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Notes to Accounts of Laurus Labs Ltd.

Mar 31, 2023

(i) Pledge on Property, plant and equipment:

Property, plant and equipment (other than vehicles) with a carrying amount of '' 2,763.52 (March 31,2022: '' 2,069.18) are subject to a pari passu first charge on the Company''s term loans. Further, the property, plant and equipment (other than vehicles) are subject to a pari passu second charge on the Company''s current borrowings. Also, refer note 13A and 13B.

(ii) The title deeds of all immovable properties are held in the name of the company. The company has not revalued its property, plant and equipment.

i) During the year ended March 31, 2021, the Company acquired 79.21% stake in Laurus Bio Private Limited (Formerly known as Richcore Lifesciences Private Limited). As on March 31,2023, the Company holds 76.60%.

ii) During the year ended March 31, 2022, the Company entered into an investment agreement with Immunoadoptive Cell Therapy Private Limited, (“ImmunoACT”) to acquire 26.62% stake, subject to completion of conditions precedent, for agreed

consideration of '' 46 Crores. As on March 31, 2022, the Company invested '' 27.60 Crores representing 996 equity shares of '' 10/- each fully paid-up and 3,983 compulsorily convertible preference shares of '' 10/- each of which '' 5/- paid up, with a stake of 18.94%. During the year ended March 31, 2023, the Company invested '' 18.40 Crores representing remaining part payment '' 5/- towards 3,983 compulsorily convertible preference shares. As on March 31,2023, the Company holds 27.57%

iii) During the year ended March 31,2023, the Company entered into an investment agreement with Ethan Energy India Private Limited (“Ethan Energy”) to acquire 26% stake, for agreed consideration of '' 3.90 Crores.

iv) The Company incorporated wholly owned subsidiary, Laurus Specialty Chemicals Private Limited (LSCPL) in India on December 01, 2022.

v) The Company has complied with number of layers prescribed under clause 87 of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of layers) Rules, 2017.

a) Incentive in the form of duty credit scrip upon sale of exports under Merchandise Exports from India Scheme under Foreign Trade Policy of India 2015-20.

b) Existing Foreign Trade Policy 2015-20, has been extended till September 30, 2022 vide notification no.64/2015-2020 dated 31.03.2022 & Public Notice No.53/2015-2020 dated 31.03.2022

c) Sales tax incentive and reimbursement of power cost under the Andhra Pradesh state incentives IIPP 2015-20 scheme. Incentives are eligible for five years from the date of commencement of production. There are no unfulfilled conditions or contingencies attached to these incentives.

a) No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

b) Trade receivables are non-interest bearing and are generally on terms of 30 - 120 days.

c) Of the trade receivables balance, '' 487.71 in aggregate (as at March 31, 2022''481.99) is due from the Company''s customers individually representing more than 5 % of the total trade receivables balance.

d) The Company has used practical expedient by computing the expected credit loss allowance for doubtful trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking estimates. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates used in the provision matrix.

11.2. Rights attached to equity shares

The Company has only one class of equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms refer note 11.2a.

The Company declares and pays dividends in Indian rupees. The final dividend, if any, proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2023, the amount of dividend (first interim dividend '' 0.80 and second interim dividend '' 1.20) per share declared as distribution to equity shareholders was '' 2.00 (March 31,2022: first interim dividend '' 0.80 and second interim dividend '' 1.20 per share declared as distribution to equity shareholders was '' 2.00).

11.2a.Liquidation terms and preferential rights

The liquidation terms of the equity shares are as follows:

(a) If the company shall be wound up, the Liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act divide amongst the shareholders, in specie or kind the whole or any part of the assets of the company, whether they shall consist of property of the same kind or not.

(b) For the purpose aforesaid, the Liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

Nature and purpose of reserves Securities premium:

Securities premium is used to record the premium on issue of shares and can be utilised in accordance with the provisions of the Companies Act, 2013.

Capital reserve:

Represents capital reserve balances of acquired entities which are transferred to the Company upon merger.

Securities premium:

Securities premium is used to record the premium on issue of shares and can be utilised in accordance with the provisions

of the Companies Act, 2013.

Share based payments reserve:

The fair value of the equity-settled share based payment transactions with employees is recognised in statement of profit and loss with corresponding credit to Share based payments reserve. This will be utilised for allotment of equity shares against outstanding employee stock options.

Retained earnings:

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distribution to share holders.

(c) The details of component of deferred tax assets are given under note 6.

(d) During the year ended March 31,2023, the Company elected to exercise the option permitted under Section 115BAA of the Income-Tax Act, 1961 as introduced by the Taxation Laws (Amendment) Ordinance, 2019. Accordingly, the Company has recognised provision for income tax for the year ended March 31, 2023 and remeasured its deferred tax assets/liabilities based on the rate prescribed in the said Section.

28. Gratuity

Defined Benefit Plans

The Company has a defined benefit gratuity plan and governed by Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of service. The scheme is funded through a policy with SBI Life Insurance Company Limited. The following tables summarise net benefit expenses recognised in the Statement of Profit and Loss, the status of funding and the amount recognised in the Balance sheet for the gratuity plan:

29. Share based payments

ESOP 2016 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2016 for issue of stock options to eligible employees of the Company effective from ]une 09, 2016. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2018 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2018 for issue of stock options to eligible employees of the Company. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

For options exercised during the year, the weighted average share price at the exercise date under under ESOP 2016 scheme, was '' 58.40 per share (March 31,2022: '' 131.82 per share).

The weighted average remaining contractual life for the stock options outstanding under ESOP 2016 as at March 31, 2023 is 4.01 years (March 31,2022: 0.67 years) and under ESOP 2018 as at March 31,2023 is 2.90 years (March 31, 2022: 3.73). The range of exercise prices for options outstanding under ESOP 2016 as at March 31,2023 was '' 550.00 (March 32, 2022: '' 550.00) and under ESOP 2018 as at March 31, 2023 was '' 255.50 (March 31,2022: '' 255.50).

The weighted average fair value of stock options granted during the year under ESOP 2013 scheme was '' 466.60 (March 31,2022: '' Nil) and under ESOP 2018 scheme was '' 466.60 (March 31,2022: '' 474.70). The Black Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

* Net of loan given '' 48.20. Maximum balance outstanding during the year '' 106.42 ; (March 31,2022 : '' 143.21) loan given for business purposes at the rate of interest 8.00% (March 31,2022 : 7.00%)

"Maximum balance outstanding during the year '' 20.00 ; (March 31,2022: '' 20.00) loan given for business purposes at the rate of interest 8.00% (March 31,2022 : 7.00%)

The Company has provided guarantees for '' 440.33 in the form of Corporate guarantees to CITI, SBI and DBS Bank for the loans obtained by Laurus Synthesis Private Limited, Laurus Bio Private Limited & Laurus Generics Inc, USA . (March 31, 2022: '' 140.90 in the form of Corporate guarantees to CITI and DBS Bank for the loans obtained by Laurus Synthesis Private Limited, Laurus Bio Private Limited & Laurus Generics Inc, USA).

A As the future liability for gratuity and leave encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to the Key Management personnel and their relatives is not ascertainable and, therefore, not included above.

The transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.

34. Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

(A) Use of estimates, Judgements and assumptions

The preparation of financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that aff ect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following note

(i) Taxes

The Company has a Minimum Alternate Tax (MAT) credit of '' Nil as on March 31, 2023 (March 31, 2022: '' 33.21). During the year ended March 31, 2023, the Company elected to exercise the option permitted under Section 115BAA of the Income-Tax Act, 1961 as introduced by the Taxation Laws (Amendment) Ordinance, 2019. Accordingly, the Company has recognised provision for income tax for the year ended March 31,2023 and remeasured its deferred tax assets/liabilities based on the rate prescribed in the said Section.

(ii) Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 29.

(iii) Defined employee benefit plans (Gratuity)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in Note 28.

(iv) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (‘DCF'') model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 37 and 38 for further disclosures.

(v) Depreciation on property, plant and equipment

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives and residual values of all its property, plant and equipment estimated by the management. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment, though these rates in certain cases are different from lives prescribed under Schedule II of the Companies Act, 2013.

(vi) Impairment of investments

The Company reviews its carrying value of investments annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.

37. Financial risk management objectives and policies

Financial risk management framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

A Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables.

Trade receivables:

The customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit limits are defined in accordance with this assessment and outstanding customer receivables are regularly monitored. Of the trade receivables balance, '' 487.71 in aggregate (as at March 31, 2022''481.99) is due from the Company''s customers individually representing more than 5 %

of the total trade receivables balance and accounted for approximately 33% (March 31, 2022: 38%) of all the receivables outstanding. The Company'' receivables turnover is quick and historically, there was no significant defaults on account of those customer in the past. Ind AS requires an entity to recognise in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with Ind AS 109. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.

Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer''s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was '' 1,487.42 (March 2022: '' 1,269.15), being the total of the carrying amount of balances with trade receivables.

B Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The table below summarises the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments:

C Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. In order to optimize the Company''s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Interest rate sensitivity

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

Foreign currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. The information on derivative instruments is as follows:

a) Forward contract (Derivatives):

Forward contract outstanding as at Balance Sheet date:

March 31,2023 Sell US $ 45,000,000

Designated as fair value hedge - receivables

March 31,2022 Sell US $ 22,000,000

Designated as fair value hedge - receivables

38. Capital management

For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company intends to keep the gearing ratio between 0.4 to 1.5. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short-term deposits.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.

No changes were made in the objectives, policies or processes for managing capital during the year ended March 31,2023.

39. Commitments and Contingencies

A. Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Operating lease commitments - Company as lessee

The Company''s lease asset classes primarily consist of leases for land. The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.

The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.

The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.

The table below provides details regarding the contractual maturities of lease liabilities as at March 31, 2023 and March 31,2022 on discounted basis

Particulars

March 31, 2023

March 31, 2022

Within one year

4.82

3.94

After one year but not more than five years

24.10

19.70

More than five years

3.96

9.80

Total

32.88

33.44

B. Commitments

Particulars

March 31, 2023

March 31, 2022

Estimated amount of contracts remaining to be executed on capital account and not provided for

160.96

263.07

C. Contingent liabilities

Particulars

March 31, 2023

March 31, 2022

(i) Outstanding bank guarantees (excluding performance obligations)

63.00

44.47

(ii) Claims arising from disputes not acknowledged as debts - direct taxes

5.89

10.90

(iii) Claims arising from disputes not acknowledged as debts - indirect taxes

56.53

53.51

(iv) On account of provident fund liability

7.57

7.57

(v) Corporate guarantees

440.33

140.90

41. Other statutory information

i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

ii) The Company does not have any transactions with companies struck off.

iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

v) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government

authority.

vi) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

vii) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

viii) The Company doesn''t have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.


Mar 31, 2022

(1) Pledge on Property, plant and equipment:

Property, plant and equipment (other than vehicles) with a carrying amount of '' 2,069.18 (March 31, 2021: '' 1,757.77) are subject to a pari passu first charge on the Company''s term loans, except to the extent of plant & machinery exclusively charged towards term loan. Further, the property, plant and equipment (other than vehicles) are subject to a pari passu second charge on the Company''s current borrowings. Also, refer note 13A and 13B.

The title deeds of all immovable properties are held in the name of the Company. The Company has not revealed its Property, Plant and Equipment.

1. During the year ended March 31, 2021, Laurus Synthesis Inc. USA (100% wholly-owned subsidiary of the Company) has been merged with Laurus Generics Inc. USA (Step-down subsidiary of the Company) with effect from September 30, 2020. For 30,000 Equity shares of USD 100/- each of Laurus Synthesis Inc., 6,100 Equity shares of USD 100/- each of Laurus Generics Inc., have been allotted based on the share exchange ratio of 1:0.2033.

2. During the year ended March 31, 2021, the Company incorporated wholly-owned subsidiary, Laurus Synthesis Private Limited (LSPL) in India.

3. During the year ended March 31, 2021, the Company acquired 100% shares of Phekolong Pharmaceuticals Pty. Ltd., (renamed as Laurus Generics SA (Pty.) Ltd.) a wholly-owned subsidiary of Pharmacare Limited t/a Aspen Pharmacare, South Africa.

4. During the year ended March 31,2021, the Company acquired 79.21% stake in Laurus Bio Private Limited (Formerly known as Richcore Lifesciences Private Limited). As on March 31, 2022, the Company holds 76.60%.

5. During the year ended March 31, 2022, the Company entered into an investment agreement with Immunoadoptive Cell Therapy Private Limited, (‘''ImmunoACT”) to acquire 26.62% stake, subject to completion of conditions precedent, for agreed consideration of '' 46 crore. As on March 31, 2022, the Company invested '' 27.60 crore representing 996 equity shares of '' 10/- each fully paid-up and 3,983 compulsorily convertible preference shares of '' 10/- each of which '' 5/- paid up, with a stake of 18.94%.

a) Incentive in the form of duty credit scrip upon sale of exports under Merchandise Exports from India Scheme under Foreign Trade Policy of India 2015-20.

b) Existing Foreign Trade Policy 2015-20, has been extended till September 30, 2022 vide notification no. 64/2015-2020 dated 31.03.2022 & Public Notice No.53/2015-2020 dated 31.03.2022

c) Sales tax incentive and reimbursement of power cost under the Andhra Pradesh state incentives IIPP 2015-20 scheme. Incentives are eligible for five years from the date of commencement of production. There are no unfulfilled conditions or contingencies attached to these incentives.

