Notes to Accounts of Max India Ltd.(Old)

Mar 31, 2018

Note

For the year, the weighted average share price at the exercise date was Rs. 140.84 (March 31, 2017: Rs. 142.55)

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2018 is 1.14 years (March 31, 2017: 1.63 years). The range of exercise prices for options outstanding at the end of the year was 2.00 to 78.80 (March 31, 2017: 2.00 to 394.00).

Stock compensation expense under the Fair Value method has been determined based on fair value of the stock options. The fair value of stock options was determined using the Black Scholes option pricing model with the following assumptions.

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.

1. Leases Operating lease: Company as lessee

The Company has entered into operating leases for its office spaces and accommodation for its employees under operating lease agreements. The lease rental expense recognized in the statement of profit and loss for the year is Rs. 123.51 Lakhs (March 31, 2017: Rs. 101.73 Lakhs). The Company has not entered into sublease agreements in respect of these leases and there are no restrictions placed upon the Company by entering into these leases.

2. Max India Limited ("the Company") is a core investment company (non systemically important - CIC) under the Non-Banking Financial Company (NBFC) Rules as defined under the RBI Act, 1934. The financials for the year ended March 31, 2018 have been prepared in accordance with the accounting standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 and Companies (Accounting Standards) Amendment Rules, 2016.

3. Till previous year, the Company had a put option to transfer up to 24% of its shareholding in Max Bupa Health Insurance Co. Limited (Max Bupa) and Bupa Singapore Pte. Limited (Bupa Singapore) had a call option under which the Company would be required to transfer 24% of its shareholding in Max Bupa to Bupa Singapore subject to approval under applicable laws and regulations. As a consideration of the call option granted by the Company, Bupa Singapore is obliged to pay an option fee.

4. During the year, the Company has acquired 201,49,399 equity shares of Max Healthcare Institute Limited (MHIL) held by International Finance Corporation, at Rs. 105/- each (i.e. 3.75% equity share capital) for a consideration of Rs. 21,156.87 Lakhs. Subsequent to such acquisition, shareholding of the Company in MHIL increased to 49.70%.

5. Previous year figures have been regrouped/reclassified to conform to the current year classification.

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Mar 31, 2017

1. Corporate information

Max India Limited (the Company) is a public limited company registered under Companies Act, 2013 and incorporated on January 01, 2015. The shares of the Company are listed on National Stock Exchange (NSE) and BSE Limited (BSE) effective July 14, 2016. The Company is primarily engaged in making business investment in its subsidiaries and providing management advisory services to the group companies.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 and Companies (Accounting Standard) Amendment Rules, 2016. The financial statements have been prepared on accrual basis and under the historical cost convention.

3.1 Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 2/- per share. Each holder of equity shares is entitled to one vote per share. The company has not declared any dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

3.2 Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 22.

3.3 Aggregate number of share issued for consideration other than cash during the period of five years immediately preceding the reporting date

The Company has issued total 286,050 shares (March 31, 2016: Nil) during the period of five years immediately preceding the reporting date on exercise of options granted under the ESOP plan wherein part consideration was received in the form of employees services.

4.1 There is no Micro, Small and Medium Enterprise to which the Company owes dues, which are outstanding for more than 45 days during the period April 01, 2016 to March 31, 2017. This information as required to be disclosed under Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

5.1. The Company has a put option to transfer upto 24% of its shareholding in Max Bupa Health Insurance Co. Limited (Max Bupa) and Bupa Singapore Pte. Limited (Bupa Singapore) has a call option under which the Company would be required to transfer 24% of its shareholding in Max Bupa to Bupa Singapore subject to approval under applicable laws and regulations. As a consideration of the call option granted by the Company, Bupa Singapore is obliged to pay an option fee, which is disclosed as above (refer note 35).

6.1. Gratuity

The Company has a defined benefit gratuity plan. Every employee who has completed 5 years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service.

The following table summarises the component of net benefit expense recognised in statement of profit and loss and the amount recognised in the balance sheet in respect of defined benefit plans.

