FUTURE APOLLO HOSPITALS Notes to Accounts

1 Corporate Information


Apollo Hospitals Enterprise Limited (‘the Company’) is a public Company incorporated in India. The address of its registered office and principal place of business are disclosed in the introduction to the annual report. The main business of the Company is to enhance the quality of life of patients by providing comprehensive, high-quality hospital services on a cost-effective basis. The principal activities of the Company include operation of multi disciplinary private hospitals, clinics, and pharmacies.


Application of new and revised Ind ASs


The company has applied all the Ind AS standards notified by the Ministry of Corporate Affairs (MCA) to the extent applicable to the Company.


2 First-time adoption - mandatory exceptions, optional exemptions


2.1 Overall principle


The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities. However, this principle is subject to the certain exception and certain optional exemptions availed by the Company as detailed below.


2.1.1 Derecognition of Financial Assets and Financial Liabilities


The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after April 1, 2015 (the transition date).


2.1.2 Classification of Debt Instruments


The Company has determined the classification of debt instruments in terms of whether they meet the amortised cost criteria or the FVTOCI criteria based on the facts and circumstances that existed as of the transition date.


2.1.3 Impairment of Financial Assets


The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognised in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind ASs, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.


2.1.4 Past business combinations


The Company has elected not to apply Ind AS 103 Business Combinations retrospectively to past business combinations that occurred before the transition date of April 1, 2015. Consequently,


The Company has kept the same classification for the past business combinations as in its previous GAAP financial statements;


The Company has not recognised assets and liabilities that were not recognised in accordance with previous GAAP in the consolidated balance sheet of the acquirer and would also not qualify for recognition in accordance with Ind AS in the separate balance sheet of the acquiree;


The Company has excluded from its opening balance sheet those items recognised in accordance with previous GAAP that do not qualify for recognition as an asset or liability under Ind AS;


The Company has tested the goodwill for impairment at the transition date based on the conditions as of the transition date;


The effects of the above adjustments have been given to the measurement of non controlling interests and deferred tax.


The above exemption in respect of business combinations has also been applied to past acquisitions of investments in associates, interests in joint ventures and interests in joint operations in which the activity of the joint operation constitutes a business, as defined in Ind AS 103.


2.1.5 Deemed cost for Property, Plant and Equipment, Investment Property, and Intangible Assets


For transition to Ind AS, the Company has elected to adopt fair value of the Buildings, Medical equipment and Furnitures recognised as of April 1, 2015 as the deemed cost as of the transition date. For the other assets, it has elected to continue with the carrying value of all of its property, plant and equipment recognised as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date. Accordingly, certain pre-operative costs and other ineligible items have been charged off upon transition.


2.1.6 Determining whether an arrangement contains a lease


The Company has applied Appendix C of Ind AS 17 determining whether an arrangement contains a lease to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.


3 Critical accounting judgements and key sources of estimation uncertainty


The preparation of these financial statements in conformity with recognition and measurement principles of Ind AS requires the Management of the Company to make estimates and assumptions that affect the reported balances of Assets and Liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amount of income and expenses for the periods presented.


The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.


3.1 Critical judgements in applying Accounting Policies


The company renders the service as a principal, the gross amounts collected from customer shall be recorded as revenue. The amounts payable to the facilitators in return for the services received shall be recorded as expenses


3.2 Key sources of estimation uncertainty


The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year.


3.2.1 Impairment of Goodwill


Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.


3.2.2 Fair value measurements and valuation processes


Some of the Company’s assets and liabilities are measured at fair value for financial reporting purposes. The business acquisitions made by the company are also accounted at fair values.


In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model.


3.2.3 Employee Benefits Defined Benefit Plans


The cost of defined benefit plans are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.


3.2.4 Litigations


The amount recognised as a provision shall be the best estimate of the expenditure required to settle the present obligation arising at the reporting period.


