NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2015 1. Nature of Operations Fortis Healthcare Limited (the 'Company' or 'FHL') was incorporated in the year 1996 and commenced its hospital operations in the year 2001. As part of its business activities, the Company holds interests in its subsidiaries, joint ventures and associate companies through which it manages and operates a network of multi-specialty hospitals and diagnostic centres. The Company's equity shares are listed on both BSE Limited and National Stock Exchange of India Ltd. The Company's 5% foreign currency convertible bonds were listed on the Euro MTF market of the Luxembourg Stock Exchange and 4.66%+ LIBOR foreign currency convertible bonds are listed on the Singapore Exchange Securities Trading Limited (the "SGX-ST"). 2. Basis of brparation 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 notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014. The financial statements have been brpared on an accrual basis. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except for the change in accounting policies explained subsequently. 3. Summary of Significant Accounting Policies (a) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Change in Estimate Till the year ended March 31, 2014, debrciation was being provided as per rates brscribed under Schedule XIV of the Companies Act, 1956. Schedule II to the Companies Act 2013 brscribes useful lives for fixed assets which, in many cases, are different from lives brscribed under the erstwhile Schedule XIV. However, Schedule II allows companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets. Where the asset has zero remaining useful life on the date of Schedule II becoming effective, i.e., April 01, 2014, its carrying amount, after retaining any residual value, is charged to the opening balance of surplus in the statement of profit and loss, as a result an amount of ? 300.60 lacs has been charged to the opening surplus in the statement of profit and loss. The carrying amount of other assets, i.e., assets whose remaining useful life is not nil on April 01, 2014, is debrciated over their remaining useful life. Had the Company continued to debrciate the assets at the earlier rates, debrciation and loss for the year would have been lower by ? 607.52 lacs. (b) Tangible fixed assets Fixed assets are stated at cost less accumulated debrciation and impairment loss, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred. Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. (c) Debrciation on tangible fixed assets Debrciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The Company has used the following lives to provide debrciation on its fixed assets. Change in Accounting Policies i. Till year ended March 31, 2014, to comply with the requirements of Schedule XIV to the Companies Act, 1956, the Company was charging 100% debrciation on assets costing less than ^5,000/- in the year of purchase. However, Schedule II to the Companies Act 2013, applicable from the current year, does not recognize such practice. Hence, to comply with the requirement of Schedule II to the Companies Act, 2013, the Company has changed its accounting policy for debrciations of assets costing less than ^5,000/-. As per the revised policy, the Company is debrciating such assets over their useful life as assessed by the management. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after April 01, 2014. The change in accounting for debrciation of assets costing less than ^5,000/- did not have any material impact on financial statements of the Company for the current year. ii. The Company was brviously not identifying components of fixed assets separately for debrciation purposes; rather, a single useful life/ debrciation rate was used to debrciate each item of fixed asset. Due to application of Schedule II to the Companies Act, 2013, the Company has changed the manner of debrciation for its fixed assets. Now, the Company identifies and determines separate useful life for each major component of the fixed asset, if they have useful life that is materially different from that of the remaining asset. This change in accounting policy did not have any material impact on financial statements of the Company for the current year. (d) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs which meet capitalization criteria, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. Intangible assets are amortized on a straight line basis over the estimated useful economic life. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. Technical Know-how Fees Technical know-how fees are amortized over a period of 3 years. Software Cost of software is amortized over a period of 6 years, being the estimated useful life as per the management estimates. Goodwill on acquisition Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. (e) Impairment of tangible and intangible assets a. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br tax discount rate that reflects current market assessment of the time value of money and risk specific to asset. This rate is estimated from the rate implicit in current market transactions for similar assets or from the weighted average cost of capital of the Company. Impairment losses are recognized in the statement of profit and loss. b. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. c. An assessment is made at each reporting date as to whether there is any indication that brviously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's or cash-generating unit's recoverable amount. A brviously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of debrciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. (f) Leases Where the Company is the lessee Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items 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. Where the Company is the lessor Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including debrciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss. (g) Investments Investments that are readily realisable and intended to be held for not more than a year from the date of the acquisition of such investments are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of such long term investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss. (h) Inventories Inventory of Medical consumables and drugs, Stores and spares are valued at lower of cost and net realizable value. Cost is determined on Weighted Average basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. The inventories of medical consumables in OPD business are expensed off on purchase. (i) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: Operating Income Operating income is recognised as and when the services are rendered / pharmacy items are sold. Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Management fee from hospitals and income from medical services is recognised as and when the contractual obligations arising out of the contractual arrangements with respective hospitals are fulfilled. Income from Clinical Research Income from clinical research is recognised as and when the services are rendered in accordance with the terms of the respective agreements. Income from Rehabilitation Centre and Sponsorships Revenue is recognised as and when the services are rendered at the rehabilitation centre. Sponsorship income is recognized when the underlying obligations are completed as per contractual terms. Income from Academic Services Revenue is recognized on pro-rata basis on the completion of such services over the duration of the program. Equipment Lease Rentals and Income from Rent Revenue is recognised in accordance with the terms of lease agreements entered into with the respective lessees on straight line basis. Export benefits Income from 'Served from India Scheme' is recognized on accrual basis as and when eligible services are performed and convertible foreign exchange is received on a net basis. Interest Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss. (j) Unamortised finance charges Costs incurred in raising funds are amortised on straight line basis over the period for which the funds have been obtained, using time proportionate basis. (k) Foreign currency transactions and balances i) Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. ii) Conversion Foreign currency monetary items are retranslated using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined. iii) Exchange differences The Company accounts for exchange differences arising on translation/ settlement of foreign currency monetary items as below: a. Exchange differences arising on a monetary item that, in substance, forms part of the Company's net investment in a non-integral foreign operation is accumulated in the foreign currency translation reserve until the disposal of the net investment. On the disposal of such net investment, the cumulative amount of the exchange differences which have been deferred and which relate to that investment is recognized as income or as expenses in the same period in which the gain or loss on disposal is recognized. b. Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and debrciated over the remaining useful life of the asset. c. Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortized over the remaining life of the concerned monetary item. d. All other exchange differences are recognized as income or as expenses in the period in which they arise. For the purpose of b and c above, the Company treats a foreign monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination. In accordance with MCA circular dated August 09, 2012, exchange differences for this purpose, are total differences arising on long-term foreign currency monetary items for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference. (l) Retirement and other employee benefits: i) Contributions to provident fund The Company makes contributions to statutory provident fund in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952. Provident Fund is a defined contribution scheme for certain employees, the contributions for these employees are charged to the statement of profit and loss of the year when an employee renders the related service. For other employees, the provident fund is defined benefit scheme contribution of which is being deposited with "Fortis Healthcare Limited Provident Fund Trust" managed by the Company; such contribution to the trust additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time, for which shortfall, if any has to be provided for as at the balance sheet date. There are no other obligations other than the contribution payable to the fund. ii) Gratuity Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the year using projected unit credit method. iii) Compensated absences Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The Company brsents the leave as a current liability in the balance sheet; to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. iv) Actuarial gains/ losses Actuarial gains/ losses are recognised in the statement of profit and loss as they occur. (m) Income Taxes Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws brvailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each reporting 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 realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority. Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. 