k) Provisions and contingencies Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for sales return and date expiry
The Company as per trade practice accepts returns from market which are primarily in the nature of expired or near expiry products. Provisions for such returns are estimated on the basis of historical experience, market conditions and specific contractual terms and are provided for.
Contingencies
A contingent liability is :
• a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or
• a present obligation that arises from past events but is not recognised because :
- it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
- the amount of the obligation cannot be measured with sufficient reliability.
l) Revenue
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory risks.
Goods and Services Tax (GST) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
Sale of products
Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the products. Invoices are payable within contractually agreed credit period.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of products, the Company considers the effects of variable consideration (if any).
Revenue from sale of products is stated exclusive of Goods and Services Tax (GST). Revenues are net of sales returns, discounts, provision for anticipated returns on expiry, made on the basis of management expectations.
Sales returns
The Company accounts for sales returns accrual by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Company’s estimate of expected sales returns.
With respect to established products, the Company considers its historical experience of sales returns, levels of inventory in the distribution channel, estimated shelf life, product discontinuances, price changes of competitive products, and the introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. With respect to new products introduced by the Company, such products have historically been either extensions of an existing line of product where the Company has historical experience or in therapeutic categories where established products exist.
Rendering of services
Service income is recognised as per the terms of the contracts/arrangements when related services are performed and is stated net of GST.
Contract balances :
Trade receivables
A receivable represents the Company’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs it’s obiligation
by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is received from customer or due, whichever is earlier. Contract liabilities are recognised as revenue when the Company performs under the contract.
m) Interest income
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition. Interest income is included in ‘Other Income’ in the Statement of Profit and Loss.
n) Employee benefits Short-term employment benefits :
All employee benefits payable within twelve months of service such as salaries, wages, bonus, ex-gratia, medical benefits, sick leave, casual leave etc. are recognised in the year in which the employees render the related service and are presented as current employee benefit obligation within the Balance Sheet. Termination benefits are recognised as an expense as and when incurred.
Short-term leave benefit is provided at undiscounted amount during the accounting period based on the service rendered by employees.
Defined contribution plan :
Contributions to defined contribution schemes such as State governed Provident Fund and Employee Pension Scheme, Employees’ State Insurance
Scheme, Superannuation, Employees’ Deposit Linked Insurance and Group Life Insurance are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above benefits are classified as defined contribution schemes and the Company has no further defined obligations beyond the contributions.
If the contribution payable to the scheme for service received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the Balance Sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to a reduction in future payment or a cash refund.
Defined benefit plan :
The Company has defined benefit plan in the form of Gratuity, Long Service Benefits and Post Retirement Medical Benefits as per policies of the Company. The liability in respect of defined benefit plans is calculated using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period. The Company’s net obligation in respect of the defined benefit plan is calculated by estimating the amount of future benefit that employee has earned in exchange of their service in the current and prior periods and discounted back to the current valuation date to arrive at the present value of the defined benefit obligation. The present value of the defined benefit obligation is deducted from the fair value of plan assets, to arrive at the net asset/ (liability), which need to be accounted for in the books of accounts of the Company.
The discount rate used to arrive at the present value of the defined benefit obligations is based on the Indian government security yields prevailing as at the Balance Sheet date that have maturity date equivalent to the tenure of the obligation.
The current service cost of the defined benefit plan, recognised in the Statement of Profit and Loss as employee benefits expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit
changes, curtailments and settlements. Past service costs are recognised in statement of profit and loss in the period of a plan amendment. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in Statement of Profit and Loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to OCI in the period in which they arise and is reflected immediately in retained earnings and is not reclassified to Statement of Profit and Loss.
When the benefits of the plan are changed or when a plan is curtailed or settlement occurs, the portion of the changed benefit related to past service by employees or the gain or loss on curtailment or settlement, is recognised immediately in the Statement of Profit and Loss when the plan amendment or when a curtailment or settlement occurs.
Other employee benefits :
Other employee benefits comprise of leave encashment which is provided for, based on the actuarial valuation carried out as at the end of the year.
Liabilities recognised in respect of other employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
o) Income Tax
Current income tax
Income Tax expense comprises of current and deferred tax and includes any adjustments related to past periods in current and/or deferred tax adjustments that may become necessary due to certain developments or reviews during the relevant period. The provision for current tax is made at the rate of tax as applicable for the income of the previous year as defined under the Income tax Act, 1961.