No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

Trade receivables are non-interest bearing and are generally on terms of 30 -120 days.

Of the trade receivables balance, '' 481.99 in aggregate (as at March 31, 2021 '' 698.65) is due from the Company''s customers individually representing more than 5% of the total trade receivables balance.

The Company has used practical expedient by computing the expected credit loss allowance for doubtful trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking estimates. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates used in the provision matrix. In calculating expected credit loss, the Company has also considered credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19.

Trade receivables is net of bills discounted without recourse amounting to '' 78.22 (as at March 31, 2021 '' 234.36)

* The Board of Directors, at their meeting held on April 30, 2020, recommended for the sub-division of equity shares of the Company from existing face value of '' 10/- each to face value of '' 2/- each (i.e. split of 1 equity share of '' 10/- each into 5 equity shares of '' 2/- each), and the same has been approved by the shareholders in the Annual General Meeting of the Company held on July 09, 2020 and the Board of Directors, at their meeting held on July 30, 2020 fixed the “record date” of September 30, 2020. Accordingly, equity shares of the Company of '' 10/ has been sub-divided into 5 equity shares of '' 2/- each w.e.f. September 30, 2020.

11.2 Rights attached to equity shares

The Company has only one class of equity shares having a par value of '' 2/- per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms refer note 11.2a.

The Company declares and pays dividends in Indian rupees. The final dividend, if any, proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2022, the amount of dividend (first interim dividend ''0.80 and second interim dividend ''1.20) per share declared as distribution to equity shareholders was '' 2.00 (March 31, 2021: first interim dividend ''0.80, second interim dividend ''0.40 and third interim dividend of ''0.80).

11.2a. Liquidation terms and preferential rights

The liquidation terms of the equity shares are as follows:

(a) If the Company shall be wound up, the Liquidator may, with the sanction of a special resolution of the Company and any other sanction required by the Act divide amongst the shareholders, in specie or kind the whole or any part of the assets of the Company, whether they shall consist of property of the same kind or not.

(b) For the purpose aforesaid, the Liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

(c) All term loans (except HDFC term loan outstanding of ''6.67, which is secured by pari passu charge on moveable property, plant and equipment by way of hypothecation and immovable property, plant and equipment by way of mortgage) are secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks. They are further secured by pari passu second charge on current assets (both present and future).

(d) Vehicle loans were prepaid in during the year (March 31, 2021: Vehicle loans from banks are repayable in instalments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles)

(e) Current borrowings are availed in both Rupee and Foreign currencies. Interest on rupee loans ranges from T-Bill to MCLR plus 0.50% (March 31, 2021: MCLR plus 0% to 0.50%). Buyers credit loan interest ranges from LIBOR plus 0.08% to SOFR plus 0.55% (March 31, 2021: LIBOR plus 0.08% to 2.00%). The secured current borrowings are backed by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future). [March 31, 2021: Secured Current borrowings are backed by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future)].

(f) The Company has used the borrowings for the purposes for which it was taken.

(g) The quarterly returns of current assets filed by the Company with banks are in agreement with books of account.

29. Share based payments ESOP 2011 Scheme

The board of directors/compensation committee has approved the Laurus Employees Stock Option Scheme(ESOP) 2011 for issue of stock options to eligible employees of the Company effective from September 19, 2011. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2016 Scheme

The board of directors/compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2016 for issue of stock options to eligible employees of the Company effective from June 09, 2016. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2018 Scheme

The board of directors/compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2018 for issue of stock options to eligible employees of the Company. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

For options exercised during the year, the weighted average share price at the exercise date under under ESOP 2016 scheme, was '' 131.82 per share (March 31, 2021: '' 131.82 per share).

The weighted average remaining contractual life for the stock options outstanding under ESOP 2016 as at March 31, 2022 is 0.67 years (March 31,2021: 1.67 years) and under ESOP 2018 as at March 31,2022 is 3.73 years (March 31,2021: 2.67). The range of exercise prices for options outstanding under ESOP 2016 as at March 31, 2022 was ''550.00 (March 31, 2021: '' 550.00) and under ESOP 2018 as at March 31, 2022 was '' 255.50 (March 31, 2021: '' 255.50).

The weighted average fair value of stock options granted during the year under ESOP 2016 scheme was '' Nil (March 31, 2021: '' Nil) and under ESOP 2018 scheme was '' 474.70 (March 31, 2021: '' Nil). The Black Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

34. Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

(A) Judgements

In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements.

(i) Lease commitments - the Company as lessor

The Company has entered into agreements to manufacture and supply API and intermediates produced at a dedicated blocks located at Unit-1 and Unit-5 constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz. economic life of the asset vs. lease term, ownership of the asset after the lease term. The Company applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17.

During the year, the Company entered into a revised agreement which resulted in lease modification and as per the terms of agreement there is no exclusive right to use or direct the use of dedicated blocks located at Unit-1 and Unit-5 respectively. Accordingly, the Company has recorded the lease modification at fair value as per Ind AS 116.

(ii) Lease commitments - the Company as lessee

The Company has entered into leases for land and office premises. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the land and office premises and the fair value of the asset, that it does not retain significant risks and rewards of ownership of the land and the office premises and accounts for the contracts as operating leases. Further, refer note no. 40 A, for effect of transition to Ind AS 116, classification of leases and other disclosures relating to leases.

(iii) Taxes

The Company has a Minimum Alternate Tax (MAT) credit of '' 33.21 as on March 31, 2022 (March 31, 2021: '' 82.55). 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. The Company based on its future projections of profit believes that the MAT credit would be fully utilised by the financial year 2022-23.

(B) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(i) Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 29.

(ii) Taxes

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

(iii) Defined employee benefit plans (Gratuity)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in Note 28.

(iv) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (‘DCF'') model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer notes 37 and 38 for further disclosures.

(v) Depreciation on property, plant and equipment

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives and residual values of all its property, plant and equipment estimated by the management. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment, though these rates in certain cases are different from lives prescribed under Schedule II of the Companies Act, 2013.

(vi) Impairment of investments

The Company reviews its carrying value of investments annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. The recoverable amounts have been determined based on value in use calculations which uses cash flow projections covering generally a period of five years (which are based on key assumptions such as margins, expected growth rates based on past experience and Management''s expectations/ extrapolation of normal increase/steady terminal growth rate) and appropriate discount rates that reflects current market assessments of time value of money and risks specific to these investments. The cash flow projections included estimates for five years developed using internal forecasts and terminal growth rate thereafter. The management believes that any reasonable possible change in key assumptions on which recoverable amount is based is not expected to cause the aggregate carrying amount to exceed the aggregate recoverable amount of the investments.

(C) Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19)

COVID-19 is the infectious disease caused by the most recently discovered coronavirus, SARS-CoV-2. In March 2020, the WHO declared COVID-19 a pandemic. The Company has adopted measures to curb the spread of infection in order to protect the health of our employees and ensure business continuity with minimal disruption. The Company immediately took steps to mitigate sanitary and health risks and the Company promptly set up a team of experts to assist the Health and Safety at Work places. In assessing the recoverability of receivables and other financials assets, the Company has considered internal and external information up to the date of approval of these Standalone financial statements. The impact of the global health pandemic may be different from that of estimated as at the date of approval of these standalone financial statements and the Company will continue to closely monitor any material changes to future economic conditions.

35. Hedging activities and derivatives

Derivatives designated as hedging instruments

The Company uses foreign currency denominated borrowings and foreign exchange forward contracts to manage some of its transaction exposures. The Company classifies its derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded in the Company''s hedging reserve as a component of equity and re-classified to the Statement of Profit and Loss as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is recorded in the Statement of Profit and Loss immediately. All outstanding forward contracts have maturity period of less than twelve months. Refer note no. 38(d) for disclosure on hedges of highly probable forecasted transactions.

The management assessed that cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Further, the management has assessed that fair value of borrowings approximate their carrying amounts largely since they are carried at floating rate of interest.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

37. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.

38. Financial risk management objectives and policies Financial risk management framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

A. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables.

Trade receivables:

The customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit limits are defined in accordance with this assessment and outstanding customer receivables are regularly monitored. Of the trade receivables balance, ''481.99 in aggregate (as at March 31, 2021''698.65) is due from the Company''s customers individually representing more than 5% of the total trade receivables balance and accounted for approximately 38% (March 31, 2021: 55%) of all the receivables outstanding. The Company'' receivables turnover is quick and historically, there was no significant defaults on account of those customer in the past. Ind AS requires an entity to recognise in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with Ind AS 109. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forwardlooking information.

Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer''s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was '' 1,269.15 (March 2021: '' 1,279.82), being the total of the carrying amount of balances with trade receivables.

B. Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

C. Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. In order to optimise the Company''s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Foreign currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. The information on derivative instruments is as follows:

d) Hedges of highly probable forecasted transactions:

In respect of hedges of highly probable forecasted transactions, the Company recorded, as a component of equity, a net loss of '' Nil for the year ended March 31, 2022 (for the year ended March 31, 2021: '' Nil).

The net carrying amount of the Company''s “hedging reserve” as a component of equity before adjusting for tax impact is '' Nil as at March 31, 2022 (as at March 31, 2021: '' Nil).

e) Impact of COVID-19 (Global pandemic)

The Company basis their assessment believes that the probability of the occurrence of their forecasted transactions is not impacted by COVID-19 pandemic. The Company has also considered the effect of changes, if any, in both counterparty credit risk and own credit risk while assessing hedge effectiveness and measuring hedge ineffectiveness. The Company continues to believe that there is no impact on effectiveness of its hedges.

39. Capital management

For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company intends to keep the gearing ratio between 0.5 to 1.5. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short-term deposits.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.

No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2022.

40. Commitments and Contingencies A. Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Operating lease commitments - Company as lessee

The Company''s lease asset classes primarily consist of leases for land. The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.

The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.

The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.

Transition to Ind AS 116

Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases which replaces the existing lease standard, Ind AS 17 leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet lease accounting model for lessees. The Company has adopted Ind AS 116, effective annual reporting period beginning April 01, 2019 and applied the standard to its leases, retrospectively, with the cumulative effect of initially applying the Standard, recognised on the date of initial application (April 01, 2019). Accordingly, the Company has not restated comparative information, instead, the cumulative effect of initially applying this standard has been recognised as an adjustment to the opening balance of retained earnings as on April 01, 2019. On transition, the adoption of the new standard resulted in recognition of Right-of-Use asset (ROU) of '' 44.85 crore and a lease liability of '' 23.24 crore. The cumulative effect of applying this standard resulted in '' 0.217 crore being debited to retained earnings (net of taxes).

42. Other statutory information

i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Group for holding any Benami property.

ii) The Company does not have any transactions with companies struck off.

iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

v) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.

vi) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

vii) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Group shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

viii) The Company has not any such transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.

43. Previous year''s figures have been regrouped/reclassified wherever necessary, to confirm to current period''s classification in order to comply with the requirements of the amended Schedule III to the Companies Act, 2013 effective 1st April, 2021.


Mar 31, 2021

Pledge on Property, plant and equipment:

Property, plant and equipment (other than vehicles) with a carrying amount of C 1,757.77 (March 31,2020: C 1,632.83) are subject to a pari passu first charge on the Company''s term loans, except to the extent of plant & machinery exclusively charged towards term loan. Further, the property, plant and equipment (other than vehicles) are subject to a pari passu second charge on the Company''s current borrowings. Also, refer note 13A and 13B.

Vehicles with a carrying amount of C 10.45 (March 31, 2020: C 8.72) are hypothecated to respective banks against vehicle loans.

1) During the year ended March 31, 2021, Laurus Synthesis Inc. USA ( 100% wholly owned subsidiary of the Company) has been merged with Laurus Generics Inc. USA (Step-down subsidiary of the Company) with effect from September 30, 2020. For 30,000 Equity shares of USD 100/- each of Laurus Synthesis Inc., 6,100 Equity shares of USD 100/- each of Laurus Generics Inc., have been allotted based on the share exchange ratio of 1:0.2033.

2) During the year ended March 31, 2021, the Company incorporated wholly owned subsidiary, Laurus Synthesis Private Limited (LSPL) in India.

3) During the year ended March 31, 2021, the Company acquired 100 % shares of Phekolong Pharmaceuticals Pty Ltd, (renamed as Laurus Generics SA (Pty) Ltd) a wholly owned subsidiary of Pharmacare Limited t/a Aspen Pharmacare, South Africa.

4) During the year ended March 31, 2021, the Company acquired 79.21% stake in Laurus Bio Private Limited (Formerly known as Richcore Lifesciences Private Limited (Richcore))

No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

Trade receivables are non-interest bearing and are generally on terms of 30 - 120 days.

Of the trade receivables balance, C 698.65 in aggregate (as at March 31, 2020 C 444.39) is due from the Company''s customers individually representing more than 5% of the total trade receivables balance.

The Company has used practical expedient by computing the expected credit loss allowance for doubtful trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking estimates. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates used in the provision matrix. In calculating expected credit loss, the company has also considered credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID -19.