The estimates of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Further, the overall expected rate on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been no significant change in expected rate of return on assets.

6.2. Provident Fund

In terms of Composite Scheme of Arrangmeent amongst Max Financial Services Limited (formerly known as Max India Limited), Max India Limited (formerly known as Taurus Ventures Limited) and Max Ventures and Industries Limited (formerly known as Capricorn Ventures Limited) sanctioned by the Hon’ble High Court of Punjab & Haryana at Chandigarh vide letter dated December 14, 2015, the Company is contributing in a provident fund trust ““Max Financial Services Limited Employees Provident Trust Fund”“ . The provident fund trust requires that interest shortfall shall be met by the employer, accordingly it has been considered as a defined benefit plan as per AS-15 (Revised).

The interest rate payable to the members of the Trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and shortfall, if any, shall be made good by the company with respect to its own employees.

The actuary has accordingly provided a valuation for “Max Financial Services Limited Employees Provident Trust Fund”.

The details of fund and plan asset position as at March 31, 2017 as per the actuarial valuation of active members are as follows:

7. Employee stock option

7.1. Max India Employee Stock Plan - 2016 (“the 2016 Plan”):

The Company had instituted the 2016 Plan, which was approved by the Board of Directors in March 29, 2016 and by the shareholders in September 27, 2016. The 2016 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of the Company to eligible employees of the Company. The 2016 Plan is administered by the Nomination and Remuneration Committee appointed by the Board of Directors. Under the plan, the employees receive shares of the Company upon completion of vesting conditions such as rendering of services across vesting period. The Option Price will be determined by the Nomination and Remuneration Committee, from time to time, in accordance with the provisions of applicable law, provided that the Option Price shall not be below the face value of the equity shares of the Company.

Note

For the period, the weighted average share price at the exercise date was Rs. 142.55 (March 31, 2016: Rs. Nil)

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2017 is 1.63 years (March 31, 2016: 1.69 years). The range of exercise prices for options outstanding at the end of the year was 2.00 to 394.00 (March 31, 2016: 2.00 to 394.00).

Stock compensation expense under the Fair Value method has been determined based on fair value of the stock options. The fair value of stock options was determined using the Black Scholes option pricing model with the following assumptions.

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.

The Company measures the cost of ESOP using intrinsic value method. Had the company used the fair value model to determine compensation, its profit after tax and EPS as reported would have changed to amount indicated below:

8. Leases operating lease: Company as lessee

The Company has entered into operating leases for its office spaces and accommodation for its employees under operating lease agreements. The lease rental expense recognized in the statement of profit and loss for the year is Rs. 101.73 Lacs (March 31, 2016: Rs. 95.04 Lacs). The Company has not entered into sublease agreements in respect of these leases and there are no restrictions placed upon the Company by entering into these leases.

9. Interest in a joint venture

The Company’s share of the assets, liabilities, income and expenses of Max Healthcare Institute Limited (MHIL), the jointly controlled entity for the period from March 31, 2017 are as follows:

10. segment reporting

Being a holding company, the Company is having investments in various subsidiaries and joint ventures and is primarily engaged in growing and nurturing these business investments and providing shared services to group companies. Accordingly, the Company views these activities as one business segment, therefore there are no separate reportable segments as per Accounting Standard 17 prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and Companies (Accouting Standard) Amendment Rules, 2016.

11. Capital and other commitments

a) Capital commitments

b) The Company will provide financial support to Max Ateev Limited and Antara Senior Living Limited a wholly owned subsidiaries of the ompany in order to meet their future financial obligations.

