1 Significant Accounting Policies a) Accounting Convention The Financial Statements are brpared under historical cost convention. The brsentation of the accounts is based on the Revised Schedule VI of Companies Act, 1956. Revenues are recognised and expenses are accounted on their accrual with necessary provisions for all known liabilities and losses. b) Fixed Assets . (i) Fixed Assets are stated at the original cost inclusive of inward freight, incidental expenses related to acquisition and related broperational expenses and technical knowhow fees where applicable. (ii) Machinery spares which can be used only in connection with specific fixed assets and the use of which are irregular, are charged over the period of the life of such fixed asset, in accordance with Accounting Standard 10. (iii) Brands rebrsent brands acquired by the Company and includes IPR & Licences purchased for a consolidated consideration. The cost of brands, patents and trademarks are amortised over a period of 60 months from the month of acquisition. (iv) INTERNALLY GENERATED INTANGIBLE ASSETS - DMF & ANDA DMF and ANDA costs rebrsent expenses incurred on development of processes and compliance with regulatory procedures of the US FDA, in filing Drug Master Files ("DMF") and Abbreviated New Drug Applications ("ANDA"), in respect of products for which commercial value has been established by virtue of third party agreements/arrangements. This is in accordance with the requirements of Accounting Standard 26. The cost of each DMF/ANDA is amortised to the extent of recovery of developmental costs applicable as per terms of agreement or over a period of five years from the date on which the product covered by DMF/ANDA is commerically marketed, whichever is earlier. (v) Assets are debrciated on straight line basis at the rates specified in Schedule XIV of the Companies Act, 1956 except in respect of the following assets, where the useful lives reckoned in computing the debrciation for the year are different from those derived from the rates specified in Schedule XIV of the Companies Act, 1956. The revised useful life of the assets have been determined by the Management based on technical assessment. Asset Categories- Useful life Reactors, Pipes, Pipe fittings, Valves, Motors, Pumps, Nitrogen Plant, Gear Boxes, Cables and Centrifuges Evaporator (Indigenous), Jet aeration system (indigenous), Ventilation & Exhaust system, HCL column, ETP (indigenous), scrubber, incenarator (indigenous) & Instrumentation items. : 9 years Debrciation is provided at rate arrived based on useful life or schedule XIV rates whichever is higher. (vi) Leasehold assets cost is amortised over the period of the Lease. (vii) Debrciation on assets added/disposed off during the year is provided on pro-rata basis from the month of addition or up to the month brceeding the month of disposal, as applicable. (viii) Impairment of assets: Management periodically assesses using external and internal sources whether there is an indication that an asset may be impaired. An impairment occurs where the carrying value exceeds the brsent value of future cash flows expected to arise from the continuing use of the assets and its eventual disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the asset's net sales price or brsent value as determined above. c) Borrowing Costs Borrowing costs includes interest, amortisation of ancillary cost incurred in connection with borrowings. Cost incurred for raising long term borrowings have been amortised over the period of the loan. Interest cost on qualifying asset being an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, is capitalised at the weighted average rate of the funds borrowed and utilised for acquisition of such assets. d) Treatment of expenditure during construction period. Expenditure during construction period is included under capital work-in-progress and the same is allocated to the respective fixed assets on the completion of construction. e) Investments Investments considered long term are shown at cost. Diminution in the value of investments other than temporary are provided for. Current investments are valued at lower of cost and market value. f) Inventories (i) Stores & Spares - At weighted average cost. (ii) Raw Materials - At annual weighted average cost (iii) Finished Goods @ - At Lower of cost or net realisable value (iv) Work in Progress & Intermediates @ - At Lower of cost or net realisable value @ After adjustment of unrealised profits on inter division transfer. g) Revenue Recognition Sales are recognised on dispatch of goods from the factory/ warehouse and price differentials are accounted for at the end of each quarter as per the terms of marketing arrangement. Sales are net of returns, discounts and inter-division transfers. Service income is recognised as per contractual terms. In respect of composite contracts involving development and other activities, income is recognised on the basis of contractual terms after considering the quantum of work completed. Benefit on account of entitlement to import duty free materials under the "Duty Entitlement Pass Book Scheme" is recognised in the year of export. h) Retirement Benefits Retirement Benefits are accounted on actuarial valuation carried out at the end of the year. The Company's liability towards the gratuity of employees is covered by a group gratuity policy with LIC, SBI and ICICI Prudential Life Insurance Company Ltd and the contribution to the fund is based on actuarial valuation carried out yearly as at the end of the financial year as per the revised AS15. Provision for Leave Encashment has been made based on actuarial valuation as at the year end as per revised AS15. Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account for the year in which the related service is rendered. i) Translation of Foreign Currency items 1) Non - Monetary foreign currency items are carried at cost 2) All inter-related transactions are recognised at common rates. 3) Transactions denominated in foreign currencies are recorded at the exchange rate brvailing on the date of transaction. 4) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of items which are covered by forward exchange contracts, the difference between the year end rate and the rate on the date of the contract is recognised as exchange difference and the brmium paid on forward contracts is recognised over the life of the contract. The Company has exercised the option provided under the amendment to the Companies (Accounting Standards) Amendment Rules, 2006 dated March 31, 2009 (AS 11). The Ministry of Company Affairs vide notification dated 29th December 2011 has extended the amortisation of gains or losses arising on reporting of Foreign Currency Monetary items over the balance period of such long term asset / liability. Accordingly Exchange loss on Long term foreign currency loans have been amortised over the balance period of such loans. Adoption of this option has resulted in (a) amount remaining unamortised in the financial statements as on March 31, 2015 is Rs.10,804.32 Lakhs (brvious year (Rs.17,657.84 Lakhs)) (b) loss for the period is higher by Rs.6,853.52 Lakhs (Previous year - loss lower by Rs.12,833.71 Lakhs). j. Subsidy on Fixed Assets Subsidy received on fixed assets is credited to the cost of respective fixed assets. 2. Sales tax recoverable has been recorded on the basis of the claims submitted or in the process of being submitted, as per rules relating to EOU and which in the opinion of the Company are recoverable. 3. Excise duty on finished goods has been accounted on removal of goods from factory,wherever applicable. Finished goods at factory have been valued at cost exclusive of excise duty and no provision has been made for excise duty on such goods. The above treatment has no impact on Profit & Loss account. 4. Extra-Ordinary Item are net of Taxes of Rs.14,525.69 Lakhs. 5. Segmental Reporting The Company considers the business as one interrelated and integrated business of "Pharmaceutical products" and hence no separate segmental reporting is provided. 6. The Governement of India, Ministry of Corporate Affairs has issued a notification under Sec 211(4) of Companies Act, 1956 dated 08th February 2011 exempting the disclosure of the quantitative details in compliance of Paras 3(i)(a), 3(ii)(a), 3(ii)(b), and 3(ii)(d) of Part II of Schedule VI of the Companies Act, 1956. 7. The Company has paid managerial remuneration to its Managing Director, and Whole time director amounting to Rs.225.23 Lakhs. The said remuneration in respect of the Managing Director, and Whole time director exceeds the limit brscribed under Schedule XIII by Rs.45.23 Lakhs (Previous year Rs.737.59 Lakhs). The said excess is subject to the approval of the members in General Meeting and from the Central Government. 8. The financial year of the Company has been extended by 6 months vide order of the Registrar of Companies dated 25/09/2014. Consequent to the extension of financial year by six months, the profit/Loss reported above was for a period of 18 months ending on 31.03.15. 9. In July 2014 the Company has completed the Business Transfer Agreement (BTA) with Hospira Healthcare India Private Limited for the sale and transfer of Orchid's Penicillin and Penem API business and the API facility located in Aurangabad (Maharashtra) together with an associated Process R&D infrastructure located in Chennai. 10. The Company has implemented the Corporate Debt Restructuring package as approved by the CDR Empowered Group (CDR EG) in July 2014. The restructuring package approved by CDR EG provided for reschedulement of the repayment of the principal amount borrowed over a period of 8 years commencing from 01/04/2015 with two years of repayment holiday, reduction in interest rate of all borrowings, carving out a portion of working capital facilities as Working Capital Term Loan, Funding of interest on restructured Termloans (two years) and working capital facilities (one year) commencing from 01/04/2013. Consequent to the reduction in interest rates, a sum of Rs.4197.70 Lakhs, being the excess provision of interest made in the financials has been reversed on implementation of CDR package. 11. In view of the CDR package implemented as mentioned in Note No: 46, the repayment obligations of the Company have been revised and the repayments would commence from 01/04/2015 only. 12. Previous year's figures have been re-grouped wherever necessary to conform to current year's classification. As per our report of even date For SNB Associates Chartered Accountants Firm Registration No. 015682N T.K. Shanmugam Partner M.No: 016195 On behalf of the Board S Krishnan Director K Raghavendra Rao Managing Director L. Chandrasekar Executive VP - Finance & Secretary Place : Chennai Date : May 28, 2015 |