11.2. Rights attached to equity shares

The Company has only one class of equity shares having a par value of C 2/- per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms refer note 11.2a.

The Company declares and pays dividends in Indian rupees. The final dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31,2021, the amount of dividend (first interim dividend C 0.80, second interim dividend C 0.40 and third interim dividend of C 0.80) per share declared as distribution to equity shareholders was C 2.00 (March 31, 2020: final dividend C1.00 and interim dividend C 1.50 {face value of C 10/- each}).

11.2a. Liquidation terms and preferential rights

The liquidation terms of the equity shares are as follows:

(a) If the company shall be wound up, the Liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act divide amongst the shareholders, in specie or kind the whole or any part of the assets of the company, whether they shall consist of property of the same kind or not.

(b) For the purpose aforesaid, the Liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

i All term loans (except HDFC) are secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks. They are further secured by pari passu second charge on current assets (both present and future). HDFC Term loan is secured by pari passu first charge on the property, plant and equipment (both present and future).

) Vehicle loans from banks are repayable in instalments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles.

) Current borrowings are availed in both Rupee and Foreign currencies. Interest on rupee loans ranges from MCLR plus 0% to 0.50%(March 31,2020: MCLR plus 0% to 0.50%). Buyers credit loan interest ranges from LIBOR plus 0.08% to 2.00% (March 31,2020: LIBOR plus 0.27% to 1%). The secured current borrowings are backed by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future). [March 31, 2020: Secured Current borrowings are backed by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future)].

28. Gratuity

Defined Benefit Plans

The Company has a defined benefit gratuity plan and governed by Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of service. The scheme is funded through a policy with SBI Life Insurance Company Limited. The following tables summarise net benefit expenses recognised in the Statement of Profit and Loss, the status of funding and the amount recognised in the Balance sheet for the gratuity plan:

29. Share based payments

ESOP 2011 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme(ESOP) 2011 for issue of stock options to eligible employees of the Company effective from September 19, 2011. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2016 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2016 for issue of stock options to eligible employees of the Company effective from June 09, 2016. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2018 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2018 for issue of stock options to eligible employees of the Company. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

For options exercised during the year, the weighted average share price at the exercise date under ESOP 2011 scheme, was C 525.86 per share (March 31,2020: C 347.95 per share, ) and under ESOP 2016 scheme, was C 131.82 per share (March 31, 2020: C 347.95 per share).

The weighted average remaining contractual life for the stock options outstanding under ESOP 2011 scheme as at March 31,2021 is Nil years (March 31,2020 : 0.47 years), under ESOP 2016 as at March 31, 2021 is 1.67 years (March 31, 2020: 3.38 years) and under ESOP 2018 as at March 31,2021 is 2.67 years (March 31,2020: 4.68). The range of exercise prices for options outstanding under ESOP 2011 scheme as at March 31, 2021 was C 10.00 (March 31, 2020: C 10.00), under ESOP 2016 as at March 31,2021 was C 550.00 (March 31, 2020: C 550.00) and under ESOP 2018 as at March 31, 2021 was C 255.50 (March 31,2020: C 255.50).

The weighted average fair value of stock options granted during the year under ESOP 2016 scheme was C Nil (March 31, 2020: C Nil) and under ESOP 2018 scheme was C Nil (March 31,2020: C 150.88). The Black Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

31. In accordance with Indian Accounting Standard (Ind AS) 108 on Operating segments, segment information has been given in the consolidated financial statements of the Company, and therefore no separate disclosure on segment information is given in these financial statements.

The transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.

i. Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

) Judgements

In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements.

Lease commitments - the Company as lessor

The Company has entered into agreements to manufacture and supply API and intermediates produced at a dedicated blocks located at Unit-1 and Unit-5 constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term. The Company applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17.

Lease commitments - the Company as lessee

The Company has entered into leases for land and office premises. The Company has determined, based on an evaluation of the terms and conditions of the

arrangements, such as the lease term not constituting a major part of the economic life of the land and office premises and the fair value of the asset, that it does not retain significant risks and rewards of ownership of the land and the office premises and accounts for the contracts as operating leases. Further, refer note no. 40 A, for effect of transition to Ind AS 116, classification of leases and other disclosures relating to leases.

(iii) Taxes

The Company has a Minimum Alternate Tax (MAT) credit of C 82.55 as on March 31, 2021 (March 31, 2020: C 192.59). 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. The Company based on its future projections of profit believes that the MAT credit would be utilised in comming two years.

(B) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(i) Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 29.

(ii) Taxes

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

(iii) Defined employee benefit plans (Gratuity)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation

involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in Note 28.

(iv) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (‘DCF'') model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 37 and 38 for further disclosures.

(v) Depreciation on property, plant and equipment

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives and residual values of all its property, plant and equipment estimated by the management. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment, though these rates in certain cases are different from lives prescribed under Schedule II of the Companies Act, 2013.

(vi) Impairment of investments

The Company reviews its carrying value of investments annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for. The recoverable amounts have been determined based on value in use calculations which uses cash flow projections covering generally a period of five years (which are based on key assumptions such as margins, expected growth rates based on past experience and Management''s expectations/ extrapolation of normal increase/ steady

terminal growth rate) and appropriate discount rates that reflects current market assessments of time value of money and risks specific to these investments. The cash flow projections included estimates for five years developed using internal forecasts and terminal growth rate thereafter. The management believes that any reasonable possible change in key assumptions on which recoverable amount is based is not expected to cause the aggregate carrying amount to exceed the aggregate recoverable amount of the investments.

(C) Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19)

COVID-19 is the infectious disease caused by the most recently discovered coronavirus, SARS-CoV-2. In March 2020, the WHO declared COVID-19 a pandemic. The Company has adopted measures to curb the spread of infection in order to protect the health of our employees and ensure business continuity with minimal disruption. The Company immediately took steps to mitigate sanitary and health risks and the Company promptly set up a team of experts to assist the Health and Safety at Work places. In assessing the recoverability of receivables and other financial assets, the Company has considered internal and external information upto the date of approval of these Standalone

financial statements. The impact of the global health pandemic may be different from that of estimated as at the date of approval of these standalone financial statements and the Company will continue to closely monitor any material changes to future economic conditions.

35. Hedging activities and derivatives

Derivatives designated as hedging instruments

The Company uses foreign currency denominated borrowings and foreign exchange forward contracts to manage some of its transaction exposures. The Company classifies its derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded in the Company''s hedging reserve as a component of equity and re-classified to the Statement of Profit and Loss as revenue in the period corresponding to the occurrence of the forecasted transactions. The ineffective portion of such cash flow hedges is recorded in the Statement of Profit and Loss immediately. All outstanding forward contracts have maturity period of less than twelve months. Refer note no. 38(d) for disclosure on hedges of highly probable forecasted transactions.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The management assessed that cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Further, the management has assessed that fair value of borrowings approximate their carrying amounts largely since they are carried at floating rate of interest.

38. Financial risk management objectives and policies

Financial risk management framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

A Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well

as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables.

Trade receivables:

The customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed

based on the individual credit limits are defined in accordance with this assessment and outstanding customer receivables are regularly monitored. Of the trade receivables balance, C 698.65 in aggregate (as at March 31, 2020 C 444.39) is due from the Company''s customers individually representing more than 5 % of the total trade receivables balance and accounted for approximately 55% (March 31, 2020: 57%) of all the receivables outstanding. The Company'' receivables turnover is quick and historically, there was no significant defaults on account of those customer in the past. Ind AS requires an entity to recognise in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with Ind AS 109. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.

Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer''s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was C 1,279.82, (March 2020: C 778.04), being the total of the carrying amount of balances with trade receivables.

B Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. In order to optimise the Company''s position with regards to interest income and interest expenses

and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Company''s profit before tax is affected through the impact on borrowings, as follows:

Foreign currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. The information on derivative instruments is as follows:

d) Hedges of highly probable forecasted transactions:

In respect of hedges of highly probable forecasted transactions, the Company recorded, as a component of equity, a net loss of C Nil for the year ended March 31,2021 (for the year ended March 31, 2020: C 13.37).

The net carrying amount of the Company''s “hedging reserve” as a component of equity before adjusting for tax impact is C Nil as at March 31, 2021 (as at March 31, 2020: C 13.37).

The below table summarises the periods when the cash flows associated with highly probable forecasted transactions that are classified as cash flow hedges are expected to occur.

e) Impact of COVID-19 (Global pandemic)

The Company basis their assessment believes that the probability of the occurrence of their forecasted transactions is not impacted by COVID-19 pandemic. The Company has also considered the effect of changes, if any, in both counterparty credit risk and own credit risk while assessing hedge effectiveness and measuring hedge ineffectiveness. The Company continues to believe that there is no impact on effectiveness of its hedges.

39. Capital management

For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company intends to keep the gearing ratio between 0.5 to 1.5. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short-term deposits.

No changes were made in the objectives, policies or processes for

managing capital during the year ended March 31, 2021.

40. Modification of terms of bonus to Executive Directors

The Company in its Board Meeting held on April 29, 2021 recommended modification to the terms of bonus for three Executive Directors with effect from April 01, 2020, subject to the shareholders'' approval. Accordingly, an additional provision of an amount of C 7.48 crores has been recorded under Note 21 ‘Employee benefits expense'' for the year ended March 31, 2021 (March 31, 2020 - C nil).

41. Commitments and Contingencies

A. Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Operating lease commitments - Company as lessee

The Company''s lease asset classes primarily consist of leases for land. The Company recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that

their carrying amounts may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.

The Company measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.

The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.

Transition to Ind AS 116

Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases which replaces the existing lease standard, Ind AS 17 leases, and other interpretations. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet lease accounting model for lessees. The Company has adopted Ind AS 116, effective annual reporting period beginning April 1, 2019 and applied the standard to its leases, retrospectively, with the cumulative effect of initially applying the Standard, recognised on the date of initial application (April 1, 2019). Accordingly, the Company has not restated comparative information, instead, the cumulative effect of initially applying this standard has been recognised as an adjustment to the opening balance of retained earnings as on April 1, 2019. On transition, the adoption of the new standard resulted in recognition of Right-of-Use asset (ROU) of C 44.86 crores and a lease liability of C 23.25 crores. The cumulative effect of applying this standard resulted in C 0.22 crores being debited to retained earnings (net of taxes).


Mar 31, 2019

1. Corporate information

Laurus Labs Limited (the “Company”) offers a broad and integrated portfolio of Active Pharma Ingredients (API) including intermediates, Generic Finished dosage forms (FDF) and Contract Research services to cater to the needs of the global pharmaceutical industry. The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognised stock exchanges in India. The registered office of the company is located at Plot no. 21, Jawaharlal Nehru Pharma city, Parawada, Vishakapatnam, Andhra Pradesh, India - 531201.

The Company is equipped with an Active Pharma Ingredients (API) manufacturing facilities situated in Jawaharlal Nehru Pharma City at Visakhapatnam, FDF drug manufacturing facility situated in Achutapuram and a Research and Development Centre in IKP Knowledge Park at Hyderabad.

These financial statements are authorised by the Board of Directors for issue in accordance with their resolution dated May 02, 2019.

Pledge on Property, plant and equipment:

Property, plant and equipment (other than vehicles) with a carrying amount of Rs. 15,763.66 (March 31, 2018: Rs. 14,285.62) are subject to a pari passu first charge on the Company''s term loans, except to the extent of plant & machinery exclusively charged towards term loan . Further, the property, plant and equipment (other than vehicles) are subject to a pari passu second charge on the Company''s current borrowings. Also, refer note 13A and 13B.

Vehicles with a carrying amount of Rs. 105.08 (March 31, 2018: Rs. 119.90) are hypothecated to respective banks against vehicle loans.

The Company has accounted for deferred tax assets (net) of Rs. 489.07 (March 31, 2018: Rs. 486.52) based on approval of business plan by board, agreements entered with customers, orders on hand, successful patent filings and a portfolio of drugs.

During the year ended March 31, 2019, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

a) No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

b) Trade receivables are non-interest bearing and are generally on terms of 30 - 120 days.

c) Of the trade receivables balance, Rs. 3,687.44 in aggregate (as at March 31, 2018 Rs. 2,997.24) is due from the Company''s customers individually representing more than 5 % of the total trade receivables balance.

d) The Company has used practical expedient by computing the expected credit loss allowance for doubtful trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forwardlooking estimates. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates used in the provision matrix.

2.1. Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms refer note 11.2a.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2019, the amount of dividend per share declared as distribution to equity shareholders was Rs. 1.50 (March 31, 2018: Rs. 1.50).

2.2a. Liquidation terms and preferential rights

The liquidation terms of the equity shares are as follows:

(a) If the company shall be wound up, the Liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act divide amongst the shareholders, in specie or kind the whole or any part of the assets of the company, whether they shall consist of property of the same kind or not.

(b) For the purpose aforesaid, the Liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

2.3. Details of shares reserved for issue under options

For details of shares reserved for issue under Employee Stock Options Scheme plan of the Company, refer note no. 29

2.4 Aggregate number of bonus shares issued, shares issued for consideration other than cash during the period of five years immediately preceeding the reporting date:

(c) All Term loans (except Andhra Bank & HDFC) are secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks. It is further secured by pari passu second charge on current assets both present and future. [(March 31, 2018: All Term loans (except Andhra Bank & HDFC) were secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks. They were further secured by pari passu second charge on current assets both present and future)]

HDFC Term loan is secured by pari passu first charge on the property, plant and equipment (both present and future).