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. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period. (n) Employee stock compensation cost In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the intrinsic value method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period rebrsents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense. Till October 27, 2014, the Company was earlier complying with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 in accounting for employee stock options. From October 28, 2014, the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 have been replaced by the SEBI (Share Based Employee Benefits) Regulations, 2014. The new regulations doesn't contain any specific accounting treatment; rather, they require ICAI Guidance Note to be followed. Consequent to the application of the new regulations, the Company has changed its accounting for equity settled option expiring unexercised after vesting in line with accounting brscribed in the Guidance Note, i.e., expense is not reversed through the statement of profit and loss. The management has decided to apply the revised accounting policy prospectively from the date of notification of new regulation, i.e., October 28, 2014. The change in accounting policy did not have any material impact on financial statements of the Company for the current year. (o) Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year (including prior period items, if any) attributable to the equity shareholders (after deducting brference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. (p) Provisions A provision is recognised when an enterprise has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. (q) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. (r) Cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less. (s) Measurement of EBITDA As permitted by the Guidance Note on the Revised Schedule VI to the Companies Act, 1956 (now Schedule III to the Companies Act, 2013), the Company has elected to brsent earnings before interest, tax, debrciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit/ (loss) from continuing operations. In its measurement, the Company includes interest income included under other income, but does not include debrciation and amortization expense, finance costs and tax expense. (t) Borrowing costs Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily take substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur. (u) Segment Reporting As the Company's business activity primarily falls within a single business and geographical segment, there are no additional disclosures to be provided in terms of Accounting Standard 17 on 'Segment Reporting'. (b) Terms/ rights attached to equity shares The Company has only one class of equity shares having par value of X 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. 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 brferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. (c) Terms of redemption of brference shares During the year ended March 31, 2009, the Company issued 1,450,000 Class 'C' Zero Percent Cumulative Redeemable Preference Shares of Rs. 10 each at a brmium of Rs. 90 per share. Preference shares were redeemable at a brmium of Rs. 117.69 per brference share, on October 18, 2010, however, the date of redemption of October 18, 2010 has been deferred to October 18, 2014 at the redemption brmium of Rs. 198.20 per share. Both the Company and the subscriber had an option for early redemption of the Preference Shares. In case the early redemption option would have been exercised, the brmium on redemption shall be adjusted proportionately. Preference shares were redeemed on October 28, 2013 at a redemption price of Rs. 184.96 per share including redemption brmium of Rs. 174.96 per share. During the year ended March 31, 2008, the Company issued 11,500,000 Class 'C' zero percent cumulative redeemable brference shares of Rs.10 each at a brmium of Rs. 90 per share, out of which 3,196,000 zero percent cumulative redeemable brference shares were still pending for redemption at the beginning of the year. These shares were redeemable at Rs. 175 per share, including brmium, on October 18 of 2008, 2009, 2010, 2011 and 2012, respectively in installment of Rs. 1,437.50 lacs each and installment of Rs. 12,937.50 lacs on October 18, 2013. The Company had the option to make voluntary brmature redemption of the Shares in part or in full in which event the redemption brmium would have been computed @ 12% compounded annually on the subscription amount from the subscription date till the redemption date. However, the due date of redemption in 2009, 2010, 2011, 2012 and 2013, respectively has been postponed to October 18, 2014 and due to this, the Company has agreed to pay additional redemption brmium calculated at 12%, 12.5%, 13%, 13% and 13%, respectively on the redemption amounts due in respective years. In the event of liquidation of the Company before redemption of brference shares, the holder of brference shares will have priority over equity shares in the repayment of capital. Preference shares were redeemed on October 28, 2013 at a redemption price of Rs. 181.36 per share including redemption brmium of Rs. 172.36 per share. 11. Disclosures under Accounting Standard - 15 (Revised) on 'Employee Benefits': Defined Benefit Plan The Company has a defined benefit gratuity plan, where under employee who has completed five 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 summarizes the components of net benefit expenses recognised in the statement of profit and loss and the amounts recognized in the balance sheet. 