3.2.5 Revenue Recognition


Revenue from fees charged for inpatient and outpatient hospital/clincial services rendered to insured and corporate patients are subject to approvals from the insurance companies and corporates. Accordingly, the Company estimates the amounts likely to be disallowed by such companies based on past trends. Estimations based on past trends are also required in determining the value of consideration from customers to be allocated to award credits for customers.


3.2.6 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 re-assessment may result in depreciation expense in future periods.


3.2.7 Loyalty Points


Estimations based on past trends of redemption of customer loyalty points is made to determine the value of revenue to be deferred.


3.2.8 Expected Credit Loss


The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix considering the nature of receivables and the risk characteristics. The provision matrix takes into accounts historical credit loss experience and adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the day of the receivables are due and the rates as given in the provision matrix.


3.3 Controls Assessment Apollo Hospitals International Limited


The Company owns 50% equity stake in Apollo Hospitals International Limited (AHIL). The Company has control over AHIL and has exposure to variable returns which are the licence fee, share of market cost and also has an unsecured loan in the form of preference shares. The Company has exisiting rights that give the current ability to direct relevant activities through Board of Directors. Since the company has control over AHIL, it has considered it as a subsidiary.


Future Parking Private Limited


The Company owns 49% equity stake in Future Parking Private Limited (FPPL). The company has control over FPPL and has exposure to variable returns The company has exisiting rights that give the current ability to direct relevant activities through Board of Directors. Since the company has control over FPPL, it has considered it as a subsidiary.


Apollo Healthcare Technology Solutions Limited


The Company owns 40% equity stake in Apollo Health Care Technology Solutions Limited (AHTSL). The company has control over AHTSL and has exposure to variable returns. The company has exisiting rights that give the current ability to direct relevant activities through Board of Directors. Since the company has control over AHTSL, it has considered it as a subsidiary.


4.1 Leasing arrangements


The Company entered into finance lease arrangements with Apollo Hospitals Educational and Research Foundation for its Building in Hyderabad. All leases are denominated in Indian Rupees. The term of finance leases entered into is 99 years.


The interest rate inherent in the leases is considered as the average incremental borrowing rate which is approximately 12% per annum (as at March 31, 2016:12% per annum; as at April 1, 2015:12% per annum).


5 Trade Receivables


i. Sundry Debtors represent the debt outstanding on sale of pharmaceutical products, hospital services and project consultancy fees is considered good. The entity holds no other securities other than the personal security of the debtors.


5.1 Trade Receivables


Majority of the Company’s transactions are earned in cash or cash equivalents. The trade receivables comprise mainly of receivables from Insurance Companies, Corporate customers and Government Undertakings. The entity’s exposure to credit risk in relation to trade receivables is low.


The average credit period on sales of services is 30-60 days from the date of the invoice.


The Company has computed the expected credit loss allowance for receivables excluding Group Companies and amount receivable from Tanzania Government. A direct confirmation is obtained from Tanzania Government confirming the Receivable amount outstanding. The provision matrix takes into account historical credit loss experience and adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows:


5.2 Ageing


6 Cash and Cash Equivalents


For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the statement of cash flows can be reconciled to the related items in the balance sheet as follows:


The company had issued 9,000,000 Global Depository Receipts of Rs.10 (now 18,000,000 Global Depository Receipts of Rs.5) each with two-way fungibility during the year 2005-06. Total GDRs converted into underlying equity shares for the year ended on 31st March 2017 is 83,138 (2015-16: 259,856) of Rs.5 each and total Equity shares converted back to GDR for the year ended 31st March 2017 is 384,562 (2015-16: 22,114) of Rs.5 each. Total GDRs converted into equity shares upto 31st March 2017 is 25,444,526 (2015-16: 25,361,388) of Rs.5 each.