Andhra Bank Term loan is secured by an exclusive charge on the present and future assets of Unit VI.

[(March 31, 2018: State Bank of India (SBI) buyer''s credit was secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future) and also personal guarantees were given by the Chief Executive Officer and one of the Executive Directors of the Company)].

(d) Vehicle loans from banks are repayable in instalments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles.

(e) Current borrowings are availed of in both Rupee and Foreign currencies. Interest on rupee loans ranges from MCLR plus 0% to 0.50%(March 31, 2018: MCLR plus 0% to 0.60%,). Buyers credit loan interest ranges from LIBOR plus 0.32% to 1.00%(March 31, 2018: LIBOR plus 0.17% to 0.75%,). These borrowings are secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future). [(March 31, 2018: Current borrowings were secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future))].

Terms and conditions of the above financial liabilities:

Trade payables are non-interest bearing and are normally settled on 30-120 day terms. For explanations on the Company''s credit risk management processes, refer note no. 38.

3. Details of CSR expenditure

As per the requirement of the Companies Act, 2013, gross amount required to be spent by the Company during the year is Rs. 44.37 (March 31, 2018 : Rs. 33.28)

4. Taxes

(a) Income tax expense:

The major components of income tax expenses for the year ended March 31, 2019 and for the year ended March 31, 2018 are:

(c) The details of component of deferred tax assets are given under note 6.

(d) During the year ended March 31, 2019, the Company has paid dividend to its shareholders. This has resulted in payment of dividend distribution tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence DDT paid is charged to equity.

5. Gratuity

Defined Benefit Plans

The Company has a defined benefit gratuity plan and governed by Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of service. The scheme is funded through a policy with SBI Life Insurance Company Limited. The following tables summarise net benefit expenses recognised in the Statement of Profit and Loss, the status of funding and the amount recognised in the Balance sheet for the gratuity plan:

The Company expects to contribute Rs. 25.61 to the gratuity fund in the next year (March 31, 2018: Rs. 17.16) against the short term liability of Rs. 25.61 (March 31, 2018: Rs. 17.16) as per the actuarial valuation.

The estimates of future salary increases, considered in the actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The overall expected rate of return on assets is determined based on the actual rate of return during the current year.

6. Share based payments

ESOP 2011 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme(ESOP) 2011 for issue of stock options to eligible employees of the Company effective from September 19, 2011. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2016 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2016 for issue of stock options to eligible employees of the Company effective from June 09, 2016. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2018 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2018 for issue of stock options to eligible employees of the Company. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme. The Scheme has not been implemented pending receipt of regulatory approval.

For options exercised during the year, the weighted average share price at the exercise date under ESOP 2011 scheme, was Rs. 434.78 per share (March 31, 2018: Rs. 547.65 per share,) and under ESOP 2016 scheme, was Rs. 434.78 per share (March 31, 2018:Rs. 547.65 per share).

The weighted average remaining contractual life for the stock options outstanding under ESOP 2011 scheme as at March 31, 2019 is 1.47 years (March 31, 2018: 2.31 years) and under ESOP 2016 as at March 31, 2019 is 4.25 years (March 31, 2018: 3.26 years). The range of exercise prices for options outstanding under ESOP 2011 scheme as at March 31, 2019 was Rs. 10 (March 31, 2018: Rs. 10) and under ESOP 2016 as at March 31, 2019 was Rs. 550 (March 31, 2018: Rs. 550).

The weighted average fair value of stock options granted during the year under ESOP 2011 scheme was Rs. Nil (March 31, 2018: Rs. Nil) and under ESOP 2016 scheme was Rs. 167.83 (March 31, 2018: Rs. Nil). The Black Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

7. In accordance with Indian Accounting Standard (Ind AS) 108 on Operating segments, segment information has been given in the consolidated financial statements of the Company, and therefore no separate disclosure on segment information is given in these financial statements.

The advance given to subsidiaries are in the nature of trade advances against orders for supply of goods & services and accordingly disclosures on maximum amount of loans/ advances/ investments during the year as required under regulation 53 (f) read with para A of Schedule V of Securities And Exchange Board Of India (Listing Obligations And Disclosure Requirements) Regulations, 2015 has not been disclosed.

The Company has provided guarantees for Rs. 538.34 (March 31, 2018: Rs. 420.09) in the form of Standby Letter of Credit (SBLC) to Citi Bank NA and Corporate guarantee to Andhra Bank for the loans obtained by Laurus Synthesis Inc. and Sriam Labs Private Limited respectively, which were be utilised for business purposes.

A As the future liability for gratuity and leave encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to the Key Management personnel and their relatives is not ascertainable and, therefore, not included above.

The transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.

8. Significant accounting judgements, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

(A) Judgements

In the process of applying the Company''s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements.

(i) Lease commitments - the Company as lessor

The Company has entered into agreements to manufacture and supply API and intermediates produced at a dedicated blocks located at Unit-1 and Unit-5 constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term.

(ii) Lease commitments - the Company as lessee

The Company has entered into leases for land and office premises. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the land and office premises and the fair value of the asset, that it does not retain significant risks and rewards of ownership of the land and the office premises and accounts for the contracts as operating leases.

(iii) Taxes

The Company has a Minimum Alternate Tax (MAT) credit of Rs. 1,756.73 as on March 31, 2019 (March 31, 2018: Rs. 1,546.39). 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. The Company based on its future projections of profit believes that the MAT credit would be utilized from financial year 2019-20.

(B) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(i) Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 29.

(ii) Taxes

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

(iii) Defined employee benefit plans (Gratuity)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries.

Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in Note 28.

(iv) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (''DCF'') model.

The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 37 and 38 for further disclosures.

(v) Depreciation on property, plant and equipment

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives and residual values of all its property, plant and equipment estimated by the management. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment, though these rates in certain cases are different from lives prescribed under Schedule II of the Companies Act, 2013.

(vi) Impairment of investments

The Company reviews its carrying value of investments annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.

The recoverable amounts have been determined based on value in use calculations which uses cash flow projections covering generally a period of five years (which are based on key assumptions such as margins, expected growth rates based on past experience and Management''s expectations/ extrapolation of normal increase/ steady terminal growth rate) and appropriate discount rates that reflects current market assessments of time value of money and risks specific to these investments.

The cash flow projections included estimates for five years developed using internal forecasts and terminal growth rate thereafter. The management believes that any reasonable possible change in key assumptions on which recoverable amount is based is not expected to cause the aggregate carrying amount to exceed the aggregate recoverable amount of the investments.

9. Hedging activities and derivatives

Derivatives designated as hedging instruments

The Company uses foreign currency denominated borrowings and foreign exchange forward contracts to manage some of its transaction exposures. The Company classifies its derivative financial instruments that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded in the Company''s hedging reserve as a component of equity and re-classified to the Statement of Profit and Loss as revenue in the period corresponding to the occurrence of the forecasted transactions.

The ineffective portion of such cash flow hedges is recorded in the Statement of Profit and Loss immediately. All outstanding forward contracts have maturity period of less than twelve months. Refer note no. 38(d) for disclosure on hedges of highly probable forecasted transactions.

10. Fair values

Set out below, is a comparison by class of the carrying amounts and fair value of the Company''s financial instruments:

The management assessed that cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Further, the management has assessed that fair value of borrowings approximate their carrying amounts largely since they are carried at floating rate of interest.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

11. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities.

Measurement of fair value Valuation techniques

The following table shows the valuation techniques used in measuring Level 2 fair values for assets and liabilities carried at fair value through profit or loss.

12. Financial risk management objectives and policies

Financial risk management framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

A Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables.

Trade receivables:

The customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit limits are defined in accordance with this assessment and outstanding customer receivables are regularly monitored. Of the trade receivables balance, Rs. 3,687.44 in aggregate (as at March 31, 2018 Rs. 2,997.24) is due from the Company''s customers individually representing more than 5 % of the total trade receivables balance and accounted for approximately 54% (March 31, 2018: 54%) of all the receivables outstanding.

The Company'' receivables turnover is quick and historically, there was no significant defaults on account of those customer in the past. Ind AS requires an entity to recognise in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with Ind AS 109. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.

Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer''s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis.

The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs. 6,866.42,

(March 2018: Rs. 5,551.35), being the total of the carrying amount of balances with trade receivables.

B Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

C Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. In order to optimize the Company''s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Company''s profit before tax is affected through the impact on borrowings, as follows:

Foreign currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company.

The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. The information on derivative instruments is as follows:

c) Foreign currency sensitivity:

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO exchange rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives. The Company''s exposure to foreign currency changes for all other currencies is not material.

d) Hedges of highly probable forecasted transactions:

In respect of hedges of highly probable forecasted transactions, the Company recorded, as a component of equity, a net loss of Rs. 10.74 for the year ended March 31, 2019 (for the year ended March 31, 2018: Rs. Nil).

The net carrying amount of the Company''s "hedging reserve" as a component of equity before adjusting for tax impact is Rs. 10.74 as at March 31, 2019 (as at March 31, 2018: Rs. Nil).

13. Capital management

For the purpose of the Company''s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company intends to keep the gearing ratio between 0.5 to 1.5. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short-term deposits.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.

No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2019.

14. Commitments and Contingencies

a. Leases

Operating and finance lease commitments - Company as lessor

The Company has entered into agreement to manufacture and supply intermediates produced at a dedicated block constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term. This lease term of assets under operating lease is upto 10 years.

Operating lease commitments - Company as lessee

The company has entered into operating leases agreement on Land, with lease terms between 33-51 years. Also, the Company has taken certain office premises on leases, with lease term of 5 years and is renewable for further periods. There are escalation clauses in the office premises lease agreement to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

15. Business combination

Acquisition during the year ended March 31, 2018

The Company acquired the existing assets and liabilities of an API unit located at Visakhapatnam of Sriam Labs Private Limited, a wholly owned subsidiary of the Company, on a slump sale basis w.e.f. December 01, 2017. The Company accounted for the business combination in accordance with the requirement of Appendix C of Ind AS 103 Business Combination which lays down the principles in respect of accounting for business combinations of entities or businesses under common control. As required by the standard, pooling of interest method has been considered for common control business combination and accordingly, the assets and liabilities are reflected in the books of the Company at their respective carrying amounts.

In accordance with the requirement of Appendix C of Ind AS 103 Business Combination, the financial information in the financial statements in respect of prior periods has been restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. Accordingly the financial statements have been restated from the date of business combination i.e. November 01, 2016 and consequently, year ended March 31, 2018 include the results of the aforementioned business acquired.


Mar 31, 2018

1. Corporate information

Laurus Labs Limited (the “Company”) offers a broad and integrated portfolio of Active Pharma Ingredients (API) including intermediates, Generic Finished dosage forms (FDF) and Contract Research services to cater to the needs of the global pharmaceutical industry. The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognised stock exchanges in India. The registered office of the company is located at Plot no. 21, Jawaharlal Nehru Pharma city, Parawada, Vishakapatnam, Andhra Pradesh, India - 531201.

The Company is equipped with an Active Pharma Ingredients (API) manufacturing facilities situated in Jawaharlal Nehru Pharma City at Visakhapatnam, FDF drug manufacturing facility situated in Achutapuram and a Research and Development Centre in IKP Knowledge Park at Hyderabad.

These financial statements are authorised by the Board of Directors for issue in accordance with their resolution dated May 10, 2018.

2. Significant accounting policies

2.1 Basis of preparation

(a) The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (‘Ind AS’), under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (‘the Act’) (to the extent notified) and guidelines issued by Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued there after.

For all periods up to and including the year ended March 31, 2016, the Company had prepared its financial statements in accordance accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (‘Indian GAAP’). Effective April 1, 2016, the Company has adopted all the Ind AS standards and the adoption was carried out in accordance with Ind AS 101 First time adoption of Indian Accounting Standards, with April 1, 2015 as the transition date.

Amounts for the year ended and as at March 31, 2017 were audited by previous auditors - S R Batliboi & Associates LLP.

3. Property, plant and equipment

Capital work-in-progress (including expenditure during construction period - note 41) : Rs.1,631.80 (March 31, 2017: Rs.1,432.56).

Estimated amount of contracts remaining to be executed on capital account and not provided for : Rs.732.35 (March 31, 2017: Rs.586.86) (Refer note 40b).

Includes expenditure during the construction period amounting to Rs.0.69 (March 31,2017: Rs.18.48 (Note 41)).

Pledge on Property, plant and equipment:

Property, plant and equipment (other than vehicles) with a carrying amount of Rs.14,285.62 (March 31, 2017: Rs.11,008.18) are subject to a pari passu first charge on the Company’s term loans, except to the extent of plant & machinery exclusively charged towards term loan and buyers credit from ICICI Bank with a carrying amount of Rs. Nil (March 31, 2017: Rs.191.49). Further, the property, plant and equipment (other than vehicles) are subject to a pari passu second charge on the Company’s current borrowings and SBI buyer’s credit. Also, refer note 13A and 13B.

Vehicles with a carrying amount of Rs.119.90 (March 31, 2017: Rs.95.92) are hypothecated to respective banks against vehicle loans.