Current income tax relating to items recognised, either in other comprehensive income or directly in equity, is also recognised in other comprehensive income or in equity, as appropriate and not in
the Statement of Profit and Loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred tax
Deferred tax is recognised using the Balance Sheet approach on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is expected to be settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised, either in other comprehensive income or in equity, is also recognised in other comprehensive income or in equity, as appropriate and not in the Statement of Profit and Loss.
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.
p) Earnings per equity share
The Company presents basic and diluted earnings per share (‘EPS’) data for its equity shares.
The Basic EPS is computed by dividing the net profit after tax for the year attributable to the equity shareholders of the Company by weighted average number of equity shares outstanding during the year.
Diluted earnings per equity share are computed by dividing the net profit attributable to equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period unless issued at a later date.
q) Share based compensation
Abbott Laboratories, USA, being the Ultimate Holding Company, has given restricted stock option plan to the employees of the Company.
Pursuant to Ind AS 102 ‘Share-based Payment’, the Company recognises an expense based on the fair value of the stock options as at grant date. The expenses are amortised over the vesting period. The corresponding credit is given to equity because the award represents in substance equity contribution by the Parent Company. The cumulative expense recognised for stock options at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.
The stock based compensation cost is recharged to the Company upon exercise, which is adjusted against share based compensation reserve.
Nature and purpose of components of other equity :
1. Amalgamation Reserve
This was created on amalgamation of Beem Healthcare Limited and Valencia Pharmaceuticals Limited, wholly owned subsidiary of the Company with appointed date as July 1, 1998. All assets and liabilities of erstwhile Beem Healthcare Limited and Valencia Pharmaceuticals Limited were transferred to the Company and all shares held by the Company in erstwhile Beem Healthcare Limited and Valencia Pharmaceuticals Limited were cancelled. The amalgamation was accounted under ‘Pooling of Interests method’ as prescribed in then Accounting Standard 14 issued by the Institute of Chartered Accountants of India. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
2. Capital Reserve
This was created on amalgamation of Lenbrook Pharmaceuticals Limited, a wholly owned subsidiary of the Company with the appointed date as October 1, 2003. All the assets and liabilities of erstwhile Lenbrook Pharmaceuticals Limited were transferred to the Company and all shares held by the Company in the erstwhile Lenbrook Pharmaceuticals Limited were cancelled. The amalgamation was accounted under the ‘Purchase Method’ as prescribed in then applicable Accounting Standards 14 issued by the Institute of Chartered Accountants of India. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
3. Capital Redemption Reserve
This was created according to Section 77A of the Companies Act, 1956 by transferring the face value of shares bought back during the period 2003 to 2008 from free reserves. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
4. Share based Compensation Reserve
The Company’s employees are awarded Restricted Stock Units (RSUs) of the Ultimate Holding Company, Abbott Laboratories, USA. The Share based Compensation Reserve is used to recognise the fair value of the RSUs awarded to the employees and reserves are used for payments towards RSU charge to the Ultimate Holding Company. The award represents in substance equity contributions by the Ultimate Holding Company.
5. General Reserve
General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. General Reserve is created by a transfer from one component of equity to another and is not an item of Other Comprehensive Income. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
6. Retained Earnings
Retained Earnings are the profits the Company has earned till date, less any transfer to General Reserve, dividends or other distributions paid to the shareholders. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.
7. Other Comprehensive Income (Remeasurement of defined benefit plan)
Differences between the interest income on plan assets and the return actually achieved and any changes in the liabilities over the year due to changes in actuarial assumptions or experience adjustments within the plans, are recognised in ‘Other Comprehensive Income’ and subsequently not reclassified to the Statement of Profit and Loss.
33 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances existing when the financial statements were prepared. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised in the year in which the estimates are revised and in any future year affected.
In the process of applying the Company’s accounting policies, management has made the following judgements, estimates and assumptions, which have the most significant effect on the amounts recognised in the financial statements :
Provision for sales return and date expiry
The Company as per trade practice accepts returns from market which are primarily in the nature of expired or near expiry products. Provisions for such returns are estimated on the basis of historical experience, shelf life of the product and market conditions and are provided for accordingly. Also refer Note 22.
Uncertainty over income tax treatment
The Company determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Company applies significant judgement in identifying uncertainties over income tax treatments (Refer Note 36).
Determining the lease term of contracts
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Leases - Estimating the incremental borrowing rate
The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its Incremental Borrowing Rate (IBR) to measure lease liabilities. IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The Company estimates the IBR using observable inputs i.e. bank borrowing interest rates on secured assets.
