiable component of the Revenue transaction as set out below:
Sale of goods
Revenue from sale of goods is recognised when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, there is neither continuing managerial involvement with the goods nor effective control over the goods sold, it is probable that economic benefits will flow to the Company, the costs incurred or to be incurred in respect of the transaction can be measured reliably and the amount of revenue can be measured reliably.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price allocated to that performance obligation. The transaction price of goods sold is net of variable consideration on account of discounts. Revenue is disclosed exclusive of goods and services tax.
Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur.
Revenue from services rendered is recognised in the statement of profit and loss over the period the underlying services are performed.
Dividend income
Dividend income is recognised at the time when right to receive the payment is established, which is generally when the shareholders approve the dividend.
Interest income
Interest income is recorded on accrual basis using the effective interest rate ("EIR") method.
Royalty income
Royalty is recognized on an accrual basis based on actual sale of product by the licensee and in accordance with the terms of the relevant agreement.
Research and license fees income
Research and license fees income is recognized on an accrual basis based on actual sale of product by the licensee and in accordance with the term of the relevant agreement.
Export incentives
Export entitlements from government authorities are recognised in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of the exports made by the Company, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
m. Financial instruments
Financial instruments are recognised when the Company becomes a party to the contractual provisions of the instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value. However, trade receivables that do not contain a significant financing component are measured at transaction price.
Recognition and initial measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value.
Subsequent measurement
Financial assets
i. Financial assets carried at amortised cost - A financial instrument is measured at amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
⢠Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method.
ii. Investments in equity instruments of subsidiaries and joint ventures - Investments in equity instruments of subsidiaries and joint ventures are accounted for at cost in accordance with Ind AS 27 Separate Financial Statements.
iii. Financial assets at fair value
Investments in equity instruments other than above - Investments in equity instruments which are held for trading are generally classified as at fair value through profit or loss ("FVTPL"). For all other equity instruments, the Company makes irrevocable choice upon initial recognition, on an instrument to instrument basis, to classify the same either as at fair value through other comprehensive income ("FVOCI") or fair value through profit or loss FVTPL.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company transfers the cumulative gain or loss within equity. Dividends on such investments are recognised in the statement of profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit or loss.
De-recognition of financial assets
A financial asset is primarily de-recognised when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Financial liabilities
Subsequent to initial recognition, all non-derivative financial liabilities, other than derivative liabilities, are subsequently measured at amortised cost using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
n. Investment in subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of these investments, the difference between net disposal proceeds and the carrying amounts are recognised in the statement of profit and loss.
o. Post-employment and other employee benefits Provident fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. The Company has no obligation other than the contribution payable to the Provided Fund. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Gratuity
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company''s net obligation in respect of the gratuity plan (administered through the Life Insurance Corporation of India), which is a defined benefit plan, is calculated by estimating the ultimate cost to the entity of the benefit that employees have earned in return for their service in the current and prior periods. This requires an entity to determine how much benefit is attributable to the current and prior periods and to make estimates (actuarial assumptions) about demographic variables and financial variables that will affect the cost of the benefit. The cost of providing benefits under the defined benefit plan is determined on the basis of actuarial valuation using the projected unit credit method. Actuarial gains/losses resulting from re-measurements of the liability are included in other comprehensive income.
Compensated absences
Compensated absences, which are expected to be utilized within the next 12 months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats compensated absences expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
Other short-term benefits
Expense in respect of other short-term benefits is recognized on the basis of amount paid or payable for the period during which services are rendered by the employees.
p. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events including a bonus issue.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
q. Income taxes
Income tax expense recognized in statement of profit and loss comprises current tax and deferred tax except the ones recognized in other comprehensive income or directly in equity.
Current tax is determined as the tax payable in respect of taxable income for the year and is computed in accordance with the applicable tax regulations. Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognised amounts and where it intends either to settle on a net basis, or to realise the asset and liability simultaneously.
Minimum alternate tax (''MAT'') credit entitlement is recognized as an asset only when and to the extent there is convincing evidence that normal income tax will be paid during the specified period. In the year in which MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the statement of profit and loss and presented as MAT credit entitlement. This is reviewed at each balance sheet date and the carrying amount of MAT credit entitlement is written down to the extent it is not reasonably certain that normal income tax will be paid during the specified period.
Deferred tax is recognized in respect of temporary differences between carrying amount of assets and liabilities for financial reporting purposes and corresponding amount used for taxation purposes. Deferred tax assets on unrealised tax loss are recognized to the extent that it is probable that the underlying tax loss will be utilised against future taxable income. This is assessed based on the Company''s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside statement of profit and loss is recognized outside statement of profit or loss (either in other comprehensive income or in equity).
r. Government grants
Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the group will comply with all the conditions.
Government grants related to the income are deferred and recognised in statement of profit and loss over the period necessary to match them with the cost that are intended to compensate and presented within other income.
Government grants related to property plant and equipment are included in the non-current liabilities as deferred income and are credited to profit and loss on a straight-line basis over the expected life of the related assets and presented within other income.
s. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
Identification of segments
In accordance with Ind AS 108 - Operating Segment, the operating segments used to present segment information are identified on the basis of information reviewed by the Company''s management to allocate resources to the segments and assess their performance. An operating segment is a component of the Company that engages in business activities from which it earns revenues and incurs expenses, including revenues and expenses that relate to transactions with any of the Company''s other components. Results of the operating segments are reviewed regularly by the Board of Director (Managing Director and Chief Financial officer) which has been identified as the chief operating decision maker (CODM), to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.
Allocation of common costs
Common allocable costs are allocated to each segment accordingly to the relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items which are not allocated to any business segment. Segment accounting policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Group as a whole. In accordance with Ind AS 108, Operating Segments, the management has disclosed the segment information in the consolidated financial statements of the Group.
t. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
u. Discontinued operations
A discontinued operation is a component of entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. Statement of profit and loss from discontinued operations comprise the post-tax Statement of profit and loss from discontinued operations and the posttax gain or loss resulting from the measurement and disposal of assets classified as held for sale. Any statement of profit and loss arising from sale or re-measurement of discontinued operations is presented as a part of single line item. Statement of profit and loss from discontinued operations separately in the Statement of profit and loss.
v. Provisions, contingent liabilities and contingent assets
Provisions are recognised when present obligations as a result of past events will probably lead to an outflow of economic resources from the Company and they can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events.
Provisions are measured at the best estimate of expenditure required to settle the present obligation at the reporting date, based on the most reliable evidence, including the risks and uncertainties associated with the present obligation.
In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the balance sheet.
Any amount that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset up to the amount of the related provisions. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Contingent assets are not recognized in the financial statements.
1.4 Significant management judgments in applying accounting policies and estimation uncertainty
The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the related disclosures.
Significant management judgments
Research and developments costs - Management monitors progress of internal research and development projects by using a project management system. Significant judgment is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred. Management also monitors whether the recognition requirements for development costs continue to be met. This is necessary due to inherent uncertainty in the economic success of any product development.
Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the future taxable income against which the deferred tax assets can be utilised.
Provisions, contingent liabilities and contingent assets - The Company is the subject of legal proceedings and tax issues covering a range of matters, which are pending in various jurisdictions. In view of the uncertainty inherent in such matters, it is difficult to predict the final outcome of such matters. The cases and claims against the Company often raise difficult and complex factual and legal issues, which are subject to many uncertainties, including but not limited to the facts and circumstances of each particular case and claim, the jurisdiction and the differences in applicable law. In the normal course of business, management consults with legal counsel and certain other experts on matters related to litigation and taxes. The Company accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated.
Impairment of financial assets - At each balance sheet date, based on historical default rates observed over expected life, the management assesses the expected credit loss on outstanding financial assets.
Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
Significant estimates
Useful lives of depreciable/amortisable assets - Management reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of certain software, IT equipment and other plant and equipment.
Defined benefit obligation - Management''s estimate of the Defined Benefit Obligations (DBO) is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
Fair value measurements
Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument.
1.5 Recent accounting pronouncements (Standard issued but not yet effective):
MCA has vide notification dated March 31,2023 notified Companies (Indian Accounting Standards) Amendment Rules, 2023 (the ''Rules'') which amends certain accounting standards, and are effective April 01,2023.
Amendment to Ind AS 1 "Presentation of Financial Statements"
The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information is material if, together with other information can reasonably be expected to influence decisions of primary users of general- purpose financial statement. The Company does not expect this amendment to have any significant impact in its financial statements.
Amendment to Ind AS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". Entities use measurement techniques and inputs to develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to have any significant impact in its financial statements.
Amendment to Ind AS 12 "Income Taxes"
The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.
Mar 31, 2018
1. Corporate information
Panacea Biotec Limited ("the Company") is a public company incorporated and domiciled in India. The Company''s shares are listed with Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Company is one of India''s leading research based biotechnology companies engaged in the business of research, development, manufacture and marketing of branded pharmaceutical formulations and vaccines. The Company has its registered place of business at Ambala-Chandigarh Highway Lalru-140501, Punjab, India.
1.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards ("Ind AS") as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 (the "Act") read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time.
The financial statements are separate financial statement of the Company. The Company has also prepared consolidated financial statement for the year ended March 31, 2018 in accordance with Ind AS 110 which were also approved by the Board of Directors, along with these financial statements on May30, 2018. Revision to the financial statements is permitted by the Board of Directors after obtaining necessary approvals or at the instance of regulatory authorities, as per provision of the Act.
For all periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Act , read together with paragraph 7 of the Companies (Accounts) Rules, 2014 which is considered as "Previous GAAP". The financial statements for the year ended March 31, 2018 are the first Ind AS financial statements of the Company. As per the principles of Ind AS 101, the transition date to Ind AS is April 01, 2016 and hence the comparatives for the previous year ended March 31, 2017 and balances as on April 01, 2016 have been restated as per the principles of Ind AS, wherever deemed necessary. Refer note 58 for understanding the transition from Previous GAAP to Ind AS and its effect on the Company''s financial position and financial performance.
The financial results have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value :
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments); and
- Defined benefit plans - plan assets measured at fair value.
The significant accounting policies that are used in the preparation of these financial statements are summarised below. These accounting policies are consistently used throughout the periods presented in the financial statements.
1.2 Use of estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in note 1.4. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
1.3 Significant accounting policies
The significant accounting policies that are used in the preparation of these financial statements are summarised below. These accounting policies are consistently used throughout the periods presented in the financial statements.
a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle*
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle*
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
*Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
b) Inventory
Inventories are valued as follows:
Raw material, components, stores and spares
Raw materials (including packing materials), components, stores and spares are valued at lower of cost or net realisable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a weighted average basis. Stores and spares having useful life of more than twelve months are capitalised as "Property, plant and equipment" and are depreciated prospectively over their remaining useful lives in accordance with Ind AS 16.
Work in progress and finished goods
Work in progress and finished goods are valued at lower of cost or net realisable value. Cost includes raw material cost and a proportion of direct and indirect overheads up to estimated stage of completion. Cost is determined on a weighted average basis.
Traded goods
Traded goods are valued at lower of cost or net realisable value. Cost includes cost of purchase and other cost incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
c) Property, plant and equipment Recognition and initial measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost comprises purchase price, borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits attributable to such subsequent cost associated with the item will flow to the Company. All other repair and maintenance costs are recognised in statement of profit or loss as incurred.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of repairs and maintenance are recognised in the statement of profit and loss as incurred.
Subsequent measurement (depreciation and useful lives)
Depreciation on property, plant and equipment is provided on the straight line method arrived on the basis of the useful life prescribed under Schedule II of the Act. The following useful life of assets has been determined by the Company:
i) Leasehold land is amortised over the period of lease
ii) Leasehold improvements are amortised over the initial period of lease or useful life, whichever is shorter.
The residual values, useful lives and method of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or significant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specific useful life from the month of such addition or, as the case may be, up to the month on which such asset has been sold, discarded, demolished or destroyed or replaced.
De-recognition
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
d) Intangible assets
Recognition and initial measurement Research and development costs
Expenditure on the research phase of projects is recognised as an expense as incurred. Costs that are directly attributable to a project''s development phase are recognised as intangible assets, provided the Company can demonstrate the following:
- the technical feasibility of completing the intangible asset so that it will be available for use.
- its intention to complete the intangible asset and use or sell it
- its ability to use or sell the intangible asset
- how the intangible asset will generate probable future economic benefits
- the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
- its ability to measure reliably the expenditure attributable to the intangible asset during its development Development costs not meeting these criteria for capitalisation are expensed as incurred.
Directly attributable costs include employee costs incurred on development of prototypes along with an appropriate portion of relevant overheads and borrowing costs Other intangibles
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding product development costs, are not capitalised and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Subsequent measurement (Amortisation and useful lives)
All finite-lived intangible assets, including internally developed intangible assets, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date and any change in the same is accounted for prospectively. The following useful lives are applied:
De-recognition
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
e) Impairment of non-financial assets
The carrying amounts of the Company''s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated. Goodwill and intangible assets that have indefinite lives or that are not yet available for use are tested for impairment annually; their recoverable amount is estimated annually each year at the reporting date.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ''cash-generating unit''). The recoverable amount of an asset or cash-generating unit is the greater of its value in use or its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The goodwill acquired in a business combination is, for the purpose of impairment testing, allocated to cash-generating units that are expected to benefit from the synergies of the combination. Intangibles with indefinite useful lives are tested for impairment individually.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. Impairment losses are recognised in the statement of profit and loss.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
f) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
g) Foreign and presentation currency
The financial statements are presented in Indian Rupees (INR), which is also the Company''s functional and presentation currency Foreign Currencies Transactions and balances
Initial recognition : Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition.
Subsequent measurement : Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss in the year in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income ("OCI") or profit or loss are also recognised in OCI or profit or loss, respectively). Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortised over the remaining life of the concerned monetary item.
All other exchange differences are charged to the statement of profit and loss.
h) Leases Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased Asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss. Contingent rentals are recognised as expenses in the periods in which they are incurred. Lease management fees, legal charges and other initial direct costs are capitalised.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the useful life of the asset and the lease term. Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term, except in case where lease rentals are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Company''s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
i) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial results are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognized in the financial statements on a recurring basis, Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period or each case. j) Revenue recognition
Revenue is measured at fair value of the consideration received or receivable, exclusive of any trade discounts, volume rebates and any taxes or duties collected on behalf of the government which are levied on sales such as GST, sales tax, value added tax, etc. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
The Company applies the revenue recognition criteria to each separately identifiable component of the Revenue transaction as set out below:
Sale of goods : Revenue from sale of goods is recognised when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, there is neither continuing managerial involvement with the goods nor effective control over the goods sold, it is probable that economic benefits will flow to the Company, the costs incurred or to be incurred in respect of the transaction can be measured reliably and the amount of revenue can be measured reliably.
Revenue from services rendered is recognised in the statement of profit and loss over the period the underlying services are performed. Dividend income : Dividend income is recognised at the time when right to receive the payment is established, which is generally when the shareholders approve the dividend.
Interest income : Interest income is recorded on accrual basis using the effective interest rate ("EIR") method.
Royalty income : Royalty is recognized on an accrual basis based on actual sale of product by the licensee and in accordance with the terms of the relevant agreement.
Research and license fees income : Research and license fees income is recognized on an accrual basis based on actual sale of product by the licensee and in accordance with the term of the relevant agreement.
Export incentives : Export entitlements from government authorities are recognised in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of the exports made by the Company, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. k) Financial instruments
Recognition and initial measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value
Subsequent measurement Financial assets
i) Financial assets carried at amortised cost - A financial instrument is measured at amortised cost if both the following conditions are met:
- The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
- Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method.
ii. Investments in equity instruments of subsidiaries and joint ventures - Investments in equity instruments of subsidiaries and joint ventures are accounted for at cost in accordance with Ind AS 27 Separate Financial Statements.
iii. Financial assets at fair value
- Investments in equity instruments other than above -Investments in equity instruments which are held for trading are generally classified as at fair value through profit or loss ("FVTPL"). For all other equity instruments, the Company makes irrevocable choice upon initial recognition, on an instrument to instrument basis, to classify the same either as at fair value through other comprehensive income ("FVOCI") or fair value through profit or loss FVTPL.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company transfers the cumulative gain or loss within equity. Dividends on such investments are recognised in the statement of profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit or loss. De-recognition of financial assets
A financial asset is primarily de-recognised when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Financial liabilities
Subsequent to initial recognition, all non-derivative financial liabilities, other than derivative liabilities, are subsequently measured at amortised cost using the effective interest method.
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 58 details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected life time losses to be recognised from initial recognition of the receivables. l) Investment in subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of these investments, the difference between net disposal proceeds and the carrying amounts are recognised in the statement of profit and loss. m) Post-employment and other employee benefits Provident fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. The Company has no obligation other than the contribution payable to the Provided Fund. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Gratuity
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company''s net obligation in respect of the gratuity plan (administered through the Life Insurance Corporation of India), which is a defined benefit plan, is calculated by estimating the ultimate cost to the entity of the benefit that employees have earned in return for their service in the current and prior periods. This requires an entity to determine how much benefit is attributable to the current and prior periods and to make estimates (actuarial assumptions) about demographic variables and financial variables that will affect the cost of the benefit. The cost of providing benefits under the defined benefit plan is determined on the basis of actuarial valuation using the projected unit credit method. Actuarial gains/losses resulting from re-measurements of the liability are included in other comprehensive income.
Compensated absences
Compensated absences, which are expected to be utilized within the next 12 months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats compensated absences expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. Other short-term benefits
Expense in respect of other short-term benefits is recognized on the basis of amount paid or payable for the period during which services are rendered by the employees n) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events including a bonus issue.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
o) Taxes
Tax expense recognized in statement of profit and loss comprises the sum of deferred tax and current tax except the ones recognized in other comprehensive income or directly in equity.
Current tax is determined as the tax payable in respect of taxable income for the year and is computed in accordance with relevant tax regulations. Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity).
Minimum alternate tax (''MAT'') credit entitlement is recognized as an asset only when and to the extent there is convincing evidence that normal income tax will be paid during the specified period. In the year in which MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the statement of profit and loss and presented as MAT credit entitlement. This is reviewed at each balance sheet date and the carrying amount of MAT credit entitlement is written down to the extent it is not reasonably certain that normal income tax will be paid during the specified period.
Deferred tax is recognized in respect of temporary differences between carrying amount of assets and liabilities for financial reporting purposes and corresponding amount used for taxation purposes. Deferred tax assets on unrealised tax loss are recognized to the extent that it is probable that the underlying tax loss will be utilised against future taxable income. This is assessed based on the Company''s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside statement of profit and loss is recognized outside statement of profit or loss (either in other comprehensive income or in equity).
p) Government grants
Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the group will comply with all the conditions.
Government grants related to the income are deferred and recognised in statement of profit and loss over the period necessary to match them with the cost that are intended to compensate and presented within other income.
Government grants related to property plant and equipment are included in the non-current liabilities as deferred income and are credited to profit and loss on a straight line basis over the expected life of the related assets and presented within other income. q) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. Identification of segments
In accordance with Ind AS 108 - Operating Segment, the operating segments used to present segment information are identified on the basis of information reviewed by the Company''s management to allocate resources to the segments and assess their performance. An operating segment is a component of the Company that engages in business activities from which it earns revenues and incurs expenses, including revenues and expenses that relate to transactions with any of the Company''s other components. Results of the operating segments are reviewed regularly by the Board of director (chairman and chief financial officer) which has been identified as the chief operating decision maker (CODM), to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.
Allocation of common costs
Common allocable costs are allocated to each segment accordingly to the relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items which are not allocated to any business segment.
Segment accounting policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial results of the Company as a whole. r) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. s) Provisions, contingent liabilities and contingent assets
Provisions are recognised when present obligations as a result of past events will probably lead to an outflow of economic resources from the Company and they can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events.