1. The Company has entered into 'Operation and Management' agreement with entities which are into hospital operations, in terms of which, the Company is responsible for developing and providing maintenance support and related services necessary to support, manage and maintain the hospital as may be required. The management fee in this case is generally based on gross billing of the hospital subject to certain conditions as per the underlying agreement. The gross billing of the hospital is considered based on the unaudited financial statements of the respective entity. The management does not anticipate any material changes in the amounts considered in financial statements. 2. As part of Sponsor Agreement entered between The Trustee-Manager of Religare Health Trust, Fortis Global Healthcare Infrastructure Pte. Limited and Hospital Service Companies (collectively referred as 'Indemnified parties') with the Company, the Company has provided following indemnities:- i) To RHT and its directors, officers, employees and agents under the relevant transaction agreements against any losses or liabilities finally determined as payable for any breach of the Consolidated Foreign Direct Investment (FDI) Policy or Foreign Exchange Management Act ('FEMA'), to the extent that such breach has resulted from the acquisition by RHT of the Hospital Services Companies. Further, the Company has undertaken to transfer or procure additional medical and healthcare services to Hospital Services Companies in the event that any regulatory authority raises concerns over compliance with any applicable law. However, the Company will not be liable to indemnify the Indemnified Parties for any losses resulting from delay or failure of the Indemnified Parties in completing any statutory filings or similar formalities under the Consolidated FDI Policy, FEMA and other laws in force in India as of the Listing Date i.e. October 19, 2012, required to be undertaken by the Indemnified Parties in relation to the acquisition by RHT or FGHIPL of the equity shares of the Hospital Services Companies. The Company's obligations under this indemnity shall continue so long as the Company or the Group holds 15.0% or more of the total units from time to time issued in RHT or three years from the Listing Date, whichever is later. However, the Company will be liable in respect of the indemnity for a maximum period of five years from the Listing Date. ii) The Company has also undertaken to indemnify ("Tax Indemnity") each of the Hospital Services Companies and their respective directors, officers, employees and agents (the "Investing Parties") against tax liabilities (including interest and penalties levied in accordance with the Income tax Act and any cost in relation thereto) which these Investing Parties may incur due to the non-allowance of interest on Compulsorily Convertible Debentures (CCDs) or Optionally Convertible Debentures (OCDs) in the hands of the Hospital service Companies. iii) Further, as per terms of the various Agreements entered into between Hospital Services Companies and Fortis Operating companies, the Hospital Services Companies have right to recover certain statutory dues levied on them from Fortis Operating Companies. There is a possible brsent obligation on Hospital Services Companies to collect certain statutory dues from the Fortis Operating Companies and pay it to the relevant authorities. In view of uncertainty arising from interbrtation of the regulations, management believes that value of such statutory dues cannot be measured reliably and therefore has not been considered in these financial statements. 3. On January, 9 2012, FHML entered into Share Purchase Agreement with the company to acquire its 49% interest in FHTL at an aggregate consideration of Rs. 37,728.39 lacs. FHTL is the owner of Shalimar Bagh Clinical Establishment and Gurgaon Clinical Establishment. FHML on September 17, 2012 entered into Shareholders' Agreement with the Company, pursuant to which FHML has a call option over the Company's 51% interest in FHTL ("FHTL Call Option") at a fixed price, subject to fulfillment of certain conditions, applicable laws including, and receipt of necessary approvals from all third parties. FHML also has the right to appoint 50% of the directors of FHTL, including the chairman of the board of directors who will have the casting vote in case of deadlock on any matter, including all financial and operating policies of the Company, brought to the board of directors for its approval. Additionally, the Company has assigned its right to receive dividends from FHTL in favour of FHML. In addition, FHML has a put option on its 49% interest in FHTL ("FHTL Put Option"), exercisable if FHML is unable to acquire 100% of the issued and paid-up share capital of FHTL within 5 years from the date of transfer of the 49% shareholding of FHTL by the Company to FHML, for any reason outside the control of FHML. The put option shall be exercised at a price that is equal to the fair market value of Put Securities on the date of exercise of put option, determined on a discounted cash flow basis. 4. During the year ended March 31, 2013, Escorts Heart Institute and Research Centre Limited ('EHIRCL') have issued 401,769 Compulsorily Convertible Preference Shares ('CCPS') of face value of X10 each at a brmium of X 7,456.98 per CCPS to Kanishka Healthcare Limited ('KHL') with a maturity period of 15 years aggregating to X 30,000 lacs. Following are the key terms of CCPS:- a) CCPS Put Option — KHL is entitled to exercise an unconditional and irrevocable right to require the Company or its nominee to buy all of CCPS upon occurrence of KHL having exercised FHTL Put Option or FHTL Call Option under shareholders agreement entered between the Company, FHTL and FHML, as per above. b) Under FHTL call Option the Company is required to pay sum equal to the fair valuation of Equity Shares of EHIRCL as per DCF Method. c) In case of FHTL put option Company has right to purchase, subject to due compliance with law, all CCPS at consideration equal to KHL's contribution along with coupon rate agreed. 