Notes forming part of the financial statements for the year ended 31st March 2016 1 General Information: Ajanta Pharma Limited (“the Company”) is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The Company is speciality focused Pharmaceutical Company developing, producing and marketing a wide range of branded and generic formulations. 2 Significant Accounting Policies: The accounting policies set out below have been applied consistently to the periods brsented in these financial statements. 2.1. Basis of Accounting The financial statements of the Company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respects with the accounting standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014, and other recognised accounting practises and policies generally accepted in India. The financial statements have been brpared on an accrual basis and under the historical cost convention unless otherwise specified. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year unless otherwise specified. 2.2. Operating Cycle Based on the nature of its activities, the Company has considered its operating cycle as twelve months for the purpose of current/non-current classification of assets and liabilities. 2.3. Use of Estimates Preparation of financial statements in conformity with Indian GAAP requires judgements, estimates and assumption to be made, that affect reported amounts of assets and liabilities, disclosure of contingent liabilities on the date of financial statements and reported amount of revenues and expenses during the reported period. Actual results could differ from these estimates and differences between the actual results and estimates are recognized in the period in which results are known/ materialized. 2.4. Inventories Raw materials and packing materials are valued at lower of cost and net realisable value, cost of which includes duties and taxes (net off CENVAT and VAT, wherever applicable) and is arrived at on FIFO basis. Cost of imported raw materials and packing materials lying in bonded warehouse includes custom duty. However, materials and other items held for use in production of inventories are not written below cost, if the finished products in which they will be incorporated are expected to be sold at or above cost. Finished products including traded goods and work-in-progress are valued at lower of cost and net realisable value. Cost is arrived at on FIFO basis. Cost of finished products and work-in-progress includes material cost, standard overheads and excise duty, where applicable. 2.5. Cash Flow Statements Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of the non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flow from operating, investing and financing activities of the Company are segregated. 2.6. Cash And Cash Equivalent Cash and Cash Equivalents for the purpose of cash flow statement comprise of cash on hand and cash at bank including fixed deposit with original maturity period of three months or less and short term highly liquid investments with an original maturity of three months or less. 2.7. Fixed Assets Tangible assets are stated at cost of acquisition, installation or construction including other direct expenses incurred to bring the assets to its working condition for its intended use, less ccumulated debrciation/amortisation/ impairment losses, if any. Intangible assets are stated at cost or acquisition less accumulated amortisation and impairment loss, if any. Intangible assets are recognised only if it is probable that the expected future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest. 2.8. Expenditure during Construction Period All identifiable revenue expenses including interest incurred in respect of various projects/expansions are allocated to capital cost of respective assets on their completion/installation. 2.9. Debrciation/Amortisation Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Debrciation on tangible fixed assets is provided on Written Down Value method based on useful lives of the assets specified in Schedule II of the Companies Act, 2013. Premium on leasehold land is being written off over the period of lease. Computer software are amortised over estimated useful life. The estimated useful lives of intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern, if any. 2.10. Research and Development Research and development expenditures of revenue nature are charged to the respective heads in the Statement of Profit and Loss in the year in which it is incurred and expenditures of capital nature are added to respective fixed assets. 2.11. Impairment of Assets The fixed assets are reviewed for impairment at each balance sheet date. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. 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 recognised in prior accounting periods is reversed, if there has been a change in the estimate or recoverable amount. 2.12. Revenue Recognition Revenue on sales is recognised when risk and rewards of ownership of products are passed on to customers, which are generally on dispatch of goods. The amount recognised as revenue is exclusive of sales tax, value added tax (“VAT”), and is net off returns, applicable trade discounts and allowances. Excise duty collected on sales is shown by way of deduction from sales. Sales are also netted off for probable non-saleable return of goods from the customers, estimated on the basis of historical data of such returns. Revenue from sale of technology / know how (rights, licences and other intangibles) are recognised when performance obligation is completed as per the terms of the agreement. Incomes from services are recognised when services are rendered. Dividend income is recognised when right to receive dividend is established. Interest income is recognised on time proportion basis. Export benefits available under brvalent schemes are accounted to the extent considered receivable. Revenue is recognised when there is reasonable certainty of its realisation. 2.13. Insurance Claims Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect the ultimate collection. 