1. SIGNIFICANT ACCOUNTING POLICIES A. Basis of Preparation of Financial Statements The financial statements are brpared under the historical cost convention under accrual method of accounting and as a going concern, in accordance with the Generally Accepted Accounting Principles (GAAP) brvalent in India and the Mandatory Accounting Standards as notified under the Companies (Accounting Standards) Rules, 2006 and according to the provisions of the Companies Act, 2013. B. Inventories 1. The inventories of all medicines, medicare items traded and dealt with by the Company are valued at cost. In the absence of any further estimated costs of completion and estimated costs necessary to make the sale, the Net Realisable Value is not applicable. Cost of these inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their brsent location after adjusting for VAT wherever applicable, applying the FIFO method. 2. Stock of provisions, stores (including lab materials and other consumables), stationeries and housekeeping items are stated at cost. The net realisable value is not applicable in the absence of any further modification/ alteration before being consumed in-house only. Cost of these inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their brsent location, after adjusting for VAT wherever applicable, applying FIFO method. 3. Surgical instruments, linen, crockery and cutlery are valued at cost and are subject to 1/3 write off wherever applicable applying FIFO method. The net realisable value is not applicable in the absence of any further modification/alteration before being consumed in-house. Cost of these inventories comprises of all costs of purchase and other costs incurred in bringing the inventories to their brsent location. 4. Imported inventories are accounted for at the applicable exchange rates brvailing on the date of transaction. C. Prior Period Items and Extraordinary Items Prior period items and extraordinary items are separately classified, identified and dealt with as required under Accounting Standard 5 on 'Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies' as notified under the Companies (Accounting Standards) Rules, 2006. D. Debrciation and Amortisation i. Debrciation has been provided on straight line method at rates specified in Schedule II of the Companies Act, 2013 on single shift basis. ii. Debrciation on new assets acquired during the year is provided at the rates applicable from the date of acquisition to the end of the financial year. iii. In respect of the assets sold during the year, debrciation is provided from the beginning of the year till the date of their disposal. iv. Amortization a. The cost/brmium of land and building taken on lease by the Company from Orient Hospital, Madurai will be amortised over a period of 30 years though the lease is for a period of 60 years. The cost/brmium of land and building taken additionally on lease by the Company at Madurai is for a period of 9 years with an option to extend the lease by another 16 years. The debrciation on the leasehold building is charged on a straight line basis with the lease period being considered as 25 years. The Company has taken land in Karaikudi from Apollo Hospitals Educational Trust on lease for a period of 30 years. The building constructed on the lease land is amortised over a period of 30 years. The cost of land and building taken on lease by the Company from Rigid Hospitals Pvt Limited, Chennai will be amortized over a period of 30 years. The cost of land and building taken on lease by the Company situated at Old Mahabalipuram Road, Karapakkam, Chennai will be amortised over a period of 30 years. This is in conformity with the definition of lease term as per Clause 3 of AS 19 'Leases' as notified under the Companies (Accounting Standards) Rules, 2006. b. Lease rental on operating leases is recognised as an expense in the Statement of Profit and Loss on straight-line basis as per the terms of the agreement in accordance with Accounting Standard 19 'Leases' as notified under the Companies (Accounting Standards) Rules, 2006. E. Revenue Recognition a. Income from Healthcare Services is recognised on completed service contract method. The hospital collections of the Company are net of discounts, payments to doctors. Revenue also includes the value of services rendered pending final billing in respect of in-patients undergoing treatment as on 31st March 2016. b. Pharmacy Sales are recognised when the risk and reward of ownership is passed to the customer and are stated net of returns, discounts and exclusive of VAT wherever applicable. c. Hospital Project Consultancy income is recognised as and when it becomes due, on percentage completion method, on achievement of milestones. d. Income from Treasury Operations is recognised on receipt or accrual basis whichever is earlier. e. Interest income is recognised on a time proportion basis taking into account the principal amount outstanding and the rate applicable. f. Royalty income is recognised on an accrual basis in accordance with the terms of the relevant agreement. g. Dividend income is recognised as and when the owner's right to receive payment is established. F. Fixed Assets a. All Fixed Assets are stated at their original cost of acquisition less accumulated debrciation and impairment losses are recognised where necessary (Also refer Note 1(O) in the Notes forming part of Accounts). Additional cost relating to the acquisition and installation of fixed assets are capitalised. Wherever VAT is eligible for input availment, Fixed Assets are stated at cost of acquisition after deduction of input VAT. b. Capital work - in - progress comprises of amounts expended on development/acquisition of Fixed Assets that are not yet ready for their intended use at the Balance Sheet Date. Expenditure during construction period directly attributable to the projects under implementation is included under Capital work- in -progress, pending allocation to the assets. c. Assets acquired under Hire Purchase agreements are capitalised to the extent of principal value, while finance charges are charged to revenue on accrual basis. d. I nterest on borrowings, for