Useful lives of Property, plant and equipment
The Company reviews the useful life of Property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods. Refer Note 2.3 (d) for management estimate of useful lives.
Defined benefit plans
The cost of the defined benefit gratuity plan and other post employment medical benefits are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post employment benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increase and gratuity increase are based on expected future inflation rates in the country.
Further details about gratuity and other post employment medical benefits obligations are given in Note 34.
Share based compensation to employees
The fair value of restricted stock units plan is measured at the date of grant using the Black Scholes option pricing model. The estimate also requires determination of the most appropriate inputs to the valuation model, including the volatility, dividend yield, risk free interest rates, expected life of share option etc., which are disclosed in the Note 35.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using appropriate valuation techniques. The inputs for these valuations are taken from observable sources where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of various inputs including liquidity risk, credit risk, volatility etc. Changes in assumptions/judgements about these factors could affect the reported fair value of financial instruments. Also refer Note 39.
Provision for inventories
Provision is made in the financial statements for slow and non-moving items based on estimates regarding their usability. Further for finished goods and stock-in-trade, all inventories expiring within six months and not expected to be sold, have been fully provided for. Also refer Note 8.
Impairment of trade receivables
For the purpose of measuring lifetime expected credit loss allowance of trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information. Refer Note 9.
Impairment of other financial assets
The loss allowance for other financial assets are based on assumptions about risk of default. The Company uses judgments in making these assumptions based on its past history, existing market conditions and certainty of realisation. Also refer Note 6 and 12.
34 EMPLOYEE BENEFITS
(a) Defined contribution plans
i) Provident Fund/Employees’ Pension Fund
ii) Employees’ State Insurance
iii) Superannuation Fund
iv) Employees’ Deposit Linked Insurance Scheme
v) Group Life Insurance Cover
The Company has recognised following amounts as expense in the Statement of Profit and Loss :
(b) Defined Benefit Plans
i. Gratuity : (Included as part of contribution to provident and other funds in Note 27 - Employee benefits expense)
Gratuity is payable to all eligible employees of the Company on retirement, death, permanent disablement and resignation in terms of the provision of the Payment of Gratuity Act 1972, or Company’s Scheme whichever is more beneficial. Benefits would be paid at the time of the separation based on employees’ salary and tenure of employment with the Company.
ii. Post Retirement Medical Benefits (PRMB) : (Included as part of staff welfare expenses in Note 27 - Employee benefits expense)
Under this scheme, select group of senior employees and their spouse are covered for hospitalisation benefits after the employee has retired from the Company. The cover is available to these beneficiaries until they are alive. The Company has procured a group hospitalisation cover from an insurance Company for providing these benefits to these beneficiaries.
iii. Long Service Benefits (LSB) : (Included as part of salaries and wages in Note 27 - Employee benefits expense)
Under this scheme, long service benefits accrues to the employee, while in service and is payable upon completion of stipulated service with the Company.
35 SHARE BASED COMPENSATION TO EMPLOYEES
a) International Stock Ownership Plan (Stocks of Abbott Laboratories, USA, being Ultimate Holding Company)
Abbott Laboratories, USA has an ‘Affiliate Employee Stock Purchase Plan’ (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of Abbott Laboratories, USA. Every employee who opts for the scheme contributes, by way of payroll deductions, up to 10% of his cash remuneration (i.e. basic salary for officers and basic salary and dearness allowance for staff category) towards purchase of shares on a monthly basis over the purchase cycle of six months.
The maximum that an employee can contribute to the plan is USD 12,500 per purchase cycle or USD 25,000 per calendar year. At the end of the cycle, accumulated payroll deductions are used to purchase shares at a discounted price. The purchase price of the share is 85% of the lesser of fair market value either on the first or last day of the purchase cycle. The shares of Abbott Laboratories, USA are listed with the New York Stock Exchange, USA and are purchased on behalf of the employees at market price less discount, allocated to participants as of last day of the purchase cycle. The concession in the price of the shares is entirely borne by Abbott Laboratories, USA.