5. During the year ended March 31, 2011, the Company had issued 1,000 5% Foreign Currency Convertible Bonds of US Dollar 100,000 each aggregating to US Dollar 100,000,000 due 2015 (the "Bonds"). These Bonds are listed on the Euro MTF market of the Luxembourg Stock Exchange. The Bonds are convertible at the option of the holder at any time on or after May 18, 2013 (or such earlier date as is notified to the holders of the Bonds by the Company) up to May 11, 2015 into fully paid equity shares with full voting rights at par value of Rs. 10 each of the Company ("Shares") at an initial Conversion Price (as defined in the "Terms & Conditions of the Bonds") of Rs.167 with 26,922.1557 shares being issued per Bond with a fixed rate of exchange on conversion of Rs. 44.96 = US Dollar 1.00. The Conversion Price is subject to adjustment in certain circumstances. The Bonds may otherwise be redeemed, in whole or in part, at the option of the Company and holders of the bonds, before the maturity date subject to satisfaction of certain conditions. Subject to the prior approval of the RBI (or any other statutory or regulatory authority under applicable laws and regulations of India) if required, the Bonds may be redeemed, in whole but not in part, at the option of the Company at any time on or after 18 May 2013 (subject to the Company having given at least 30 days' notice) at 100 percent of their aggregate principal amount plus accrued but unpaid interest if the closing price of the Shares on each trading day with respect to the shares for a period of at least 30 consecutive such trading days is equal to or greater than 130 per cent of the Accreted Conversion Price (as defined in the terms and conditions of the Bonds). The Bonds may also be redeemed in whole, but not in part, at the option of the Company subject to satisfaction of certain conditions including obtaining Reserve Bank of India ("RBI") approval, at certain early redemption amount, as specified, on the date fixed for redemption in the event of certain changes relating to taxation in India. Unless brviously redeemed, converted or purchased and cancelled, the Bonds will be redeemed by the Company in US Dollars on May 18, 2015 at 103.1681 per cent of its principal amount. Management has reassessed the probability for conversion of bonds into equity and is of the opinion that it is unlikely that conversion option will be availed by the bondholders. On account of the same, the Company has utilized Securities brmium account and provided for the proportionate brmium on redemption for the period up to March 31, 2015 amounting to Rs. 1,922.85 lacs (Previous year Rs.1,472.10 lacs). These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date. Exchange Rate at March 31, 2015 considered for restatement of the Bonds at the year end was Rs. 62.33553= US Dollar 1 (X60.059349= US Dollar 1 at March 31, 2014). Subsequent to the end of current year, the Bonds have been fully redeemed on the due date as per aforesaid terms. 6. During the year ended March 31, 2014, the Company issued 150 Foreign Currency Convertible Bonds aggregating to US Dollar 30,000,000 due 2018 (the "Bonds") at the rate of (4.66%+LIBOR). These Bonds are listed on the Singapore Exchange Securities Trading Limited (the "SGX-ST"). The Bonds are convertible upto US Dollar 24,000,000 of principal amount at the option of the holder at any time on or after September 17, 2013 (or such earlier date as is notified to the holders of the Bonds by the Company) up to August 01, 2018 into fully paid equity shares with full voting rights at par value of Rs.10 each of the Company ("Shares") at an initial Conversion Price (as defined in the "Terms & Conditions of the Bonds") of Rs. 99.09 with 1,204.71 shares being issued per Bond with a fixed rate of exchange on conversion of Rs. 59.6875 = US Dollar 1.00. The Conversion Price is subject to adjustment in certain circumstances. Subject to certain conditions, the Bonds may be converted mandatorily into fully paid equity shares, 20% of the principal amount of bond outstanding (but in no event exceeding US Dollar 6,000,000 in aggregate principal amount of Bonds), at the option of the Company at any time on or after September 17, 2013 up to August 01, 2018 at the Partial Reset Conversion Price (as defined in the "Terms & Conditions of the Bonds"). The Bonds may otherwise be redeemed, in whole or in part, at the option of the Company and holders of the bonds, before the maturity date subject to satisfaction of certain conditions. Unless brviously redeemed, converted or purchased and cancelled, the Bonds will be redeemed by the Company in US Dollars on August 08, 2018 at 100 per cent of its principal amount. These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date. The Company has incurred expenses of Rs. 542.62 lacs (including Rs. 24.72 lacs paid to Auditors) in connection with this issue. The proceeds of the issue amounting to Rs. 18,390.74 lacs have been used for repayment of debts. Exchange Rate at March 31, 2015 considered for restatement of the Bonds at the year end was Rs. 62.33553= US Dollar 1 (Rs.60.059349= US Dollar 1 at March 31, 2014). 