Provisions are measured at the best estimate of expenditure required to settle the present obligation at the reporting date, based on the most reliable evidence, including the risks and uncertainties associated with the present obligation.
In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognised in the balance sheet.
Any amount that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset up to the amount of the related provisions. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Contingent assets are not recognised.
1.4 Significant management judgments in applying accounting policies and estimation uncertainty
The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the related disclosures.
Significant management judgments
Research and developments costs - Management monitors progress of internal research and development projects by using a project management system. Significant judgment is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred. Management also monitors whether the recognition requirements for development costs continue to be met. This is necessary due to inherent uncertainty in the economic success of any product development.
Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the future taxable income against which the deferred tax assets can be utilised.
Provisions, contingent liabilities and contingent assets - The Company is the subject of legal proceedings and tax issues covering a range of matters, which are pending in various jurisdictions. In view of the uncertainty inherent in such matters, it is difficult to predict the final outcome of such matters. The cases and claims against the Company often raise difficult and complex factual and legal issues, which are subject to many uncertainties, including but not limited to the facts and circumstances of each particular case and claim, the jurisdiction and the differences in applicable law. In the normal course of business, management consults with legal counsel and certain other experts on matters related to litigation and taxes. The Company accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated.
Impairment of financial assets - At each balance sheet date, based on historical default rates observed over expected life, the management assesses the expected credit loss on outstanding financial assets.
Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
Significant estimates
Useful lives of depreciable/amortisable assets - Management reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of certain software, IT equipment and other plant and equipment.
Defined benefit obligation - Management''s estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
Fair value measurements
Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument.
1.5 Standard issued but not yet effective:
a. Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force with effect from April 01, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not expected to be material.
b. Ind AS 115- Revenue from Contract with Customers: On March 28, 2018, Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers..
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors;
- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.
The Company will adopt the Ind AS 115 on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The Company is in the process of identifying the impact of adoption of Ind AS 115.
Mar 31, 2017
1. Corporate information
Panacea Biotec Limited ("the Companyâ) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on both BSE Limited and National Stock Exchange of India Limited. The Company is one of India''s leading research based health management companies engaged in the business of research, development, manufacture and marketing of branded pharmaceutical formulations and vaccines.
2. Basis of Preparation
The financial statements have been prepared on going concern basis under the historical cost basis, in accordance with the generally accepted accounting principles in India and in compliance with the applicable accounting standards ("ASâ) as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended). All assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in the Companies Act, 2013.
2.1 Summary of significant accounting policies
a) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
b) Tangible fixed assets (''Property, plant and equipment'') Tangible fixed assets, except land and buildings are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Revalued assets (land and buildings) are measured at fair value on the revaluation date less accumulated depreciation and impairment losses, if any, recognized after the date of the revaluation. In case of revaluation of tangible fixed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss, in which case the increase is recognized in the statement of profit and loss. A revaluation deficit is recognized in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognized in the revaluation reserve. The amount transferred from revaluation reserve to revenue (general) reserve represent the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on its original cost. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing tangible fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates it over the remaining
life of the asset. In accordance with the Ministry of Corporate Affairs (MCA) circular dated August 09, 2012, exchange differences adjusted to the cost of tangible fixed assets are total differences, arising on long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset, for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.
Gains or losses arising from derecognition of tangible fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
c) Depreciation on tangible fixed assets
Depreciation has been provided on the useful life of its fixed assets as per the useful life prescribed in Schedule II to the Companies Act, 2013. The following useful life of assets has been taken by the Company:
i) Leasehold land is amortized over the period of lease.
ii) Leasehold improvements are amortized over the initial period of lease or useful life, whichever is shorter.
d) Intangibles assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding product development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there is a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Research and development costs: Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the following can be demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the Company''s intention to complete the asset and use or sell it;
- the Company''s ability to use or sell the asset;
- how the asset will generate probable future economic benefits;
- the availability of adequate resources to complete the development and to use or sell the asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized on a straight line basis over the period of expected future benefit from the related asset. Amortization is recognized in the statement of profit and loss. During the period of development, the asset is tested for impairment annually.
A summary of amortization policies applied to the Company''s intangible assets is as below:
Intangible Assets Amortization Period
Patents, trademarks - Amortized over a period of 7 years and designs
Product development - Amortized over a period of 5 years Technical know-how - Amortized over a period of 5 years Software - Amortized over a period of 5 years
Websites - Amortized over a period of 2 years
e) Leases
Where the Company is the Lessee:
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset or the useful life envisaged in Schedule II to the Companies Act, 2013, whichever is lower. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset, the lease term or the useful life envisaged in Schedule II to the Companies Act, 2013. Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Where the Company is the Less or:
Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, the Company apportions lease rentals between the principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the statement of profit and loss. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
f) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company''s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss, except for previously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
g) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from short term foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
h) Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that
i) the Company will comply with the conditions attached to them, and
ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
Where the Company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited to capital reserve and treated as a part of the shareholders'' funds.
i) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. j) Inventories
Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a weighted average basis. Stores and spares having useful life of more than twelve months are capitalized as tangible assets under "Fixed Assetâ and are depreciated prospectively over their remaining useful lives in accordance with Accounting Standards 10 (Revised).
Work-in-progress ("WIPâ) and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost of finished goods and WIP is determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other cost incurred in bringing the inventories to their present location and condition. Cost is determined on weighted basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. k) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
Sales of products - Revenue from domestic sale of goods are recognized on dispatch which coincides with transfer of significant risks and rewards to customer. Revenue from export sales is recognized when the significant risks and rewards of ownership of products are transferred to the customer, which is based upon the terms of the applicable contract. Revenue from product sales is stated exclusive of returns, sales tax and applicable trade discounts and allowances. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Income from services- Revenue from contract manufacturing is recognized as and when services are rendered.
Export benefits - Export benefits income is recognized in statement of profit and loss, when right to receive the benefits amount is established as per terms of relevant scheme.
Royalty income - Royalty income is recognized on an accrual basis based on actual sale of product by the licensee and in accordance with the term of the relevant agreement.
Research and license fees income - Research and license fees income is recognized on an accrual basis based on actual completion of activities and in accordance with the terms of the relevant agreement.
Interest income - Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other incomeâ in the statement of profit and loss.
Dividend income - Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date. l) Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are restated using the exchange rate prevailing at the reporting date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange differences
The Company accounts for exchange differences arising on translation/ settlement of foreign currency monetary items as below:
i) Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset.
ii) Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Accountâ and amortized over the remaining life of the concerned monetary item.
iii) All other exchange differences are recognized as income or as expenses in the period in which they arise.
For the purpose of 1 and 2 above, the Company treats a foreign monetary item as âlong-term foreign currency monetary itemâ, if it has a term of 12 months or more at the date of its origination. In accordance with MCA circular dated August 09, 2012, exchange differences for this purpose, are total differences arising on long-term foreign currency monetary items for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference. m) Retirement and other employee benefits
i) Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
ii) The Company operates a defined benefit plan for its employees, i.e., gratuity. The costs of providing benefits under the plan are determined on the basis of actuarial valuation at each year-end. Actuarial valuation is carried out by using the projected unit credit method. Actuarial gains and losses for defined benefit plan are recognized in full in the period in which they occur in the statement of profit and loss. Gratuity fund is administered through Life Insurance Corporation of India.
iii) Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
iv) The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
n) Income taxes
Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under the Income Tax Act, 1961, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognises unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
Minimum Alternate Tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternate Tax under the Income Tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement.â The Company reviews the "MAT credit entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
o) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any. p) Provisions
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit and loss net of any reimbursement. q) Segment reporting policies
i) Identification of segments:
Primary segment
Business segment: The Company''s operating businesses are organised and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development activities.
Secondary segment
Geographical segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
- Revenue from domestic market includes sales to customers located within India.
- Revenue from overseas market includes sales to customers located outside India.
ii) Allocation of common costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
iii) Unallocated items: Unallocated items include general corporate income and expense items which are not allocated to any business segment.
iv) Segmental accounting policies: The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
r) Cash & cash equivalent
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. s) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized. Direct expenditure incurred during construction period is capitalized as part of the direct construction cost to the extent to which the expenditure is directly related to construction. t) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
c) Terms/right attached to equity shares:
The Company has only one class of equity shares having a par value of Re.1 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board of Directors has not proposed any dividend for current year and previous year. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts including preference shares. The distribution will be in proportion to the number of equity shares held by the equity shareholders.
d) Terms/right attached to 0.5% cumulative non convertible and non participating redeemable preference shares:
The Company has only one class of preference shares having a par value of Rs.10 per share. The Company declares and pays dividends in Indian Rupees. The dividend, if any, proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board of Directors has not proposed any dividend for current year and previous year.
The preference shares have been issued for a period of 10 years with an option with the Company as well as preference shareholders for early redemption of preference shares, provided CDR debts are fully serviced and the Company comes out from purview of CDR system. In the event of liquidation of the Company, the holders of preference shares will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts, in preference to the equity shareholders. The distribution will be in proportion to the number of preference shares held by the preference shareholders.
e) Reconciliation of the equity shares outstanding at the beginning and at the end of the reporting financial year:
Notes :
A. Loans under Corporate Debt Restructuring (CDR) (refer note 46)
1. All the long-term loans and sustainable working capital borrowings from banks have been restructured under the CDR package approved by the Corporate Debt Restructuring Empowered Group (CDR- EG) on September 24, 2014, except foreign currency term loan from Bank of India.
2. The Company had executed Master Restructuring Agreement (MRA)/other definitive documents with all lender banks, except State Bank of Travancore ("SBTâ), on December 27, 2014 with Cut Off Date of October 01, 2013. Under the CDR package, the Company is entitled to reliefs and concessions granted by the banks, effective from the Cut Off Date.
3. Key terms of restructuring of the long-term loans are as under:
i. Tenure: Door to Door 10 Years.
ii. Additional moratorium of 2 years and 2 months from Cut Off Date.
iii. Repayment of loans: 32 structured quarterly installments starting from quarter ending December 2015 till quarter ending September 2023. However, first installment was payable on November 30, 2015 instead of December 31, 2015.
iv. Interest rate: 11% p.a. (floating), linked to base rates of respective Lenders from October 1, 2013 to September 30, 2018, thereafter rate of interest will increase to 13% p.a. linked to base rate of respective lenders w.e.f. October 1, 2018.
v. Interest obligations aggregating Rs.1,156.4 million on (i) restructured long-term loans and the foreign currency term loan from Bank of India for a period of 24 months from Cut Off Date; and (ii) sustainable working capital borrowings for a period of 12 months from Cut Off Date, were converted into Funded Interest Term Loan (FITL).
vi. The dues aggregating to Rs.842.8 million in the working capital borrowings as on the Cut Off Date were converted into Working Capital Term Loan (WCTL).
4. The foreign currency term loan (ECB) from Bank of India of US$ 25.0 million is repayable in three equal yearly installments commencing from financial year 2017-18 onwards.
5. During financial year 2015-16, SBT had assigned all the rights, title and interest in the entire outstanding dues owed by the Company together with all the underlying securities and guarantees, comprising its Rupee term loan and sustainable working capital along with all accrued interest thereon, in favour of Edelweiss Asset Reconstruction Company Limited ("EARCâ) (refer note 46 & 47). These loans were part of CDR. EARC had restructured the entire outstanding of Rs.1,649.5 million for an aggregate principal amount of Rs.1,153.0 million. As a result of restructuring of repayment of interest and principal, total liability of Rs.1,900.0 million shall be repaid as per the following terms:
i. Cut Off date January 01, 2016
ii. Principal payment of Rs.30.5 million to be paid on or before January 31, 2016
iii. Balance principal amount of Rs.1,122.5 million shall be repaid in 29 structured quarterly installments commencing from the quarter ending March 31, 2016 till the quarter ending March 31, 2023
iv. Interest rate shall be 11% p.a. up to September 30, 2018 and 13% p.a. thereafter up to March 31, 2023, payable on quarterly rests along with principal installments.
6. During financial year 2015-16, State Bank of Mysore ("SBMâ) had absolutely assigned all the rights, title and interests in financial assistance granted to the Company, during the year, with all the underlying rights, benefits and obligations in favour of EARC vide assignment agreement dated February 26, 2016. (refer note 46 & 47). These loans were part of CDR. EARC had restructured the entire outstanding of Rs.166.9 million for an aggregate principal amount of Rs.140.0 million. As a result of restructuring of repayment of interest and principal, total liability of Rs.223.3 million shall be repaid as per the following terms:
i. Cut Off date February 26, 2016
ii. Principal amount of Rs.140.0 million shall be repaid in 28 structured quarterly installments commencing from the quarter ending June 30, 2016 till the quarter ending March 31, 2023
iii. Interest rate shall be 11% p.a., payable on quarterly rests along with principal installments.
B. Securities for the long-term loans and sustainable working capital borrowings:
1. The long-term borrowings, except rupee term loans from BIRAC, TDB and DST have been secured by way of (i) first pari-passu charge over entire fixed assets (both present and future) of the Company, by way of mortgage of the immovable properties and hypothecation of all movable fixed assets: and (ii) second pari passu charge over entire current assets (both present and future) of the Company, by way of hypothecation and/or pledge of all current assets including all receivable, finished goods, raw materials, work in progress, consumable stores and spares, book debts and bills receivable.
2. The sustainable working capital facilities (fund based, non-fund based, buyer credits etc.) have been secured by way of (i) first pari-passu charge over entire current assets (both present and future) of the Company, by way of hypothecation and/or pledge of all current assets including all receivable, finished goods, raw materials, work in progress, consumable stores and spares, book debts, bills receivable; and (ii) second pari-passu charge over entire fixed assets (both present and future) of the Company, by way of mortgage of the immovable properties and hypothecation of all movable fixed assets.
3. The long-term borrowings and sustainable working capital facilities, restructured under the CDR package, have been additionally secured by personal guarantees and pledge of equity shares of the Company held by three promoter directors of the Company viz. Mr. Soshil Kumar Jain, Dr. Rajesh Jain and Mr. Sandeep Jain. The personal guarantee and pledge of equity shares of the Company held by Mr. Ravinder Jain and Mr. Sumit Jain are currently pending.
4. The long-term loans and working capital facilities from SBI are additionally secured by way of mortgage of personal property of promoter directors, viz. Mr. Soshil Kumar Jain, Dr. Rajesh Jain and Mr. Sandeep Jain, situated at House No.18 (Middle and Rear Portions), Block No.56, East Park Road, Karol Bagh, New Delhi
5. The details of immovable properties of the Company mortgaged in favour of the CDR Lenders to secure the long-term borrowings and sustainable working capital borrowings as mentioned above, are as under:
i. All parcels of lands admeasuring 96 Bighas 19 Biswas situated at Village Samelheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali), Punjab;
ii. All parcels of land admeasuring 93 Bighas, 12 Biswas and 10 Biswasi situated at Village Samelheri, Sub Registrar Derabassi, District Patiala, Punjab;
iii. All parcels of land admeasuring 26 Bighas 3 biswas comprised in various Khewat/Khatoni Numbers, situated at Village Manpura, Tehsil Baddi, District Solan, Himachal Pradesh;
iv. All parcels of land admeasuring 91 Bighas 1 Biswa, comprised in various Khewat/Khatoni Numbers situated at Village Malpur, Tehsil Baddi, District Solan, Himachal Pradesh;
v. All parcels of Land bearing Plot No. E-4, Phase-2, Area Measuring 9435.66 Sq.Yds., situated at Industrial Area S.A.S. Nagar, District S.A.S. Nagar (Mohali), Punjab;
vi. Flat number 3, 4, 203 and 303 situated at Elite Heights Apartment, at municipal no. 6-3-1238/15/1 & 6-3-1238/16 survey no. 32/1, at Somajiguda, Hyderabad, Telangana;
vii. Industrial plot no. A-24, A-25 and A-27 having land measuring 718.92 sq yds each at Block B-1 Extension and Industrial plot no: E-12 having land measuring 1,372.52 sq yds at Block B-1, situated at Mohan Co-operative Industrial Estate, Mathura Road, New Delhi;
viii. Plot no.35 & 36 measuring 900 sq. yds. each at Silver City Main, Village Bishanpura, MC Zirakpur, Tehsil Dera Bassi, District SAS Nagar (Mohali), Punjab;
ix. 80 flats, i.e., 20 flats comprising in block: A-2 bearing no: 101 to 104, 201 to 201, 301 to 304, 401 to 404 & 501 to 504 each having super area 1495 sqft and 60 flats in block B-10, B-11, B-12 bearing no: 101 to 104, 201 to 201, 301 to 304, 401 to 404 & 501 to 504 each having super area 1161 sqft (30 flats) and super area 1186 sq ft (30 flats) in building built on land measuring 28 bigha 11 biswa in khewat khatoni no: 89/91 comprised in khasra no: 1747(4-12), khewat khatoni no: 168/194 khasra no: 1970/1746 (1-15), 1971/1746(3-0), 1748(9-0) khewat khatoni no: 339/333 khasra no: 1749 (4-11),1750(5-13), kitat 6, village Bhatoli Kalan, Hadbast no: 214, Pargna Dharampura, Tehsil Baddi, District Solan, H.P.
x. Flat no. 201 at Samarpan Complex, village Chakala, Taluka Andheri (East), Mumbai;
xi. Flat no. 401, 601 in A-wing and Flat no. 214 in C-wing situated at Progressive''s Signature Tower, plot no: 53/54 sector-6, Ghansoli, Navi Mumbai;
xii. Residential premises no. 703, 704, 903, 904 and 1001 to 1004 in wing "Bâ of Sagar Heights Building F; and Commercial premises no. 707 to 712, 714 to 718, 808 to 812 and 814 to 818 in Sagar Tech Plaza- Building A, all situated at CTS no . 721/A, 721B, & 721/1 survey no: 14,15,20 52, at village Mohili, Andheri Kurla Road, Andheri (East), Mumbai; and
xiii. Industrial plot no, Gen-72/3, land measuring 5518 sqmts in the Trans Thane Creek Industrial Area, Navi Mumbai.
Mar 31, 2016
to the financial statements for the year ended March 31, 2016
1. Corporate information
Panacea Biotec Limited ("the Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on stock exchanges in India. The Company is one of the India''s leading research based health management companies engaged in the business of research, development, manufacture and marketing of branded Pharmaceutical Formulations and Vaccines. The Company has products for various segments, which include pain management, diabetes management, organ transplantation, oncology and pediatric vaccines.
2. Basis of Preparation
The financial statements have been prepared on going concern basis under the historical cost basis, in accordance with the generally accepted accounting principles in India and in compliance with the applicable accounting standards ("AS") as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended). All assets and liabilities have been classified as current or non-current as per the company''s operating cycle and other criteria set out in the Companies Act, 2013.
2.1 Summary of significant accounting policies
a) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
b) Fixed assets
Fixed assets, except land and buildings are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Revalued assets (land and buildings) are measured at fair value on the revaluation date less accumulated depreciation and impairment losses, if any, recognized after the date of the revaluation. In case of revaluation of fixed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss, in which case the increase is recognized in the statement of profit and loss. A revaluation deficit is recognized in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognized in the revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates it over the remaining life of the asset. In accordance with the Ministry of Corporate Affairs (MCA) circular dated August 09, 2012, exchange differences adjusted to the cost of fixed assets are total differences, arising on long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset, for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.
