1(a) General information
Anuh Pharma Limited (‘the Company’) is engaged in the business of manufacturing and selling of “Bulk drugs and chemicals” .
The company is a public limited company incorporated and domiciled in India and has its registered office at 3-A, Shivsagar Estate, North Wing, Dr. Annie Besant Road, Worli, Mumbai- 400018, Maharashtra, India.
2.1 Office Premises includes value of shares of a co-operative society.
2.2 Some of the Motor Vehicles are held in the name of the Director of the Company.
2.3 From April 1, 2014, Depreciation on Tangible Fixed Assets is provided on pro-rata basis on the written down value method over the useful lives of assets as prescribed in Part C of Schedule II of the Companies Act, 2013. The Management of the Company estimates the useful lives and residual value for the following assets, based on independent technical evaluation, which is different from the useful lives and residual values as per Part C of Schedule II of the Companies Act, 2013, as under:
3.1 The company has only one class of Equity Shares having a par value of Rs. 5 per share. Each holder of equity share is entitled to one vote per share. The company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting.
3.2 The shareholders of the Company had approved the sub-division of Equity Shares of the Company having nominal/face value of Rs. 10 each into Equity Shares having nominal/face value of Rs. 5 each at the Extraordinary General Meeting (“EGM”) held on June 9, 2006.
Consequently, the Authorised, Issued and Paid-up Share Capital were divided from Rs. 10 per Equity share to Rs. 5 per Equity Share.
NOTE NO. 4
First - time adoption of Ind AS
I. Transition to Ind AS
These are the company’s first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 1(b) have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the presentation of an opening Ind AS balance sheet at 1 April 2016 (the Company’s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amount reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the company’s financial position and financial performance is set out in the following tables and notes.
II. Exemptions from retrospective application
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
Deemed cost for Property, Plant and Equipment (PPE) and Intangible assets
Ind AS 101 permits a first time adopters to continue with the carrying value for all its property, plant and equipment and intangible assets as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Accordingly, the company has elected to measure all of its PPE and intangible asset at their previous GAAP carrying values.
The remaining voluntary exemptions as per Ind AS 101 - First time adoption either do not apply or are not relevant to the Company.
III. Exceptions from full retrospective application:
a) Estimates
Upon an assessment of the estimates made under Indian GAAP the Company has concluded that there was no necessity to revise such estimates under Ind AS, except where estimates were required by Ind AS and not required by Indian GAAP
The company made estimate for following items in accrodance with Ind AS at the date of transition as these were not required under previous GAAP:
Investment in Mutual Fund instruments carried at FVTPL.
b) Classification and measurement of financial assets
The Company has classified and measured the financial assets on the basis of facts and circumstances that exist at the date of transition to Ind AS.
The remaining mandatory exceptions either do not apply or are not relevant to the Company.
(f) Reconciliation of statement of Cash Flow;
There are no material adjustments to the statement of cash flow as reported under previous GAAP
(g) Notes to the reconciliation:
1 Fair valuation of investments in mutual funds
Under previous GAAP invesments in mutual funds were classified as long term investments or current investments based on the intended holding period and realisability. Current investments were measured at lower of cost or market price as of each reporting date while long term investments were measured at cost reduced for dimunition. Under Ind AS, these invesments are required to be measured at fair value. The resulting fair value changes of these investments have been recognised in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31 March 2017.
2 Proposed dividend
Under Indian GAAP proposed dividends are recognised as a liability in the period to which they relate, irrespective of when they are declared. Under Ind-AS, a proposed dividend is recognised as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. In the case of the Company, the declaration of dividend occurs after transition date. Therefore, the liability recorded for this dividend has been derecognised against retained earnings.
3 Remeasurement of post employment benefit obligation
Under Ind AS, remeasurements i.e. acturial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income (net of deferred tax) instead of profit and loss under the previous GAAP
The company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income in which the relevant entity operates and the period over which deferred income tax assets will be recovered.
B. Measurement of fair values
Ind AS 107, ‘Financial Instrument - Disclosure’ requires classification of the valuation method of financial instruments measured at fair value in the Balance Sheet, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurements). The hierarchy gives the highest priority to un-adjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to un-observable inputs (Level 3 measurements). Fair value of derivative financial assets and liabilities are estimated by discounting expected future contractual cash flows using prevailing market interest rate curves. The three levels of the fair-value-hierarchy under Ind AS 107 are described below:
Level 1: Level 1 Heirarchy includes financial instruments measured using quoted prices.