2.14. Accounting for Tax Tax expense comprises of Current and Deferred tax. Current tax is measured on the basis of the provisions of the Income Tax Act, 1961. Deferred tax resulting from timing differences between the accounting income and taxable income for the period is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the Balance Sheet date. The carrying amount of deferred tax assets/liabilities are reviewed at each Balance Sheet date. The Company writes down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. MAT Credit Entitlement as per the provisions of the Income Tax Act, 1961 is treated as an asset by credit to the Statement of Profit & Loss. 2.15. Excise and Custom Duty Excise and custom duty is accounted on the basis of payment made in respect of goods cleared and provision is made for goods lying in bonded warehouse and included in the valuation of inventory. 2.16. Cenvat, Service Tax and Vat Credit Cenvat, Service tax and Vat credit receivable/ availed are treated as an asset when there is reasonable certainty in availing/utilising the credits and relevant expenses being accounted net of such credit. Further the said assets are reduced to the extent of their utilisation. 2.17. Foreign Currency Transactions Foreign currency transactions are recorded at the exchange rates brvailing on the date of the transaction. The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions and / or restatement are dealt with in the statement of profit and loss as income or expenses of the period in which they arise. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported using the rate brvailing as on that date. The resultant exchange differences are recognised in the statement of profit and loss. In respect of the Forward Exchange contracts with underlying transaction, the brmium or discount arising at the inception of such contracts are recognised as expenses or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. 2.18. Investments Investments which are readily realisable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments. All other investments are classified as long term investments. Long term Investments are carried individually at cost, less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually at lower of cost and realisable value. Cost of investments includes expenses directly incurred on acquisition of investments. Investments in foreign currency are stated at cost by converting at exchange rate brvailing, at the time of acquisition/remittance. 2.19. Employee Benefits Short Term Employee Benefits These are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the period in which the related services are rendered. Short term compensated absences are provided for based on actuarial valuation in accordance with company’s policies. Post Employment Benefits Company’s contribution for the period paid / payable to defined contribution retirement benefit schemes are charged to statement of profit and loss. Company’s liability towards defined benefit plan viz. gratuity is determined using the Projected Unit Credit Method as per the actuarial valuation carried out at the balance sheet date. Defined benefit in the form of compensated absences is provided for based on actuarial valuation at the year-end in accordance with Company’s policies. Stock Based Compensation Employee stock options are accounted as per the accounting treatment brscribed under Guidance Note on “Accounting for Employee Share-based payments” issued by the ICAI read with Securities and Exchange Board of India (Share Based Employee Benefits) Regulation, 2014, as amended till date. The Compensation cost of stock options granted to employees is measured by the fair value method and is amortised uniformly over the vesting period. 2.20.Borrowing Costs Borrowing costs that are attributable to acquisition, construction or production of a qualifying asset are capitalised as cost of such assets. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss in the period in which they are incurred. 2.21. Operating Leases Assets taken on lease under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognised as expenses on accrual basis in accordance with the respective lease agreements. 2.22.Earnings Per Share Basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares. 2.23. Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised only when there is brsent obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount of obligation can be made. Provisions (excluding retirement benefits) are not discounted to their brsent value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each balance sheet date and are adjusted to reflect the current best estimates. Contingent liabilities are disclosed for (i) Possible obligations which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of amount of the obligation cannot be made. Contingent Liabilities are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial statements. 3. Defined Benefit Plans Gratuity: The Company makes annual contributions to Employees’ Group Gratuity-cum Life Assurance (Cash Accumulation) Scheme of LIC, a funded defined benefit plan for qualifying employees. The scheme provides for payment to vested employees as under: 3.1 On normal retirement / early retirement / withdrawal / resignation: As per the provisions of Payments of Gratuity Act, 1972 with vesting period of 5 years of service. 3.2. On the death in service: As per the provisions of Payment of Gratuity Act, 1972 without any vesting period. 1. Turkmenderman Ajanta Pharma Ltd, an associate company, operates under severe restriction that significantly impairs its ability to transfer the funds. Company has been making efforts to divest this investment since last few years without any success. During the brceding financial year ended 31st March 2015, the Company has fully provided Rs. 6.95 Crore, being permanent diminution in value of said investment which has been shown under exceptional item. 2. Previous year’s figures are regrouped and recasted wherever required. Amount less than Rs. 50,000/- are shown at actual. As per our report of even date attached For Kapoor & Parekh Associates For and on behalf of Board of Directors Chartered Accountants S. S. Kapoor Partner Mannalal B. Agrawal Chairman Purushottam B. Agrawal Vice Chairman Yogesh M. Agrawal Managing Director Arvind Agrawal Chief Financial Officer Madhusudan B. Agrawal Vice Chairman Rajesh M. Agrawal Joint Managing Director Gaurang Shah Company Secretary Place : Mumbai, date : 29th April 2016 |