22.8 Equity shares extinguished on buy-back
Current year
The Board of Directors of the Company, at its meeting held on 10 March 2023 has approved the proposal of Buy-back of 2,210,500 fully paid-up equity shares of the Company of face value of H 2 each at a price of H 1,425/- per equity share, on a proportionate basis, for an aggregate amount not exceeding H 315.00 Crore through the tender offer process ("Buyback"), in accordance with the provisions of the Companies Act, 2013, and rules made thereunder, and the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 (the "SEBI Buyback Regulations"). The buyback issue opened on 31 March 2023 and closed on 10 April 2023. The Company has taken the impact of buyback in current financial year and for this Company has utilised its General Reserve (H 315.00 Crore) for the buyback of its equity shares. Total transaction cost of H 1.44 Crore incurred towards buyback and tax of H 73.28 Crore was offset from retained earnings. In accordance with Section 69 of the Companies Act, 2013, the Company has created Capital Redemption Reserve of H 0.44 Crore equal to the nominal value of the shares bought back as an appropriation from the General Reserve.
Previous years
The Board of Directors of the Company, at its meeting held on 28 December 2021 had approved a proposal to buyback up to 1,120,000 equity shares of the Company for an aggregate amount not exceeding H 285.60 Crore being 1.29% of the total paid up equity share capital at H 2,550 per equity share. A Letter of Offer was made to all eligible shareholders. The Company bought back 1,120,000 equity shares out of the shares that were tendered by eligible shareholders and extinguished the equity shares bought back on 28 February 2022. The Company has utilised its Securities Premium (H 0.54 Crore) and General Reserve (H 285.06 Crore) for the buyback of its equity shares. Total transaction cost of H 2.02 Crore incurred towards buyback and tax of H 66.48 Crore was offset from retained earnings. In accordance with Section 69 of the Companies Act, 2013, the Company has created Capital Redemption Reserve of H 0.22 Crore equal to the nominal value of the shares bought back as an appropriation from the General Reserve.
The Company bought back 735,000 equity shares for an aggregate amount not exceeding of H 136 Crore being 0.84% of the total paid up equity share capital at H 1,850 per equity share. The equity shares bought back were extinguished on 30 December 2020.
The Company bought back 769,230 equity shares for an aggregate amount not exceeding of H 100 Crore being 0.87% of the total paid up equity share capital at H 1,300 per equity share. The equity shares bought back were extinguished on 26 March 2019.
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 (EBIT) on capital, as well as the level of dividends to equity shareholders. The Company's objective for capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans.
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 (EBIT) on capital, as well as the level of dividends to equity shareholders. The Company's objective for capital management is to maximise shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans.
46.1 Defined contribution plans
The Company offers its employee's defined contribution plans in the form of provident fund (PF) and Employees' pension scheme (EPS) with the government, and certain state plans such as Employees' State Insurance (ESI). PF and EPS cover substantially all regular employees and the ESI covers certain employees. Contributions are made to the Government's administered funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into the Pension fund is made only by the Company. The contributions are normally based on a certain proportion of the employee's salary. The Company does not have any liability beyond depositing these amounts in to the government administered fund. During the year, the Company has made the following contributions:
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H in Crore
|
|
Particulars
|
Year ended 31 March 2023
|
Year ended 31 March 2022
|
|
Provident fund and employee's pension scheme
|
29.75
|
26.89
|
|
Employees state insurance and others
|
0.77
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0.78
|
|
Total
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30.52
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27.67
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46.2 Defined benefit plans
Gratuity:
The Company makes annual contributions to Employees' Group Gratuity-cum Life Assurance (Cash Accumulation) Scheme of LIC, a funded defined benefit plan for qualifying employees. The Companies scheme provides for payment to vested employees as under:
On normal retirement/ early retirement/ withdrawal/ resignation:
As per the provisions of Payments of Gratuity Act, 1972 with vesting period of 5 years of service with a maximum limit of H 0.20 Crore.
On the death in service:
As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2023. 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.
46.1 Defined contribution plans
The Company offers its employee's defined contribution plans in the form of provident fund (PF) and Employees' pension scheme (EPS) with the government, and certain state plans such as Employees' State Insurance (ESI). PF and EPS cover substantially all regular employees and the ESI covers certain employees. Contributions are made to the Government's administered funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into the Pension fund is made only by the Company. The contributions are normally based on a certain proportion of the employee's salary. The Company does not have any liability beyond depositing these amounts in to the government administered fund. During the year, the Company has made the following contributions:
|
H in Crore
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|
Particulars
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Year ended 31 March 2023
|
Year ended 31 March 2022
|
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Provident fund and employee's pension scheme
|
29.75
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26.89
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Employees state insurance and others
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0.77
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0.78
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Total
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30.52
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27.67
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46.2 Defined benefit plans
Gratuity:
The Company makes annual contributions to Employees' Group Gratuity-cum Life Assurance (Cash Accumulation) Scheme of LIC, a funded defined benefit plan for qualifying employees. The Companies scheme provides for payment to vested employees as under:
On normal retirement/ early retirement/ withdrawal/ resignation:
As per the provisions of Payments of Gratuity Act, 1972 with vesting period of 5 years of service with a maximum limit of H 0.20 Crore.