During the year ended March 31, 2024, 19,831 shares (March 31, 2023 : 20,943 shares) were purchased by employees at weighted average fair value of US $ 94.29 (March 31, 2023 : US $ 93.64) per share.
b) Employees Restricted Stock Options Plan (Stocks of Abbott Laboratories, USA, being Ultimate Holding Company)
Abbott Laboratories, USA as part of the ‘Long Term Incentive Program’ has offered Restricted Stock Units (RSUs) to specified employees of its subsidiaries, whereby the employees covered by the plan are granted units. The units when vested, become shares of Abbott Laboratories, USA at a NIL Cost. The shares of Abbott Laboratories, USA are listed with the New York Stock Exchange, USA. The grants issued are vested in one third instalments over a three year period. Pursuant to Ind AS 102 ‘Share-based Payment’, the fair value of the RSUs have been recorded by the Company. The fair value of the RSUs is estimated at the grant date using Black Scholes Option Pricing Model, taking into account the terms and conditions upon which such RSUs were granted.
b. Contingent liabilities :
Claims against Company not acknowledged as debts
(i) In February 1996, the Government had made a tentative claim for a sum of ' 11.12 Crores to be paid into the Drugs Prices Equalisation Account (DPEA) on account of unintended benefit allegedly enjoyed by the Company during the period May 1, 1981 to August 25, 1987. This was contested by the Company and subsequently during the year ended November 30, 2005, a final demand was received for ' 3.47 Crores (including interest of ' 1.90 Crores upto March 31, 2004). The Company, being aggrieved of the said demand and based on legal advice obtained in this regard, contested the above final demand of ' 3.47 Crores and filed a writ petition before the Bombay High Court to restrain the government from recovering the said amount. The Bombay High Court has admitted the writ petition and granted stay of the recovery of the amount subject to the Company furnishing a bank guarantee in respect of the principal amount of ' 1.56 Crores. The said bank guarantee has been furnished. The Company however, out of abundant caution and based on its understanding of the facts and circumstances of the case provided for a sum of ' 1.35 Crores (March 31, 2023 : ' 1.31 Crores) including interest liability till date.
37 SEGMENT REPORTING
The Managing Director of the Company takes decision in respect of allocation of resources and assesses the performance basis information provided by functional heads and are thus considered to be Chief Operating Decision Maker.
The Company operates under the principal business segment viz. “Pharmaceuticals”. The Chief Operating Decision Maker (CODM) views and monitors the operating results of its single business segment for the purpose of making decisions about resource allocation and performance assessment. Also, sales of Company is substantially in domestic market. Accordingly, there are no separate reportable segments in accordance with the requirements of Ind AS 108 ‘Operating segment’ and hence, there are no additional disclosures to be provided other than those already provided in the financial statements. There are no individual customer contributing more than 10% of Company’s total revenue.
38 RELATED PARTY DISCLOSURE
A) Parties where control exists :
Ultimate Holding Company : Abbott Laboratories, USA Holding Company : Abbott Capital India Ltd., UK
B) Other related parties with whom transactions have taken place during the year :
I) Fellow subsidiaries :
British Colloids Ltd., U.K.
Abbott Healthcare Products Ltd., U.K
Abbott Healthcare Private Ltd., India
Abbott International LLC, USA
Abbott Products Operations AG., Switzerland
Abbott Laboratories (Singapore) Pte Ltd., Singapore
Abbott GmbH, Germany
Abbott Diagnostics Medical Private Limited, India Abbott Manufacturing Singapore Private Limited, Singapore
Abbott Laboratories GmbH, UAE (previously known as Abbott Laboratories S.A., Dubai)
Diversified Healthcare Solutions Operations Unlimited Company (Erstwhile Abbott Laboratories Vascular Enterprises Limited Partnership)
Abbott Laboratories, Philippines Abbott Operations Uruguay s.r.l.
St Jude Medical India Private Limited, India
Abbott Laboratuarlari Ithalat Ve Ihracat Tic.Ltd.Sti., Turkiye
II) Key Management personnel and Independent directors :
Ms. Swati Dalal, Managing Director (appointed as Managing Director effective April 1, 2024)
Mr. Vivek Kamath, Managing Director (ceased to be the Managing Director effective close of business hours on March 18, 2024)
Mr. Munir Shaikh, Chairman
Mr. Rajiv Sonalker, Whole-Time Director (ceased to be the Whole-Time Director and CFO effective close of business hours on June 30, 2023)
Mr. Sridhar Kadangode, Chief Financial Officer (appointed as Chief Financial Officer effective July 1, 2023)
Mr. Kaiyomarz Marfatia, Non-Executive Director Ms. Anisha Motwani, Independent Director Mr. Sudarshan Jain, Independent Director Ms. Shalini Kamath, Independent Director
40 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s activities expose it to variety of financial risks namely market risk, credit risk and liquidity risk. The Company has various financial assets such as deposits, trade and other receivables and cash and bank balances directly related to their business operations. The Company’s principal financial liabilities comprise of trade and other payables.