Gains or losses arising from de recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is de recognized.
c) Depreciation on tangible fixed assets
i) Depreciation has been provided on the useful life of its fixed assets as per the useful life prescribed in Schedule II to the Companies Act, 2013. The following useful life of assets has been taken by the Company:
ii) Leasehold land is amortized over the period of lease.
iii) Leasehold improvements are amortized over the initial period of lease or useful life, whichever is shorter.
d) Intangibles assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding product development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there is a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. Gains or losses arising from de recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Research and development costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the following can be demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the Company''s intention to complete the asset and use or sell it;
- the Company''s ability to use or sell the asset;
- how the asset will generate probable future economic benefits;
- the availability of adequate resources to complete the development and to use or sell the asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized on a straight line basis over the period of expected future benefit from the related asset. Amortization is recognized in the statement of profit and loss. During the period of development, the asset is tested for impairment annually.
A summary of amortization policies applied to the Company''s intangible assets is as below:
Patents, trademarks and - Amortized over a period of 7 years designs
Product development - Amortized over a period of 5 years Technical know-how - Amortized over a period of 5 years Software - Amortized over a period of 5 years
Websites - Amortized over a period of 2 years
e) Leases
Where the Company is the Lessee:
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset or the useful life envisaged in Schedule II to the Companies Act, 2013, whichever is lower. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset, the lease term or the useful life envisaged in Schedule II to the Companies Act, 2013.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Where the Company is the Lessor:
Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, the Company apportions lease rentals between the principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
f) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating units (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company''s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss, except for previously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
g) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from short term foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
h) Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that
(i) the Company will comply with the conditions attached to them, and
(ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
Where the Company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited to capital reserve and treated as a part of the shareholders'' funds.
i) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
j) Inventories
Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a weighted average basis.
Work-in-progress ("WIP") and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost of finished goods and WIP is determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
k) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
Sales of products - Revenue from domestic sale of goods are recognized on dispatch which coincides with transfer of significant risks and rewards to customer. Revenue from export sales is recognized when the significant risks and rewards of ownership of products are transferred to the customer, which is based upon the terms of the applicable contract. Revenue from product sales is stated exclusive of returns, sales tax and applicable trade discounts and allowances. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Income from services- Revenue from contract manufacturing is recognized as and when services are rendered.
Export benefits - Export benefits income is recognized in statement of profit and loss, when right to receive the benefits amount is established as per terms of relevant scheme.
Royalty income - Royalty income is recognized on an accrual basis based on actual sale of product by the licensee and in accordance with the term of the relevant agreement.
Research and license fees income - Research and license fees income is recognized on an accrual basis based on actual completion of activities and in accordance with the terms of the relevant agreement.
Interest income - Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.
Dividend income - Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date.
l) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are restated using the exchange rate prevailing at the reporting date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange differences
The Company accounts for exchange differences arising on translation/ settlement of foreign currency monetary items as below:
(i) Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset.
(ii) Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and Amortized over the remaining life of the concerned monetary item.
(iii) All other exchange differences are recognized as income or as expenses in the period in which they arise.
For the purpose of (i) and (ii) above, the Company treats a foreign monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination. In accordance with MCA circular dated August 09, 2012, exchange differences for this purpose, are total differences arising on long-term foreign currency monetary items for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.
m) Retirement and other employee benefits
(i) Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
(ii) The Company operates a defined benefit plan for its employees, i.e., gratuity. The costs of providing benefits under the plan are determined on the basis of actuarial valuation at each year-end. Actuarial valuation is carried out by using the projected unit credit method. Actuarial gains and losses for defined benefit plan are recognized in full in the period in which they occur in the statement of profit and loss. Gratuity fund is administered through Life Insurance Corporation of India.
(iii) Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
(iv) The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
n) Income taxes
Tax expense comprises current and deferred tax. Current
income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under the Income Tax Act, 1961, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
Minimum Alternate Tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternate Tax under the Income Tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
o) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
p) Provisions
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit and loss net of any reimbursement.
q) Segment reporting policies
(i) Identification of segments:
Primary segment
Business segment: The Company''s operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development activities.
Secondary segment
Geographical segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
- Revenue from domestic market includes sales to customers located within India.
- Revenue from overseas market includes sales to customers located outside India.
(ii) Allocation of common costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(iii) Unallocated items: Unallocated items include general corporate income and expense items which are not allocated to any business segment.
(iv) Segmental accounting policies: The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
r) Cash & cash equivalent
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
s) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized. Direct expenditure incurred during construction period is capitalized as part of the direct construction cost to the extent to which the expenditure is directly related to construction.
t) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Mar 31, 2015
A) Change in Accounting Policy
During the financial year ended March 31, 2014, the Company, with effect
from October 1, 2013, had revised its accounting policy of providing
for depreciation from written down value method to the straight-line
method as the management believed that the straight line method of
depreciation accounting would result in more appropriate presentation
of financial information. The Company had also carried out a technical
evaluation to assess the revised useful life of fixed assets. The change
in the above accounting policy resulted in a surplus of Rs.1,948.3
million relating to the depreciation already charged upto the period
ended September 30, 2013. Out of the total surplus of Rs.1,948.3
million, surplus of Rs.1,770.9 million, was credited to the statement
of profit and loss of the previous year and shown as exceptional income
and the balance surplus of Rs.177.4 million, which was related to the
revalue amount of fixed assets, was credited to the revaluation reserve
during the previous year.
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
c) Fixed assets
Fixed assets, except land and buildings are stated at cost, net of
accumulated depreciation and accumulated impairment losses, if any. The
costs comprises of purchase price, borrowing costs if capitalisation
criteria are met and directly attributable cost of bringing the asset
to its working condition for the intended use. Any trade discounts and
rebates are deducted in arriving at the purchase price.
Revalue assets (land and buildings) are measured at fair value on the
revaluation date less accumulated depreciation and impairment losses,
if any, recognized after the date of the revaluation. In case of
revaluation of fixed assets, any revaluation surplus is credited to the
revaluation reserve, except to the extent that it reverses a
revaluation decrease of the same asset previously recognised in the
statement of profit and loss, in which case the increase is recognized
in the statement of profit and loss. A revaluation deficit is recognized
in the statement of profit and loss, except to the extent that it offsets
an existing surplus on the same asset recognized in the revaluation
reserve.
Subsequent expenditure related to an item of fixed asset is added to its
book value only if it increases the future benefits from the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
statement of profit and loss for the period during which such expenses
are incurred.
The Company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates it over the remaining life of the asset. In accordance with
the Ministry of Company Affairs (MCA) circular dated August 09, 2012,
exchange differences adjusted to the cost of fixed assets are total
differences, arising on long-term foreign currency monetary items
pertaining to the acquisition of a depreciable asset, for the period.
In other words, the Company does not differentiate between exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost and other exchange
difference.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit and
loss when the asset is derecognised.
d) Depreciation on tangible fixed assets
Depreciation has been provided on the useful life of its fixed assets as
per the useful life prescribed in Schedule II to the Companies Act,
2013. The following useful life of assets has been taken by the
company:
i) Leasehold land is amortised over the period of lease.
ii) Leasehold improvements are amortised over the initial period of
lease or useful life, whichever is shorter.
iii) With effect from April 1, 2014, the Company has discontinued the
recoupment of depreciation from revaluation reserve in compliance with
the provisions of Schedule II of the Companies Act, 2013.
e) Intangibles assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding product development costs, are not capitalised and
expenditure is reflected in the statement of profit and loss in the year
in which the expenditure is incurred. The amortisation period and the
amortisation method are reviewed at least at each financial year end. If
the expected useful life of the asset is significantly different from
previous estimates, the amortisation period is changed accordingly. If
there is a significant change in the expected pattern of economic
benefits from the asset, the amortisation method is changed to reflect
the changed pattern. Such changes are accounted for in accordance with
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes
in Accounting Policies. Gains or losses arising from derecognition of
an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are
recognised in the statement of profit and loss when the asset is
derecognised.
Research and development costs - Research costs are expensed as
incurred. Development expenditure incurred on an individual project is
recognised as an intangible asset when the following can be
demonstrated:
- the technical feasibility of completing the intangible asset so that
it will be available for use or sale;
- the Company''s intention to complete the asset and use or sell it;
- the Company''s ability to use or sell the asset;
- how the asset will generate probable future economic benefits;
- the availability of adequate resources to complete the development
and to use or sell the asset; and
- the ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortisation and accumulated impairment
losses. Amortisation of the asset begins when development is complete
and the asset is available for use. It is amortised on a straight line
basis over the period of expected future benefit from the related asset.
Amortisation is recognised in the statement of profit and loss. During
the period of development, the asset is tested for impairment annually.
A summary of amortisation policies applied to the Company''s intangible
assets is as below:
Patents, trademarks and - Amortised over a period of 7 years designs
Product development - Amortised over a period of 5 years
Technical know-how - Amortised over a period of 5 years
Software - Amortised over a period of 5 years
Websites - Amortised over a period of 2 years
f) Leases
Where the Company is the Lessee:
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalised at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognised as finance costs in the statement of profit and loss. Lease
management fees, legal charges and other initial direct costs of lease
are capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule II to the
Companies Act, 2013, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalised asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule II
to the Companies Act, 2013. Leases, where the lessor effectively
retains substantially all the risks and benefits of ownership of the
leased item, are classified as operating leases. Operating lease
payments are recognised as an expense in the statement of profit and
loss on a straight- line basis over the lease term. Where the Company
is the Lesser:
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under finance lease are recognised as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognised in the statement of profit and
loss. Initial direct costs such as legal costs, brokerage costs, etc.
are recognised immediately in the statement of profit and loss. Leases
in which the Company does not transfer substantially all the risks and
benefits of ownership of the asset are classified as operating leases.
Assets subject to operating leases are included in fixed assets. Lease
income on an operating lease is recognised in the statement of profit
and loss on a straight- line basis over the lease term. Costs,
including depreciation, are recognised as an expense in the statement
of profit and loss. Initial direct costs such as legal costs, brokerage
costs, etc. are recognised immediately in the statement of profit and
loss.
g) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. In determining net selling
price, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation
model is used. The Company bases its impairment calculation on
detailed budgets and forecast calculations which are prepared
separately for each of the company''s cash-generating units to which the
individual assets are allocated. These budgets and forecast
calculations are generally covering a period of five years. For longer
periods, a long term growth rate is calculated and applied to project
future cash flows after the fifth year. Impairment losses of continuing
operations, including impairment on inventories, are recognised in the
statement of profit and loss, except for previously revalue tangible
fixed assets, where the revaluation was taken to revaluation reserve.
In this case, the impairment is also recognised in the revaluation
reserve up to the amount of any previous revaluation. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life. An assessment is made at
each reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may have
decreased. If such indication exists, the company estimates the asset''s
or cash- generating unit''s recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset''s recoverable amount since the
last impairment loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the statement of
profit and loss unless the asset is carried at a revalue amount, in
which case the reversal is treated as a revaluation increase.
h) Borrowing costs
Borrowing costs includes interest, amortisation of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from short term foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i) Government grants and subsidies
Grants and subsidies from the government are recognised when there is
reasonable assurance that
i) the Company will comply with the conditions attached to them, and
ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognised as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognised as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the Company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognised at a nominal value.
Government grants of the nature of promoters'' contribution are credited
to capital reserve and treated as a part of the shareholders'' funds.
j) Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. On initial recognition, all
investments are measured at cost. The cost comprises purchase price
and directly attributable acquisition charges such as brokerage, fees
and duties. Current investments are carried at lower of cost and fair
value determined on an individual investment basis. Long- term
investments are carried at cost. However, provision for diminution, in
value is made to recognise a decline other than temporary in the value
of the investments. On disposal of an investment, the difference
between its carrying amount and net disposal proceeds is charged or
credited to the statement of profit and loss.
k) Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realisable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost of raw materials, components
and stores and spares is determined on a weighted average basis.
Work-in-progress ("WIP") and finished goods are valued at lower of cost
and net realisable value. Cost includes direct materials and labor and
a proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost of finished
goods and WIP is determined on a weighted average basis.
Traded goods are valued at lower of cost and net realisable value. Cost
includes cost of purchase and other cost incurred in bringing the
inventories to their present location and condition. Cost is determined
on weighted basis. Net realisable value is the estimated selling price
in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale.
l) Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must also
be met before revenue is recognised: Sales of products - Revenue from
domestic sale of goods are recognised on dispatch which coincides with
transfer of significant risks and rewards to customer. Revenue from
export sales is recognised when the significant risks and rewards of
ownership of products are transferred to the customer, which is based
upon the terms of the applicable contract. Revenue from product sales
is stated exclusive of returns, sales tax and applicable trade
discounts and allowances. The Company collects sales taxes and value
added taxes (VAT) on behalf of the government and, therefore, these are
not economic benefits flowing to the Company. Hence, they are excluded
from revenue. Excise duty deducted from revenue (gross) is the amount
that is included in the revenue (gross) and not the entire amount of
liability arising during the year. Income from services- Revenue from
contract manufacturing is recognised as and when services are rendered.
Export benefits - Export benefits income is recognised in statement of
profit and loss, when right to receive the benefits amount is established
as per terms of relevant scheme. Royalty income - Royalty income is
recognised on an accrual basis based on actual sale of product by the
licensee and in accordance with the term of the relevant agreement.
Research and license fees income - Research and license fees income is
recognised on an accrual basis based on actual completion of activities
and in accordance with the terms of the relevant agreement.
Interest income - Interest income is recognised on a time proportion
basis taking into account the amount outstanding and the applicable
interest rate. Interest income is included under the head "other
income" in the statement of profit and loss.
Dividend income - Dividend income is recognised when the Company''s
right to receive dividend is established by the reporting date.
m) Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are restated using the exchange rate
prevailing at the reporting date. Non-monetary items which are carried
in terms of historical cost denominated in a foreign currency are
reported using the exchange rate at the date of the transaction and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
Exchange differences
The Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:
1. Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalised and
depreciated over the remaining useful life of the asset.
2. Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Difference Account" and amortized over the remaining life of
the concerned monetary item.
3. All other exchange differences are recognised as income or as
expenses in the period in which they arise.
For the purpose of 1 and 2 above, the Company treats a foreign monetary
item as "long-term foreign currency monetary item", if it has a term of
12 months or more at the date of its origination. In accordance with
MCA circular dated August 09, 2012, exchange differences for this
purpose, are total differences arising on long-term foreign currency
monetary items for the period. In other words, the Company does not
differentiate between exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost and other exchange difference.
n) Retirement and other employee benefits
i. Retirement benefit in the form of provident fund is a defend
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognises
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds
the contribution already paid, the deficit payable to the scheme is
recognised as a liability after deducting the contribution already
paid. If the contribution already paid exceeds the contribution due for
services received before the balance sheet date, then excess is
recognised as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
ii. The Company operates a defend benefit plan for its employees, i.e.,
gratuity. The costs of providing benefits under the plan are determined
on the basis of actuarial valuation at each year-end. Actuarial
valuation is carried out by using the projected unit credit method.
Actuarial gains and losses for defend benefit plan are recognised in
full in the period in which they occur in the statement of profit and
loss.
iii. Accumulated leave, which is expected to be utilised within the
next 12 months, is treated as short term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long- term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year-end. Actuarial gains/losses are immediately taken to
the statement of profit and loss and are not deferred. Accumulated
leave, which is expected to be utilised within the next 12 months, is
treated as short-term employee benefit. The Company measures the
expected cost of such absences as the additional amount that it expects
to pay as a result of the unused entitlement that has accumulated at
the reporting date.
o) Income taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively
enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognised for all taxable timing
differences. Deferred tax assets are recognised for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income Tax Act, 1961, no deferred tax (asset or liability) is
recognised in respect of timing differences which reverse during the tax
holiday period, to the extent the Company''s gross total income is
subject to the deduction during the tax holiday period. Deferred tax in
respect of timing differences which reverse after the tax holiday period
is recognised in the year in which the timing differences originate.
However, the Company restricts recognition of deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realised. For
recognition of deferred taxes, the timing differences which originate
first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognised deferred
tax assets. It recognises unrecognised deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-of current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognises MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to be
carried forward. In the year in which the Company recognises MAT credit
as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternative Tax under the Income
Tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
p) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes, if any) by the
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares, if
any.
q) Provisions
A provision is recognised when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of profit and loss net of any reimbursement.
r) Segment reporting policies
(i) Identification of segments:
Primary segment
Business segment: The Company''s operating businesses are organized and
managed separately according to the nature of products, with each
segment representing a strategic business unit that offers different
products.
The identified segments are Vaccines, Formulations and
Research & Development activities.
Secondary segment
Geographical segment: The analysis of geographical segment is based on
the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
Revenue from domestic market includes sales to customers located within
India. Revenue from overseas market includes sales to customers
located outside India.
ii) Allocation of common costs: Common allocable costs are allocated to
each segment on a rational basis based on nature of each such common
cost.
iii) Unallocated items: Unallocated items include general corporate
income and expense items which are not allocated to any business
segment.
iv) Segmental accounting policies: The Company prepares its segment
information in conformity with the accounting policies adopted for
preparing and presenting the financial statements of the Company as a
whole.
s) Cash & cash equivalent
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
t) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalised.
Direct expenditure incurred during construction period is capitalised
as part of the direct construction cost to the extent to which the
expenditure is directly related to construction. u) Contingent
liabilities A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does not
recognise a contingent liability but discloses its existence in the
financial statements.
Mar 31, 2014
A) Change in Accounting Policy
Upto the period ended September 30, 2013, the Company had been
accounting for depreciation on fixed assets based on written down value
method. During the current year, the Company has revised its accounting
policy of providing for depreciation with efect from October 1, 2013,
from written down value method to the straight-line method as the
management believes that the straight line method of depreciation
accounting would result in more appropriate presentation of financial
information. The Company has also carried out a technical evaluation to
assess the revised useful life of fixed assets. The change in the above
accounting policy has resulted in a surplus of Rs.1,948.3 million
relating to the depreciation already charged upto the period ended
September 30, 2013. Out of the total surplus of Rs.1,948.3 million,
surplus of Rs.1,770.9 million has been credited to the statement of
Profit and loss and shown as exceptional income and the balance surplus
of Rs.177.4 million which are related to the revalued amount of fixed
assets has been credited to the revaluation reserve.
Consequently, the net Profit for the current year is higher by
Rs.1,770.9 million. Pursuant to the change in accounting policy w.e.f.
October 1, 2013, a depreciation expense of Rs.643.1 million has been
charged to the statement of Profit and loss and Rs.68.5 million has been
recouped from the revaluation reserve during the current year. Had the
Company followed the written down value basis of depreciation
accounting for the full year ended, the depreciation expense for the
current year would have been higher by Rs.84.5 million and recoupment
to revaluation reserve would have been higher by Rs.29.2 million
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that afect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period.
Although these estimates are based on the management''s best knowledge
of current events and actions, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets or liabilities in future periods.
c) Fixed assets
Fixed assets, except land and buildings are stated at cost, net of
accumulated depreciation and accumulated impairment losses, if any. The
cost comprises purchase price, borrowing costs if capitalization
criteria are met and directly attributable cost of bringing the asset
to its working condition for the intended use. Any trade discounts and
rebates are deducted in arriving at the purchase price.
During the year ended March 31, 2012, the Company revalued its land and
buildings existing as on that date. These land and buildings are
measured at fair value on the revaluation date less accumulated
depreciation and impairment losses, if any, recognized after the date
of the revaluation. In case of revaluation of fixed assets, any
revaluation surplus is credited to the revaluation reserve, except to
the extent that it reverses a revaluation decrease of the same asset
previously recognized in the statement of Profit and loss, in which case
the increase is recognized in the statement of Profit and loss. A
revaluation defcit is recognized in the statement of Profit and loss,
except to the extent that it ofsets an existing surplus on the same
asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to its
book value only if it increases the future benefits from the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
statement of Profit and loss for the period during which such expenses
are incurred.