On 31 March 2016 an interim dividend of Rs.6 per share was paid to holders of fully paid equity shares (total dividend Rs.1003.79 including Dividend Distribution Tax). For the year 2014-15, the Board of Directors proposed a dividend of Rs.5.75 per share which was paid in the year 2015-16 (total dividend Rs.963.76 including Dividend Distribution Tax).


The average credit period on purchases of goods ranges from immediate payments to credit period of 45 days based on the nature of the expenditures. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.


The amount due to Micro, Small and Medium Enterprises for the financial year ended 31st March 2017 TU6.12 million (Rs. 254.70 million). No interest in terms of Section 16 of Micro, Small and Medium Enterprises Development Act, 2006 or otherwise has either been paid or payable or accrued and remaining unpaid as at 31st March 2017.


7 Segment Information


The Directors of the Company are directly involved in the operations of the Company. Accordingly, the Board of DirectorshasbeenidentifiedastheChiefOperatingDecisionMaker(CODM). Information reported to the CODM for the purposes of resource allocation and assessment of segment performance focuses on the model of healthcare services delivered. The Directors of the Company have chosen to organise the Company around differences in products and services. Accordingly, hospitals and pharmacies have been identified as the operating segments. No operating segments have been aggregated in arriving at the reportable segments of the Company.


The Company operates mainly in India, and the drugs sold in the pharmacies, are regulated under the Drugs Cosmetics Act, which applies uniformly all over the Country.


The following are the accounting policies adopted for segment reporting


a. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under “unallocable expenses”.


b. Inter segment revenue and expenses are eliminated.


The Company has disclosed this Segment Reporting in Financial Statements as per Ind AS 108


8.1 Segment Revenues and Results


The following is an analysis of the Company’s revenue and results from continuing operations by reportable segment.


Segment profit represents the profit before tax earned by each segment without allocation of central administration costs and directors’ salaries, other income, as well as finance costs. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.


8.2 Revenue from major products and services


No single customer represents 10% or more of the company’s total revenue during the year ended March 31, 2017 and March 31, 2016.


8.3 The Company is geographically diversified within India.


9.1 Basic Earnings Per Share


The Earnings and weighted average number of Equity Shares used in the calculation of Basic Earnings Per Share are as follows.


9.2 Diluted Earnings Per Share


The Earnings used in the calculation of diluted earnings per share are as follows.


The weighted average number of equity shares for the purpose of diluted earnings per share reconciles to the weighted average number of equity shares used in the calculation of basic earnings per share as follows:


10 Defined contribution plans


The Company makes contributions towards provident fund and employees state insurance as a defined contribution retirement benefit fund for qualifying employees. The provident fund is operated by the regional provident fund commissioner. The Employees state insurance is operated by the Employees State Insurance Corporation. Under these schemes, the Company is required to contribute a specific percentage of the payroll cost as per the statute. The Company has no further obligations in this regard.


The total expenses recognised in the statement of profit or loss of Rs.632.73 million (for the year ended March 31, 2016: Rs.536.09 million) represents contributions payable to these plans by the Company at rates specified in the rules of the plans.


Defined benefit plans


10.1 Gratuity


The company contributes all ascertained liabilities towards gratuity to the Fund. The plan assets have been primarily invested in insurer managed funds. The company provides for gratuity, a defined benefit retiring plan covering eligible employees. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death incapacitation or termination of employment based on the respective employees salary and tenure of the employment with the company.


In respect of the plan in India, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2017 by Ms. Seethakumari, Fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.


The current service cost and the net interest expense for the year are included in the ‘Employee Benefits Expense’ line item in the statement of profit and loss.


The remeasurernent of the net defined benefit liability is included in other comprehensive income.


Each year, Asset and Liability matching study is performed in which the consequences of strategic investments policiies are analysed in terms of risk and returns profiles. Investments and Contributions policies are integrated within this study.


The actual return on plan assets including interest income was Rs.57.49 million (for the year ended March 31, 2016: Rs.41.21 million).


Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.