7. During the year ended March 31, 2014, the Company issued 550 Foreign Currency Convertible Bonds of US Dollar 100,000 each aggregating to US Dollar 55,000,000 due 2018 (the "Bonds") at the rate of LIBOR+4.86%. The Bonds are convertible at the option of International Finance Corporation ("IFC"), an international organization established by Articles of Agreement among its member countries including the Republic of India (the holder) giving 7 days notice to the Company at any time on or after June 07, 2013 up to June 08, 2018 into fully paid equity shares with full voting rights at par value of Rs. 10 each of the Company ("Shares") at an initial Conversion Price (as defined in the "Terms & Conditions of the Bonds") of Rs. 99.09 and number of shares to be issued will be calculated on conversion on the basis of applicable rate of exchange of US Dollar and X on conversion date. The Conversion Price is subject to adjustment in certain circumstances. The Bonds may be converted on the request of the holder but not less than value of US Dollar 5,000,000 or in multiple of US Dollar 1,000,000 thereafter. Except in certain condition mentioned in the "Terms & Conditions of the Bonds" the holder cannot exercise the Conversion Option in part or in full in respect of twenty per cent (20%) of the original bond value for a period of three (3) years after the Subscription Date. The Bonds may otherwise be redeemed, in whole or in part, at the option of the Company and holders of the bonds, before the maturity date subject to satisfaction of certain conditions. Subject to the prior approval of the RBI (or any other statutory or regulatory authority under applicable laws and regulations of India) if required, the Bonds may be converted mandatorily into fully paid equity shares, 20% of the principal amount of bond at the option of the Company at any time on or after June 07, 2013 at Modified Conversion Price (as defined in the "Terms & Conditions of the Bonds"). Unless brviously redeemed, converted or purchased and cancelled, the Bonds will be redeemed by the Company in US Dollars on June 08, 2018 at 100 per cent of its principal amount. These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date. Exchange Rate at March 31, 2015 considered for restatement of the Bonds at the year end was Rs. 62.33553= US Dollar 1 (Rs.60.059349= US Dollar 1 at March 31, 2014). 8. During the year ended March 31, 2013, the Company initiated an institutional placement programme (IPP) for issuance of equity share of the Company. The issue was authorised by the Board of Directors through circular resolutions dated November 27, 2012 and by the Company's shareholders through a special resolution passed by way of postal ballot the result whereof was announced on January 15, 2013. During the year ended March 31, 2014, the Board of Directors of the Company, through its resolution dated May 17, 2013, authorised the issuance of up to 34,993,030 equity shares of face value Rs. 10 each at a price of Rs. 92 per equity share under IPP. The transaction was concluded in May 2013. The total proceeds of the issue were approximately Rs. 32,193.59 lacs. The Company has incurred expenses of Rs. 1,377.92 lacs (including Rs. 37.10 lacs paid to Auditors) in connection with this issue. The specified purposes for utilization of issue proceeds were repayment of debts, funding capital expenditure requirements and general corporate purposes. All proceeds of the issue have been utilized for the specified purposes as follows:- 9. During the year ended March 31, 2014, the Board of Directors of the Company, through its resolution dated April 24, 2013, authorised the issuance of up to 28,610,355 Equity Shares to International Finance Corporation through a brferential allotment. Subsequently, on June 6, 2013, the Company issued and allotted 18,833,700 equity shares to International Finance Corporation at Rs. 99.09 per share including brmium of Rs. 89.09 per share aggregating to Rs. 18,662.31 lacs. 10. During the year ended March 31, 2014, the shareholders of the Company, through its special resolution dated August 22, 2013, authorized the issuance of 3,737,449 Equity shares to Standard Chartered Private Equity (Mauritius) III Limited through a brferential allotment. Subsequently, on September 5, 2013, the Company issued and allotted 3,737,449 equity shares to Standard Chartered Private Equity (Mauritius) III Limited at Rs. 99.09 per share including brmium of Rs. 89.09 per share aggregating to Rs.3,703.44 lacs. 11. Details of dues to Micro and Small Enterprises as per MSMED Act, 2006 During the period ended December 31, 2006, Government of India has promulgated an Act namely The Micro, Small and Medium Enterprises Development Act, 2006 which comes into force with effect from October 2, 2006. As per the Act, the Company is required to identify the Micro, Small and Medium suppliers and pay them interest on overdue beyond the specified period irrespective of the terms agreed with the suppliers. The management has confirmed that none of the suppliers have confirmed that they are registered under the provision of the Act. In view of this, the liability of the interest and disclosure are not required to be disclosed in the financial statements. 32. Previous Year Figures Previous year figures have been regrouped / reclassified, where necessary, to conform to this year's classification. As per our report of even date For S. R. Batliboi & Co. LLP Firm Registration Number: 301003E Chartered Accountants Sd/- per Tridibes Basu Partner Membership No.: 017401 For and on behalf of the Board of Directors of Fortis Healthcare Limited Sd/- Malvinder Mohan Singh Executive Chairman DIN 00042981 Sd/- Rahul Ranjan Company Secretary Membership No.: A17035 Place : Gurgaon Date : May 28, 2015 Sd/- Shivinder Mohan Singh Executive Vice Chairman DIN 00042910 Sd/- Gagandeep Singh Bedi Chief Financial Officer CA Membership No.: 0 Place : Gurgaon Date : May 28, 2015 |