Notes to the Financial Statements 1. Corporate information Biocon Limited (‘Biocon’ or ‘the Company’), was incorporated at Bangalore in 1978 for manufacture of biotechnology products. Biocon is an integrated healthcare company engaged in manufacture of biotechnology products for the pharmaceutical sector. The Company is also engaged in research and development in the biotechnology sector. During the year ended March 31, 2007, the Company had received an approval for operation of SEZ Developer and for setting up SEZ Unit operations to be located within Biocon SEZ. Syngene International Limited (‘Syngene’), promoted by Dr Kiran Mazumdar-Shaw, was incorporated at Bangalore in 1993. In March 2002, Biocon acquired 99.99 per cent of the equity shares of Syngene and, resultantly, Syngene became the subsidiary of Biocon. During the year, Syngene completed its Initial Public Offering (IPO), through an offer for sale of 22,000,000 equity shares of Rs. 10 each, by the Company. Post the IPO, 72.61% of the equity interest in Syngene is held by Biocon and 0.93% is held by Biocon Research Limited (‘BRL’). On January 10, 2008, Biocon entered into an agreement with Dr. B.R. Shetty to set up a joint venture Company NeoBiocon FZ-LLC, with a 50% equity interest incorporated in Dubai (‘NeoBiocon’). On July 1, 2014, the Company acquired an additional equity stake of 1% in NeoBiocon, taking its holding to 51%. Accordingly, effective July 1, 2014, NeoBiocon has become a subsidiary of the Company. The Company has also established BRL, a subsidiary of the Company to undertake research and development in novel and innovative drug initiatives. During the year ended March 31, 2009, Biocon set up a wholly owned subsidiary Company in Switzerland, Biocon SA (“BSA”) to undertake research and development in novel and innovative drug initiatives. During the year ended March 31, 2016, Biocon set up a wholly owned subsidiary Company in United Kingdom, Biocon Biologics Limited (“BUK”) to undertake development and commercialisation of biosimilar products. During the year ended March 31, 2011, Biocon set up a wholly owned subsidiary company in Malaysia, Biocon Sdn. Bhd. (‘Biocon Malaysia’) for development and manufacture of bio-pharmaceuticals. During the year ended March 31, 2016, the Company transferred its investment in shares of Biocon Malaysia to BUK. Accordingly, Biocon Malaysia has become a step-down subsidiary of the Company. During the year ended March 31, 2014, the Company established Biocon Academy, a not for profit company under Companies Act, 1956 to provide educational courses, training and research in the biosciences, life sciences and all fields of study. On October 31, 2014, the Company incorporated Biocon Pharma Limited, a wholly owned subsidiary of Biocon, to engage in the business of formulation, development and sale of biopharmaceutical products. During the year ended March 31, 2016, Biocon set up a wholly owned subsidiary Company in Dubai, Biocon FZ LLC (“Biocon FZ”) to engage in the business of biopharmaceutical products in the Middle East region. 2. Basis of brparation The financial statements 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 (“the Act”) read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year. For the purpose of administration of the employee stock option plans of the Company, the Company has established the Biocon India Limited Employee Welfare Trust (‘The ESOP Trust’). The Securities and Exchange Board of India (Share Based Employee benefits) Regulations 2014 (‘SEBI Regulations’) requires companies to follow ‘Guidance Note on Accounting for employee share-based Payments’ (Guidance Note) or Accounting Standards as may be brscribed by the Institute of Chartered Accountants of India (ICAI). As per the Guidance Note, Trust created for the purpose of administering employee share-based plans which does not provide any economic benefit to the Company should not be consolidated with the financial statements of the Company. Hitherto, under the erstwhile Securities and Exchange Board of India (Employee stock option scheme and employee stock purchase scheme) Guidelines, 1999, financial statements of the Company were brpared as if the Company itself is administering the ESOP scheme. Pursuant to the SEBI Regulations, the Company has discontinued the consolidated of the accounts of the ESOP Trust in its standalone financial statements for the year ended March 31, 2015 onwards. The Central Government in consultation with National Advisory Committee on Accounting Standards has amended Companies (Accounting Standards) Rules, 2016 (‘principal rules’), vide notification issued by Ministry of Corporate Affairs dated and effective March 30, 2016. The Company believes that the Rule 3(2) of the principal rules has not been withdrawn or replaced and accordingly, the Companies (Accounting Standards) Rules, 2016 will apply for the accounting periods commencing on or after March 30, 2016. Hence, the Company has not applied the Companies (Accounting Standards) Rules, 2016 in brparation of financial results for the year ended March 31, 2016. 2.1 Summary of Significant Accounting Policies a. Use of estimates The brparation of financial statements in conformity with Indian GAAP requires management to make judgements, 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 upon management’s best knowledge of current events and actions, actual results could differ from these estimates. b. Tangible fixed assets Fixed assets are stated at cost, except for certain freehold land and buildings revalued on November 1, 1994, which are shown at estimated replacement cost as determined by valuers less impairment loss, if any, net of accumulated debrciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalisation criteria are met and other directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is debrciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and debrciates them accordingly. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the fixed assets as a replacement if the recognition criteria are satisfied. Leasehold land on a lease-cum-sale basis are capitalised at the allotment rates charged by the Municipal Authorities. 