The Company adjusts exchange diferences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset. In
accordance with MCA circular dated August 09, 2012, exchange diferences
adjusted to the cost of fixed assets are total diferences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset, for the period. In other words, the Company
does not diferentiate between exchange diferences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost and other exchange diference.
Gains or losses arising from derecognition of fixed assets are measured
as the diference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of Profit and
loss when the asset is derecognised.
d) Depreciation on tangible fixed assets
i) Depreciation on fixed assets is calculated on Straight line method
using the rates based on the useful lives estimated by the management,
or those prescribed under the Schedule XIV to the Companies Act, 1956,
whichever is higher. However, during the year depreciation on fixed
assets for the six months period September 30, 2013 was calculated on
written down value method (as explained in 2.1 (a) above) using the
rates based on the useful lives estimated by the management, or those
prescribed under the Schedule XIV to the Companies Act, 1956, whichever
were higher. The Company has used following rates:
e) Intangibles assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is refected in the statement of Profit and loss in the year
in which the expenditure is incurred. The amortization period and the
amortization method are reviewed at least at each financial year end. If
the expected useful life of the asset is significantly diferent from
previous estimates, the amortization period is changed accordingly. If
there has been a significant change in the expected pattern of economic
benefits from the asset, the amortization method is changed to refect
the changed pattern. Such changes are accounted for in accordance with
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes
in Accounting Policies. Gains or losses arising from derecognition of
an intangible asset are measured as the diference between the net
disposal proceeds and the carrying amount of the asset and are
recognized in the statement of Profit and loss when the asset is
derecognised.
Research and development costs - Research costs are expensed as
incurred. Development expenditure incurred on an individual project is
recognized as an intangible asset when the following can be
demonstrated:
- the technical feasibility of completing the intangible asset so that
it will be available for use or sale;
- the Company''s intention to complete the asset and use or sell it;
- the Company''s ability to use or sell the asset;
- how the asset will generate probable future economic benefits;
- the availability of adequate resources to complete the development
and to use or sell the asset; and
- the ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized on a straight line
basis over the period of expected future benefit from the related asset.
Amortization is recognized in the statement of Profit and loss. During
the period of development, the asset is tested for impairment annually.
A summary of amortization policies applied to the Company''s
intangible assets is as below:
Patents, Trademarks & - Amortized over a period of 7 years Designs
Product Development - Amortized over a period of 5 years Technical
Know-how - Amortized over a period of 5 years Software - Amortized over
a period of 5 years
Websites - Amortized over a period of 2 years
f) Leases
Where the Company is the Lessee
Finance leases, which efectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognized as finance costs in the statement of Profit and loss. Lease
management fees, legal charges and other initial direct costs of lease
are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor efectively retains substantially all the risks
and benefits of ownership of the leased item, are classifed as operating
leases. Operating lease payments are recognized as an expense in the
statement of Profit and loss on a straight- line basis over the lease
term. Where the Company is the Lessor
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classifed as finance leases.
Assets given under finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognized in the statement of Profit and
loss. Initial direct costs such as legal costs, brokerage costs, etc.
are recognized immediately in the statement of Profit and loss. Leases
in which the Company does not transfer substantially all the risks and
benefits of ownership of the asset are classifed as operating leases.
Assets subject to operating leases are included in fixed assets. Lease
income on an operating lease is recognized in the statement of Profit
and loss on a straight- line basis over the lease term. Costs,
including depreciation, are recognized as an expense in the statement
of Profit and loss. Initial direct costs such as legal costs, brokerage
costs, etc. are recognized immediately in the statement of Profit and
loss.
g) Impairment of tangible and intangible assets
The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that refects current market assessments of the
time value of money and the risks Specific to the asset. In determining
net selling price, recent market transactions are taken into account,
if available. If no such transactions can be identified, an appropriate
valuation model is used. The company bases its impairment calculation
on detailed budgets and forecast calculations which are prepared
separately for each of the company''s cash-generating units to which the
individual assets are allocated. These budgets and forecast
calculations are generally covering a period of five years. For longer
periods, a long term growth rate is calculated and applied to project
future cash flows after the ffth year. Impairment losses of continuing
operations, including impairment on inventories, are recognized in the
statement of Profit and loss, except for previously revalued tangible
fixed assets, where the revaluation was taken to revaluation reserve.
In this case, the impairment is also recognized in the revaluation
reserve up to the amount of any previous revaluation. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life. An assessment is made at
each reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the company estimates the asset''s
or cash- generating unit''s recoverable amount. A previously recognized
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset''s recoverable amount since the
last impairment loss was recognized. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognized for the
asset in prior years. Such reversal is recognized in the statement of
Profit and loss unless the asset is carried at a revalued amount, in
which case the reversal is treated as a revaluation increase.
h) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
diferences arising from short term foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i) Government grants and subsidies
Grants and subsidies from the government are recognized
when there is reasonable assurance that
i) the Company will comply with the conditions attached to
them, and ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of Profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset.
Where the Company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited
to capital reserve and treated as a part of the shareholders'' fund.
j) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classifed as current investments. All other investments are
classifed as long-term investments. On initial recognition, all
investments are measured at cost. The cost comprises purchase price
and directly attributable acquisition charges such as brokerage, fees
and duties. Current investments are carried at lower of cost and fair
value determined on an individual investment basis. Long- term
investments are carried at cost. However, provision for diminution, in
value is made to recognize a decline other than temporary in the value
of the investments. On disposal of an investment, the diference
between its carrying amount and net disposal proceeds is charged or
credited to the statement of Profit and loss.
k) Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the fnished products in which they will be incorporated are
expected to be sold at or above cost. Cost of raw materials, components
and stores and spares is determined on a weighted average basis.
Work-in-progress and fnished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of fnished goods includes excise duty. Cost of fnished
goods and WIP is determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other cost incurred in bringing the
inventories to their present location and condition. Cost is determined
on weighted basis. Net realizable value is the estimated selling price
in the ordinary course of business, less estimated costs of completion
and estimated costs necessary to make the sale.
l) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will fow to the Company and the revenue can be
reliably measured. The following Specific recognition criteria must also
be met before revenue is recognized: Sales of products - Revenue from
domestic sale of goods is recognized on dispatch which coincides with
transfer of significant risks and rewards to customer. Revenue from
export sales is recognized when the significant risks and rewards of
ownership of products are transferred to the customer, which is based
upon the terms of the applicable contract. Revenue from product sales
is stated exclusive of returns, sales tax and applicable trade
discounts and allowances. The Company collects sales taxes and value
added taxes (VAT) on behalf of the government and, therefore, these are
not economic benefits fowing to the Company. Hence, they are excluded
from revenue. Excise duty deducted from revenue (gross) is the amount
that is included in the revenue (gross) and not the entire amount of
liability arising during the year. Income from services- Revenue from
contract manufacturing is recognized as and when services are rendered.
Export benefits - Export benefits income is recognized in statement of
Profit and loss, when right to receive the benefits amount is
established as per terms of relevant scheme. Royalty income -
Royalty income is recognized on an accrual basis based on actual sale
of product by the licensee and in accordance with the term of the
relevant agreement. Research and license fees
income - Research and license fees income is recognized on an accrual
basis based on actual completion of activities and in accordance with
the terms of the relevant agreement.
Interest income - Interest income is recognized on a time proportion
basis taking into account the amount outstanding and the applicable
interest rate. Interest income is included under the head "other
income" in the statement of Profit and loss.
Dividend income - Dividend income is recognized when the Company''s
right to receive dividend is established by the reporting date. m)
Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction. Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items which are
carried in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
Exchange diferences
The Company accounts for exchange diferences arising on translation/
settlement of foreign currency monetary items as below:
1. Exchange diferences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.
2. Exchange diferences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Diference Account" and amortized over the remaining life of
the concerned monetary item.
3. All other exchange diferences are recognized as income or as
expenses in the period in which they arise.
For the purpose of 1 and 2 above, the Company treats a foreign monetary
item as "long-term foreign currency monetary item", if it has a term of
12 months or more at the date of its origination. In accordance with
MCA circular dated August 09, 2012, exchange diferences for this
purpose, are total diferences arising on long-term foreign currency
monetary items for the period. In other words, the Company does not
diferentiate between exchange diferences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost and other exchange diference. n) Retirement and other
employee benefits
i. Retirement benefit in the form of provident fund is a Defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as expenditure,
when an employee renders the related service. If the contribution
payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the defcit payable to
the scheme is recognized as a liability after deducting the
contribution already paid. If the contribution already paid
exceeds the contribution due for services received before the
balance sheet date, then excess is recognized as an asset to the
extent that the pre payment will lead to, for example, a reduction
in future payment or a cash refund.
ii. The Company operates a Defined benefit plan for its employees,
viz., gratuity. The costs of providing benefits under the plan are
determined on the basis of actuarial valuation at each year-end.
Actuarial valuation is carried out by using the projected unit
credit method. Actuarial gains and losses for Defined benefit plan
are recognized in full in the period in which they occur in the
statement of Profit and loss.
iii. Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short term employee benefit. The
Company measures the expected cost of such absences as the additional
amount that it expects to pay as a result of the unused entitlement
that has accumulated at the reporting date. iv. The Company treats
accumulated leave expected to be carried forward beyond twelve months,
as long-term employee benefit for measurement purposes. Such long- term
compensated absences are provided for based on the actuarial valuation
using the projected unit credit method at the year-end. Actuarial
gains/losses are immediately taken to the statement of Profit and loss
and are not deferred. Accumulated leave, which is expected to be
utilized within the next 12 months, is treated as short-term employee
benefit. The Company measures the expected cost of such absences as the
additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting date. The Company
presents the entire leave as a current liability in the balance sheet,
since it does not have an unconditional right to defer its settlement
for 12 months after the reporting date. o) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes refect the impact of timing diferences between
taxable income and accounting income originating during the current
year and reversal of timing diferences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
diferences. Deferred tax assets are recognized for deductible timing
diferences only to the extent that there is reasonable certainty that
sufcient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
Profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing diferences which
reverse during the tax holiday period, to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing diferences which reverse
after the tax holiday period is recognized in the year in which the
timing diferences originate. However, the Company restricts recognition
of deferred tax assets to the extent that it has become reasonably
certain or virtually certain, as the case may be, that sufcient future
taxable income will be available against which such deferred tax assets
can be realized. For recognition of deferred taxes, the timing
diferences which originate frst are considered to reverse frst.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufcient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufcient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufcient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are ofset, if a
legally enforceable right exists to set-of current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of Profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to be
carried forward. In the year in which the Company recognizes MAT credit
as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of Profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
p) Earnings per share
Basic earnings per share are calculated by dividing the net Profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes, if any) by the
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
Profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the efects of all dilutive potential equity shares, if
any.
q) Provisions
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount
of the obligation. Provisions are not discounted to their present value
and are determined based on the best estimate required to settle the
obligation at the reporting date. These estimates are reviewed at each
reporting date and adjusted to refect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of Profit and loss net of any reimbursement. r)
Segment reporting policies (i) Identifcation of segments:
Primary segment
Business segment: The Company''s operating businesses are organized and
managed separately according to the nature of products, with each
segment representing a strategic business unit that ofers diferent
products.
The identified segments are Vaccines, Formulations and Research &
development activities.
Secondary segment
Geographical segment: The analysis of geographical segment is based
on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
Revenue from domestic market includes sales to customers located within
India. Revenue from overseas market includes sales to customers
located outside India. ii) Allocation of common costs: Common
allocable costs are allocated to each segment on a rational basis based
on nature of each such common cost.
iii) Unallocated items: Unallocated items include general corporate
income and expense items which are not allocated to any business
segment.
iv) Segmental accounting policies: The Company prepares its
segment information in conformity with the accounting policies adopted
for preparing and presenting the financial statements of the Company as
a whole.
s) Cash & cash equivalent
Cash and cash equivalents for the purposes of cash fow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
t) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized.
Direct expenditure incurred during construction period is capitalized
as part of the direct construction cost to the extent to which the
expenditure is directly related to construction. u) Contingent
liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
Notes :
a) Foreign currency term loan from Bank of India carries interest @ 6
months LIBOR plus 4.75% p.a. The loan is repayable in three equal
yearly installments commencing at the end of sixth year from the date
of frst draw down [i.e. in financial year 2017-18] .
b) Indian rupee term loans (I, II and III) from State Bank of India
carry interest @ base rate plus 5.9%, 5.2% and 5.5% p.a. respectively
and are repayable in twelve quarterly installments commencing from
June''14.
c) Indian rupee term loan from State Bank of Travancore carry interest
@ base rate plus 7.5% p.a. and is repayable in twelve quarterly
installments commencing from June''14.
d) Indian rupee term loan from Indian Overseas Bank carries interest @
4.25% p.a. above base rate. This loan is repayable in eight equal
quarterly installments commencing from March''14.
e) Above Foreign currency term loan and Indian rupee term loans taken
from banks are secured by way of frst pari-passu charge by
hypothecation of the Company''s entire movable and immovable fixed
assets, both present and future including mortgage of immovable
properties of the Company being land admeasuring 96 bighas, 19 biswas &
93 bighas 12 biswas & 10 biswas situated at village Samalheri, Tehsil
Dera Bassi, District S.A.S. Nagar (Mohali), Punjab and land admeasuring
26 bighas, 3 biswas situated at Village Manpura, Tehsil Nalagarh,
District Solan and land admeasuring 91 bighas, 1 biswas situated at
Village Malpura, Tehsil Nalagarh, District Solan in the state of
Himachal Pradesh and land admeasuring 9435.66 sq yards situated at
Indl. Plot No.E-4, PH-2, Indl. Area, S.A.S Nagar, (Mohali), Punjab .
These loans, except loan from State Bank of Travancore are also
collaterally secured by second pari-passu charge on the entire current
assets of the company and personal guarantees of the promoter-
directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder
Jain, Dr. Rajesh Jain and Mr. SandeepJain.
f) Indian rupee term loans from Government of India through Department
of Biotechnology are project Specific loans which carry interest @ 2.00%
p.a. These loans are repayable in ten equal half-yearly installments.
The repayment of these loans would commence from one year after the
completion of the respective projects.
g) Secured term loans from Government of India through Department of
Biotechnology are secured by way of hypothecation of the Company''s all
equipment, apparatus, machineries, machineries spares, tools and other
accessories, goods and/or other movable property present and future by
way of frst charge on pari-passu basis.
h) Indian rupee term loans from Government of India through Technology
Development Board is a project Specific loan which carry interest @
5.00% p.a. The loan is repayable in nine equal half-yearly installments
commencing from January''15.
i) Secured term loan from Government of India through Technology
Development Board is secured by way of frst pari-passu charge on the
whole of the moveable properties of the borrower including its movable
plant & machinery, machinery spares, tools & accessories & other
moveables both present & future except book debts and mortgage of
immovable properties of the Company being land admeasuring 1011.11 sq.
yards, situated at Plot no. 37, Sector 21-A, Urban Estate Faridabad,
Haryana. The loan is also collaterally secured by personal guarantees
of the promoter-directors of the Company, viz. Mr. Soshil Kumar Jain,
Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep Jain.
j) Indian rupee term loan from Government of India, through Department
of Science & Technology is a project Specific loan which carries
interest @ 3.00% p.a. The loan is repayable in ten equal annual
installments which would commence from September''2012.
k) For details of application fled for Comprehensive Debt
Restructuring, refer note 48 and for details of amount and period of
defaults in repayment of loan installments and interests for each loan,
refer note 49.
* Maharashtra State Electricity Distribution Company Limited [MSEDCL]
served a demand notice to the company on account of wrong tarif rates
applied for the power consumption at its research and development
center located at Navi Mumbai. Company contested the matter in Consumer
Grievance Redrassal Forum [CGRF] of MSEDCLwhich had already given
decision in favour of the Company. However, MSEDCL challenged the
decision and fle the case with Mumbai High Court. During the current
year, High court has passed a favourable order for the company.
However, the MSEDCL has further challenged the decision of High Court
and moved the matter to Honorable Supreme Court. Provision of Rs.10.0
million has been accounted for in the books of accounts pertaining to
this notice on a conservative basis.
c) Working capital loan from bank carries interest @13.25 to 13.75%
p.a.
d) Deposits from public carries interest @ 8% to 9% p.a.
e) Loans & deposits from related parties carries interest @ 8% to 9.5%
p.a.
f) Cash credits, Buyers'' credits & Working capital loan from banks are
secured by way of frst pari-passu charge by hypothecation of all
current assets and also by way of second pari- passu charge on all the
movable fixed assets (including machinery and spares) and immovable
properties of the Company, both present and future including land
admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 biswas
situated at village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar
(Mohali), Punjab and land admeasuring 26 bighas, 3 biswas situated at
Village Manpura, Tehsil Nalagarh, District Solan and land admeasuring
91 bighas, 1 biswas situated at Village Malpura, Tehsil Nalagarh,
District Solan in the state of Himachal Pradesh and land admeasuring
9435.66 sq yards situated at Indl. Plot No. E-4, PH-2, Indl. Area,
S.A.S. Nagar, (Mohali ), Punjab. These are also collaterally secured by
personal guarantees of the promoter- directors of the Company, viz Mr.
Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep
Jain.
g) For details of application fled for Comprehensive Debt
Restructuring, refer note 48 and for details of amount and period of
defaults in repayment of loan installments and interests for each loan,
refer note 49.
Notes :
1. The Company revalued freehold land, leasehold land and buildings on
1 April 2011, at the fair values determined by an independent external
valuer in the previous year. The valuer determined the fair value by
reference to market-based evidence. This means that valuations
performed by the valuer were based on active market prices, adjusted
for any diference in the nature, location or condition of the Specific
property. The historical cost of freehold land, leasehold land and
building fair valued by the Company was Rs.306.1 million, Rs.54.8
million and Rs.1,957.3 million respectively and their fair value were
Rs.2,517.7 million, Rs.207.9 million and Rs.3,010.0 million
respectively. Hence, the revaluation resulted in an increase in the
book value of freehold land, leasehold land and building by Rs.2,211.6
million, Rs.155.5 million and Rs.1,579.4 million respectively which was
credited to revaluation reserve [Refer note 4]. In accordance with the
option given in the guidance note on accounting for depreciation in
companies, the Company recoups depreciation on revaluation of these
assets out of revaluation reserve.
2. Plant & Machinery includes Plant & Machinery amounting to Rs.2.1
million (Previous year Rs.2.5 million) (net block) lying with third
parties.
3. For assets given on operating lease, refer note 36(i) (a).
* Exchange diferences capitalized during the year (refer note 50).
Mar 31, 2013
A) Use of estimates
The preparation of fnancial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that afect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
b) Fixed assets
Fixed assets, except land and buildings are stated at cost, net of
accumulated depreciation and accumulated impairment losses, if any. The
cost comprises purchase price, borrowing costs if capitalization
criteria are met and directly attributable cost of bringing the asset
to its working condition for the intended use. Any trade discounts and
rebates are deducted in arriving at the purchase price.
During the year ended March 31, 2012, the company revalued its land and
buildings existing as on that date. These land and buildings are
measured at fair value on the revaluation date less accumulated
depreciation and impairment losses, if any, recognized after the date
of the revaluation. In case of revaluation of fxed assets, any
revaluation surplus is credited to the revaluation reserve, except to
the extent that it reverses a revaluation decrease of the same asset
previously recognized in the statement of proft and loss, in which case
the increase is recognized in the statement of proft and loss. A
revaluation defcit is recognized in the statement of proft and loss,
except to the extent that it ofsets an existing surplus on the same
asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fxed asset is added to its
book value only if it increases the future benefts from the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fxed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
statement of proft and loss for the period during which such expenses
are incurred.