12. Scheme of Arrangement (Demerger) between Max Financial Services Limited (MFS), the Company and Max Venture and Industries Limited (MVIL)

In the previous year, the Board of Directors of Max Financial Services Limited (‘MFS’, erstwhile Max India Limited) in their meeting held on January 27, 2015 had approved the Corporate Restructuring plan to vertically split MFS through a Composite scheme of arrangement (‘Scheme’), into three separate listed companies.

a) The Hon’ble High Court of Punjab and Haryana vide its order dated December 14, 2015, sanctioned the Scheme under Sections 391 to 394 read with Sections 100 to 104 of the Companies Act, 1956 between Max Financial Services Limited (‘MFS’ - erstwhile Max India Limited), Max India Limited (“the Company” - erstwhile Taurus Ventures Limited) and Max Ventures and Industries Limited (‘MVIL’- erstwhile Capricorn Ventures Limited). The Scheme is effective from January 15, 2016 i.e. the date of filing of the certified copy of the order of the Hon’ble High Court of Punjab and Haryana with the Registrar of Companies, Chandigarh and Shimla. Pursuant to the Scheme, all the assets and liabilities pertaining to the Demerged Undertaking (as defined in the Scheme) have been transferred to and vested in the Company with retrospective effect from the appointed date i.e. April 1, 2015 at their respective book values appearing in the books of demerged company i.e., MFS. Accordingly, the Scheme has been given effect to in the financial statements. in the previous year.

b) The consideration for the demerger to the equity shareholders of the demerged company i.e., MFS is discharged by the Company i.e., Max India Limited wholly by issue of equity shares of the Company. Pursuant to the Scheme coming into effect, every shareholder holding fully paid up equity shares of Rs. 2/- each in MFS as on the Record Date i.e., January 28, 2016 will be allotted one equity share of Rs.2/- each in the Company for every one equity share of Rs.2/- each held in MFS as on the Record Date. As a result of this and pursuant to the provisions of the Scheme, the existing share capital of Rs.5 lacs of the Company shall stand cancelled. Further, with respect to employee’s stock options granted by the demerged company i.e. MFS to its employees (irrespective of whether they continue to be employees of MFS or become employees of the Company or not) shall be allotted one stock option by the Company under the new ESOP scheme for every stock option held in MFS. Accordingly, ESOP outstanding as on the Effective Date in MFS shall be allocated between the demerged company and resulting companies. The surplus of net assets acquired by the Company over the aggregate face value of share capital to be issued shall be credited to capital reserve. The value of net assets acquired effective from April 1, 2015 and the calculation of differential consideration and value of net identifiable assets acquired is set out below:

c) The reconciliation of share capital to be issued pursuant to the scheme is given below and disclosed as ‘Shares capital pending allotment’ in the financial statements in the previous year:

d) The Company has received the Foreign Investment Promotion Board (FIPB) approval to issue and allot shares to MFS’s shareholders as on the record date i.e. January 28, 2016, vide its letter dated May 06, 2016. The Company has issued and allotted 26,69,83,999 equity shares of Rs. 2/- each on May 14, 2016 and the existing equity capital of the Company of Rs. 5.00 lacs which was fully held by MFS, has been cancelled pursuant to the provisions of the Scheme and the Company ceases to be a subsidiary of MFS effective May 14, 2016.

e) This Scheme is a non-cash transaction and hence, has no impact on the cash flow of the Company.

13. The Board of Directors of Max India Limited (“the Company”) approved a composite scheme of amalgamation and arrangement (“Scheme”) on August 8, 2016 (“Proposed Scheme”), which inter alia contemplates (a) merger of Max Life Insurance Company Limited with Max Financial Services Limited (“MFSL”) (with a share exchange ratio of one share of MFSL for approximately five shares held in Max Life); (b) demerger of the life insurance undertaking of MFSL and merger of the said undertaking with HDFC Standard Life Insurance Company Limited (“HDFC Life”) (share exchange ratio of approx. seven shares of HDFC Life for every three shares held in MFSL); and (c) merger of MFSL (holding the non-life insurance business) with the Company (with a share exchange ratio of one share of the Company for 500 shares held in MFSL).

The parties to the Proposed Scheme have applied for various regulatory approvals as required for implementing the Proposed Scheme.

On November 11, 2016, Insurance Regulatory and Development Authority of India (“IRDAI”) issued a letter raising concerns over the Proposed Scheme in its current form. Max Life has made representation to the IRDAI in this regard and awaits a response from IRDAI.