The Company’s senior management’s focus is to foresee the unpredictability and minimize potential adverse effects on the Company’s financial performance. The Company’s overall risk management procedures to minimise the potential adverse effects of financial market on the Company’s performance are as follows :
a) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks namely interest rate risk, currency risk and other price risk, such as commodity risk. The Company is not exposed to other price risk whereas the exposure to currency risk and interest risk is given below :
(i) 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 market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s deposit accounts with banks.
(ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates and arises where transactions are done in foreign currency. It arises mainly where receivables and payables exist due to transactions entered in foreign currencies.
The Company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies including use of derivatives like foreign exchange forward contracts to hedge foreign currency risk. The Company does not enter into financial instrument transactions for trading or speculative purposes. Unhedged exposure at any point of time during the year is not material.
c) Liquidity risk
Liquidity risk is the risk that Company will not be able to meet its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or encounters difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The Company manages liquidity risk by maintaining sufficient cash and bank balance and availability of funding through adequate amount of committed credit facilities.
b) Credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Concentration of credit risk arises when counter parties are engaged in similar business activities or have similar economic features that would cause the ability to meet contractual obligations to be similarly affected by changes in economical, political or other conditions. Concentration of credit risk indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.
Credit risk of Company arises principally from the trade debts, loans and advances, trade deposits, other receivables and balance with banks. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ' 4,204.67 Crores as at March 31, 2024 (March 31, 2023 : ' 3,546.56 Crores). Customer credit risk is managed for each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Further, significant sales of the Company are against advance payment/collection on delivery terms. Outstanding customer receivables are regularly monitored and any shipments to new overseas customers are generally covered by letters of credit or other forms of credit insurance. The management continuously monitors the credit exposure towards the customers and makes provision against those balances considered doubtful of recovery.
Refer Note 9 for ageing of trade receivables.
41 CAPITAL MANAGEMENT
For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to safeguard the Company’s ability to remain as a going concern and maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans and long-term and other strategic investment plans. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. The current capital structure of the Company is equity based with no financing through borrowings except through leasing. The Company is not subject to any externally imposed capital requirements.
No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2024 and March 31, 2023.
ii) Relationship with Struck off Companies :
The Company does not have any transaction with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956, during the current year and in the previous year.
43 The Company appears in the breach list displayed on the website of the Depositories and BSE limited as the total foreign investment in the Company exceeded the sectoral cap in the past. In this connection, the Company has received post-facto approval from the Department of Pharmaceuticals permitting foreign shareholding in excess of the sectoral cap, up to 80% of the paid-up share capital of the Company, subject to compounding with the Reserve Bank of India (RBI). The Company had filed a compounding application with the Reserve Bank of India in this regard. However, the RBI vide its letter dated March 19, 2024, has informed the Company that the compounding application requires further examination in consultation with the Government. Further, RBI has informed the Company that since compounding was a time-bound process, the application was being returned for the time being along with the compounding fees. RBI has advised the Company to await further communication/advice from RBI in this regard, on further course of action, if any. The Company does not expect the impact on financial statements to be material.
44 i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the
Company for holding any Benami property.
ii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.
iii) 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.
iv) 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.
v) The Company has not entered into any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).
vi) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
45 (i) The Company has maintained proper books of account as prescribed under Section 128(1) of the Companies Act,
2013 (as amended). The books of accounts are maintained in electronic mode as required under Section 128 (1) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 (as amended). The back-up of books of account and other relevant books and papers maintained in electronic mode were taken on a server physically located in India on daily basis except for an application used for processing expenses of field employees where backups on a daily basis were taken on a server physically located outside India.
(ii) The Company has used accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software except that, audit trail feature was not enabled for changes made using privileged/ administrative access rights to the application and the underlying Oracle database. Further, there were no instances of audit trail feature being tampered with in respect of the said software.
46 Previous year’s figures have been regrouped/reclassified to confirm to the current year’s classification.
As per our report of even date For and on behalf of the Board of Directors
For S R B C & CO LLP SWATI DALAL SUDARSHAN JAIN
Chartered Accountants Managing Director Director
ICAI Firm Registration No. 324982E/E300003 DIN : 01513751 DIN : 00927487
per ARUNA KUMARASWAMY SRIDHAR KADANGODE SANGEETA SHETTY
Partner Chief Financial Officer Company Secretary
Membership No. 219350 Membership No. ACS 18865
Place : Mumbai Place : Srinagar
Date : May 9, 2024 Date : May 9, 2024
|