The company adjusts exchange diferences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset. In
accordance with MCA circular dated August 09, 2012, exchange diferences
adjusted to the cost of fxed assets are total diferences, arising on
long-term foreign currency monetary items pertaining to the acquisition
of a depreciable asset, for the period. In other words, the company
does not diferentiate between exchange diferences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to
the interest cost and other exchange diference.
Gains or losses arising from derecognition of fxed assets are measured
as the diference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of proft and
loss when the asset is derecognized.
c) Depreciation on tangible fxed assets
i) Depreciation on fxed assets is calculated on written down value
method using the rates based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company has used following rates:
ii) Leasehold land is amortized over the period of lease (i.e 63 years
to 95 years).
iii) Leasehold improvements are amortized over the initial period of
lease or useful life, whichever is shorter.
d) Intangibles assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is refected in the statement of proft and loss in the year
in which the expenditure is incurred.
The amortization period and the amortization method are reviewed at
least at each fnancial year end. If the expected useful life of the
asset is signifcantly diferent from previous estimates, the
amortization period is changed accordingly. If there has been a
signifcant change in the expected pattern of economic benefts from the
asset, the amortization method is changed to refect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Proft or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the diference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
proft and loss when the asset is derecognized.
Research and development costs - Research costs are expensed as
incurred. Development expenditure incurred on an individual project is
recognized as an intangible asset when the following can be
demonstrated: the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
the Company''s intention to complete the asset and use or sell it;
the Company''s ability to use or sell the asset;
how the asset will generate probable future economic benefts;
the availability of adequate resources to complete the development and
to use or sell the asset; and
the ability to measure reliably the expenditure attributable to the
intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. Amortization of the asset begins when development is complete
and the asset is available for use. It is amortized on a straight line
basis over the period of expected future beneft from the related asset.
Amortization is recognized in the statement of proft and loss. During
the period of development, the asset is tested for impairment annually.
e) A summary of amortization policies applied to the company''s
intangible assets is as below:
Patents, Trademarks & - Amortized over a period of 7 years Designs
Product Development - Amortized over a period of 5 years
Technical Know-how - Amortized over a period of 5 years
Software - Amortized over a period of 5 years
Websites - Amortized over a period of 2 years
f) Leases
Where the Company is the Lessee
Finance leases, which efectively transfer to the company substantially
all the risks and benefts incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the fnance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognized as fnance costs in the statement of proft and loss. Lease
management fees, legal charges and other initial direct costs of lease
are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor efectively retains substantially all the risks
and benefts of ownership of the leased item, are classifed as operating
leases. Operating lease payments are recognized as an expense in the
statement of proft and loss on a straight- line basis over the lease
term.
Where the Company is the Lessor
Leases in which the company transfers substantially all the risks and
benefts of ownership of the asset are classifed as fnance leases.
Assets given under fnance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the fnance
lease. The interest income is recognized in the statement of proft and
loss. Initial direct costs such as legal costs, brokerage costs, etc.
are recognized immediately in the statement of proft and loss.
Leases in which the company does not transfer substantially all the
risks and benefts of ownership of the asset are classifed as operating
leases. Assets subject to operating leases are included in fxed assets.
Lease income on an operating lease is recognized in the statement of
proft and loss on a straight- line basis over the lease term. Costs,
including depreciation, are recognized as an expense in the statement
of proft and loss. Initial direct costs such as legal costs, brokerage
costs, etc. are recognized immediately in the statement of proft and
loss.
g) Impairment of tangible and intangible assets
Impairment loss, if any is provided to the extent, the carrying amount
of assets exceeds their recoverable amount. Recoverable amount is
higher of an asset''s net selling price and its value in use. Value in
use is the present value of estimated future cash fows expected to
arise from the continuing use of an asset and from its disposal at the
end of its useful life.
Assessment is done at each balance sheet date as to whether there is
any indication that an impairment loss recognized for an asset in prior
accounting periods may no longer exist or may have decreased.
Impairment losses, including impairment on inventories, are recognized
in the statement of proft and loss, except for previously revalued
tangible fxed assets, where the revaluation was taken to revaluation
reserve. In this case, the impairment is also recognized in the
revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
h) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
diferences arising from short term foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i) Government grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that
(i) the company will comply with the conditions attached to them, and
(ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of proft and
loss over the periods necessary to match them with the related costs,
which they are intended to compensate. Where the grant relates to an
asset, it is recognized as deferred income and released to income in
equal amounts over the expected useful life of the related asset.
Where the company receives non-monetary grants, the asset is accounted
for on the basis of its acquisition cost. In case a non-monetary asset
is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited
to capital reserve and treated as a part of the shareholders'' funds.
j) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classifed as current investments. All other investments are
classifed as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried at lower of cost and fair value
determined on an individual investment basis. Long- term investments
are carried at cost. However, provision for diminution, in value is
made to recognize a decline other than temporary in the value of the
investments.
On disposal of an investment, the diference between its carrying amount
and net disposal proceeds is charged or credited to the statement of
proft and loss. k) Inventories
Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the fnished products in which they will be incorporated are
expected to be sold at or above cost. Cost of raw materials, components
and stores and spares is determined on a weighted average basis.
Work-in-progress and fnished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of fnished goods includes excise duty and is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
l) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefts will fow to the Company and the revenue can be
reliably measured. The following specifc recognition criteria must also
be met before revenue is recognized:
Sales of products - Revenue from domestic sale of goods is recognized
on dispatch which coincides with transfer of signifcant risks and
rewards to customer. Revenue from export sales is recognized when the
signifcant risks and rewards of ownership of products are transferred
to the customer, which is based upon the terms of the applicable
contract. Revenue from product sales is stated exclusive of returns,
sales tax and applicable trade discounts and allowances. The company
collects sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefts fowing to the
company. Hence, they are excluded from revenue. Excise duty deducted
from revenue (gross) is the amount that is included in the revenue
(gross) and not the entire amount of liability arising during the year.
Income from services- Revenue from contract manufacturing is recognized
as and when services are rendered.
Export benefts - Export benefts income is recognized in statement of
proft and loss, when right to receive the benefts amount is established
as per terms of relevant scheme.
Royalty income - Royalty income is recognized on an accrual basis based
on actual sale of product by the licensee and in accordance with the
term of the relevant agreement.
Lease rent - Lease rent is recognized on an accrual basis in accordance
with the term of the relevant agreement.
Research and license fees income - Research and license fees income is
recognized on an accrual basis based on actual completion of activities
and in accordance with the terms of the relevant agreement.
Interest income - Interest income is recognized on a time proportion
basis taking into account the amount outstanding and the applicable
interest rate. Interest income is included under the head "other
income in the statement of proft and loss.
Dividend income - Dividend income is recognized when the company''s
right to receive dividend is established by the reporting date.
m) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items which are
carried in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
Exchange diferences
The company accounts for exchange diferences arising on translation/
settlement of foreign currency monetary items as below:
1. Exchange diferences arising on long-term foreign currency monetary
items related to acquisition of a fxed asset are capitalized and
depreciated over the remaining useful life of the asset.
2. Exchange diferences arising on other long-term foreign currency
monetary items are accumulated in the "Foreign Currency Monetary Item
Translation Diference Account and amortized over the remaining life of
the concerned monetary item.
3. All other exchange diferences are recognized as income or as
expenses in the period in which they arise.
For the purpose of 1 and 2 above, the company treats a foreign monetary
item as "long-term foreign currency monetary itemÂ, if it has a term of
12 months or more at the date of its origination. In accordance with
MCA circular dated August 09, 2012, exchange diferences for this
purpose, are total diferences arising on long-term foreign currency
monetary items for the period. In other words, the company does not
diferentiate between exchange diferences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost and other exchange diference.
n) Retirement and other employee benefts
i. Retirement beneft in the form of provident fund is a defned
contribution scheme. The company has no obligation, other than the
contribution payable to the provident fund. The company recognizes
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds
the contribution already paid, the defcit payable to the scheme is
recognized as a liability after deducting the contribution already
paid. If the contribution already paid exceeds the contribution due for
services received before the balance sheet date, then excess is
recognized as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
ii. The Company operates a defned beneft plan for its employees, viz.,
gratuity. The costs of providing benefts under the plan are determined
on the basis of actuarial valuation at each year-end. Actuarial
valuation is carried out by using the projected unit credit method.
Actuarial gains and losses for defned beneft plan are recognized in
full in the period in which they occur in the statement of proft and
loss.
iii. The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee beneft for
measurement purposes. Such long- term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year-end. Actuarial gains/losses are immediately taken to
the statement of proft and loss and are not deferred. Accumulated
leave, which is expected to be utilized within the next 12 months, is
treated as short-term employee beneft. The company measures the
expected cost of such absences as the additional amount that it expects
to pay as a result of the unused entitlement that has accumulated at
the reporting date. The company presents the entire leave as a current
liability in the balance sheet, since it does not have an unconditional
right to defer its settlement for 12 months after the reporting date.
o) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred income taxes refect the impact of timing diferences between
taxable income and accounting income originating during the current
year and reversal of timing diferences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
diferences. Deferred tax assets are recognized for deductible timing
diferences only to the extent that there is reasonable certainty that
sufcient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profts.
In the situations where the company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing diferences which
reverse during the tax holiday period, to the extent the company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing diferences which reverse
after the tax holiday period is recognized in the year in which the
timing diferences originate. However, the company restricts recognition
of deferred tax assets to the extent that it has become reasonably
certain or virtually certain, as the case may be, that sufcient future
taxable income will be available against which such deferred tax assets
can be realized. For recognition of deferred taxes, the timing
diferences which originate frst are considered to reverse frst.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufcient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufcient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufcient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are ofset, if a
legally enforceable right exists to set-of current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of proft and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specifed period, i.e., the period for which MAT credit is allowed to be
carried forward. In the year in which the company recognizes MAT credit
as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of proft and loss and shown as "MAT Credit Entitlement. The
company reviews the "MAT credit entitlement asset at each reporting
date and writes down the asset to the extent the company does not have
convincing evidence that it will pay normal tax during the specifed
period.
p) Earnings per share
Basic earnings per share are calculated by dividing the net proft or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes, if any) by the
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
proft or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the efects of all dilutive potential equity shares, if
any.
q) Provisions
A provision is recognized when the company has a present obligation as
a result of past event, it is probable that an outfow of resources
embodying economic benefts will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to refect the current best estimates.
Where the company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of proft and loss net of any reimbursement.
r) Segment reporting policies
(i) Identifcation of segments:
Primary segment
Business segment: The Company''s operating businesses are organized and
managed separately according to the nature of products, with each
segment representing a strategic business unit that ofers diferent
products. The identifed segments are Vaccines, Formulations and
Research & development activities.
Secondary segment
Geographical segment: The analysis of geographical segment is based on
the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
Revenue from domestic market includes sales to customers located within
India.
Revenue from overseas market includes sales to customers located
outside India.
(ii) Allocation of common costs: Common allocable costs are allocated
to each segment on a rational basis based on nature of each such common
cost.
(iii) Unallocated items: Unallocated items include general corporate
income and expense items which are not allocated to any business
segment.
(iv) Segmental accounting policies: The Company prepares its segment
information in conformity with the accounting policies adopted for
preparing and presenting the fnancial statements of the company as a
whole.
s) Cash & cash equivalent
Cash and cash equivalents for the purposes of cash fow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
t) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized.
Direct expenditure incurred during construction period is capitalized
as part of the direct construction cost to the extent to which the
expenditure is directly related to construction.
u) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confrmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outfow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
fnancial statements.
Mar 31, 2012
A) Change in accounting policy
Presentation and disclosure of financial statements: During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company, for preparation and presentation of its financial statements. The revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
c) Tangible assets
Tangible assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
On 1 April 2011, the Company revalued all its land and buildings existing as on that date. These land and buildings are measured at fair value less accumulated depreciation and impairment losses, if any, recognized after the date of the revaluation. In case of revaluation of tangible assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss, in which case the increase is recognized in the statement of profit and loss. A revaluation deficit is recognized in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of tangible asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing tangible assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
From accounting periods commencing on or after 7 December 2006, the Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset.
Gains or losses arising from de-recognition of tangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is de-recognized.
d) Depreciation on tangible assets
i) Depreciation on tangible assets is provided on written down value method as per the rates based on the useful life of the assets estimated by the management, or as per rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is higher. Depreciation is provided on the following rates:
ii) Leasehold Land is amortized over the period of lease on straight line basis.
iii) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
e) Intangibles assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the effect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset is recognized in the statement of profit and loss when the asset is derecognized.
Patents, trademarks & designs - Costs relating to patents, trademarks and designs, which are acquired, are capitalized.
Research and development costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the following can be demonstrated:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the Company's intention to complete the asset and use or sell it;
- the Company's ability to use or sell the asset;
- how the asset will generate probable future economic benefits;
- the availability of adequate resources to complete the development and to use or sell the asset; and
- the ability to measure reliably the expenditure attributable to the intangible asset during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized on a straight line basis over the period of estimated useful life. Amortization is recognized in the statement of profit and loss. During the period of development, the asset is tested for impairment annually.
Product development - Product Development is capitalized on successful completion of development activities and commercial launch of developed products.
Technical know-how - Technical Know-how is capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website - Software and website are stated at cost of acquisition and include all attributable costs of bringing them to their working condition for their intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
f) Amortization of intangible assets
Amortization of intangibles assets is provided on straight line basis of the estimated useful lives as follows:- Patents, Trademarks & - Amortized over a period of 7 years Designs
Product Development - Amortized over a period of 5 years Technical Know-how - Amortized over a period of 5 years Software - Amortized over a period of 5 years Websites - Amortized over a period of 2 years
g) Leases
Where the Company is the Lessee Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.
A leased asset is depreciated on written down value method as per the rates based on the useful life of the assets estimated by the management, or as per rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is higher. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of profit and loss on a straight- line basis over the lease term.
Where the Company is the Lessor
Leases in which the company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, the company apportions lease rentals between the principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
Leases in which the company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in tangible assets. Lease income on an operating lease is recognized in the statement of profit and loss on a straight- line basis over the lease term. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
h) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company's cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss, except for previously revalued tangible assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's or cash- generating unit's recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
i) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
j) Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that
(i) the Company will comply with the conditions attached to them, and
(ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
Where the company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of the shareholders' funds.
k) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued.
Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
l) Inventories
Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a weighted average basis.
Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty and is determined on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
m) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sales of products- Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and Sales Tax / Value Added Tax (VAT) but includes Excise Duty. The Company collects sales taxes and value added taxes on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Income from Services - Revenue is recognized on an accrual basis in accordance with the terms of the relevant agreement.
Export incentives - Export entitlements under Duty Entitlement Pass Book Schemes are recognized in the statement of profit and loss when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Interest income - Revenue is recognized on a time proportion
basis taking into account the amount outstanding and the rate applicable.
Dividend income - Revenue is recognized when the shareholders' right to receive payment is established by the balance sheet date.
n) Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non- monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange differences
From accounting periods commencing on or after 7 December 2006, the Company accounts for exchange differences arising on translation/ settlement of foreign currency monetary items as below:
- Exchange differences arising on long-term foreign currency monetary items related to acquisition of a tangible asset are capitalized and depreciated over the remaining useful life of the asset. For this purpose, the company treats a foreign currency monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination.
- Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortized over the remaining life of the concerned monetary item.
- All other exchange differences are recognized as income or as expense in the period in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability.
The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.
o) Retirement and other employee benefits
i) Retirement benefit in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the statement of profit and loss of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the provident funds.
ii) Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation using projected unit credit method made at the end of each financial year. Actuarial gains and losses are recognized in full in the period in which they occur in the statement of profit and loss.
iii) Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
iv) The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long- term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
p) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the company's gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement"The company reviews the"MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.
q) Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r) Provisions
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of profit and loss net of any reimbursement.
s) Segment reporting policies
(i) Identification of segments:
Primary segment
Business segment: The Company's operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & development activities.
Secondary segment
Geographical segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
- Revenue from domestic market includes sales to customers located within India.
- Revenue from overseas market includes sales to customers located outside India.
(ii) Allocation of common costs: Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
(iii) Unallocated items: Corporate income and expenses are considered as a part of unallocable income and expense, which are not identifiable to any business segment.
(iv) Segmental accounting policies: The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
t) Derivative instruments
As per announcement of the Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the statement of profit and loss. Net gains are ignored.
u) Cash & cash equivalent
Cash and cash equivalents in the cash flow statement comprise cash at bank and on hand and short-term investments with an original maturity of three months or less.
v) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Mar 31, 2011
1. Basis of Preparation
The financial statements have been prepared to comply in all material respects with the Accounting Standards notified by Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956.The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
2. Use of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions,actual results could differ from these estimates.
3. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and Sales Tax /VAT but includes Excise Duty. Excise Duty deducted from turnover (gross) is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arisen during the year.
Research & Development - Income from Research & Development Services is recognized on an accrual basis in accordance with the terms of the relevant agreement.
Contract Manufacturing - Revenue is recognized on an accrual basis in accordance with the terms of the relevant agreement.
Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
Dividend - Revenue is recognized when the shareholders' right to receive payment is established by the balance sheet date. Dividend from subsidiaries is recognized even if same are declared after the Balance Sheet date but pertains to the period on or before the date of Balance Sheet, as per the requirements of Schedule VI to the Companies Act, 1956.
Royalty - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.
Export Benefits - Export entitlements under Duty Entitlement Pass
Book Schemes are recongnised in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
4. Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
As a result of change in Accounting Policy during the financial year 2008-09 in respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.
5. Impairment of Fixed Assets
The carrying amounts of assets are reviewed at each Balance Sheet date, if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and valuein use.ln assessing valuein use, the estimated futurecash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.
After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
6. Intangibles
Patents, Trademarks & Designs - Costs relating to patents, trademarks and designs, which areacquired,are capitalized.
Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the following can be demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the Company's intention to complete the asset and use or sell it;
the Company's ability to use or sell the asset;
how the asset will generate probable future economic benefits;
the availability of adequate resources to complete the development and to use or sell the asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during development.
Product Development - Product Development is capitalized on successful completion of development activities and commercial launch of developed products.
Technical Know how -Technical Know how is capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website - Software and website are stated at cost of acquisition and include all attributable costs of bringing them to their working condition for their intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use,and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
b) Amortization of intangibles is provided on straight line basis of the estimated useful lives as follows:-
Patents,Trademarks & Designs
- Amortized over a period of 7 years
Product Development - Amortized over a period of 5 years
Technical Know-how - Amortized over a period of 5 years
Software - Amortized over a period of 5 years
Websites - Amortized over a period of 2 years
c) Land is amortized over the period of lease or useful life, whichever is shorter.
d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
8. Borrowing Costs
Borrowing costs directly attributable to the acquisition,construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
9. Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with.
Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of shareholders' funds.
10. Leases
Where the Company is the Lessee
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
Where the Company is the Lessor
Assets given under a finance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method.The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight- line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
11. Deferred Revenue Expenditure
Expenditure incurred prior to April 1,2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter.Expenditure of the similar nature incurred during the year is charged off to revenue.
12. Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, in value is made to recognize a decline other than temporary in the value of the investments.
13. Inventories
Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spare parts are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.
'Cost' of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spare parts is arrived at by using 'Weighted Average Price'method.
Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using 'Weighted Average Price' method.Cost of Finished Goods includes Excise Duty.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.
14. Retirement and Other Employee Benefits
a) Retirement benefit in the form of Provident Fund is a defined contribution schemes and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.
b) Gratuity liability is defined benefit obligations and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.
c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method.
d) Leave encashment payable /adjustable during the year is provided on the basis of last salary drawn by employees.
e) Actuarial gains/losses are immediately taken to Profit & Loss Account and are not deferred.
15. Foreign Currency Transactions
Initial Recognition : Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion : Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences : Exchange differences arising on a monetary item that, in substance, form part of Company's net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses.
Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in 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, and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the financial statements and amortized over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31st March, 2011.
Exchange differences arising on the settlement of monetary items not covered above,or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
Forward Exchange Contracts not intended for trading or speculation purposes : The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.
16. Income Taxes
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal oftiming differences of earlier years.
Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.
At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance sheet date.The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Minimum Alternative tax credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal IncomeTax during the specified period.
17. Earnings Per Share
Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
18. Provisions
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management's best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
19. Segment Reporting Policies
(a) Identification of Segments:
Primary Segment
Business Segment: The Company's operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products.The identified segments are Vaccines, Formulations and Research & Development Activities.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
Revenue from domestic market includes sales to customers located within India.
Revenue from overseas market includes sales to customers located outside India.
(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.
(d) Segmental Policies: The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.
20. Derivative Instruments
As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Profit and Loss Account. Net gains are ignored.
21. Cash & Cash Equivalent
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
22. Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized. Direct expenditure incurred during construction period is capitalized as part of the direct construction cost to the extent to which the expenditure is directly related to construction.
Mar 31, 2010
1. Basis of Preparation
The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards pursuant to Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
2. Use of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the results of operations during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.
3. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and Sales Tax/VAT but includes Excise Duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arisen during the year.
Research & Development - Income from Research &
Development Services is accounted for as per the stage of completion.
Contract Manufacturing- Revenue is recognized on an accrual basis in accordance with the terms of the relevant agreement.
Interest- Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
Dividend- Revenue is recognized when the shareholders'right to receive payment is established by the balance sheet date. Dividend from subsidiaries is recognized even if same are declared after the Balance Sheet date but pertains to the period on or before the date of Balance Sheet, as per the requirements of Schedule VI to the Companies Act, 1956.
Royalty - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.
Export Benefits- Export entitlements under Duty Entitlement Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
4. Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
As a result of change in Accounting Policy during the previous year in respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.
5. Impairment of Fixed Assets
The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
6. Intangibles
Patents, Trademarks & Designs - Costs relating to patents, trademarks and designs, which are acquired, are capitalized.
Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.
Product Development- Product Development is capitalized on successful completion of development activities and commercial launch of developed products.
Technical Know how-Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website - Software and website is stated at cost of acquisition and includes all attributable costs of bringing them to their working condition for their intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
7. Depreciation / Amortization
b) Amortization on intangibles is provided on the basis of the estimated useful lives as follows:-
Patents,Trademarks - Amortized on straight line basis & Designs over a period of 7 years.
Product Development - Amortized on straight line basis over a period of 5 years.
Technical Know-how - Amortized on straight line basis over a period of 5 years.
Software - Amortized on straight line basis over a period of 5 years.
Websites - Amortized on straight line basis over a period of 2 years.
c) Leasehold Land is amortized over the period of lease or useful life, whichever is shorter.
d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
e) No Depreciation is provided on freehold land, as Accounting Standard-6 on `Depreciation Accounting' notified by the Companies Accounting Standard Rules, 2006, does not apply to land unless it has a limited useful life.
8. Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.
9. Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with.
Government grants of the nature of promoters'contribution are credited to capital reserve and treated as a part of shareholders'funds.
10. Leases
Where the Company is the Lessee:
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item,are capitalized at the lowerof the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term
Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
Where the Company is the Lessor:
Assets given under a finance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
11. Deferred Revenue Expenditure
Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year is charged off to revenue.
12. Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments.
13. Inventories
Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spare parts are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.
Cost of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spare parts is arrived at by using`Moving Average Price'method.
Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using `Moving Average Price' method. Cost of Finished Goods includes Excise Duty.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.
14. Retirement and Other Employee Benefits
a) Retirement benefits in the form of Provident Fund are defined contribution schemes and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due.There are no other obligations other than the contribution payable to the respective funds.
b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for.
c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method.
d) Leave encashment payable /adjustable during the year is provided on the basis of last salary drawn by employees.
e) Actuarial gains/losses are immediately taken to Profit & Loss Account and are not deferred.
15. Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting such monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those monetary items as mentioned below.
Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in 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, and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" in the financial statements and amortized over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31 st March, 2011.
Exchange differences arising on a monetary item that, in substance, form part of companys net investment in a non- integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses.
Forward Exchange Contracts not intended for trading or speculation purposes
The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.
16. Income Taxes
Tax expense comprises of current, deferred & fringe benefit tax. Current Income Tax & fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred Income Taxes reflect the impact of current yeartiming differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.
At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain orvirtuallycertain,as the case may be, that sufficient future taxable income will be available.
MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. In the year in which the Minimum Alternative tax (MAT) credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that Company will pay normal Income Tax during the specified period.
17. Earnings per Share
Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average numberof equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
18. Provisions
A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management's best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
19. Segment Reporting Policies
a) Identification of Segments:
Primary Segment
Business Segment: The Company's operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development Activities.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
- Revenue from domestic market includes sales to customers located within India.
- Revenue from overseas market includes sales to customers located outside India.
b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
c) Unallocated Items: Corporate income and expenses are
considered as a part of unallocable income & expense, which are not identifiable to any business segment.
d) Segmental Policies: The Company prepares its segment
information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.
20. Derivative Instruments
As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Profit and Loss Account. Net gains are ignored.
21. Cash & Cash Equivalent
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
22. Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized. Direct expenditure incurred during construction period is capitalized as part of the direct construction cost to the extent to which the expenditure is directly related to construction.
Mar 31, 2009
1. Basis of Preparation
The fnancial statements have been prepared to comply in all material respects with the Notifed Accounting Standards pursuant to Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The fnancial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and except for the changes in accounting policies discussed more fully below, are consistent with those used in the previous year.
2. Change in Accounting Policy
For the fnancial year ended 31st March, 2008, the Company was charging off exchange differences arising on foreign currency monetary assets and liabilities to proft and loss account. Pursuant to Companies (Accounting Standards) Amendments Rules, 2009, the Company has exercised the option of deferring the charge of exchange difference to the Proft and Loss Account, in respect of accounting periods commencing on or after 7th December, 2006, on long-term foreign currency monetary items (i.e. monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination). As a result, such exchange differences so far as they relate to the acquisition of a depreciable capital asset have been adjusted with the cost of such asset and are being depreciated over the balance life of the asset, and in other cases, have been accumulated in Foreign Currency Monetary Item Translation Difference Account and are being amortized over the balance period of such long term asset/liability but not beyond, accounting period ending on or before 31st March 2011.
In the current year, such exchange differences, pertaining to accounting periods commencing on 1st April, 2007 and ending on 31st March, 2008 are transferred from General Reserve, to the extent they related to acquisition of depreciable capital assets are adjusted with the cost of such assets Rs.24,810,859 (net of depreciation of Rs.1,609,882) (net of tax of Rs.12,775,656) and in other cases, are transferred to the Foreign Currency Monetary Item Translation Difference Account Rs.61,039,657 (net of tax of Rs.31,430,661).
Had the Company continued to use the earlier basis of accounting for exchange differences arising on long-term foreign currency monetary items, the loss after tax for the current period would have been higher by Rs.561,174,198 (net of tax of Rs.288,960,930), the net block of fixed assets would have been lower by Rs.624,117,162 (net of depreciation of Rs.94,952,131) and general reserve would have been higher by Rs.130,056,833.
3. Use of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date on the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.
4. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefts will fow to the Company and the revenue can be reliably measured.
Sale of Goods - Revenue is recognized when the signifcant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and Sales Tax /VAT but includes Excise Duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arisen during the year.
Research & Development - Income from Research & Development Services is accounted for as per the stage of completion.
Contract Manufacturing - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.
Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
Dividends - Revenue is recognized when the shareholders right to receive payment is established by the balance sheet date.
Dividend from subsidiaries is recognized even if same are declared after the Balance Sheet date but pertains to the period on or before the date of Balance Sheet, as per the requirements of Schedule VI to the Companies Act, 1956.
Royalties - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.
Export Benefts - Export entitlements under Duty Entitlement Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no signifcant uncertainty regarding the ultimate collection of the relevant export proceeds.
5. Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fxed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
As a result of change in Accounting Policy during the year (refer note no. 2 above) in respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous fnancial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fxed asset.
6. Impairment of Fixed Assets
The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash fows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
7. Intangibles
Patents, Trademarks & Designs - Costs relating to patents, trademarks and designs, which are acquired, are capitalized.
Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.
Product Development - Product Development is capitalized on successful completion of development activities and commercial launch of developed products.
Technical Know how - Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website - Software and website is stated at cost of acquisition and includes all attributable costs of bringing them to their working condition for their intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
8. Depreciation / amortization
a) Depreciation on fxed assets is provided on written down value method as per the rates based on the useful life of the assets estimated by the management, or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates:
b) Amortization on intangibles is provided on the basis of the estimated useful lives as follows:-
Software - Amortized on straight line basis over a period of 5 years.
Websites - Amortized on straight line basis over a period of 2 years.
Patents, Trade Marks & Designs - Amortized on straight line basis over a period of 7 years.
Product Development - Amortized on straight line basis over a period of 5 years.
Technical Know-how - Amortized on straight line basis over a period of 5 years.
c) Leasehold Land is depreciated over the period of lease or useful life, whichever is shorter.
d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
9. Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.
10. Leases
Where the Company is the Lessee
Leases, where the lessor effectively retains substantially all the risks and benefts of ownership of the leased term, are classifed as operating leases. Operating lease payments are recognized as an expense in the Proft and Loss account on a straight-line basis over the lease term.
Where the Company is the Lessor
Assets subject to operating leases are included in fxed assets. Lease income is recognized in the Proft and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Proft and Loss Account.
Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Proft and Loss Account.
11. Deferred Revenue Expenditure
Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year is charged off to revenue.
12. Investments
Investments that are readily realizable and intended to be held for not more than a year are classifed as current investments. All other investments are classifed as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments.
13. Inventories
Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the fnished goods in which they will be incorporated are expected to be sold at or above cost.
Cost of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spares is arrived at by using Moving Average Price method.
Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using `Moving Average Price method. Cost of fnished goods includes Excise Duty.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.
14. Retirement and Other Benefts
a) Retirement benefts in the form of Provident Fund are defned contribution scheme and the contributions are charged to the Proft and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.
b) The contribution to Gratuity Fund, which is a defned beneft plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for.
c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method.
Leave encashment payable /adjustable during the year is provided on the basis of last salary drawn by employees. Actuarial gains/losses are adjusted in Proft & Loss Account and are not deferred.
15. Income Taxes
Tax expense comprises of current, deferred and fringe beneft tax. Current Income Tax and Fringe Beneft Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred Income Taxes refect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that suffcient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profts.
At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that suffcient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that suffcient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that suffcient future taxable income will be available.
16. Earnings Per Share
Basic Earnings per Share are calculated by dividing the net proft or loss for the period attributable to Equity Shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of Equity Shares outstanding during the period. Partly paid Equity Shares, if any are treated as a fraction of an Equity Share to the extent that they were entitled to participate in dividends relative to a fully paid Equity Share during the reporting period. The weighted average number of Equity Shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any.
For the purpose of calculating diluted Earnings per Share, the net proft or loss for the period attributable to Equity Shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential Equity Shares.
17. Provisions
A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outfow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to refect the current best estimates.
18. Segment Reporting Policies
(a) Identification of Segments:
Primary Segment
Business Segment: The Companys operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development Activities.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
- Revenue from domestic market includes sales to customers located within India.
- Revenue from overseas market includes sales to customers located outside India.
(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifable to any business segment.
19. Derivative Instruments
As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Proft & Loss Account. Net Gains are ignored.
20. Cash & Cash Equivalent
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
21. Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto is charged to the Proft and Loss Account. Income earned during construction period is deducted from the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalized. As regards indirect expenditure on expansion, only that portion is capitalized which represents the marginal increase in such expenditure involved as a result of capital expansion. Both direct and indirect expenditure are capitalized only if they increase the value of the asset beyond its original standard of performance.
Mar 31, 2008
A. Nature of Operations
Panacea Biotec is one of Indias leading research based Company engaged in the business of Vaccines and Branded Pharmaceutical Formulations. The Company has products for various segments, which include pediatric vaccines, pain management, diabetes management and organ transplantation.
B. Significant Accounting Policies
1. Basis of Preparation
The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards pursuant to Companies (Accounting Standard) Rules,2006 and the relevant provisions of the Companies Act, 1956.The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and except for the changes in accounting policies discussed more fully below, are consistent with those used in the previous year.
2. Change in Accounting Policy
Till March 31, 2007, the Company was adjusting exchange difference arising due to change in exchange rate between the transaction date and the date of settlement on any monetary foreign currency transaction, in the carrying amount of fixed assets as per the requirement of Schedule VI to the Companies Act, 1956. In the current year, pursuant to notification of the Companies (Accounting Standards) Rules, 2006 by the Ministry of Corporate Affairs on 7th December, 2006 (effective in respect of accounting periods commencing on or after the date of notification), where the accounting treatment of exchange differences contained in AS 11 (revised 2003) - The Effects of Changes in Foreign Exchange Rates, is required to be followed irrespective of the relevant provisions of Schedule VI to the Companies Act, 1956. Accordingly, the Company has adopted the accounting treatment of exchange difference contained in AS 11 from 1st April 2007, whereby exchange difference arising due to change in the exchange rate is recognized in the Profit and Loss Account as against the hitherto followed practice of adjusting the same to the carrying amount of fixed assets.
Had the Company continued to use the earlier basis of accounting for foreign exchange fluctuation, the profit after taxation for the current year would have been higher by Rs.13,706,977 (net of tax of Rs.7,058,024) and the net block of fixed Assets would correspondingly have been higher by Rs.20,765,001.
3. Uses of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.
4. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and Sales Tax /VAT but includes Excise Duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arisen during the year. Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Research & Development - Income from Research & Development Services is accounted for as per the stage of completion. Dividends - Revenue is recognized when the shareholders right to receive payment is established by the balance sheet date. Dividend from subsidiaries is recognized even if same are declared after the Balance Sheet date but pertains to the period on or before the date of Balance Sheet, as per the requirements of Schedule VI to the Companies Act, 1956. Royalties - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement. Export Benefits - Export entitlements under Duty Exemption Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
5. Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
6. Impairment of Fixed Assets
The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
7. Intangibles
Patents and Trademarks - Costs relating to patents and trademarks, which are acquired, are capitalized.
Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.
Technical Know how - Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website - Software and website is stated at cost of acquisition and includes all attributable costs of bringing them to their working condition for their intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
9. Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.
10. Leases
Where the Company is the Lessee: Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
Where the Company is the Lessor. Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term.Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.
11. Deferred Revenue Expenditure
a) Expenditure incurred prior to April 1,2003 for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition was categorized as Miscellaneous Expenditure. Such deferred revenue expenditure are amortized over a period of five years beginning from the year of product registration. Expenditure of the similar nature incurred during the year is charged off to revenue.
b) Expenditure incurred prior to April 1,2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year are charged off to revenue.
12. Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments.
13. Inventories
Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.
Cost of Raw Materials, Packing Materials and Stores & Spares is arrived at by using Moving Average Price method.
Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using Moving Average Price method. Cost of finished goods includes Excise Duty.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.
14. Retirement and Other Benefits
a) Retirement benefits in the form of Provident Fund and Pension Schemes is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.
b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager. Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for.
c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method.
Leave encashment payable /adjustable during the year is provided on the basis of last salary drawn by employees.
d) Actuarial gains/losses are adjusted in Profit & Loss Account and are not deferred.
15. Foreign Currency Transactions Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting companys monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those arising from investments in non-integral operations.
Exchange differences arising in respect of fixed assets acquired from outside India before accounting period commencing on or before December 7,2006 are capitalized as a part of fixed assets.
Exchange differences arising on a monetary item that, in substance, form part of companys net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses.
Forward Exchange Contracts not intended for trading or speculation purposes
The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.
16. Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred Income Taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets are recognized only to the extent that there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.
At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets, if any lt recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized.
17. Earnings Per Share
Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to Equity Shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of Equity Shares outstanding during the period. Partly paid Equity Share, if any is treated as a fraction of an Equity Share to the extent that they were entitled to participate in dividends relative to a fully paid Equity Share during the reporting period. The weighted average number of Equity Shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any.
For the purpose of calculating diluted Earnings per Share, the net profit or loss for the period attributable to Equity Shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential Equity Shares.
18. Provisions
A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates.
19. Security Issue Expenses
Expenses incurred on issue of securities are charged to Securities Premium Account.
20. Segment Reporting Policies
(a) Identification of Segments:
Primary Segment
Business Segment:The Companys operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products.The identified segments are Vaccines, Formulations and Research & Development Activities.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
Sales within India including sales to customers located within India.
Sales outside India including sales to customers located outside India.
(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.
21. Derivative Instruments
As per recent announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the income statement. Net Gains are ignored.
22. Expenditure on New Projects and Substantial Expansion
Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during construction period is deducted from the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalized. As regards indirect expenditure on expansion, only that portion is capitalized which represents the marginal increase in such expenditure involved as a result of capital expansion. Both direct and indirect expenditure are capitalized only if they increase the value of the asset beyond its original standard of performance.
23. Cash Flow Statement
Cash Flows are reported using indirect method, whereby profit before tax is adjusted for effects of transactions of non cash nature and any deferral or accruals of any past or future cash receipts or payments. The Cash flows from regular revenue generating, financing and investing activity of the company are segregated.
Cash and Cash equivalents in the Balance Sheet comprise Cash at Bank and in Hand and Short-Term Investments with an original maturity of three months or less.
Mar 31, 2007
A. Nature of Operations
Panacea Biotec is one of India's leading research based company engaged in the business of vaccines and branded pharmaceutical formulations. The Company has products for various segments, which include pediatric vaccines, pain management, diabetes management and organ transplantation.'
B. Significant Accounting Policies
1. Method of Accounting
The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out.The accounting policies are consistent with those used in the previous year.
2. Change in Accounting Policy
Till March 31,2006 Company was providing for leave benefits based on actuarial valuation in accordance with old Accounting Standard 15. In the current year, the Company has opted for early adoption of the Accounting Standard 15 (Revised 2005) which is otherwise mandatory for accounting periods commencing on or after December 7,2006. Accordingly the Company has changed the basis of providing short term leave benefits. As a result, estimated liability of short term absences as at April 1,2006 is higher by Rs. 2,845,706 (net of income-tax Rs.1,443,872), which in accordance with the transitional provision in the revised Accounting Standard, has been adjusted to the opening balance of General Reserves.This change does not have material impact on the profit for the current year.
3. Uses of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialized.
4. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of Goods: Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and sales tax but includes excise duty.
Interest: Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
Research & Development: Income from Research & Development Services is accounted for as per the stage of completion.
Dividends: Revenue is recognised when the shareholders' right to receive payment is established by the balance sheet date.
Export Benefits: Export entitlements under Duty Exemption Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
5. Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount.
The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
6. Intangibles
Patents and Trademarks: Costs relating to patents and trademarks, which are acquired, are capitalized.
Research and Development Costs: Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.
Technical Know how : Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website: Software is stated at cost of acquisition and includes all attributable costs of bringing the software to its working condition for its intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
7. Depreciation/amortization
a) Depreciation on fixed assets is provided on written down value method as per the rates based on the estimated useful life or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates:
Tangibles Assets WDV %
Building - Factory 10.00 Building - Office Premises 5.00 Plants Machinery 13.91 Furniture Spittings 18.10 Vehicles 25.89 Office Equipments 13.91 Computer Equipments 40.00
b) Amortization on intangibles is provided on the basis of the estimated useful lives as follows :-
Software - Amortized on straight line basis over a period of 5 years.
Websites - Amortized on straight line basis over a period of 2 years.
Patents and Trade Mark - Amortized on straight line basis over a period of 7 years.