The Company has accounted for deferred tax assets (net) of Rs.486.52 (March 31, 2017: Rs.634.61) based on approval of business plan by board, agreements entered with customers, orders on hand, fresh infusion of funds, successful patent filings and a portfolio of drugs.

During the year ended March 31, 2018, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence, DDT paid is charged to equity.

4. Trade receivables

a) No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person. Nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

b) Trade receivables are non-interest bearing and are generally on terms of 30 - 90 days.

c) Of the trade receivables balance, Rs.2,997.24 in aggregate (as at March 31, 2017 Rs.3,380.44) is due from the Company’s customers individually representing more than 5 % of the total trade receivables balance.

d) The Company has used practical expedient by computing the expected credit loss allowance for doubtful trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking estimates. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates used in the provision matrix.

5.1. Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10/- per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 11.3a.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2018, the amount of dividend per share declared as distribution to equity shareholders was Rs.1.50 (March 31, 2017: Rs.1.50).

5.2. Rights attached to preference shares

0.001% Compulsorily convertible participatory cumulative Preference Shares - Series A of Rs.10/each fully paid up

During the year ended March 31, 2008, the Company issued 6,800,000 CCPCPS of Rs.10/- each fully paid at a premium of Rs.140 per share and also during the year ended March 31, 2009, 88,690 CCPCPS had been issued at par as part of the scheme of amalgamation of Aptuit Informatics India Private Limited with the Company. Each CCPCPS at the option of the holder is convertible into one equity share or will automatically be converted into one equity share on the twentieth anniversary of the initial issuance. For Liquidation terms and preferential rights refer note 11.3a.

During the year ended March 31, 2012, the preference share holder converted 4,629,630 CCPCPS into equity shares and the balance of 2,259,060 CCPCPS was renamed as ““Series A Preference Shares”“. Each ““Series A Preference Shareholder”“ is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per one share at the general meetings of the Company. For liquidation terms and preferential rights refer note 11.3a.

During the year ended March 31, 2017, all the 2,259,060 Series A Preference Shares have been converted into equity shares in the ratio of 1:1. 0.001% Compulsorily convertible participatory cumulative Preference shares - Series B of Rs.243/each fully paid up

During the year ended March 31, 2012, the Company had issued Series B Preference Shares of Rs.243 each fully paid up aggregating 2,477,387 shares to FIL Capital Management (Mauritius) Limited, Fidelity India Principals and Dr. Satyanarayana Chava(Promoter). Each Series B

Preference Share at the option of the holder is convertible into one equity share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series B Preference Shareholder is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 11.3a.

During the year ended March 31, 2017, all the 2,477,387 Series B Preference Shares have been converted into equity shares in the ratio of 1:1. 0.001% Compulsorily convertible participatory cumulative Preference Shares - Series C of Rs.10/each fully paid up

During the year ended March 31, 2015, the Company had issued Series C Preference Shares of Rs.10/- each fully paid up aggregating 4,153,399 shares to Bluewater Investment Limited (““Blue Water”“). Each Series C Preference Share at the option of the holder is convertible into one equity share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series C Preference Shareholder is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 11.3a.

During the year ended March 31, 2017, all the 4,153,399 Series C Preference Shares have been converted into equity shares in the ratio of 1:1.

5.3a. Liquidation terms and preferential rights

In case of winding up or liquidation, if the liquidation proceeds are adequate to cater to the amount of investment of Bluewater, FIL Capital Management (Mauritius) Limited and Fidelity India Principals as increased by an Internal Rate of Return (IRR) of 18% per annum computed thereon from the date of investment by each of them, then the liquidation proceeds will be shared equally among all the shareholders including preference shareholders proportionate to their holdings.

In the case of winding up or liquidation , if the liquidation proceeds are not adequate to cater to the amount of investment of Bluewater, FIL Capital Management (Mauritius) Limited and Fidelity India Principals, then such proceeds shall be distributed amongst Bluewater,

FIL Capital Management (Mauritius) Limited, Fidelity India Principals and Promoter pari passu in proportion to Bluewater Investment Amount, FIL Capital Management (Mauritius) Limited Investment amount, Fidelity India Principals Investment amount and Promoter Investment Amount of Series B Preference Shares respectively. Of the remaining proceeds if any, the preference is defined as under:

- Contracted investment of Series A preference shareholders

- Promoter contracted investment amount of 465,000 equity shares

- Other shareholders including promoter contracted investment amount of equity shares

- Balance distributed to all shareholders in proportion to their shareholding.

However, with effect from December 19, 2016, upon equity shares of the Company becoming listed on the stock exchanges, the liquidation terms are as follows:

(a) If the company shall be wound up, the Liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act divide amongst the shareholders, in specie or kind the whole or any part of the assets of the company, whether they shall consist of property of the same kind or not.

(b) For the purpose aforesaid, the Liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

5.4. Details of shares reserved for issue under options

For details of shares reserved for issue under Employee Stock Options Scheme plan of the Company, refer note no. 29

5.5. Aggregate number of bonus shares issued, shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

(c) All Term loans (except Andhra Bank & HDFC) are secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks. It is further secured by pari passu second charge on current assets both present and future. (March 31, 2017 All Term loans (except ICICI) were secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks.

They were further secured by pari passu second charge on current assets both present and future. Also personal guarantees were given by the Chief Executive Officer and one of the Executive Directors of the Company. ICICI Term loan and buyers credit was secured by exclusive charge on the movable machinery/property, plant and equipment procured from the term loan/buyers credit sanctioned by ICICI Bank and also personal guarantees were given by the Chief Executive Officer and one of the Executive Directors of the Company).

HDFC Term loan is secured by pari passu first charge on the property, plant and equipment (both present and future).

Andhra Bank Term loan is secured by an exclusive charge on the present and future assets of Unit VI.

State Bank of India (SBI) buyer’s credit is secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future) (March 31, 2017 State Bank of India (SBI) buyer’s credit was secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future) and also personal guarantees were given by the Chief Executive Officer and one of the Executive Directors of the Company).

(d) Vehicle loans from banks are repayable in installments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles.

(e) Current borrowings are availed of in both Rupee and Foreign currencies. Interest on rupee loans ranges from MCLR plus 0% to 0 .60%(March 31, 2017: MCLR plus 0% to 1.85%, ). Buyers credit loan interest ranges from LIBOR plus 0.17% to 0.75%(March 31, 2017: LIBOR plus 0.23% to 0.75%, ). These borrowings are secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future).

(March 31, 2017 Current borrowings were secured by pari passu first charge on current assets and pari passu second charge on the fixed assets (both present and future). Also personal guarantees were given by the Chief Executive Officer and one of the Executive Directors of the Company)

6. Details of CSR expenditure

During the year, as per the Companies Act, 2013, Gross amount required to be spent by the Company during the year is Rs.33.28 (March 31, 2017 : Rs.24.61)

7. Taxes

(a) Income tax expense:

The major components of income tax expenses for the year ended March 31, 2018 and for the year ended March 31, 2017 are:

(i) Statement of Profit and Loss

(b) Reconciliation of effective tax rate:

(c) The details of component of deferred tax assets are given under note 6.

(d) During the year ended March 31, 2018, the Company has paid dividend to its shareholders. This has resulted in payment of dividend distribution tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence DDT paid is charged to equity.

8. Gratuity

Defined Benefit Plans

The Company has a defined benefit gratuity plan and governed by Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of service. The scheme is funded through a policy with SBI Life Insurance Company Limited. The following tables summarise net benefit expenses recognised in the Statement of Profit and Loss, the status of funding and the amount recognised in the Balance sheet for the gratuity plan:

The Company expects to contribute Rs.17.16 to the gratuity fund in the next year (March 31, 2017: Rs.7.50) against the short term liability of Rs.17.16 (March 31, 2017: Rs.7.25) as per the actuarial valuation.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:

(i) The principal assumptions used in determining gratuity for the Company’s plans are shown below:

The estimates of future salary increases, considered in the actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The overall expected rate of return on assets is determined based on the actual rate of return during the current year.

(ii) Disclosure related to indication of effect of the defined benefit plan on the entity’s future cashflows:

Expected benefit payments for the year ending:

The average duration of the defined benefit plan obligation at the end of the reporting period is 25.92 years (March 31, 2017: 25.91 years).

(iii) Sensitivity analysis:

A quantitative sensitivity analysis for significant assumption is as shown below:

9. Share based payments ESOP 2011 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme(ESOP) 2011 for issue of stock options to eligible employees of the Company effective from September 19, 2011. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee’s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2016 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2016 for issue of stock options to eligible employees of the Company effective from July 01, 2016. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee’s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

For options exercised during the year, the weighted average share price at the exercise date under ESOP 2011 scheme, was Rs.547.65 per share (March 31, 2017: Rs.514.79 per share) and under ESOP 2016 scheme, was Rs.547.65 per share (March 31, 2017: Rs. Nil per share).

The weighted average remaining contractual life for the stock options outstanding under ESOP 2011 scheme as at March 31, 2018 is 2.31 years (March 31, 2017: 3.19 years) and under ESOP 2016 as at March 31, 2017 is 3.26 years (March 31, 2017: 4.26 years). The range of exercise prices for options outstanding under ESOP 2011 scheme as at March 31, 2018 was Rs.10 (March 31, 2017: Rs.10) and under ESOP 2016 as at March 31, 2018 was Rs.550 (March 31, 2017: Rs.550).

The weighted average fair value of stock options granted during the year under ESOP 2011 scheme was Rs. Nil (March 31, 2017:Rs. nil) and under ESOP 2016 scheme was Rs. Nil (March 31, 2017: Rs.84.45). The Black Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

The expected life of the stock is based on the historical data and current expectations and is not necessarily indicative of exercise pattern that may occur.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

10. In accordance with Indian Accounting Standard (Ind AS) 108 on Operating segments, segment information has been given in the consolidated financial statements of the Company, and therefore no separate disclosure on segment information is given in these financial statements.

The advance given to subsidiaries/ associate are in the nature of trade advances against orders for supply of goods & services and accordingly disclosures on maximum amount of loans/ advances/ investments during the year as required under regulation 53 (f) read with para A of Schedule V of Securities And Exchange Board Of India (Listing Obligations And Disclosure Requirements) Regulations, 2015 has not been disclosed.

The Company has provided guarantees for Rs.420.09 (March 31, 2017: Rs.820.28) in the form of Standby Letter of Credit (SBLC) to Citi Bank NA and Corporate guarantee to Andhra Bank for the loans obtained by Laurus Synthesis Inc. and Sriam Labs Private Limited respectively, which were be utilised for business purposes.

As the future liability for gratuity and leave encashment is provided on an actuarial basis for the Company as a whole, the amount pertaining to the Key Management personnel and their relatives is not ascertainable and, therefore, not included above.

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.

11. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

(A) Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements.

(i) Lease commitments - the Company as lessor

The Company has entered into agreements to manufacture and supply API and intermediates produced at a dedicated blocks located at Unit-1 and Unit-5 constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term.

(ii) Lease commitments - the Company as lessee

The Company has entered into leases for land and office premises. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the land and office premises and the fair value of the asset, that it does not retain significant risks and rewards of ownership of the land and the office premises and accounts for the contracts as operating leases.

(iii) Taxes

The Company has a Minimum Alternate Tax (MAT) credit of Rs.1,546.39 as on March 31, 2018 (March 31, 2017: Rs.1,467.37). 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. The Company based on its future projections of profit believes that the MAT credit would be utilized from financial year 2018-19.

(B) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(i) Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 29.

(ii) Taxes

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

(iii) Defined employee benefit plans (Gratuity)

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in Note 28.

(iv) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (“DCF”) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 37 and 38 for further disclosures.

(v) Depreciation on property, plant and equipment

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives and residual values of all its property, plant and equipment estimated by the management. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment, though these rates in certain cases are different from lives prescribed under Schedule II of the Companies Act, 2013.

12. Hedging activities and derivatives Derivatives not designated as hedging instruments

The Company uses foreign currency denominated borrowings and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from one week to twelve months.

13. Fair values

Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments:

The management assessed that cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Further, the management has assessed that fair value of borrowings approximate their carrying amounts largely since they are carried at floating rate of interest.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

14. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities.

Quantitative disclosures fair value measurement hierarchy for assets and liabilities as at March 31, 2018:

Measurement of fair value Valuation techniques

The following table shows the valuation techniques used in measuring Level 2 fair values for assets and liabilities carried at fair value through profit or loss.

15. Financial risk management objectives and policies

Financial risk management framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

A Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables.

Trade receivables:

The customer credit risk is managed by the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit limits are defined in accordance with this assessment and outstanding customer receivables are regularly monitored. Of the trade receivables balance, Rs.2,997.24 in aggregate (as at March 31, 2017 Rs.3,380.44) is due from the Company’s customers individually representing more than 5 % of the total trade receivables balance and accounted for approximately 54%(March 31, 2017: 60%) of all the receivables outstanding. The Company’ receivables turnover is quick and historically, there was no significant defaults on account of those customer in the past. Ind AS requires an entity to recognise in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with Ind AS 109. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.

Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs.5,551.35, (March 2017:’ 5,619.56), being the total of the carrying amount of balances with trade receivables.

B Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

C Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. In order to optimize the Company’s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Company’s profit before tax is affected through the impact on borrowings, as follows:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

Foreign Currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. The information on derivative instruments is as follows:

c) Foreign currency sensitivity:

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives. The Company’s exposure to foreign currency changes for all other currencies is not material.

16. Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, compulsorily convertible preference shares, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company intends to keep the gearing ratio between 0.5 to 1.5. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short-term deposits.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.

No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2018.

17. Commitments and contingencies

a. Leases

Operating and finance lease commitments - Company as lessor

The company has entered into agreement to manufacture and supply intermediates produced at a dedicated block constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term. This lease term of assets under operating lease is upto 10 years.

Operating lease commitments - Company as lessee

The company has entered into operating leases agreement on Land, with lease terms between 33-51 years. Also, the Company has taken certain office premises on leases, with lease term of 5 years and is renewable for further periods. There are escalation clauses in the office premises lease agreement to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

18. Business combination

Acquisitions during the year ended March 31, 2018

During the current year, the Company acquired the existing assets and liabilities of an API unit located at Visakhapatnam of Sriam Labs Private Limited, a wholly owned subsidiary of the Company, on a slump sale basis w.e.f. December 01, 2017. The Company accounted for the business combination in accordance with the requirement of Appendix C of Ind AS 103 Business Combination which lays down the principles in respect of accounting for business combinations of entities or businesses under common control. As required by the standard, pooling of interest method has been considered for common control business combination and accordingly, the assets and liabilities are reflected in the books of the Company at their respective carrying amounts.

In accordance with the requirement of Appendix C of Ind AS 103 Business Combination, the financial information in the financial statements in respect of prior periods has been restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. Accordingly the financial statements have been restated from the date of business combination i.e. November 01, 2016 and consequently, year ended March 31, 2017 include the results of the aforementioned business acquired.

Assets acquired and liabilities assumed

The carrying values of the identifiable assets and liabilities of the said unit of Sriam Labs Private Limited as at the date of acquisition were:

19. The Company has completed the Initial Public Offer (IPO) of 31,116,785 equity shares of Rs.10 each at an issue price of Rs.428 per share (Rs.388 per share for eligible employees), consisting of fresh issue of 7,009,345 equity shares and an offer for sale of 24,107,440 equity shares by selling shareholders. The equity shares of the Company were listed on BSE Limited (‘BSE’) and National Stock Exchange of India Limited (‘NSE’), w.e.f from December 19, 2016.

The details of utilisation of IPO proceeds - Rs.2,859.24 (net off IPO related expenses including service tax - Rs.137.86) are as follows:

The Company had originally estimated Rs.644.00 (inclusive of service tax) as IPO related expenses. Of such IPO related expenses, certain expenses (such as listing fee) aggregating to Rs.5.78 are directly attributable to the Company. Remaining IPO related expenses aggregating to Rs.638.22, have been allocated between the Company (Rs.143.77) and the selling shareholders (Rs.494.45) in proportion to the equity shares allotted to the public as fresh issue by the Company and under offer for sale by the selling shareholders. The company has incurred an amount of Rs.592.11 (inclusive of service tax) towards IPO related expenses and does not expect any further expenditure. The remaining unspent amount of Rs.51.89 has been re-allocated between the Company and the selling shareholders in the originally apportioned manner. Accordingly, an amount of Rs.11.69 has been credited to securities premium and an amount of Rs.40.20 is paid to the selling shareholders during the current year.


Mar 31, 2017

1. includes expenditure during the construction period amounting to Rs. 18.48 (March 31,2016: Rs. 35.74, April 01, 2015: 32.47 (Note 44)).

Pledge on Property, plant and equipment:

Property, plant and equipment (other than vehicles) with a carrying amount of Rs. 11,008.18 (March 31, 2016: Rs. 9,816.81, April 01, 2015: Rs. 7083.97) are subject to a pari passu first charge on the Company''s term loans. Property, plant and equipment/ Moveable plant & machinery with a carrying amount of Rs. 191.49 (March 31, 2016: Rs. 202.44, April 01, 2015: Rs. 207.91) is exclusively charged towards term loan and buyers credit from ICICI Bank. Further, the property, plant and equipment (other than vehicles) are subject to a pari passu second charge on the Company''s current borrowings and SBI buyer''s credit. Also, refer note 14A and 14B.

Vehicles with a carrying amount of Rs. 95.92 (March 31, 2016: Rs. 56.40, April 01, 2015: 49.78) are hypothecated to respective banks against vehicle loans.

2. Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 12.3a. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting. For the year ended March 31, 2017, the amount of dividend per share declared as distribution to equity shareholders was Rs. 1.50 (March 31, 2016: Rs. 2.00 (not adjusted for bonus issue) and April 01, 2015: Rs. Nil).

3. Rights attached to Preference Shares

0.001% Compulsorily Convertible Participatory Cumulative Preference Shares - Series A of Rs. 10/each fully paid up During the year ended March 31, 2008, the Company issued 6,800,000 CCPCPS of Rs. 10/- each fully paid at a premium of Rs. 140 per share and also during the year ended March 31, 2009, 88,690 CCPCPS had been issued at par as part of the scheme of amalgamation of Aptuit Informatics India Private Limited with the Company. Each CCPCPS at the option of the holder is convertible into one equity share or will automatically be converted into one equity share on the twentieth anniversary of the initial issuance. For Liquidation terms and preferential rights refer note 12.3a. During the year ended March 31, 2012, the preference share holder converted 4,629,630 CCPCPS into equity shares and the balance of 2,259,060 CCPCPS was renamed as ''"''Series A Preference Shares””. Each "''Series A Preference Shareholder”” is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per one share at the general meetings of the Company. For liquidation terms and preferential rights refer note 12.3a.

During the year ended March 31, 2017, all the 2,259,060 Series A Preference Shares have been converted into equity shares in the ratio of 1:1. For the year ended March 31, 2017, the amount of dividend per share declared as distribution to Series A preference shareholders was Rs. Nil (March 31, 2016: Rs. 2.00 (including cumulative preference dividend) (not adjusted for bonus issue) and April 01, 2015: Rs. Nil).

0.001% Compulsorily Convertible Participatory Cumulative Preference shares - Series B of Rs. 243/each fully paid up

For the year ended March 31, 2012, the Company had issued Series B Preference Shares of Rs. 243 each fully paid up aggregating 2,477,387 shares to FIL Capital Management (Mauritius) Limited, Fidelity India Principals and Dr. Satyanarayana Chava(Promoter). Each Series B Preference Share at the option of the holder is convertible into one equity share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series B Preference Shareholder is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 12.3a.

During the year ended March 31, 2017, all the 2,477,387 Series B Preference Shares have been converted into equity shares in the ratio of 1:1.

For the year ended March 31, 2017, the amount of dividend per share declared as distribution to Series B preference shareholders was Rs. Nil (March 31, 2016: Rs. 2.00 (including cumulative preference dividend) (not adjusted for bonus issue) and April 01, 2015: Rs. Nil).

0.001% Compulsorily Convertible Participatory Cumulative Preference Shares - Series C of Rs. 10/each fully paid up

During the year ended March 31, 2015, the Company had issued Series C Preference Shares of Rs. 10/- each fully paid up aggregating 4,153,399 shares to Bluewater Investment Limited (“"Blue Water""). Each Series C Preference Share at the option of the holder is convertible into one equity share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series C Preference Shareholder is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 12.3a. During the year ended March 31, 2017, all the 4,153,399 Series C Preference Shares have been converted into equity shares in the ratio of 1:1.

For the year ended March 31, 2017, the amount of dividend per share declared as distribution to Series C preference shareholders was Rs. Nil (March 31, 2016: Rs. 2.00 (including cumulative preference dividend) (not adjusted for bonus issue) and April 01, 2015: Rs. Nil).

4. Liquidation terms and preferential rights

In case of winding up or liquidation, if the liquidation proceeds are adequate to cater to the amount of investment of Bluewater, FIL Capital Management (Mauritius) Limited and Fidelity India Principals as increased by an Internal Rate of Return (IRR) of 18% per annum computed thereon from the date of investment by each of them, then the liquidation proceeds will be shared equally among all the shareholders including preference shareholders proportionate to their holdings.

In the case of winding up or liquidation, if the liquidation proceeds are not adequate to cater to the amount of investment of Bluewater, FIL Capital Management (Mauritius) Limited and Fidelity India Principals, then such proceeds shall be distributed amongst Bluewater, FIL Capital Management (Mauritius) Limited, Fidelity India Principals and Promoter pari passu in proportion to Bluewater Investment Amount, FIL Capital Management (Mauritius) Limited Investment amount, Fidelity India Principals Investment amount and Promoter Investment Amount of Series B Preference Shares respectively. Of the remaining proceeds if any, the preference is defined as under:

- Contracted investment of Series A preference shareholders

- Promoter contracted investment amount of 465,000 equity shares

- Other shareholders including promoter contracted investment amount of equity shares

- Balance distributed to all shareholders in proportion to their shareholding.

However, with effect from December 19, 2016, upon equity shares of the Company becoming listed on the stock exchanges, the liquidation terms are as follows:

5. If the company shall be wound up, the Liquidator may, with the sanction of a special resolution of the company and any other sanction required by the Act divide amongst the shareholders, in specie or kind the whole or any part of the assets of the company, whether they shall consist of property of the same kind or not.

6. For the purpose aforesaid, the Liquidator may set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

7. All Term loans (except term loan and buyer''s credit from ICICI and buyer''s credit from SBI) are secured by pari passu first charge on the property, plant and equipment (both present and future) except to the extent of assets exclusively charged to banks. It is further secured by pari passu second charge on current assets both present and future. Also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company. ICICI Term loan and buyer''s credit is secured by exclusive charge on the movable plant & machinery/ property, plant and equipment procured from the term loan/buyer''s credit sanctioned by ICICI Bank and also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company. State Bank of India (SBI) buyer''s credit is secured by pari passu first charge on current assets and pari passu second charge on the property, plant and equipment (both present and future) and also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company.

8. Vehicle loans from banks are repayable in installments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles.

9. CITI Bank Term loan is secured by Standby Letter of Credit (SBLC) from Citibank NA, South Africa on behalf of a customer.

10. Current borrowings are availed of in both Rupee and Foreign currencies. Interest on rupee loans ranges from MCLR plus 0% to 1.85%(March 31, 2016: Base rate plus 1% to 2.25%, April 01, 2015: Base rate plus 1% to 2.25%). buyer''s credit loan interest ranges from LIBOR plus 0.23% to 0.75%(March 31, 2016: LIBOR plus 0.25% to 0.52%, April 01, 2015: LIBOR plus 0.25% to 0.52%). These borrowings are secured by pari passu first charge on current assets and pari passu second charge on the property, plant and equipment (both present and future). Also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company.

11. Gratuity

Defined Benefit Plans

The Company has a defined benefit gratuity plan and governed by Payment of Gratuity Act, 1972. Every employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of service. The scheme is funded through a policy with SBI Life Insurance Company Limited. The following tables summaries net benefit expenses recognized in the statement of profit and loss, the status of funding and the amount recognized in the Balance sheet for the gratuity plan:

12. Share based payments ESOP 2011 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme(ESOP) 2011 for issue of stock options to eligible employees of the Company effective from September 19, 2011. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

ESOP 2016 Scheme

The board of directors/ compensation committee has approved the Laurus Employees Stock Option Scheme (ESOP) 2016 for issue of stock options to eligible employees of the Company effective from July 01, 2016. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme. Options granted shall vest so long as the employee continues to be in the employment of the Company as on the date of vesting. Subject to an employee''s continued employment with the Company, options can be exercised any time on or after the date of vesting of options as specified in the respective grants under the Scheme.

The weighted average remaining contractual life for the stock options outstanding under ESOP 2011 scheme as at March 31, 2017 is 3.19 years (March 31, 2016: 4.00 years, April 01, 2015: 2.24 years) and under ESOP 2016 as at March 31, 2017 is 4.26 years (March 31, 2016: Nil years, April 01, 2015: Nil years). The range of exercise prices for options outstanding under ESOP 2011 scheme as at March 31, 2017 was Rs. 10 (March 31, 2016: Rs. 10, April 01, 2015: 10) and under ESOP 2016 as at March 31, 2017 was Rs. 550 (March 31, 2016: Rs. Nil, April 01, 2015: Rs. Nil).

The weighted average fair value of stock options granted during the year under ESOP 2011 scheme was Rs. Nil (March 31, 2016: Rs. 525.65, April 01, 2015: Rs. 262.84) and under ESOP 2016 scheme was Rs. 84.45 (March 31, 2016: Rs. Nil, April 01, 2015: Rs. Nil). The Black Scholes valuation model has been used for computing the weighted average fair value considering the following inputs:

13. Significant accounting judgments, estimates and assumptions

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 accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

14. Judgments

In the process of applying the Company''s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements.

15. Lease commitments - the Company as lessor The Company has entered into agreements to manufacture and supply API and intermediates produced at a dedicated blocks located at Unit-1 and Unit-5 constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term

16. Lease commitments - the Company as lessee The Company has entered into leases for land and office premises. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the land and office premises and the fair value of the asset, that it does not retain significant risks and rewards of ownership of the land and the office premises and accounts for the contracts as operating leases.