acquisition of Fixed Assets and exchange fluctuation arising out of foreign borrowings and the related revenue expenditure incurred for the period prior to the commencement of operations for the expansion activities of the Company are capitalised. G. Transactions in Foreign Currencies a. Monetary items relating to foreign currency transactions remaining unsettled at the end of the year are translated at the exchange rates brvailing at the date of the Balance Sheet. The difference in translation of monetary items and the realised gains and losses on foreign exchange transactions are recognised in the Statement of Profit and Loss in accordance with Accounting Standard 11 - 'The Effects of Changes in Foreign Exchange Rates (Revised 2003)', as notified under the Companies (Accounting Standards) Rules, 2006 (Also refer Note 23 (a) in the Notes forming part of Accounts). b. Exchange differences arising on settlement or restatement of foreign currency denominated liabilities borrowed for the acquisition of Fixed Assets are now capitalised based on Para 46A of Accounting Standard 11 - 'The Effects of Changes in Foreign Exchange Rates (Revised 2003)'. c. The use of foreign currency forward/swap contract is governed by the Company's policies approved by the Board of Directors. These hedging contracts are not meant for speculation. H. Investments Investments are classified as current or long term in accordance with Accounting Standard 13 on 'Accounting for Investments' a. Long-term investments are stated at cost to the Company in accordance with Accounting Standard 13 on 'Accounting for Investments'. The Company provides for diminution in the value of Long-term investments other than those temporary in nature. b. Current investments are valued at lower of cost and fair value. Any reduction to carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss. c. On disposal of an investment, the difference between the carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss. d. In case of foreign investments i. The cost is the rupee value of the foreign currency on the date of investment. ii. The face value of the foreign investments is shown at the face value reflected in the foreign currency of that country. I. Employee Benefits Short-term employee benefits (benefits which are payable within twelve months after the end of the period in which the employees render service) are measured at cost. Long-term employee benefits (benefits which are payable after the end of twelve months from the end of the period in which employees render service), and post-employment benefits (benefits which are payable after completion of employment), are measured on a discounted basis by the Projected Unit Credit Method, on the basis of annual third party actuarial valuations. Defined Contribution Plan The Company makes contribution towards Provident Fund and Employees State Insurance as a defined contribution retirement benefit fund for qualifying employees. The Provident Fund Plan is operated by the Regional Provident Fund Commissioner. Under the scheme, the Company is required to contribute a specified percentage of payroll cost, as per the statute, to the retirement benefit schemes to fund the benefits. Employees State Insurance dues are remitted to the Employees State Insurance Corporation. Defined Benefit Plans For Defined Benefit Plan the cost of providing benefits is determined using the Projected Unit Credit Method with actuarial valuation being carried out at each Balance Sheet date. Actuarial Gains or Losses are recognised in full in the Statement of Profit and Loss for the period in which they occur. a. Gratuity The Company makes annual contribution to the Employees' Group Gratuity-cum-Life Assurance Scheme of the ICICI and Life Insurance Corporation of India, for funding defined benefit plan for qualifying employees which are recognised as an expense. The Scheme provides for lump sum payment to vested employees at retirement, death while in employment, or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service, or part thereof in excess of six months. Vesting occurs upon completion of five years of service. The Company restricts the payment of gratuity to the employees below the rank of General Managers to the limits specified in the payment of Gratuity Act, 1972. However the Company complies with the norms of Accounting Standard 15. b. Leave Encashment Benefits The Company pays leave encashment benefits to employees as and when claimed, subject to the policies of the Company. The Company provides leave benefits through annual contributions to the fund managed by HDFC Life. J. Borrowing Cost Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such asset. As per Accounting Standard 16 'Borrowing costs', a qualifying asset is one that takes necessarily a substantial period of time to get ready for its intended use. All other borrowing costs are expensed as and when incurred. K. Segment Reporting Identification of Segments The Company has complied with Accounting Standard 17- 'Segment Reporting' with Business as the primary segment. The Company operates in a single geographical segment, which is India, and the drugs sold in the pharmacies, are regulated under the Drug Control Act, which applies uniformly all over the Country. The risk and returns of the enterprise are very similar in different geographical areas within the Country and hence there is no reportable secondary segment as defined in Accounting Standard 17. Segment Policies The accounting policies adopted for segment reporting are in line with the accounting policies adopted in consolidated financial statements with the following additional policies for Segment Reporting: i. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "unallocable expenses". ii. Inter segment revenue and expenses are eliminated. The Company has disclosed this Segment Reporting in Consolidated Financial Statements as per para (4) of Accounting Standard - 17- 'Segment Reporting'. L. Lease Operating Lease Leases where the lessor effectively retains substantially all the risks and the benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight - line basis over the lease term. M. Earnings per Share In determining the earnings per share, the Company considers the net profit after tax before extraordinary item and after extraordinary items and includes post - tax effect of any extraordinary items. The number of shares used in computing the basic earnings per share is the weighted average number of shares outstanding during the period. For computing diluted earnings per share, potential equity shares are added to the above weighted average number of shares. N. Taxation i. Income Tax I ncome tax is computed using the tax effect accounting method, where taxes are accrued in the same period as and when the related revenue and expense arise. A provision is made for Income Tax annually based on the tax liability computed after considering tax allowances and exemptions. ii. Deferred Tax The differences that result between the profit calculated for income tax purposes and the profit as per the financial statements are identified and thereafter deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and get reversed in another, based on the tax effect of the aggregate amount being considered. Deferred tax asset are not recognized unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realized. The tax effect is calculated on the accumulated timing differences at the beginning of this accounting year based on the brvailing enacted or substantively enacted regulations. O. Impairment The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain if there is any indication of impairment based on internal/external factors. An asset is treated as impaired based on the cash generating concept at the year end, when the carrying cost of assets exceeds the recoverable value, in terms of Para 5 to Para 13 of AS-28 'Impairment of Assets' as notified under the Companies (Accounting Standards) Rules, 2006 for the purpose of arriving at impairment loss thereon, if any. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount. P. Bad Debts Policy The Board of Directors approves the Bad Debt Policy, on the recommendation of the Audit Committee, after the review of debtors every year. The standard policy for write off of bad debts is as given below subject to management inputs on the collectability of the same, Period % 0-1 years 0 1-2 years 25 2-3 years 50 Over 3 years 100 Q. Intangible Assets Intangible assets are initially recognised at cost and amortised over the best estimates of their useful life. Cost of software including directly attributable cost, if any, acquired for internal use, is allocated / amortised over a period of 36 months to 120 months. R. Provisions, Contingent Liabilities and Contingent Assets A provision is recognised when the Company has a brsent obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are not provided for unless a reliable estimate of probable outflow to the Company exists as at the Balance Sheet date. Contingent assets are neither recognised nor disclosed in the financial statements. S. Derivative Financial Instruments The Company is exposed to foreign currency fluctuations on foreign currency loans and payables. The Company limits the effect of foreign exchange rate fluctuations by following established risk management policies including the use of derivatives. The Company enters into derivative financial instruments where the counterparty is a bank. All derivatives are effective hedges against an underlying liability and any cash flows are recognised as and when they occur. Attributable transaction costs are recognised in statement of income as a cost. Gain / (losses) on settlement of foreign currency derivative instruments relating to borrowings which have not been designated as hedges are recorded as finance expense. 2 Capital Work–in-Progress of Rs.5,790.99 million (Rs.5,121.59 million) comprises, amount spent on assets under construction and directly related br-operative expenses. The amount of interest included in capital work in progress is Rs.857.38 million (Rs.667.24 million)*. * Includes interest on borrowings capitalised for the year ended 31st March 2016 of Rs.694.93 million (Rs.620.00 million). 3 During the year 2002-03, on a review of fixed assets, certain selected medical equipments were identified and impaired. For the current year, on a review as required by Accounting Standard 28 ‘ Impairment of Assets’, the management is of the opinion that no impairment loss or reversal of impairment loss is required, as conditions of impairment do not exist. 4 Pursuant to section 129 of the Act and Rule 5 of companies (Accounts) Rules 2014, the financial statements for twenty one of the company subsidiaries including fellow subsidiaries, six joint ventures and three associates are furnished Form AOC 1. 5 On review of the operations of setting up the Hospital in Noida, the Company has re-assigned the lease agreement between itself and the lessor to its associate, Indraprastha Medical Corporation Limited by extinguishing its rights and privileges in the original lease deed dated 27th October 2001. 6 Unrealised amounts on project development and br-operative project expenses incurred at Bilaspur Hospital amounting to Rs.56.62 million are included in advances and deposits account. The above expenses incurred on project will be amortised over the balance lease period of 4 years. The balance yet to be amortised as on 31.03.2016 is Rs.12.58 million (Rs.15.73 million). 7 Figures of the current year and brvious year have been shown in millions. 8 Figures in brackets relate to the figures for the brvious year. 9 Previous year figures have been regrouped and reclassified wherever necessary to confirm with current year classification. As per our Report annexed For S. Viswanathan LLP Chartered Accountants Firm Registration No. 004770S/S200025 V C Krishnan Partner (Membership No. 022167) For and on behalf of the Board of Directors Krishnan Akhileswaran Chief Financial Officer Dr. Prathap C Reddy Executive Chairman S M Krishnan Vice President - Finance & Company Secretary Preetha Reddy Executive Vice Chairperson Suneeta Reddy Managing Director 17, Bishop Wallers Avenue West Mylapore, Chennai - 600 004 Place : Chennai Date : 25th May 2016 |