Product Development - Amortized on straight line basis over a period of 5 years.
c) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
8. Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.
9. Leases
Where the Company is the Lessee: Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term,are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
Where the Company is the Lessor: Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.
10. Deferred Revenue Expenditure
a) Expenditure incurred prior to April 1,2003 for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition was categorized as Miscellaneous Expenditure. Such deferred revenue expenditure are amortized over a period of five years beginning from the year of product registration. Expenditure of the similar nature incurred during the year is charged off to revenue.
b) Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year are charged off to revenue.
11. Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments.
12. Inventories
Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.
`Cost' of Raw Materials and Packing Materials is arrived at by using 'Moving Average Price' method and cost of Stores & Spares is arrived at by using `First - in -first -out' method.
Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of factory overheads. Cost of traded goods is arrived at by using `First-in-first out' method. Cost of finished goods includes excise duty.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.
13. Retirement and Other Benefits
a) Retirement benefits in the form of Provident Fund and Pension Schemes is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective fund.
b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year,actuarial valuation is done by an Independent Actuary and any shortfall in the fund balance is further provided for.
c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation.
Leave encashment payable/adjustable during the year is provided on the basis of last salary drawn by employees.
d) Actuarial gains/losses are adjusted in Profit and Loss Account and are not deferred.
14. Foreign Currency Transactions
Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise except those arising from investments in non-integral operations. Exchange differences arising on a monetary item that, in substance, form part of company's net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognised as income or as expenses.
Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets from outside India, in which case they are adjusted to the carrying value of such fixed assets. Forward Exchange Contracts not intended for trading or speculation purposes
The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.
15. Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred income tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities across various countries of operation are not set off against each other as the company does not have a legal right to do so. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. If the company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable profits. At each Balance Sheet date the Company re-assesses unrecognised deferred tax assets, if any. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised.
16. Earnings Per Share
Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to Equity Shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of Equity Shares outstanding during the period. Partly paid Equity Shares are treated as a fraction of an Equity Share to the extent that they were entitled to participate in dividends relative to a fully paid Equity Share during the reporting period. The weighted average number of Equity Shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares).
For the purpose of calculating diluted Earnings per Share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential Equity Shares.
17. Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates.
18. Security Issue Expenses
Expenses incurred on issue of securities are charged to Securities Premium Account.
19. Segment Reporting Policies
(a) Identification of Segments:
Primary Segment
Business SegmentThe Company's operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products.The identified segments are Vaccines, Formulations and Research & Development activities.
Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers. The geographical segments considered for disclosure are as follows:
Sales within India include sales to customers located within India.
Sales outside India include sales to customers located outside India.
(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.
20. Derivative Instruments
The Company uses derivative financial instruments such as forward exchange contracts to hedge its risks associated with foreign currency fluctuations. Accounting policy for forward exchange contracts is given in note 14.
21. Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during construction period is deducted from the total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards indirect expenditure on expansion, only that portion is capitalised which represents the marginal increase in such expenditure involved as a result of capital expansion. Both direct and indirect expenditure are capitalised only if they increase the value of the asset beyond its original standard of performance.
22. Cash & cash equivalent
Cash and cash equivalents in the Balance Sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
Mar 31, 2006
A. SIGNIFICANT ACCOUNTING POLICIES
1) Method of Accounting
The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis.
2) Uses of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialised.
3) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sole of Goods:
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and sales tax but includes excise duty.
Interest:
Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
Research & Development:
Income from Research & Development Services is accounted for as per the stage of completion.
Dividends:
Revenue is recognised when the shareholders' right to receive payment is established by the balance sheet date.
Export Benefits:
Export entitlements under Duty Exemption Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
4) Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
5) Expenditure During Construction Period
Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure.
6) Intangibles
Patents and Trademarks:
Costs relating to patents and trademarks, which are acquired, are capitalised.
Research and Development Costs:
Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.
Technical Know how:
Technical Know how is being capitalised on successful transfer of technology when its future recoverability can reasonably be regarded as assured.
Software and Website :
Software is stated at cost of acquisition and include all attributable costs of bringing the software to its working condition for its intended use.
The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
7) Depreciation
a) Depreciation on fixed assets is provided on written down value method as per the rates based on the estimated useful life or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates:
Tangibles Assets WDV%
Building - Factory 10.00 Building - Office Premises 5.00 Plant & Machinery 13.91 Furniture & Fittings 18.10 Vehicles 25.89 Office Equipments 13.91 Computer Equipments 40.00
b) Depreciation on intangibles is provided on the basis of the estimated useful lives as follows:-
Software - Depreciated on Straight Line basis over a period of 5 years.
Websites - Depreciated on Straight Line basis over a period of 2 years.
Patents and Trade Mark - Depreciated on Straight Line basis over a period of 7 years.
Product Development - Depreciated on Straight Line basis over a period of 5 years.
c) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
8) Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.
9) Leases
Where the Company is the lessee:
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
Where the Company is the lessor:
Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.
10) Deferred Revenue Expenditure
a) Expenditure incurred prior to April 1, 2003 for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition were categorized as Miscellaneous Expenditure. Such deferred revenue expenditure are amortized over a period of five years beginning from the year of product registration. Expenditure of the similar nature incurred during the year are charged off to revenue.
b) Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year are charged off to revenue.
11) Investments
Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognise a decline other than temporary in the value of the investments.
12) Inventories
Finished Goods, Stock in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. `Cost' of Raw Materials and Packing materials is arrived at by using 'Moving Average Price' method and cost of Stores & Spares is arrived at by using FIFO method.
Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of factory overheads. Cost of traded goods is arrived at by using 'First-in-first out' method. Cost of finished goods includes excise duty. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.
13) Retirement and Other Benefits
a) Retirement benefits in the form of Provident Fund and Pension Schemes are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due.
b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done by an Independent Actuary and any shortfall in the fund balance is further provided for.
c) Leave encashment payable on separation of employees/adjustable in due course is provided on the basis of actuarial valuation carried out by an independent actuary at the end of each financial year. Leave encashment payable/adjustable during the year is provided on the basis of last salary drawn by employees.
14) Foreign Currency Transactions
Initial Recognition:
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion:
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences:
Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous Financial Statements, are recognised as income or as expenses in the year in which they arise except those arising from investments in non-integral operations. Exchange differences arising on a monetary item that, in substance, form part of company's net investment in a non-integral foreign operation its accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognised as income or as expenses.
Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets from outside India, in which case they are adjusted to the carrying value of such fixed assets.
Forward Exchange Contracts not intended for trading or speculation purposes: The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.
15) Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred income tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities across various countries of operation are not set off against each other as the company does not have a legal right to do so. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. If the company has carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognised only if there is virtual certainty that such deferred tax assets can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.
16) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period are adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
17) Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.
18) Security Issue Expenses
Expenses incurred on issue of securities are charged to Securities Premium Account.
19) Segment Reporting Policies
(a) Identification of Segments:
Primary Segment
Business Segment: The Company's operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development activities. Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
* Sales within India include sales to customers located within India.
* Sales outside India include sales to customers located outside India.
(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.
20) Derivative Instruments
The Company uses derivative financial instrument such as forward exchange contracts to hedge its risks associated with foreign currency fluctuations. Accounting policy for forward exchange contracts is given in note 14.
Mar 31, 2005
A. SIGNIFICANT ACCOUNTING POLICIES
1. METHOD OF ACCOUNTING
The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis.
2. USES OF ESTIMATES
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialised.
3. REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sale of Goods : Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and sales tax but includes excise duty.
Interest: Revenue is recognised on a time proportion basistakingintoaccount the amount outstanding and the rate applicable. Research & Development: Income from Research & Development Services is accounted for as per the stage of completion.
Dividends : Revenue is recognised when the shareholders' right to receive payment is established by the balance sheet date.
Export Benefits : Export entitlements under Duty Exemption Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
4. FIXED ASSETS
Fixed Assets are stated at historical cost of acquisition or construction and include all other incidental expenses related to acquisition and any attributable cost of bringing the asset to its working condition for its intended use.
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
5. EXPENDITURE DURING CONSTRUCTION PERIOD
Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure.
6. INTANGIBLES
Patents and Trademarks : Costs relating to patents and trademarks, which are acquired, are capitalised.
Research and Development Costs : Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.
The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
Capital Expenditure on Research & Development is included in the gross block of fixed assets and depreciation thereon is provided on Written Down Value method as per the rates and the manner prescribed in Schedule XIV to the Companies Act, 1956.
Technical Know-how : Technical Know-how is being capitalised on successful transfer of technology forward when its future recoverability can reasonably be regarded as assured.
Software and Website : Software is stated at cost of acquisition and include all attributable costs of bringing the software to its working condition for its intended use.
7. DEPRECIATION
a) Depreciation on fixed assets is provided on the Written Down Value as per rates based on the estimated useful life or as per rates prescribed in Schedule XIV to the Companies Act, 1956, whichever is higher.
b) Depreciation on intangibles is provided on the basis of the estimated useful lives as follows:
Software - Depreciated on Straight Line basis over a period of 5 years.
Websites - Depreciated on Straight Line basis over a period of 2 years.
Patents and Trade Mark - Depreciated on Straight Line basis over a period of 7 years.
Product Development - Depreciated on straight line basis over a period of 5 years.
c) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.
8. BORROWING COSTS
Borrowing costs attributable to the acquisition, construction or production a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.
9. LEASES
Where the Company is the lessee : Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalised.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.
Where the Company is the lessor: Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account.
10. DEFERRED REVENUE EXPENDITURE
Expenditure incurred prior to April 1, 2003 for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition were categorized as Miscellaneous Expenditure. Such deferred revenue expenditure are amortized over a period of five years beginning from the year of product registration. Expenditure of the similar nature incurred during the year are charged off to revenue.
Expenditure incurred prior to April 1,2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter.
11. INVESTMENTS
Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognise a decline other than temporary in the value of the investments.
12. INVENTORIES
Finished Goods, Stock in process, Goods held for resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value.
`Cost' of Raw Materials, Packing materials and Stores & Spares is arrived at by using `First-in-First out' method.
Cost of Work in progress and finished goods is determined by considering direct material cost and appropriate portion of factory and administrative overheads. Cost of traded goods is arrived at by using 'First-in-First out' method.
13. RETIREMENT AND OTHER BENEFITS
a) Retirement benefits in the form of Provident Fund and Pension Schemes are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due.
b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done by an Independent Actuary and any shortfall in the funding claims is further provided for.
c) Leave encashment
Leave encashment payable on separation of employees/adjustable in due course is provided on the basis of actuarial valuation done by an independent actuary at the end of each financial year.
Leave encashment payable/adjustable during the year is provided on the basis of last salary drawn by employees.
14. FOREIGN CURRENCY TRANSACTIONS
Initial Recognition: Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion : Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange Differences : Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise except those arising from investments in non-integral operations.
Exchange differences arising on a monetary item that, in substance, form part of company's net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognised as income or as expenses.
Forward Exchange Contracts not intended for trading or speculation purposes : The premium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year.
Exchange Difference on Fixed Assets : Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets from outside India, in which case they are adjusted to the carrying value of such fixed assets.
15. INCOME TAXES
Tax expense comprises both current and deferred taxes. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities across various countries of operation are not set off against each other as the company does not have a legal right to do so. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realised.
16. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
17. PROVISIONS
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.
18. SEGMENT REPORTING POLICIES
(a) Identification of Segments:
Primary Segment
Business Segment: The Company's operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development activities. Secondary Segment
Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
* Sales within India include sales to customers located within India.
* Sales outside India include sales to customers located outside India.
(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.
(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.
Mar 31, 2004
A. SIGNIFICANT ACCOUNTING POLICIES
1. Method of Accounting
The financial statements have been prepared to comply in all material respects with the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of income from certain export licenses which in view of uncertainty involved, is accounted for on cash basis.
2. Uses of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialised.
3. Revenue Recognition
Sales are recognised at the time of constructive delivery of goods and are stated net of trade discounts, returns and sales tax but include excise duty.
Income from Research & Development Services is accounted for as per the stage of completion.
4. Export Benefits
Export benefits under Duty Exemption Pass Book Scheme and Advance Licenses are accounted for in the year of export of goods except in case of certain licenses which are accounted for on cash basis in view of uncertainty involved as mentioned in Para 1 above.
5. Fixed Assets
Fixed assets are stated at historical cost of acquisition or construction and include all other incidental expenses related to acquisition and any attributable cost of bringing the asset to its working condition for its intended use.
6. Expenditure during Construction Period
Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure.
7. Intangibles
Acquired Intangibles are stated at the cost of acquisition. In case of internally generated intangibles, they are stated at directly attributable cost.
8. Depreciation
a) Depreciation on fixed assets is provided (except in case of software & website, patents, trademarks, copyrights & leasehold improvements) on written down value method as per the rates and the manner prescribed in Schedule XIV to the Companies Act, 1956.
b) Depreciation on intangibles is provided as follows:-
Software - Depreciated on Straight Line basis over a period of 5 years.
Websites - Depreciated on Straight Line basis over a period of 2 years.
Patent/Trade Mark & Copyrights - Depreciated on Straight Line basis over a period of 7 years.
c) Leasehold Improvements are amortized over the initial period of lease.
9. Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of an asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to fixed assets, are recognized as an expense in the period in which they are incurred.
10. Deferred Revenue Expenditure
a) Expenditure incurred prior to April 1, 2003 for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition were categorized as Miscellaneous Expenditure. Such deferred revenue expenditure are amortized over a period of five years beginning from the year of product registration. Expenditure of the similar nature incurred during the year are charged off to revenue.
b) Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter.
11. Investments
Long-term investments are stated at cost. A provision for diminution (if any) is made to recognise a decline, other than temporary, in the value of long-term investments.
12. Inventories
Finished Goods, Stock in process, Goods held for Resale, Raw Materials, At the lower of cost and net Packing Materials and Stores & Spares realisable value
Cost of Raw Materials, Packing materials and Stores & Spares is arrived at by using `First-in-first out' method.
Cost of stock in process, finished goods is determined by considering direct material cost and appropriate portion of factory and administrative overheads. Cost of traded goods is arrived at by using `First-in-first out' method.
13. Custom & Excise Duty
Custom Duty on materials lying in bonded warehouses and Excise Duty on manufactured goods lying in the factory premises is accounted for on accrual basis.
14. Research and Development
Revenue expenditure incurred on Research & Development is charged to Profit & Loss Account of the year in which it is incurred, except for development costs which relate to the design and testing of new or improved materials, products or processes which are recognized as an asset to the extent that it is expected that such assets will generate future economic benefits.
Capital Expenditure on Research & Development is included in the gross block of fixed assets and depreciation thereon is provided on Written Down Value method as per the rates and the manner prescribed in Schedule XIV to the Companies Act, 1956.
15. Employee Terminal Benefits
a) Provident Fund: Company's contribution to defined contribution schemes being Provident Fund is accrued as per the terms of contracts with the employees and provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 and is charged to Profit and Loss Account.
b) Gratuity: Provision for Gratuity is made on the basis of actuarial valuation made by an independent actuary as of the balance sheet date.
c) Leave Encashment: Provision for leave encashment benefit to the employees as per Company's policy is made on the basis of actuarial valuation made by an independent actuary as of the balance sheet date.
16. Foreign Currency Transactions
a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction.
b) Investments in foreign companies are continued to be accounted for at the exchange rates prevailing on the dates of making the investments.
c) Assets and liabilities (except non-monetary assets) related to foreign currency transactions, remaining unsettled at the year-end, are stated at year-end rates. In cases where the foreign currency assets and liabilities are covered by Forward Exchange Contract, the same are stated at forward contract rates and resultant exchange difference is spread over the life of the contract.
d) Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets, in which case they are adjusted to the carrying value of such fixed assets.
17. Income Taxes
a) Provision is made for current income tax liability, which is likely to arise on the results for the year at the current rate of tax in accordance with the provisions of Income Tax Act, 1961.
b) Deferred income tax is provided, using the liability method, on all timing differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
c) Deferred tax assets are recognised only to the extent that there is reasonable certainty of their realisation.
d) Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or substantively enacted at the balance sheet date.
18. Earning per Share
The basic earning per share ("EPS") is computed by dividing the net profit after tax for the year (net of dividend on Preference Shares) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earning per share, net profit after tax for the year and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
19. Contingencies
Contingency loss arising from claims, litigation, assessments, fines, penalties etc. are provided for when it is probable that a liability may be incurred, and the amount can be reasonably estimated.
Mar 31, 2003
1) Method of Accounting
The accompanying financial statements have been prepared in accordance with the historical cost conventions following accrual basis of accounting and in accordance with Generally Accepted Accounting Practices in India and confirm to the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956, as amended upto date.
2) Uses of Estimates
The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilites on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialised.
3) Revenue Recognition
Sales are recognised at the time of constructive delivery of goods and are stated net of trade discounts, returns and sales tax but include excise duty.
Income from Research & Development Services is accounted for as per the stage of completion.
4) Export Benefits
Export benefits under Duty Exemption Pass Book Schemes and Advance Licenses are accounted for in the year of export of goods.
5) Fixed Assets
Fixed Assets are stated at historical cost of acquisition or construction and include all other incidental expenses related to acquisition.
6) Expenditure during Construction Period
Expenditure incurred during construction period (net of income, if any) on new Projects is capitalised on the commissioning of the projects.
7) Intangibles
Acquired Intangibles are stated at the cost of acquisition. In case of internally generated intangibles, they are stated at directly attributable cost.
8) Depreciation
a) Depreciation on fixed assets (except in case of Software & Website, Patents, Trade Marks, Copyrights & Leasehold Improvements) is provided on written down value method as per the rates and the manner prescribed in Schedule XIV to the Companies Act, 1956.
b) Depreciation on intangibles is provided as follows:-
Software - Depreciated on Straight Line basis over a period of 5 years.
Websites - Depreciated on Straight Line basis over a period of 2 years.
Patents, Trade Marks & Copyrights - Depreciated on Straight Line basis over a period of 7 years.
c) Leasehold Imporvements are amortized over the initial period of lease.
9) Borrowing Costs
Borrowing costs attributable to the acquisition, construction or production of an asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to fixed assets, are recognized as an expense in the period in which they are incurred.
10) Deferred Revenue Expenditure
a) Expenditure for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition is charged off over a period of five years beginning from the year of product registration.
b) Expenditure towards procuring license for new products is written off over the period of agreement.
11) Investments
Long-term investments are stated at cost. A provision for diminution (if any) is made to recognise a decline, other than temporary, in the value of long-term investments.
12) Inventories
Finished Goods, Stock in process, Goods held for resale, - At the lower of cost and net
Raw Materials, Packing Materials and Stores & Spares realisable value
Cost of Raw Materials, Packing materials and Stores & Spares is arrived at by using 'First-in-first out' method.
Cost of stock in process and finished goods is determined by considering direct material cost and appropriate portion of factory and administrative overheads. Cost of traded goods is arrived at by using 'First-in-first out' method.
13) Custom & Excise Duty
Custom duty on materials lying in bonded warehouses and Excise Duty on manufactured goods lying in the factory premises is accounted for on accrual basis.
14) Research and Development
Revenue expenditure incurred on Research & Development is charged to Profit & Loss Account of the year in which it is incurred.
Capital Expenditure on Research & Development is included in the gross block of fixed assets and depreciation thereon is provided on Written Down Value method as per the rates and the manner prescribed in Schedule XIV to the Companies Act, 1956.
15) Employee Terminal Benefits
a) Provident Fund : Company's contribution to defined contribution schemes being Provident Fund is accrued as per the terms of contracts with the employees and provisions of Employees' Provident Fund and Miscellaneous Provisions Act, 1952 and is charged to Profit and Loss Account.
b) Gratuity: Provision for Gratuity is made on the basis of actuarial valuation made by an independent actuary as of the Balance Sheet date.
c) Leave Encashment: Provision for leave encashment benefit to the employees as per Company's policy is made on the basis of actuarial valuation made by an independent actuary as of the Balance Sheet date.