14. Max India Limited (“the Company”) is a core investment company (non systemically important - CIC) under the Non-Banking Financial Company (NBFC) Rules as defined under the RBI Act, 1934. The financial statements for the year ended March 31, 2017 have been prepared in accordance with the accounting standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 and Companies (Accounting Standards) Amendment Rules, 2016.

15. During the year, the Company divested its 23% stake in Max Bupa Health Insurance Limited (Max Bupa), a subsidiary company, to Bupa Singapore Pte. Limited for a consideration of Rs. 20,654.00 lacs. Consequently, the Company’s stake in Max Bupa has reduced to 51% and the option agreement stands terminated effective June 09, 2016.

16. Subsequent to the year end, on May 11, 2017, the Board of Directors of the Company approved issuance of 19,384,854 warrants at an exercise price of Rs. 154.76 each to Mohair Investment and Trading Company Private Limited, one of the Promoter Group companies. Each warrant entitles the holder thereof to subscribe to one equity share of Rs. 2/- each in the share capital of the Company at a premium of Rs. 152.76 per equity share. Each warrant is convertible into one equity share as per prevalent SEBI guidelines at any time before expiry of 18 months from the date of allotment. The allotment of warrants shall be subject to the approval of members of the Company in the Extra Ordinary General Meeting scheduled to be held on June 10, 2017.

17. Subsequent to the year end, on May 11, 2017, the Board of Directors of the Company approved acquisition of 3.75% equity share capital of Max Healthcare Institute Limited (MHIL) held by International Finance Corporation, for a consideration of Rs. 21,156.87 lacs (approx). Subsequent to such acquisition, shareholding of the Company in MHIL will increase to 49.70%, same as that of its joint-venture partner Life Healthcare International.

18. Pursuant to notification of Ministry of Corporate Affairs dated March 30,2017, disclosure of specified bank notes (SBN) held and transacted during the period from November 08,2016 to December 30, 2016 is provided in table below:

19. Figures for previous period are from January 01, 2015 March 31, 2016, hence not comparable with current year figures.

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Mar 31, 2016

1. Employee Stock Option Plan

1.1 Employee Stock Option Plan – 2003 ("the 2003 Plan"):

Max Financial Services Limited-"MFSL" (formerly known as Max India Limited) had instituted the 2003 Plan, which was approved by the Board of Directors in August 25, 2003 and by the shareholders in September 30, 2003. The 2003 Plan provides for grant of stock options aggregating not more than 5% of number of issued equity shares of MFSL to eligible employees of MFSL. The 2003 Plan is administered by the Nomination and Remuneration Committee appointed by the Board of Directors. Under the plan, the employees receive shares upon completion of vesting conditions such as rendering of services across vesting period. Vesting period ranges from one to five years and options can be exercised within two years from vesting date. As amended in the 2003 Plan and approved by the shareholders in the Annual General Meeting held on September 30, 2014, the Option Price will be determined by the Nomination and Remuneration Committee, from time to time, in accordance with the provisions of applicable law, provided that the Option Price shall not be below the face value of the equity shares of MFSL.

Pursuant to the Scheme of demerger, with respect to the employee''s stock options granted by the de-merged company i.e. MFS to its employees (irrespective of whether they continue to be employees of MFS or become employees of the Company) shall be allotted one stock option by the Company under the new ESOP scheme for every stock option held in MFS. Accordingly, ESOP outstanding as on the effective date in MFS shall be allocated between the demerged company and resulting companies. The Company is in the process of implementation of an ESOP scheme on terms and conditions similar to the relevant ESOP plan of MFSL. Accordingly, 2,503,560 stock options granted to the employees of MFSL and outstanding as on Effective date i.e. January 15, 2016 are eligible for stock options of the Company under new ESOP scheme on similar terms and conditions. These ESOPs have intrinsic value of Rs. 198.38 laces, which got transferred to the Company.

2. Segment Reporting

Being a holding company, the Company is having investments in various subsidiaries and joint ventures and is primarily engaged in growing and nurturing these business investments and providing shared services to group companies. Accordingly, the Company views these activities as one business segment, therefore there are no separate reportable segments as per Accounting Standard 17 prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014.