On the death in service:
As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.
The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2023. 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.
Although the analysis does not take into account full distribution of cash flows expected under the plan, it does provide an approximation of sensitivity of assumptions. The estimate of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.
46.3 Leave Encashment
The Company's employees are entitled for compensated absences which are allowed to be accumulated and encashed as per the Company's policies. The liability of compensated absences, which is non-funded, has been provided based on report of independent actuary using "Projected Unit Credit Method".
Accordingly, H 27.14 Crore (Previous Year H 23.85 Crore) being liability as at the year-end for compensated absences as per actuarial valuation has been provided in the accounts.
47. SHARE-BASED PAYMENTS
Company has established "Employees Stock Option Scheme 2011" ('ESOS - 2011') and Share based Incentive Plan 2019 as approved in earlier year by the shareholders of the Company and Compensation committee of Board of Directors for key Employees of the Group. The options issued under the above scheme vest in a phased manner.
Valuation of stock options
The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. They key inputs and assumptions used are as follows:
Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted.
Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Remuneration and Compensation Committee.
Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.
Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.
Expected dividends: Expected dividend yield has been calculated as an average of dividend yields for four years preceding the date of the grant.
Risk free interest rate: The risk-free interest rate on the date of grant considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero-coupon yield curve for Government Securities.
These assumptions reflect management's best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company's control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future years. The Company has granted stock options to employees of a subsidiary, the estimated fair value of stock options issued are included in the carrying value of the investment in the said subsidiary on a straight-line basis over the requisite service period of each separately vesting portion of the award.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have declared buyback NAV. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (like Mark to market derivatives, Nonconvertible debentures and Non-convertible market link debenture) is 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 as instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Measurement of fair values:
Valuation techniques and significant unobservable inputs:
The following tables show the valuation techniques used in measuring Level 2 fair values, for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used:
B. Financial risk management
Company has exposure to following risks arising from financial instruments:
• credit risk
• liquidity risk
• market risk
• currency risk
Risk management framework
Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. Management is responsible for developing and monitoring the Company's risk management policies, under the guidance of Audit Committee.
Company's risk management policies are established to identify and analyse the risks faced by it, 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. Company, through its training and procedures aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.
Company's 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 ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit committee.
i. Credit risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and mutual funds, foreign exchange transactions and other financial instruments.
The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets.
65% (Previous Year 70%) of total receivables is from wholly owned subsidiaries.
Sales to certain jurisdictions are either based on advance payments or restricted to certain limits to curtail exposures to credit risk.
Expected credit loss assessment
The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments, available press information etc.) and applying experienced credit judgement.
Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macroeconomic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. The trend of the bad debts is negligible.
a) Trade receivables
Customer credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to customer credit risk management. Trade receivables, which are non-interest bearing, are mainly from stockists, distributors and customers and are generally on 14 days to 270 days credit term excluding wholly owned subsidiaries. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
As at 31 March 2023, Company had 37 customers, excluding wholly owned subsidiaries (31 March 2022: 32 customers) that owed the Company more than H 0.50 Crore each and accounted for approximately 26% and 22% respectively of the total outstanding as at 31 March 2023 and 31 March 2022.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively.
During the year impairment gain has been recognised due to write-back of allowance of trade receivable. b) Financial instruments
Company limits its exposure to credit risk by investing in liquid securities issued by mutual funds having a credit ranking of at least 3 and above from CRISIL or equivalent rating agency. Company monitors changes in credit risk by tracking published external credit ranking. Based on its on-going assessment of counterparty risk, the Company adjusts its exposure to various counterparties.
ii. Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company's objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate sources of financing including bilateral loans, debt, and overdraft from banks at an optimised cost. Working capital requirements are adequately addressed by internally generated funds. Trade receivables are kept within manageable levels.
Company aims to maintain the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess of expected cash outflows on financial liabilities over the next six months. The ratio of cash and cash equivalents and other highly marketable debt investments to outflows is 0.86 at 31 March 2023 (0.56 at 31 March 2022).
iii. Market risk
Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Financial instruments affected by market risk include loans and borrowings, deposits, investments, and derivative financial instruments.
The Company's activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative financial instruments such as foreign exchange contracts to manage its exposures to foreign exchange fluctuations. All such transactions are carried out within the guidelines set by the risk management committee.
iv. Currency risk
Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of Company. The currencies in which these transactions are primarily denominated are US dollars, Australian dollars, Great Britain Pound and Euro.
At any point in time, Company covers foreign currency risk by taking appropriate percentage of its foreign currency exposure, as approved by risk management committee in line with the laid down policy approved by the Board. Company uses forward exchange contracts to mitigate its currency risk, most with a maturity of less than one year from the reporting date. In respect of other monetary assets and liabilities denominated in foreign currencies, the Company's policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
The operations of the Company are limited to only one segment viz. pharmaceuticals and related products. Revenue from contract with customers is from sale of manufactured goods. Sale of goods are made at a point in time and revenue is recognised upon satisfaction of the performance obligations which is typically upon dispatch/delivery. The Company has a credit evaluation policy based on which the credit limits for the trade receivables are established. There is no significant financing component as the credit period provided by the Company is not significant.