17. Taxes

The Company has a Minimum Alternate Tax (MAT) credit of Rs. 1,467.37 as on March 31, 2017 (March 31, 2016: 989.58, April 01, 2015: 633.98). 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. The Company based on its future projections of profit believes that the MAT credit would be utilized from financial year 2017-18.

18. Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

19. Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 30.

20. Taxes

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

21. Defined employee benefit plans (Gratuity) The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in Note 29.

22. Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 37 and 38 for further disclosures.

23. Depreciation on property, plant and equipment

Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives and residual values of all its property, plant and equipment estimated by the management. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment, though these rates in certain cases are different from lives prescribed under Schedule II of the Companies Act, 2013.

24. Hedging activities and derivatives

Derivatives not designated as hedging instruments

The Company uses foreign currency denominated borrowings and foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as cash flow hedges and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally from one week to twelve months.

25. Fair Values

Set out below, is a comparison by class of the carrying amounts and fair value of the Company''s financial instruments:

The management assessed that cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Further, the management has assessed that fair value of borrowings approximate their carrying amounts largely since they are carried at floating rate of interest.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

26. Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Company''s assets and liabilities. Quantitative disclosures fair value measurement hierarchy for assets and liabilities as at March 31, 2017:

27. Financial risk management objectives and policies

Financial Risk Management Framework

The Company is exposed primarily to Credit Risk, Liquidity Risk and Market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

28. Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analyzing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk, except for trade receivables.

Trade receivables:

The customer credit risk is managed by the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on the individual credit limits are defined in accordance with this assessment and outstanding customer receivables are regularly monitored. At March 31, 2017, the Company had 5 customers (March 31, 2016: 5 customers; April 01, 2015: 4 customers) that owed the Company more than Rs. 365.96 each (March 31, 2016: Rs. 126.62 each; April 01, 2015: Rs. 37.89 each) and accounted for approximately 60% (March 31, 2016: 62%, April 01, 2015: 53%) of all the receivables outstanding. The Company'' receivables turnover is quick and historically, there was no significant defaults on account of those customer in the past. Ind AS requires an entity to recognise in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized in accordance with Ind AS 109. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. Expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information.

Before accepting any new customer, the Company uses an internal credit scoring system to assess the potential customer''s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

Exposure to credit risk:

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs. 5,619.56, Rs. 4,437.01 and Rs. 2,850.45 as of March 31, 2017, March 31, 2016 and April 01, 2015 respectively, being the total of the carrying amount of balances with trade receivables.

29. Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

30. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates. In order to optimize the Company''s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Company''s profit before tax is affected through the impact on borrowings, as follows:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

Foreign Currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar against the functional currencies of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies. The information on derivative instruments is as follows:

31. Foreign currency sensitivity:

The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO exchange rates, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives. The Company''s exposure to foreign currency changes for all other currencies is not material.

32. Capital management

For the purpose of the Company''s capital management, capital includes issued equity capital, compulsorily convertible preference shares, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximize the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company intends to keep the gearing ratio between 0.5 to 1.5. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short-term deposits.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.

No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2017

33. First time adoption of Ind AS

These are the Company''s first set of financial statements which have been prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2016, the Company had prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for the year ending on March 31, 2017, together with the comparative period data as at and for the year ended March 31, 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''s opening balance sheet was prepared as at April 01, 2015, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 01, 2015 and the financial statements as at and for the year ended March 31, 2016.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

34. The Company has elected to regard carrying values for all of property, plant and equipment as deemed cost at the date of the transition.

35. Appendix C to Ind-AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind-AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements based for embedded leases based on conditions in place as at the date of transition.

36. Ind AS 101 requires a first-time adopter to apply de recognition requirements in Ind AS 109 prospectively to transactions occurring on or after the date of transition to Ind AS. Accordingly, the Company continues to de-recognize the financial assets and financial liabilities for transactions which have occurred before the date of transition to Ind AS.

37. In the preparation of separate financial statements, Ind AS 27 Separate Financial Statements requires an entity to account for its investments in subsidiaries, jointly controlled entities and associates either:

38. At cost, or

39. In accordance with Ind AS 109.

If a first-time adopter measures such an investment at cost, it can measure that investment at one of the following amounts in its separate opening Ind AS balance sheet:

- Cost determined in accordance with Ind AS 27

- Deemed cost, defined as - Fair value determined in accordance with Ind AS 113 at the date of transition to Ind AS, or

- Previous GAAP carrying amount at the transition date.

A first-time adopter may choose to use either of these bases to measure investment in each subsidiary, joint venture or associate where it elects to use a deemed cost. Accordingly, the Company has opted to carry the investment in subsidiaries and associate at the Previous GAAP carrying amount at the transition date.

Estimates

The estimates as at April 01, 2015 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from impairment of financial assets based on expected credit loss model where application of Indian GAAP did not require estimation. The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 01, 2015 (transition date), March 31, 2016 and March 31, 2017.

40.. Notes to reconciliation of equity as at April 01, 2015 and March 31, 2016 and statement of profit or loss for the year ended March 31, 2016:

41. Leasehold Land

The Company carries leasehold land in its books of accounts. As per Indian GAAP, leasehold land was classified as property, plant and equipment and was amortized over the period of lease tenure. However, as per Ind AS, premium paid is considered as prepayment of lease charges and is charged to Statement of profit and loss over the period of lease. The unamortized prepayments are disclosed under other non-current and current assets. This has resulted in decrease of carrying value of property, plant and equipment and increase in other non-current and current prepayments as at March 31, 2016 by Rs. 315.53 (April 01, 2015: Rs. 261.58).

41. Lease Assets

The Company has entered into agreement to manufacture and supply intermediates produced at a dedicated block constructed exclusively for the customer. The Company had recognized revenue on the reimbursements of fixed costs (depreciation) in the Indian GAAP. However, as per Ind AS, based on the terms of the arrangement, the dedicated block constructed for customer is considered as lease asset. Accordingly, the Company has identified assets into operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term. Consequently, the assets, which have been classified as finance lease, have been derecognized from property, plant and equipment and adjusted against advance received from the customer. This has resulted in decrease of net block of property, plant and equipment and decrease in advance from customers as at March 31, 2016 by Rs. 330.67 (April 01, 2015: Rs. 340.90).

42. Security Deposit

The Company has paid interest free security deposits for office premises and effluent treatment process facility. As per Indian GAAP, the Company has recognized the security deposit under other non-current assets. As per Ind AS,

43. the security deposits are to be recognized at fair value,

44. interest income on such security deposits are to be recognized through effective interest method and

45. lease expense to be amortized over the period of lease on a straight line basis. Accordingly, the Company has recognized the security deposit at present value using the market rate of interest and the differential deposit amount is recognized over the period of lease. This has resulted in decrease of security deposits and increase of non-current and current deferred lease expenses as at March 31, 2016 by Rs. 3.45 (April 01, 2015: Rs. 2.97).

46. MAT Credit entitlement

MAT credit entitlement is to be presented under loans and advance in accordance with Guidance Note on "Accounting for Credit available in respect of MAT under the Income Tax Act, 1961” issued by ICAI. However, as per Ind AS, MAT credit entitlement is generally recognized as a deferred tax asset with a corresponding deferred tax benefit in the statement of profit and loss. Accordingly, the Company has reclassified the MAT credit entitlement from loans and advances to deferred tax assets as at March 31, 2016 Rs. 989.58 (April 01, 2015: Rs. 633.98).

47. Deferred Tax Assets

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires accounting for deferred taxes using the Balance sheet approach, which focuses on temporary difference between the carrying amount of an asset or liability in the Balance Sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP. In addition, the various transitional adjustments lead to temporary differences and the Company has accounted for such differences. Deferred tax adjustment are recognized in correlation to the underlying transaction either in retained earnings or a separate component in equity. Accordingly, the Company has recognized deferred tax assets/ (liabilities) as at March 31, 2016 for Rs. 6.88 (April 01, 2015: Rs. 16.89).

48. Borrowings

Under Indian GAAP, transaction costs incurred in connection with borrowings are amortized over the period. However, as per Ind AS 109, transaction costs (origination fees paid on financial liabilities) are considered as an integral part of the effective interest rate of the financial liability. Accordingly, the Company has adjusted unamortized processing fee paid towards the outstanding borrowings under financial liabilities as at March 31, 2016 for an amount of Rs. 14.45 (April 01, 2015: Rs. 25.26).

49.Valuation of foreign currency forward contracts The Company had certain outstanding foreign currency forward contracts to hedge certain of its foreign currency financial liabilities. Under Indian GAAP, premium/ discount on forward contracts was amortized over the period of forward contract and the outstanding forward contracts was restated as at the balance sheet date. However, under Ind AS 109, the foreign currency financial assets and liabilities are restated at closing rate and the derivative contracts are fair valued by recognizing the mark-to-market gain/loss on the forward contract in the statement of profit and loss. Accordingly, the Company has fair valued the derivative contracts by recognizing the mark-to-market gain/loss on the forward contract in the statement of profit and loss by derecognizing the unamortized premium and reversing the restatement on outstanding forward contracts as at the balance sheet date. This has resulted in an eventual increase of trade payables and decrease in other current assets as at March 31, 2016 by Rs. 10.75 and Rs. 9.12 respectively (April 01, 2015: Rs. 0.22 and Rs. 48.57 respectively).

50. Revenue

The Company has entered into agreement to manufacture and supply intermediates produced at a dedicated block constructed exclusively for the customer. The Company had recognized revenue on the reimbursements of fixed costs (depreciation on property, plant and equipment of the dedicated block) under Indian GAAP. However, as per Ind AS, based on the terms of the arrangement, the dedicated block constructed for customer is considered as a lease asset. Accordingly, the Company has identified such assets under finance lease and reversed the depreciation expenditure on such lease assets and reversed the revenue recognized on reimbursement of depreciation from the Customer. This has resulted in decrease of revenue and depreciation expense by Rs. 48.61. Further, the Company has continued to recognise lease rental income under other income on the assets which have been classified as operating lease. Accordingly, this has resulted in decrease of revenue and increase in other income by Rs. 13.33.

51.Finance Income

The Company has paid interest free security deposits for office premises and effluent treatment process. As per Ind AS, the Group has to recognize interest income on such security deposits through effective interest method and the excess of the principal amount of the deposit over its fair value is accounted for as prepaid lease expense and amortized over the lease term on a straight-line basis. Accordingly, the Company has recognized income on such security deposits through effective interest method and amortized the lease expenses over the period of lease on a straight line basis. This resulted in increase of other income and rental expense of March 31, 2016 by Rs. 0.74 and Rs. 0.84.

52. Excise duty on sale of goods

As per Indian GAAP, excise duty should included in the turnover and should be shown as reduction from the gross turnover on the face of the statement of profit and loss. However, Ind AS 18 does not specifically prescribe any guidance for inclusive presentation of excise duty. Accordingly the Company has presented revenue gross of excise duty. This resulted in increase of revenue and increase of excise duty expense by Rs. 334.08.

53. Rent straight lining

As per Indian GAAP, the Company has provided additional expenditure towards rent straight lining. However, as per Ind AS, lease payments shall not be recognized as an expense on a straight-line basis over the lease term when the payments to the lessor are structured to increase in line with expected general inflation. Since, the Company has factored escalation clauses in the lease rental agreements based on the general inflation, no straight lining effect needs to be recognized in the statement of profit and loss. Accordingly, the Company has reversed the straight lining effect on rent. This resulted in decrease of rental expense and trade payables for March 31, 2016 by Rs. 3.49.

54. Leasehold Land

As per Ind AS, the premium paid on leasehold land is considered as prepayment of lease charges and same is charged to Statement of Profit and Loss over the period of lease. This resulted in increase of lease rental expense and decrease in depreciation for March 31, 2016 by Rs. 9.18.

55. Valuation of foreign currency forward contracts The Company had certain outstanding foreign currency forward contracts to hedge certain of its foreign currency financial liabilities. Under Indian GAAP, premium/ discount on forward contracts was amortized over the period of forward contract and the outstanding forward contracts was restated as at the balance sheet date. However, under Ind AS 109, the foreign currency financial assets and liabilities are restated at closing rate and the derivative contracts are fair valued by recognizing the mark-to-market gain/loss on the forward contract in the statement of profit and loss. Accordingly, the Company has fair valued the derivative contracts by recognizing the mark-to-market gain/loss on the forward contract in the statement of profit and loss by derecognizing the unamortized premium and reversing the restatement on outstanding forward contracts as at the balance sheet date. This has resulted in reduction in loss on foreign exchange fluctuations by Rs. 28.92.

56.Other comprehensive income

Under Indian GAAP, the Company has not presented other comprehensive income separately. Hence, it has reconciled Indian GAAP profit or loss to profit or profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.

57. Re measure of actuarial gains/ (losses):

Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, re measurements comprising of actuarial gains and losses are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus, the employee benefit cost for March 31, 2016 is reduced by 12.32 and re measurement gains/ losses on defined benefit plans has been recognized in the OCI net of tax.

58. Proposed dividend:

Under Indian GAAP, proposed dividends including DDT are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. In the case of the Company, the declaration of dividend occurs after period end. Therefore, the liability of Rs. 59.39 for the year ended 31 March 2016 recorded for dividend has been derecognized against retained earnings and adjusted as an appropriation for the year ended March 31, 2017.