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 routine 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. The Company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a debrciable asset to the cost of the asset and debrciates the same over the remaining life of the asset. In accordance with MCA circular dated August 9, 2012, exchange differences adjusted to the cost of fixed assets are arising on long-term foreign currency monetary items pertaining to the acquisition of a debrciable asset, for the period. 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 recognised in the statement of profit and loss when the asset is derecognised. Assets funded by third parties are capitalised at gross value and the funds so received are recorded as funding received from co-developer and amortised over the useful life of the assets. Intangible assets (i) Goodwill: Goodwill rebrsents the excess of purchase consideration over the net book value of assets acquired. Goodwill on acquisition of business is amortised on a straight line basis over a period of 5 years and is tested for impairment on an annual basis. (ii) Intangible asset: Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalied and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred. Computer software which is not an integral part of the related hardware is classified as an intangible asset. Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable brsumption that the useful life of an intangible asset will not exceed its remaining patent life or ten years, whichever is lower. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from brvious estimates, the amortisation period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortisation method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. 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 derecognised. Amortisation of intangible assets: a. Intellectual Property rights/marketing rights are amortized on a straight line basis over the estimated useful economic life of five years. b. Manufacturing rights are amortised on a straight line basis over the estimated useful economic life of ten years. c. Computer software is amortised on a straight line basis over a period of three - five years, being its estimated useful life. Research and development costs Research and development costs, incurred for development of products are expensed as incurred. Development costs which relate to the design and testing of new or improved materials, products or processes or for existing products in new territories are recognised as an intangible asset when the Company can demonstrate all the following: a. it is technically feasible to complete the development of asset and it will be available for sale/use. b. it is expected that such development will be completed and used/sold. c. it is expected that such assets will generate future economic benefits. d. there are adequate resources to complete such development. e. it is possible to measure reliably the expenditure attributable to the asset during development. Research and development expenditure of a capital nature is added to fixed assets. Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. The carrying value of the development cost is tested for impairment annually. e. Borrowing Costs Borrowing cost includes interest, amortisation of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from short-term foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a 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. f. Impairment of tangible and intangible assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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 assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. Impairment losses, including impairment on inventories, are recognised in the statement of profit and loss, except for brviously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognised in the revaluation reserve up to the amount of any brvious revaluation. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. 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 recoverable amount. A brviously recognised 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 recognised. 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 recognised 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. g. Inventories Inventories are valued as follows: Raw materials and packing materials Lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a first-in-first-out basis. Customs duty on imported raw materials (excluding stocks in the bonded warehouse) is treated as part of the cost of the inventories. Work-in-progress and finished goods Lower of cost and net realisable value. Cost includes direct materials (on a first–in-first out basis) and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Traded goods Lower of cost and net realizable value. Cost includes the purchase price and other associated costs directly incurred in bringing the inventory to its brsent location. Cost is determined on a first-in-first-out 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. h. 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 recognised. (i) Sale of products: Revenue from sale of products is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. 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. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year. (ii) Sale of services: The Company enters into certain dossier sales, licensing and supply agreements (including arrangement for capacity reservation fee) relating to various products. Revenue from such arrangements is recognised upon completion of performance obligations or on a proportional performance basis over the period the Company performs its obligations, based on the terms of the agreements. Proportionate performance is measured based upon the efforts/ costs incurred to date in relation to the total estimated efforts/costs to complete the contract. The Company monitors estimates of the total contract revenue and cost on a routine basis throughout the contract period. The cumulative impact of any change in estimates of the contract revenue or costs is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss. In respect of services, the Company collects service tax as applicable on behalf of the Government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue. (iii) Interest Income: Interest income is recognised 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. (iv) Dividend income: Dividend income is recognised when the Company’s right to receive dividend is established by the reporting date. i. Investments Investments that are readily realisable and intended to be held for not more than twelve months from the date on which such investments are made are classified as current investments. All other investments are classified as non-current investments. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Non-current investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the 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. j. Retirement benefits Retirement benefit in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the statement of profit and loss for the year when the employee renders the related service and the contributions to the government funds are due. The Company has no obligation other than the contribution payable to provident fund authorities. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The gratuity benefit of the Company is administered by a trust formed for this purpose through the group gratuity scheme. Actuarial gains and losses for defined benefit plan are recognised in full in the period in which they occur in the statement of profit and loss. Accumulated leave, which is expected to be utilised 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 12 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. Actuarial gains/ losses are immediately taken to the statement of profit and loss and are not deferred. The Company brsents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date. k. Foreign currency translation Foreign currency transaction and balances 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. Conversion Foreign currency monetary items are retranslated using the exchange rate brvailing at the reporting date. Non-monetary items which are carried 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 carried at fair value or other similar valuation denominated in a foreign currency are translated using the exchange rates at the date when such values were determined. Exchange Differences The Company accounts for exchange differences arising on translation/settlement of foreign currency monetary items as below: (i) 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 in the financial statements until the disposal of the net investment, at which time they are recognised as income or as expenses. (ii) 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. (iii) Exchange differences arising on other long-term foreign currency monetary items are accumulated in the “Foreign Currency Monetary Item Translation Difference Account” and amortised over the remaining life of the concerned monetary item. (iv) All other exchange differences are recognised as income or as expenses in the period in which they arise. For the purpose of (ii) and (iii) 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 9, 2012, exchange differences for this purpose, are arising on long-term foreign currency monetary items for the period. Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/liability. The brmium or discount arising at the inception of forward exchange contract is amortized and recognised as an expense/income over the life of the contract. Exchange differences on such contracts, except the contracts which are long-term foreign currency monetary items, are recognised in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognised as income or as expense for the period. Any gain/loss arising on forward contracts which are long-term foreign currency monetary items are recognised in accordance with paragraph (ii) and (iii). l. Income tax 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. 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 recognised directly in equity is recognised 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 income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax liability is recognised for all taxable timing differences. Deferred tax assets are recognised 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 realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws brvailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognised in respect of timing differences which reverse during the tax holiday period, to the extent the Company’s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognised in the year in which the timing differences originate. However, the Company restricts recognition of deferred tax assets 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 realised. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first. At each reporting date, the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets 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 realised. The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of a 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. 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. m. Employee stock compensation costs Employees (including senior executives) of the Company also receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). 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 and recognised, together with a corresponding increase in the “Stock options outstanding account” in reserves. The cumulative expense recognised 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. Expenses for equity settled options expiring unexercised after vesting are not reversed through statement of profit and loss. The expense or credit recognised in the statement of profit and loss for a period rebrsents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense. n. Earnings per share (EPS) Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the year is adjusted for events such as bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the 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. o. Operating lease Where the Company is a Lessee Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognised as an expense on a straight-line basis over the lease term. Where the Company is a 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 is recognised on a straight line basis over the lease term. Costs, including debrciation are recognised as an expense. Initial direct costs such as legal costs, brokerage costs, etc are recognised immediately in the statement of profit and loss. p. Segment reporting Identification of segments The Company’s operating businesses are organised and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and services to different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operates. Inter-segment Transfers The Company generally accounts for inter-segment sales and transfers at an agreed marked-up price. Allocation of common costs Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items The Corporate and other segment include general corporate income and expense items which are not allocated to any business segment. Segment policies The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the Company as a whole. q. Provisions A provision is recognised when the Company has a brsent obligation as a result of past event; 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. Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is brsented in the statement of profit and loss net of any reimbursement. r. Contingent liability 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 recognised 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 recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements. s. Cash and cash equivalents Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. t. Derivative instruments In accordance with the ICAI announcement, derivative contracts, other than foreign currency forward contracts covered under AS 11, are marked to market on a portfolio basis, and the net loss, if any, after considering the offsetting effect of gain on the underlying hedged item, is charged to the statement of profit and loss. Net gain, if any, after considering the offsetting effect of loss on the underlying hedged item, is ignored. 30. Employee stock compensation (a) Biocon ESOP Plan On September 27, 2001, Biocon’s Board of Directors approved the Biocon Employee Stock Option Plan (‘ESOP Plan 2000’) for the grant of stock options to the employees of the Company and its subsidiaries/ joint venture company. The Nomination and Remuneration Committee (‘Remuneration Committee’) administers the plan through a trust established specifically for this purpose, called the Biocon India Limited Employee Welfare Trust (ESOP Trust). The ESOP Trust shall make additional purchase of equity shares of the Company using the proceeds from the loan obtained from the Company, other cash inflows from allotment of shares to employees under the ESOP Plan and shall subscribe, when allotted to such number of shares as is necessary for transferring to the employees. The ESOP Trust may also receive shares from the promoters for the purpose of issuance to the employees under the ESOP Plan. The Remuneration Committee shall determine the exercise price which will not be less than the face value of the shares. Grant I In September 2001, the Company granted 71,510 options (face value of shares Rs. 5 each) under the ESOP Plan 2000 to be exercised at a price of Rs. 10 (before adjusting bonus and share split). The options vested with the employees equally over a four year period. Grant II In January 2004, the Company granted 142,100 options (face value of shares - Rs. 5 each) under ESOP Plan 2000 to be exercised at a price of Rs. 5 per share. The options vest with the employees equally over a four year period. Grant III In January 2004, the Board of Directors announced the Biocon Employee Stock Option Plan (ESOP Plan 2004) for the grant of stock options to the employees of the Company and its subsidiaries/ joint venture company, pursuant to which the Remuneration Committee on March 19, 2004 granted 422,000 options (face value of shares - Rs. 5 each) under the ESOP Plan 2004 to be exercised at a grant price of Rs. 315 being the issue price determined for the IPO through the book building process. The options vest with the employees equally over a four year period. Grant IV In July 2006, the Company approved the grant of 3,478,200 options (face value of shares - Rs. 5 each) to its employees under the existing ESOP Plan 2000. The options under this grant would vest to the employees as 25%, 35% and 40% of the total grant at the end of first second and third year from the date of grant for existing employees and at the end of third, fourth and fifth year from the date of grant for new employees. Exercise period is 3 years for each grant. The conditions for number of options granted include service terms and performance grade of the employees. These options are exercisable at a discount of 20% to the market price of Company’s shares on the date of grant. 37. Segmental information In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements. 38. Other notes (a) The Company had entered into transactions of sale of products to a private company during the year ended March 31, 2013 and 2012 amounting to Rs. 28 and Rs. 17 respectively that required prior approval from Central Government under Section 297 of the Companies Act, 1956. These transactions, entered into at brvailing market prices were approved by the Board of Directors of the Company. During the year ended March 31, 2014, the Company had filed application with the Central Government for approval of such transactions and for compounding of such non-compliance and same is pending with Central Government as at March 31, 2016. (b) Recovery of product development costs from co-development partner (net) pertains to co-development partner’s share of expenses under the development agreements comprising of payroll costs, debrciation and amortisation and other expenses. (c) The Company has paid the dividend distribution tax of Rs. 107 (March 31, 2015: Rs. 30) on interim dividend, after reducing the amount of dividend received by the Company from its subsidiaries. 39. Corporate Social Responsibility As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately brceding three financial years on corporate social responsibility (CSR) activities. (a) Gross amount required to be spent by the company during the year is Rs. 81; and 40. Prior years’ comparatives The Company has reclassified and regrouped the brvious year figures to conform to current year’s classification. As per our report of even date For S.R. Batliboi & Associates LLP For and on behalf of the Board of Directors of Biocon Limited ICAI Firm registration no.: 101049W Chartered Accountants per Aditya Vikram Bhauwala PartnerMembership no.: 208382 Kiran Mazumdar-Shaw Managing Director DIN: 00347229 Arun Chandavarkar Joint Managing Director & CEO DIN: 01596180 Siddharth Mittal President - Finance & Chief Financial Officer Kiran Kumar Company Secretary M No. A14594 Place : Bengaluru Date : April 26, 2016 |