16) Foreign Currency Transactions
a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction. -
b) Investments in foreign companies are continued to be accounted for at the exchange rates prevailing on the dates of making the investments.
c) Assets and liabilities (except non-monetary assets) related to foreign currency transactions, remaining unsettled at the year-end, are stated at year-end rates. In cases where the foreign currency assets and liabilities are covered by-Forward Exchange Contract, the same are stated at forward contract rates and resultant exchange difference is spread over the life of the contract.
d) Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets, in which case they are adjusted to the carrying value of such fixed assets.
17) Income Taxes
a) Provision is made for current income tax liability, which is likely to arise on the results for the year at the current rate of tax in accordance with the provisions of Income Tax Act, 1961.
b) Deferred income tax is provided, using the liability method, on all timing differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
c) Deferred tax assets are recognised only to the extent that there is reasonable certainty of their realisation.
d) Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or subsequently enacted at the balance sheet date.
Mar 31, 2002
1) METHOD OF ACCOUNTING
The accompanying financial statements have been prepared in accordance with the historical cost conventions following accrual basis of accounting and in accordance with Generally Accepted Accounting Practices in India and confirms to the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956, as amended upto date.
2) USES OF ESTIMATES
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilites on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known/materialised.
3) REVENUE RECOGNITION
Sales are recognised at the time of constructive delivery of goods and are stated net of trade discounts, returns and sales tax but includes excise duty.
4) EXPORT BENEFITS
Export benefits under Duty Exemption Pass Book Schemes and Advance Licenses are accounted for in the year of export of goods.
5) FIXED ASSETS
Fixed assets are stated at historical cost of acquisition or construction and include all other incidental expenses related to acquisition.
6) EXPENDITURE DURING CONSTRUCTION PERIOD
Expenditure incurred during construction period (net of income, if any) on new Projects is carried forward and is allocated to Fixed Assets on the commissioning of the projects.
7) INTANGIBLES
Acquired Intangibles are stated at the cost of acquisition. In case of internally generated intangibles, they are stated at directly attributable cost.
8) DEPRECIATION
a) Depreciation on fixed assets is provided (except in case of software & website, patents, trade marks & copyrights) on written down value method as per rates and manner prescribed in Schedule XIV to the Companies Act, 1956.
b) Depreciation on intangibles are provided as follows:-
Software & Website - Depreciated on Straight Line basis over a period of 5 years. Patents, Trade Marks & Copyrights - Depreciated on Straight Line basis over a period of 7 years.
9) BORROWING COSTS
Borrowing costs attributable to the acquisition, construction or production of an asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to fixed assets, are recognized as an expense in the period in which they are incurred.
10) DEFERRED REVENUE EXPENDITURE
a) Expenditure for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition are charged off over a period of five years beginning from the year of product registration.
b) Expenditure towards procuring license for development of new products is written off over the period of agreement.
11) INVESTMENTS
Long-term investments are stated at cost. A provision for diminution (if any) is made to recognise a decline, other than temporary, in the value of long-term investments.
12) INVENTORIES
Finished Goods, Work in process, Goods held for resale, - At lower of cost or net Raw Materials, Packing Materials and Stores & Spares realisable value `Cost of Raw Materials, Packing materials and Stores & Spares is arrived at by using `First-in-first out method.
Cost of stock in process & finished goods is determined by considering direct material cost and appropriate portion of factory and administrative overheads. Cost of traded goods is arrived at by using `First-in-first out method.
13) CUSTOM & EXCISE DUTY
Custom duty on materials lying in bonded warehouses and Excise Duty on manufactured goods lying in the factory premises is accounted for on accrual basis,
14) RESEARCH AND DEVELOPMENT
Revenue expenditure incurred on Research & Development is charged to Profit & Loss Account of the year in which it is incurred.
Capital Expenditure on Research & Development is included in the gross block of fixed assets and depreciation thereon has been provided on Written Down Value method as per rates and manner prescribed in Schedule XIV to the Companies Act, 1956.
15) EMPLOYEE TERMINAL BENEFITS
a) Provident Fund and ESI: Companys contribution to defined contribution schemes such as Provident Fund and ESI is accrued as per terms of contracts with the employees and provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 and is charged to Profit and Loss Account.
b) Gratuity: Provision for Gratuity has been made on the basis of actuarial valuation made by an independent actuary as of the balance sheet date.
c) Leave Encashment: The provision for leave encashment benefit to the employees as per Companys policy has been made on the basis of actuarial valuation made by an independent actuary as of the balance sheet date.
16) FOREIGN CURRENCY TRANSACTIONS
a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction.
b) Investments in foreign companies are translated at the exchange rates prevailing on the dates of making the investments.
a) Assets and liabilities (except non-monetary assets) related to foreign currency transactions, remaining unsettled at the year-end, are stated at year-end rates. In cases where the foreign currency assets and liabilities are covered by Forward Exchange Contract, the same are stated at forward contract rates and resultant exchange difference is spread over the life of the contract.
d) Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets in which case they are adjusted to the carrying value of such fixed assets.
17) INCOME TAXES
a) Provision is made for current income tax liability, which is likely to arise on the results for the year at the current rate of tax in accordance with the provisions of Income Tax Act, 1961.
b) Deferred income tax is provided, using the liability method, on all timing differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes.
c) Deferred tax assets are recognised only to the extent that there is reasonable/virtual certainty of their realisation.
d) Deferred tax assets and liabilities are measured using the tax rates and the tax laws that have been enacted or subsequently enacted at the balance sheet date.
Mar 31, 2001
A. SIGNIFICANT ACCOUNTING POLICIES
1 ) METHOD OF ACCOUNTING
The accompanying financial statements have been prepared in accordance with the historical cost conventions following accrual basis of accounting and in accordance with Generally Accepted Accounting Practices in India and confirms to the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956, as amended upto date.
2) USES OF ESTIMATES
The presentation of financial statements in confirmity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of the assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known/materialised.
3) REVENUE RECOGNITION
Sales are recognised at the time of constructive delivery of goods and are stated net of trade discounts, returns and sales tax but includes excise duty and export incentives. Export incentives are accounted on accrual basis and include the estimated value of export receivable under the Duty Entitlement Pass Book Scheme and the Duty Drawback Scheme.
4) FIXED ASSETS
Fixed assets are stated at historical cost of acquisition or construction and include all other incidental expenses related to acquisition.
5) PATENTS, TRADE MARKS & COPYRIGHTS
The cost of acquisition of Patents, Trademarks and Copyrights is amortised over its estimated useful life.
6) DEPRECIATION
Depreciation on fixed assets is provided (except in case of patents, trade marks & copyrights) on written down value method as per rates and manner prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on Patents, Trademarks & Copy rights is provided on straight line method over a period of seven years.
7) DEFERRED REVENUE EXPENDITURE
Expenditure for registration and for obtaining regulatory approvals for products for overseas markets and product acquisition are charged off as a Deferred Revenue Expenditure over a period of 5 years beginning from the year of product registration.
8) INVESTMENTS
Long term Investments are stated at cost. A provision for diminution (if any) is made to recognise a decline, other than temporary, in the value of long-term investments.
9) EXPENSES INCURRED ON DEVELOPMENT & MAINTENANCE OF WEB-SITE
The expenses incurred on development & maintenance of new web-site is charged to Profit & Loss Account.
10) INVENTORIES
Inventories have been valued as follows:
Raw Materials, packing materials and stores & spares At cost
Finished GoodsAt lower of cost or net realisable value Work / Stocks in process At cost Goods for resale At lower of cost or net realisable value 'Cost' of Raw Materials, Packing Materials and Stores & Spares is arrived at by using 'First-in-first-out cost' method.
'Cost' of self-manufactured goods is determined by considering direct material and excise duty and appropriate portion of factory and administrative overheads. 'Cost' of traded goods is arrived at by using 'First-in-first-out cost' method.
11) RESEARCH AND DEVELOPMENT
Revenue expenditure incurred on Research & Development is charged to Profit & Loss Account of the year in which it is incurred Capital Expenditure on Research & Development is included in the gross block of fixed assets and depreciation thereon has been provided on Written Down Value method as per rates and manner prescribed in Schedule XIV to the Companies Act, 1956
12) EMPLOYEE TERMINAL BENEFITS
a) Provident Fund and ESI: Company's contribution to defined contribution schemes such as Provident Fund and ESI is accrued as per terms of contracts with the employees and provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 and is charged to Profit and Loss Account.
b) Gratuity: Provision for Gratuity has been made on the basis of actuarial valuation made by independant actuary as of the balance sheet date.
c) Leave Encashment: The provision for leave encashment benefit to the employees as per Company policy has been made on the basis of actuarial valuation made by independant actuary.
13) FOREIGN CURRENCY TRANSACTIONS
a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction.
b) Investments in Foreign Companies are translated at the exchange rates prevailing on the dates of making the investments
c) Assets and liabilities (except investment) related to foreign currency transactions, remaining unsettled at the year-end are stated at year-end rates. In cases where foreign currency assets and liabilities are covered by Forward Exchange Contract,the same are stated at forward contract rates and resultant exchange difference is spread over the life of the contract.
d) Exchange gains/losses are recognised in the Profit and Loss Account except in respect of liabilities incurred to acquire fixed assets in which case they are adjusted to the carrying value of such fixed assets.
Mar 31, 1999
1. METHOD OF ACCOUNTING
a. The accompanying financial statements have been prepared in accordance with the historical cost conventions and in accordance with the relevant accounting standards and provisions of the Companies Act, 1956 and as amended upto date.
b. Accounting policies not specifically referred to otherwise are consistent and in accordance with generally accepted accounting principles.
2. FIXED ASSETS
Fixed assets are stated at cost of acquisition or construction and the expenses incurred during construction period have been capitalized under respective heads of fixed assets.
3. DEPRECIATION
Depreciation on all items of fixed assets is provided on Written Down Value method as per rates and manner prescribed in Schedule XIV of the Companies Act, 1956.
However depreciation on "Patents and Trade Marks", has been charged at 5 per cent per annum, by estimating the life of a patent to be 20 years.
4. FOREIGN CURRENCY TRANSACTIONS
a. Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date and time of specific transactions.
b. Outstanding items of liabilities and assets in foreign exchange on this Balance Sheet date have been converted to Indian Rupees at the rate of exchange prevailing on said date and any resultant foreign exchange conversion gain or loss has been accounted for.
5. EMPLOYEE TERMINAL BENEFITS
Company's contribution to Employees' Provident Fund and ESI is charged to the profit and loss account. Provision for Gratuity and Leave Encashment is accounted for on accrual basis.
6. INVENTORY VALUATION
i. Raw materials, packing material and stores & spares : at cost
ii. Finished Goods : at lower of cost or net realisable value
iii. Work/Stocks in Process : at lower of cost or net realisable value
7. SALES
Domestic Sales are stated net of Returns and Sales Tax but inclusive of Excise duty.
8. DEFERRED REVENUE EXPENDITURE
Amount transferred to deferred Revenue Expenditure is being written off over a period of ten years except the revenue expenditure on Research and Development deferred, which is being written off over a period of twenty years corresponding to the commercial life of patents as per international norms and laws.
9. RESEARCH AND DEVELOPMENT
The activities of the Company being Research and Development focussed, expenditure under the head Research and Development constitutes expenses directly attributable to the R&D activities of the Company plus expenses of other heads which can be reasonably apportioned to this head.
Revenue expenditure incurred on Research and Development has been deferred and is being written off over a period of 20 years, being the period for which patents are valid in the pharmaceutical industry. Capital Expenditure on Research and Development is included in the gross block of fixed assets and depreciation on them has been provided in the usual manner as per the Companies Act, 1956 and as amended upto date.
10. DUTY DRAW BACK
Duty draw back from the Govt. of India in respect of Company's exports has been accounted for on receipt basis.
11. DIVIDEND ADJUSTMENT AGAINST ALLOTMENT MONEY DUE
In respect of those equity shareholders whose allotment money subsequent to the Public issue of the company in Sept. 1995 has not been received in full, the dividend for 1997-98 has been adjusted against their allotment money due.
Mar 31, 1998
1) METHOD OF ACCOUNTING
a) The accompanying financial statements have been prepared in accordance with the historical cost conventions and in accordance with the relevant accounting standards and provisions of the Companies Act, 1956, as amended upto date.
b) Accounting policies not specifically referred to otherwise are consistent and in accordance with generally accepted accounting principles.
2) FIXED ASSETS
Fixed Assets are stated at cost of acquisition or construction and the expenses incurred during construction period have been capitalised under respective heads of fixed assets.
3) DEPRECIATION
Depreciation on all items of Fixed Assets is provided on Written Down Value method as per rates and manner prescribed in Schedule XIV of the Companies Act, 1956.
However, depreciation on "Patents and Trade Marks", has been charged at 5 per cent per annum, by estimating the life of a patent to be 20 years.
4) FOREIGN CURRENCY TRANSACTIONS
a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date and time of specific transactions.
b) Outstanding items of liabilities and assets in foreign exchange on this Balance Sheet date have been converted to Indian Rupees at the rate of exchange prevailing on said date and any resultant foreign exchange conversion loss has been accounted for. However, wherever the conversion resulted in a gain, the values have been kept at original exchange rate, to be accounted for only at the time of their actual currency conversion upon payment or receipt, as the case may be.
5) EMPLOYEE TERMINAL BENEFITS
Company's Contribution to Employees Provident Fund and ESI is charged to the Profit and Loss account. Provision for Gratuity and Leave Encashment is accounted for on accrual basis.
6) INVENTORY VALUATION
Items of value forming part of the total inventory have been valued as under :
i) Raw materials, packing material and stores & spares : at cost
ii) Finished Goods : at lower of cost or net realisable value
iii) Work/Stocks in Process : at lower of cost or net realisable value
7) SALES
Sales are stated net of returns and Sales Tax.
8) DEFERRED REVENUE EXPENDITURE
Balance transferred to Deferred Revenue Expenditure till 31.03.1995 is being written off over a period of four years and that relating to subsequent years is being written off over a period of ten years, except revenue expenditure on Research and Development deferred, which is being written off over a period of twenty years corresponding to the commercial life of patents as per international norms and laws.
9) RESEARCH AND DEVELOPMENT
The activities of the Company being Research and Development focussed, expenditure under the head Research and Development constitutes expenses directly attributable to the R&D activities of the Company plus expenses of other heads which can be reasonably apportioned to this head.
Revenue expenditure incurred on Research and Development has been deferred and is being written off over a period of 20 years, being the period for which patents are valid in the pharmaceutical industry. Capital Expenditure on Research and Development is included in the gross block of fixed assets and depreciation on them has been provided in the usual manner as per the Companies Act, 1956, as amended upto date.
10) DUTY DRAW BACK
Duty draw back from the Govt. of India in respect of Company's exports has been accounted for on receipt basis.
11) DIVIDEND ADJUSTMENT AGAINST ALLOTMENT MONEY DUE
In respect of those equity shareholders whose allotment money subsequent to the Public issue of the Company in Sept. 1995 has not been received in full, the dividend for 1996-97 has been adjusted against their allotment money due.
Mar 31, 1997
1. Method of Accounting
The Accounts of the company are prepared in accordance with the
generally accepted accounting principles in India and the provisions of the Companies Act, 1956.
The Company follows Accrual Method of Accounting and recognises all significant and ascertainable items of income and expenditure on accrual basis.
2. Fixed Assets Fixed Assets are stated at cost, net of modvat, less accumulated depreciation plus any subsequent improvements. All costs including freight, duties, levies, financing cost till the commencement of commercial production, and any directly attributable cost of bringing the assets to their working condition are capitalised.
Capital Works in Progress includes advances and provisions..
3. Depreciation Depreciation on all items of fixed assets is provided on Written Down Value method at rates prescribed in the Schedule XIV of the Companies Act, 1956.
For items of Patents and Trade Marks, the Company has charged depreciation at 5 per cent per annum, by estimating the life of a patent to be 20 years after it comes into use.
4. Foreign Currency Transaction a. Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of specific transaction.
b. Monetary items of current assets and current liabilities is denominated in foreign currencies are restated at the rates prevailing at the year end, and the difference between the year end rate and the exchange rate at the date of the transaction is recognised as income or expense, as the case may be, in the profit and loss account.
c. Non monetary transactions, including items of contingent liability like guarantees and letters of credit are stated at cost.
5. Employee Terminal benefits Company's contribution to Employee's provident fund and ESI is charged to the profit and loss account. Provision for gratuity is on actuarial basis.
6. Inventory Valuation Items of inventory have been valued as under:
a. Raw materials, packaging material and stores and spares : at cost;
b. Finished Goods : at lower of cost (material cost plus direct expenses) or net realisable value;
c. Work/Stocks in Process : at cost upto estimated stage of process.
7. Sales Sales are stated net of returns and Sales Tax.
8. Issue Expenses Issue expenses pertaining to the expansion project of the company are capitalised
9. Deferred Revenue Expenditure Deferred revenue expenditure relating to years before 1995 is being written off over a four year period and that relating to subsequent years is being written off over a period of ten years. During the year there is no addition to the deferred revenue expenditure except the revenue expenditure on Research and Development which is being written off over a period of twenty years.
10. Research and Development Research and Development expenditure constitutes expenses directly attributable to the R&D activities of the Company plus expenses of other heads which can be reasonably apportioned to this head.
Revenue expenditure incurred on Research and Development have been deferred and are being written off over a period of 20 years, being the period for which product patents in the pharmaceutical industry are valid. Capital Expenditure on Research and Development is included in the gross block of fixed assets and depreciation on them has been provided in the usual manner as per the Companies Act, 1956.
11. Duty draw back Duty draw back from the Govt. of India has been accounted for on receipt basis.
12. Dividend Adjustment against Allotment Money due In respect of those equity shareholders whose allotment money subsequent to the Public issue of the company in Sept. 1995 has not been received in full, the dividend for 1995-96, released in Nov. 1996 has been adjusted against the allotment money due.
Mar 31, 1996
1. METHOD OF ACCOUNTING
The Accounts are prepared in accordance with accounting principles generally accepted in India. The Company follows Accrual Method of Accounting.
2. FIXED ASSETS
Fixed assets are stated at the cost of acquisition added by subsequent improvements thereto inclusive of taxes, duties, freight and other incidental expenses related to acquisition,
3. DEPRECIATION
Depreciation on Assets is provided on Written Down Value method at rates prescribed in Schedule XIV of the Companies Act, 1956.
4. GRATUITY
The Company does not have any gratuity scheme on the basis of actuarial valuation. Gratuity is accounted for on cash basis.
5. FOREIGN CURRENCY TRANSACTIONS
a) Sales made in Foreign Currency is converted at the exchange rate applicable at the time of despatch/shipment of goods. Gain/loss arising out of fluctuation in the exchange rates, if any, is accounted for on realisation.
b) Payments made in foreign currency are converted at the applicable exchange rates prevailing at the time of payment.
6. INVENTORIES
a) Finished and semi-finished products produced and purchased by the Company are carried at lower of cost or market value.
b) Work in progress is carried at lower of cost or net realisable value.
7. MISCELLANEOUS EXPENDITURE
Deferred Revenue expenditure incurred till 31.03.95 are being written off over a period of four years and deferred revenue expenditure incurred after 31.03.95 are being written off over a period of ten years.
8. RESEARCH & DEVELOPMENT
The revenue expenditure incurred on Research and Development have been deferred and are being written off over a period of twenty years and the capital expenditure on Research and Development are included in the gross block of fixed assets and depreciation on them has been provided as per Companies Act 1956.