59. Statement of cash flows

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

60.. Commitments and Contingencies

61. Leases

Operating lease commitments - Company as lessor

The company has entered into agreement to manufacture and supply intermediates produced at a dedicated block constructed exclusively for the lessee. The Company has identified assets under operating and finance lease based on the factors indicated under Appendix C to Ind AS 17 and terms of the agreement, viz., economic life of the asset vs. lease term, ownership of the asset after the lease term. This lease term of assets under operating lease is upto 10 years.

Operating lease commitments - Company as lessee

The company has entered into operating leases agreement on Land, with lease terms between 33-51 years. Also, the Company has taken certain office premises on leases, with lease term of 5 years and is renewable for further periods. There are escalation clauses in the office premises lease agreement to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

62. The Company has completed the Initial Public Offer (IPO) of 31,116,785 equity shares of Rs. 10 each at an issue price of Rs.428 per share (Rs. 388 per share for eligible employees), consisting of fresh issue of 7,009,345 equity shares and an offer for sale of 24,107,440 equity shares by selling shareholders. The equity shares of the Company were listed on BSE Limited (''BSE'') and National Stock Exchange of India Limited (''NSE''), w.e.f from December 19, 2016.

The Company had originally estimated Rs. 644.00 (inclusive of service tax) as IPO related expenses. Of such IPO related expenses, certain expenses (such as listing fee) aggregating to Rs. 5.78 are directly attributable to the Company. Remaining IPO related expenses aggregating to Rs. 638.22, have been allocated between the Company (Rs. 143.77) and the selling shareholders (Rs. 494.45) in proportion to the equity shares allotted to the public as fresh issue by the Company and under offer for sale by the selling shareholders. The company has incurred an amount of Rs. 592.11 (inclusive of service tax) towards IPO related expenses and does not expect any further expenditure. The remaining unspent amount of Rs. 51.89 has been re-allocated between the Company and the selling shareholders in the originally apportioned manner. Accordingly, an amount of Rs. 11.69 has been credited to securities premium and an amount of Rs. 40.20 is payable to the selling shareholders.

63. Disclosure on Specified Bank Notes (SBNs)

During the year, the Company had specified bank notes or other denomination note as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017 on the details of Specified Bank Notes (SBN) held and transacted during the period from November 8, 2016 to December, 30 2016, the denomination wise SBNs and other notes as per the notification is given below:


Mar 31, 2015

1. Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 10 Per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 3.3a.

2. Rights attached to Preference Shares

0.001% Compulsorily Convertible Participatory Cumulative Preference shares - Series A of Rs. 10/each fully paid up

During the year ended March 31, 2008, the Company issued 6,800,000 CCPCPS of Rs. 10/each fully paid at a premium of Rs. 140 per share and also during the year ended March 31, 2009, 88,690 CCPCPS had been issued as part of the scheme of amalgamation of Aptuit Informatics India Private Limited with the Company. Each CCPCPS at the option of the holder is convertible into one equity share or will automatically be converted into one equity share on the twentieth anniversary of the initial issuance. For Liquidation terms and preferential rights refer note 3.3a. During the year ended March 31, 2012, the preference share holder converted 4,629,630 CCPCPS into equity shares and the balance of 2,259,060 CCPCPS was renamed as “Series A Preference Shares”. Each “Series A Preference Shareholder" is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per one share at the general meetings of the Company. For liquidation terms and preferential rights refer note 3.3a.

0.001% Compulsorily Convertible Participatory Cumulative Preference shares - Series B of Rs. 243/each fully paid up

During the year ended March 31, 2012, the Company had issued Series B Preference Shares of Rs. 243 each fully paid up aggregating 2,477,387 shares to FIL Capital Management (Mauritius) Limited, Fidelity India Principles (Both together named as Fidelity) and Dr. Satyanarayana Chava (Promoter). Each Series B Preference Share at the option of the holder is convertible into one equity share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series B Preference Shareholder is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 3.3a.

0.001% Compulsorily Convertible Participatory Cumulative Preference shares - Series C of Rs. 10/each fully paid up

During the year ended March 31, 2015, the Company had issued Series C Preference Shares of Rs. 10 each fully paid up aggregating 4,153,399 shares to Bluewater Investment Limited (“Blue Water”). Each Series C Preference Share at the option of the holder is convertible into one equity share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series C Preference Shareholder is entitled to cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For liquidation terms and preferential rights refer note 3.3a.

3.a. Liquidation terms and preferential rights

In case of winding up or liquidation, if the liquidation proceeds are adequate to cater to the amount of investment of Bluewater and Fidelity as increased by an Internal Rate of Return (IRR) of 18% per annum computed thereon from the date of investment by each of them, then the liquidation proceeds will be shared equally among all the shareholders including preference shareholders proportionate to their holdings.

In the case of winding up or liquidation , if the liquidation proceeds are not adequate to cater to the amount of investment of Bluewater and Fidelity, then such proceeds shall be distributed amongst Bluewater, Fidelity and Promoter paripassu in proportion to Blue water Investment Amount, Fidelity Investment Amount and Promoter Investment Amount of Series B Preference Shares respectively. Of the remaining proceeds if any, the preference is defined as under:

- Contracted investment of Series A preference shareholders

- Promoter contracted investment amount of 465,000 equity shares

- Other shareholders including promoter contracted investment amount of equity shares

- Balance distributed to all shareholders in proportion to their shareholding.

4. Details of Shares Reserved for issue under Options

For details of shares reserved for issue under Employee Stock Options Scheme plan of the Company, refer Note 30.

(c) All Term loans (except ICICI and SBH Corporate Loan) are secured by pari passu first charge on the fixed assets (both present and future) except to the extent of assets exclusively charged to banks. It is further secured by pari passu second charge on current assets both present and future. Also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company.

Corporate Loan from SBH has been secured by pari passu first charge on the current assets (both present and future) and by pari passu second charge on the fixed assets, excluding assets with an exclusive charge to banks. Also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the company.

ICICI Term loan is secured by exclusive charge on the movable machinery/fixed assets procured from the term loan/FCNR/Buyers Credit/LC sanctioned by ICICI Bank and also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company.

(d) Vehicle loans from banks are repayable in installments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles.

5. GRATUITY

Defined Benefit Plans

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of service. The Scheme is funded through a policy with SBI Life Insurance Company Limited. The following tables summaries net benefit expenses recognized in the statement of profit and loss, the status of funding and the amount recognized in the Balance sheet for the gratuity plan:

6. EMPLOYEES STOCK OPTION SCHEME (ESOP 2011 PLAN)

The board of directors has approved the Laurus Employees Stock Option Scheme (ESOP) 2011 for issue of shares to eligible employees of the Company effective from September 19, 2011. According to the Scheme, the options granted vest within a period of four years, subject to the terms and conditions specified in the scheme.

7. In accordance with Accounting Standard 17 - Segment Reporting, segment information has been given in the consolidated financial statements of the Company, and therefore no separate disclosure on segment information is given in these financial statements.

8. SALE OF INFORMATICS DIVISION

As approved by the Board on October 18, 2013, the informatics division of the Company, not considered to be a part of the core business, was sold on February 28, 2014 to Laurus Infosystems (India) Private Limited , a related party, on a going concern basis in accordance with an independent valuation, for a total consideration of Rs. 32.50 million, received by way of cash. The transaction resulted in a profit of Rs. 5 million over the net asset value of the division in the Company''s books amounting to Rs. 27.50 million and this profit is included in Other Income in the previous year.


Mar 31, 2014

1. Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of H10 Per share. Each holder of equity shares is entitled to one vote per share at the general meetings of the Company. For Liquidation terms and preferential rights refer note 3.3a.

2. Rights attached to Preference Shares 0.001% Compulsorily Convertible Participatory Cumulative Preference shares - (CCPCPS/Series A ) of 110/- each

During the year ended March 31, 2008, the Company issued 6,800,000 CCPCPS of H10/- each fully paid at a premium of H140 per share and also during the year ended March 31, 2009, 88,690 CCPCPS had been issued as part of the scheme of amalgamation of Aptuit Informatics India Private Limited. Each CCPCPS at the option of the holder is convertible into one equity share or will automatically be converted into one equity share on the twentieth anniversary of the initial issuance. For Liquidation terms and preferential rights refer note 3.3 a.

During year ended March 31, 2012, the preference share holder converted 4,629,630 CCPCPS into equity shares and the balance 2,259,060 CCPCPS was renamed as “”Series A Preference Shares””. Each “”Series A Preference Shareholder”” is entitled for cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per one share at the general meetings of the Company. For Liquidation terms and preferential rights refer note 3.3a.

0.001% Compulsorily Convertible Preference shares -Series B (Series B) of 1243/- each

During the year ended March 31, 2012, the Company had issued Series B Preference Shares of H243 each fully paid up aggregating 2,477,387 shares to FIL Capital Management (Mauritius) Limited, Fidelity India Principles (Both together named as Fidelity) and Dr. Satyanarayana Chava(Promoter). Each Series B Preference Share at the option of the holder is convertible into one Equity Share or will automatically be converted into one equity share after completion of 19 years and 365 days from the date of issue. Each Series B Preference Shareholder is entitled for cumulative preference dividend equal to 0.001% per financial year and to exercise one vote per share at the general meetings of the Company. For Liquidation terms and preferential rights refer note 3.3 a.

3.a. Liquidation terms and preferential rights

In case of winding up or liquidation, if the liquidation proceeds are adequate to cater to the amount of investment of Fidelity as increased by an Internal Rate of Return (IRR) of 18% per annum computed thereon, then the liquidation proceeds will be shared equally among all the shareholders including preference shareholders proportionate to their holdings.

In the case of winding up or liquidation or in the event of any merger or amalgamation, or arrangement with the shareholders or creditors, or sale/lease of all or substantially all of the assets, resulting in a change of control of the Company, if the liquidation proceeds are not adequate to cater to the amount of investment of Fidelity as increased by an Internal Rate of Return (IRR) of 18% per annum computed thereon, then the first preference of payment of the proceeds is given to the investment made by Fidelity including investment in Equity shares. Of the remaining proceeds if any, the preference is defined as under:

- Promoter investment amount of Series B Preference Shares

- Contracted investment of Series A preference shareholders

- Promoter contracted investment amount of 465,000 equity shares

- Other shareholders including promoter contracted investment amount of equity shares

- Balance distributed to all shareholders in proportion to their shareholding

(a) Indian rupee loans from banks comprise term loans and Corporate Loan.

The term loan from SBI to the extent of Rs.249.32 (Rs.300 sanctioned amount) is repayable in 19 quarterly installments commencing from September 2013, ranging from Rs. 15.00 to Rs.22.50, together with interest at Banks Prime Lending Rate (Base rate) plus 3.15% per annum from the date of the loan i.e. December 2012.

The term loan from SBI to the extent of Rs.354.41 (Rs.490 sanctioned amount) is repayable in 23 quarterly installments commencing from September 2015 ranging from Rs.20.00 to Rs.22.50, together with interest at Base rate plus 3.20% per annum from the date of loan i.e. December 2013.

The term loan from EXIM to the extent of Rs.369.14 (Rs.490 sanctioned amount) is repayable in 23 quarterly installments commencing from July 2015 ranging from Rs.20.00 to Rs.22.50, together with interest at Base rate plus 3% per annum from the date of loan i.e. December 2013.

The term loan from EXIM Bank to the extent of Rs.709.08 (Rs.1000 sanctioned amount) is repayable in 18 quarterly installments commencing from a moratorium of 3 months from the date of commercial production or 18 months from the date of first disbursement whichever is earlier, together with interest at Base rate plus 2% per annum from the date of loan i.e. March 2013.

ICICI Term Loan amounting to Rs.64.29 (Rs.225.3 Sanctioned Amount) is repayable in equal quarterly installments commencing from 3 calendar months from the date of disbursement i.e. November, 2013, together with interest at Base rate plus 2.5% per annum.

The Corporate Loan from SBH amounting to Rs.251.79 (Rs.450 sanctioned amount) is repayable in 9 quarterly installments commencing from end of the third quarter from the date of disbursement, ranging from Rs.45 to Rs.60, together with interest at Base rate plus 2.25% per annum from the date of the loan i.e. March 2014.

(b) Foreign currency loan from bank comprise term loan from BBK amounting to H283.91 carrying interest at London Inter Bank Offered Rate (LIBOR) plus 3.50% per annum. The loan is repayable in 16 quarterly installments starting from November 2013, ranging from USD 0.338 to USD 0.330.

(c) All Term loans (except ICICI & SBH Corporate Loan) are secured by pari passu first charge on the fixed assets (both present and future) except to the extent of assets exclusively charged to banks. It is further secured by pari passu second charge on current assets both present and future. Also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company

Corporate Loan from SBH has been secured by pari passu first charge on the current assets (both present and future) and by pari passu second charge on the fixed assets, excluding assets with an exclusive charge to banks. Also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the company.

ICICI Term loan is secured by exclusive charge on the movable machinery/fixed assets procured from the term loan/FCNR/Buyers Credit/LC sanctioned by ICICI Bank and also personal guarantees have been given by the Chief Executive Officer and one of the Executive Directors of the Company

(d) Vehicle loans from banks are repayable in installments ranging from 36 to 48 months from the date of the loan and secured by hypothecation of the respective vehicles.

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