Level 2: The fair value of financial instruments that are not traded in an active market are determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. e.g. unlisted equity securities.
Transfers between Levels
There have been no transfers between Levels during the reporting periods
The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.
Financial instruments measured at fair value
There are no transfers betweeen the levels
C. Financial risk management
The Company has exposure to the following risks arising from financial instruments:
- Credit risk;
- Liquidity risk; and
- Market risk
i. Risk management framework
The Company’s board of directors has overall responsibility for the establishment and oversight of the Company risk management framework. The board of directors is responsible for developing and monitoring the Company risk management policies.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.
ii. Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investments in debt securities, cash and cash equivalents, mutual funds, bonds etc.
The carrying amount of financial assets represents the maximum credit exposure.
Trade and other receivables
Around 45% of the sales are export sales. For major part of the sales, customer credit risk is managed by requiring domestic and export customers to pay advances before transfer of ownership, therefore substantially eliminating the Company’s credit risk in this respect.
Based on prior experience and an assessment of the current economic environment, management believes that no provision is required for credit risk wherever credit is extended to customers.
Impairment
The ageing of trade and other receivables that were not impaired was as follows:
Management believes that the unimpaired amounts that are past due by more than 6 months are still collectible in full, based on historical payment behaviour.
Concentration of credit risk
At 31st March 2018, the carrying amount of the Company’s most significant customer is Rs. 2,574 lakhs (31st March, 2017 : Rs. 2,489 lakhs; 1st April, 2016 : Rs. 2,665 lakhs)
Loan to others
The credit worthiness of the counter party is evaluated by the management on an ongoing basis and is considered to be good. The Company did not have any amounts that were past due but not impaired. The Company has no collateral in respect of these loans.
Investment in mutual funds and bonds
The investment in mutual funds, Government bonds are entered into with credit worthy fund houses, Government of India and financial institution respectively. The credit worthiness of these counter parties are evaluated by the management on an ongoing basis and is considered to be good. The Company does not expect any losses from non-performance by these counter-parties.
Cash and cash equivalents
Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the company’s policy. Investment of surplus funds are made in mainly in mutual funds with good returns and within approved credit ratings.
Other than trade and other receivables, the Company has no other financial assets that are past due but not impaired.
iii. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation. The Company has obtained fund and non-fund based working capital lines from two banks. The Company also constantly monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.
As at 31st March, 2018, the Company had working capital of Rs. 9554.66 lakhs, including cash and cash equivalents of Rs. 379.91 lakhs and highly marketable current investments of Rs. 3556.50 lakhs. As at 31st March, 2017, the Company had working capital of Rs. 9054.52 lakhs, including cash and cash equivalents of Rs. 520.30 lakhs and highly marketable current investments of Rs. 3925.95 lakhs. As at 1st April, 2016 the Company had working capital of Rs. 8013.95 lakhs, including cash and cash equivalents of Rs. 305.25 lakhs and highly marketable current investments of Rs. 2200.54 lakhs.
Exposure to liquidity risk
The table below analyses the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities :
iv. Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
a) Currency risk
The company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchase, other expenses and borrowings are denominated and the functional currency of the company. The functional currency of the company is Indian Rupees (INR). The currencies in which these transactions are primarily denominated is USD.
Sensitivity analysis
The strenghtening / weakening of the respective foreign currencies with respect to functional currency of Company would result in increase or decrease in profit or loss and equity as shown in table below. This analysis assumes that all other variables, in particular interest rates, remain constant. The following analysis has been worked out based on the exposures as of the date of statements of financial position.
b) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates.
Interest rate sensitivity - fixed rate instruments
The company’s fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in IND AS 107, since neither the carrying amount nor the future cash flow will fluctuate because of a change in market interest rates.
NOTE NO. 5 Capital Management
The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.
The Company monitors capital using a ratio of ‘net debt’ to ‘equity’. For this purpose, net debt is defined as total debt, comprising loans and borrowings less cash and cash equivalents and current investments.