3. Scheme of Arrangement (Demerger) between Max Financial Services Limited (MFS), the Company and Max Venture and Industries Limited (MVIL)

The Board of Directors of Max Financial Services Limited (''MFS'', erstwhile Max India Limited) in their meeting held on January 27, 2015 had approved the Corporate Restructuring plan to vertically split MFS through a Composite scheme of arrangement (''Scheme''), into three separate listed companies.

a) The Hon''ble High Court of Punjab and Haryana vide its order dated December 14, 2015, sanctioned the Scheme under Sections 391 to 394 read with Sections 100 to 104 of the Companies Act, 1956 between Max Financial Services Limited (''MFS'' - erstwhile Max India Limited), Max India Limited ("the Company" - erstwhile Taurus Ventures Limited) and Max Ventures and Industries Limited (''MVIL''- erstwhile Capricorn Ventures Limited). The Scheme is effective from January 15, 2016 i.e. the date of filing of the certified copy of the order of the Hon''ble High Court of Punjab and Haryana with the Registrar of Companies, Chandigarh and Shimla. Pursuant to the Scheme, all the assets and liabilities pertaining to the Demerged Undertaking (as defined in the Scheme) have been transferred to and vested in the Company with retrospective effect from the appointed date i.e. April 1, 2015 at their respective book values appearing in the books of demerged company i.e., MFS. Accordingly, the Scheme has been given effect to in the financial statements.

b) The consideration for the demerger to the equity shareholders of the demerged company i.e., MFS is discharged by the Company i.e., Max India Limited wholly by issue of equity shares of the Company. Pursuant to the Scheme coming into effect, every shareholder holding fully paid up equity shares of Rs. 2/- each in MFS as on the Record Date i.e., January 28, 2016 will be allotted one equity share of Rs. 2/- each in the Company for every one equity share of Rs. 2/- each held in MFS as on the Record Date. As a result of this and pursuant to the provisions of the Scheme, the existing share capital of Rs. 5 lacs of the Company shall stand cancelled. Further, with respect to employee''s stock options granted by the demerged company i.e. MFS to its employees (irrespective of whether they continue to be employees of MFS or become employees of the Company or not) shall be allotted one stock option by the Company under the new ESOP scheme for every stock option held in MFS. Accordingly, ESOP outstanding as on the Effective Date in MFS shall be allocated between the demerged company and resulting companies. The surplus of net assets acquired by the Company over the aggregate face value of share capital to be issued shall be credited to capital reserve. The value of net assets acquired effective from April 1, 2015 and the calculation of differential consideration and value of net identifiable assets acquired is set out below:

d) Subsequent to the year end, the Company has received the Foreign Investment Promotion Board (FIPB) approval to issue and allot

shares to MFS''s shareholders as on the record date i.e. January 28, 2016, vide its letter dated May 06, 2016. The Company has issued and allotted 26,69,83,999 equity shares of Rs. 2/- each on May 14, 2016 and the existing equity capital of the Company of Rs. 5.00 lacs which was fully held by MFS, has been cancelled pursuant to the provisions of the Scheme and the Company ceases to be a subsidiary of MFS effective May 14, 2016.

e) This Scheme is a non-cash transaction and hence, has no impact on the cash flow of the Company for the current period.

4. Pursuant to the scheme of demerger investments in Max Neeman Medical International Limited having carrying value of Rs. 942.90 lacs (net of provision for impairment) were transferred in the name of the Company which has been sold to JSS Medical Research for a consideration of Rs. 942.90 lacs. This has no financial impact on current period financial statement.

5. Subsequent to the year end, on April 29, 2016, Max India Limited executed an agreement with Bupa Singapore Pte. Limited (Bupa Singapore) to divest its 23% stake in Max Bupa Health Insurance Limited to Bupa Singapore at par value, for a consideration of Rs. 20,654.00 lacs.

6. Being the first year of the Comapny, the accounts have been drawn up for a period of January 01, 2015 (i.e. date of incorporation) to March 31, 2016. Accordingly, there are no comparitive previous period figures.