51. DISCLOSURE FOR LEASES UNDER IND AS 116 - “LEASE"
Company has taken various premises under operating lease. These are generally cancellable and ranges from 11 months to 5 years and are renewable by mutual consent on mutually agreeable terms. Some of these lease agreements have price escalation clauses. There are no restrictions imposed by these lease arrangements and there are no sub leases. There are no contingent rents. A single discount rate has been applied to a portfolio of leases with reasonably similar characteristics.
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52. CONTINGENT LIABILITIES AND COMMITMENTS Contingent Liabilities
|
|
H in Crore
|
|
Particulars
|
As at 31 March 2023
|
As at 31 March 2022
|
|
i. Claims against the Company not acknowledged as debt
|
0.61
|
0.61
|
|
ii. Custom Duty on import under Advance License Scheme, pending fulfilment of Exports obligation.
|
2.32
|
5.22
|
|
iii. Disputed Octroi.
Amount paid under protest and included under "Other Current Assets" H 0.52 Crore (Previous Year H 0.52 Crore)
|
0.52
|
0.52
|
|
iv. Excise duty, Service Tax, VAT and GST disputed by the Company
|
1.10
|
0.93
|
The Company has three ongoing patent litigations as on 31 March 2023. No liability is expected to arise from these litigations.
The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company's financial condition, results of operations or cash flows.
Future cash outflows in respect of liability under clause (i) is dependent on terms agreed upon with the parties, in respect of clauses (ii) to (iv) is dependent on decisions by relevant authorities of respective disputes.
Code on social Security, 2020
The new Code on Social Security, 2020 (Code) has been enacted, which could impact the contributions by the Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the rules are yet to be framed. The Company will complete its evaluation and will give appropriate impact in its financial statements in the period in which the Code becomes effective and the related rules are published.
Commitments
Estimated amounts of contracts remaining to be executed on capital account and not provided for, net of advances H 86.97 Crore (Previous Year H 69.16 Crore).
Based on the internal and external transfer pricing review and validation, the Company believes that all transactions with associated enterprises are undertaken on the basis of arm's length principle. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. Details related to ESOP given to Employees of Subsidiary provided in note 47
During the year, Ajanta Pharma (Mauritius) International Limited, a wholly owned subsidiary of Ajanta Pharma (Mauritius) Limited, was wound up and removed from register of companies u/s 308 of the Companies Act, 2001 (Mauritius) by Business registration department dated 27 September 2022.
A. The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
B. The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:
(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
61. IMPAIRMENT OF INVESTMENT IN SUBSIDIARY
The Company in prior years has made full provision for investment in aggregate value of unquoted investment in Ajanta Pharma Nigeria Limited and the carrying value of investment is considered as Nil.
62. INVESTMENT PROPERTIES
Rental income recognised in profit or loss for investment properties aggregates to H 0.35 Crore (Previous year H 0.01 Crore). Maintenance and other expenses aggregating to H 0.04 Crore (Previous year H 0.02 Crore). Fair value of Investment Properties aggregates to H 12.48 Crore as per registered valuer.
The Company has entered into agreement for sale of its investment properties, subject to fulfilment of certain conditions. Transaction is expected to be completed in the next 3 months. Pending fulfilment of such conditions, the said properties aggregating to H 7.92 Crore has been reclassified from investment properties to assets held for sale.
The charge relating to temporary differences during the year ended 31 March 2023 are primarily on account of property plant and equipment and gain on investment at FVTPL partially offset by provision for expired goods, provision for loss allowance, compensated absences. The credit to temporary differences during the year ended 31 March 2022 are primarily on account of property plant and equipment and gain on investment at FVTPL partially offset by provision for expired goods, provision for loss allowance, compensated absences. Current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same authority.
64. ADDITIONAL DISCLOSURES REQUIRED BY SCHEDULE III (AMENDMENTS DATED 24 MARCH 2021) TO THE COMPANIES ACT, 2013A. Relationship with struck off company
The Company has one transaction with the companies struck off under Companies Act, 2013 or Companies Act, 1956
• Name of the struck off company: Airtech Filters & Systems Private Limited
• Nature of transactions: Payable towards purchase of spare parts
• Balance outstanding: H 0.06 Crore
• Relationship with the struck off company (if any): No Relationship
B. Undisclosed income
There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.
C. Utilisation of borrowings availed from banks
The borrowings obtained by the Company from banks have been applied for the purposes for which such loans were taken.
D. Details of benami property held
No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
E. Wilful defaulter
The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority.
F. Compliance with number of layers of companies
The Company has complied with the number of layers prescribed under the Companies Act, 2013.
G. Compliance with approved scheme(s) of arrangements
The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
H. Details of crypto currency or virtual currency
The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.
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