The Company’s net debt to equity ratio as at 31st March 2018, 31st March 2017 and 1st April 2016 was as follows.
NOTE NO. 6 Earning Per Share (EPS):
Basic EPS and Diluted EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the company by the weighted average number of Equity shares outstanding during the year.
Terms and conditions of transactions with related parties
* All the related party transactions were made on terms equivalent to those that prevail in an arm’s length transactions.
* Parties identified by the Management and relied upon by the auditors.
No amount in respect of related parties have been written off/back or are provided for.
Leases - Finance leases as lessee:
The company has entered into long-term leasing arrangements for land with government authority which are in the nature of finance lease. These arrangements do not involve any material recurring payments, hence other disclosures are not given.
NOTE NO. 7
a) As at 31st March, 2018, there are no Micro, Small and Medium Enterprises, as defined in the Micro, Small, Medium Enterprises Development Act, 2006, to whom the Company owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made.
b) The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
NOTE NO.8
Employee Benefit obligations
(A) Defined Contribution Plan
The Company has various schemes for long-term benefits such as provident fund and superannuation. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees /appropriate authorities. The Company’s defined contribution plans are superannuation and employees’ pension scheme (under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any.
(B) Defined Benefit Plan
In accordance with the provisions of the Payment of Gratuity Act, 1972, the Company has a defined benefit plan which provides for gratuity payments. The plan provides a lump sum gratuity payment to eligible employees at retirement or termination of their employment. The amounts are based on the respective employee’s last drawn salary and the years of employment with the Company. Liabilities in respect of the gratuity plan are determined by an actuarial valuation, based upon which the Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC of India, a funded defined benefit plan for qualifying employees. Trustees adminster the contributions made by the Company to the gratuity scheme. The most recent actuarial valuation of the defined benefit obligation along with the fair valuation of the plan assets in relation to the gratuity scheme was carried out as at March 31, 2018. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.
Based on the actuarial valuation obtained in this respect, the following table sets out the details of the employee benefit obligation and the plan assets as at balance sheet date:
(vi) Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.
The above sensitivity analyses have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the reporting date. In practice, generally it does not occur. When we change one variable, it affects to others. In calculating the sensitivity, project unit credit method at the end of the reporting period has been applied.
Other long-term employee benefits:
Compensated absences are payable to employees at the rate of daily basic salary and other components for each day of accumulated leave partially at the year end and partially on death or on resignation or upon retirement. The charge towards compensated absences for the year ended 31st March, 2018 based on actuarial valuation using the projected accrued benefit method is Rs. 29 lakhs (31st March 2017 : Rs. 4 lakhs).
9.1 The figure of Rs. 27.03 lakhs is as per the orders dated April 10, 2003 of the Assistant Commissioner of Sales Tax (Appeals), Thane. Thereafter, the Company had preferred an appeal before the Maharashtra Sales Tax Tribunal, which has passed its orders on August 27, 2009. However, the Company has not yet received the revised assessment orders giving effect to the above referred Tribunal orders. The Company has filed a Writ Petition before the Honourable High Court of Bombay contesting the Tribunal order.
9.2 The Company has imported certain raw materials and chemicals under the Advance Authorisation/License scheme without payment of duty subject to fulfilment of specified export obligations. However, the Company has yet to fulfil certain portion of these export obligations within the stipulated validity period. On a forward basis, the Company’s management is confident of fulfilling these export obligations within the stipulated validity period and hence, no provision for the duty payable, in case the export obligation is not fulfilled, has been made in the accounts.
During the financial year 2012-2013, the Company had set up an in-house Research and Development facility at A-514, TTC Industrial Area, Mahape, Navi Mumbai 400701. This facility has commenced research and development work on May 1, 2012. The facility has been recognised by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India vide its letter dated December 31, 2012 upto December 31, 2015 and vide its letter dated April 1, 2015 upto March 31, 2018.
NOTE NO. 10
EVENTS AFTER THE REPORTING PERIOD
The Board of Directors have recommended a final dividend of Rs. 2.75 (55 %) per equity share of Rs. 5/-each. The cash outgo on account of final dividend and dividend tax will be Rs. 830.67 Lakhs.
NOTE NO. 11
Previous year’s figures have been regrouped/reclassified wherever necessary to correspond with the current year’s classification/disclosure.
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