The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.


Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.


There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.


The defined benefit obligation shall mature in next 3 years.


The Company expects to make a contribution of Rs.148.09 million (as at March 31, 2016: Rs.113.52 million) to the defined benefit plans during the next financial year.


10.2 Leave Encashment Benefits


The Company pays leave encashment benefits to employees as an when claimed subject to the policies of the Company. The Company provides leave benefits through annual contributions to the fund managed by HDFC Life


The principal assumptions used for the purposes of the actuarial valuations were as follows.


The current service cost and the net interest expense for the year are included in the ‘Employee benefits expense’ line item in the statement of profit and loss. The remeasurement of the net defined benefit liability is included in other comprehensive income.


The amount included in the balance sheet arising from the entity’s obligation in respect of its defined benefit plans is as follows:


Each year Asset Liability matching study is performed in which the consequences of strategic investments policies are analysed in terms of risk and returns profiles. Investments and Contributions policies are integrated within this study.


The actual return on plan assets including interest income was Rs.81.36 million (for the year ended March 31, 2016: Rs.23.29 million).


Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.


The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.


There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.


The Company expects to make a contribution of Rs.156.87 million (as at March 31, 2016: Rs.53.03 million) to the defined benefit plans during the next financial year.


11 Financial instruments


11.1 Capital management


The Company manages its capital with the objective to maximize the return to stakeholders through the optimisation of the debt and equity mix.


The Company’s risk management committee reviews the capital structure of the Company on a semiannual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Company intends to limit gearing ratio to an outer limit of 100% of net debt to total equity determined as the proportion of net debt to total equity. The gearing ratio at March 31, 2017 of 70% was below the target range,


11.2 Financial risk management objectives


The Company’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.


The Company seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non -derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.


11.3 Market risk


The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see note 32.5 below) and interest rates (see note 32.6 below). The Company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including currency cum interest rate swaps.


11.4 Foreign currency risk management


The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising appropriate derivative contracts.


The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.


Foreign currency sensitivity analysis


Of the above, borrowings of USD 57.43 million as at March 31, 2017, USD 65.72 million as at March 31, 2016 and USD 94 million as at April 1, 2015 is completely hedged against foreign currency fluctuation using forward contracts and Interest rate swaps. The Company is mainly exposed to US Dollars currency fluctuation risk.


The following table details the Company’s sensitivity to a 10% increase and decrease in the Rs. against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit or equity where the Rs. strengthens 10% against the relevant currency. For a 10% weakening of the Rs. against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below would be negative.


(i) This is mainly attributable to the exposure to outstanding USD payable at the end of the reporting period. The Company has entered into derivative Contracts for its External Commercial Borrowings for interest and currency risk exposure to manage and mitigate its exposure to foreign exchange rates. The Counterparty is generally a bank. In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.


11.5 Interest rate risk management


The Company is exposed to interest rate risk because the Company borrow funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts and forward interest rate contracts.


Interest rate sensitivity analysis


The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis points increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.


If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s profit for the year ended March 31, 2017 would decrease/increase by Rs.72.83 million (for the year ended March 31, 2016: decrease/ increase by Rs.67.17 million). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.


Interest rate swap contracts


Under interest rate swap contracts, the Company agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts for borrowings in foreign currency. Such contracts enable the Company to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt and the cash flow exposures on the issued variable rate debt. The average interest rate is based on the outstanding balances at the end of the reporting period.


11.6 Credit risk management


Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Majority of the Company’s transactions are earned in cash or cash equivalents. The trade receivables comprise mainly of receivables from Insurance Companies, Corporate customers and Government Undertakings. The Insurance Companies are required to maintain minimum reserve levels and the Corporate Customers are enterprises with high credit ratings. Accordingly, the Company’s exposure to credit risk in relation to trade receivables is considered low. Before accepting any new credit customer, the Company uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed annually. The outstanding with the debtors is reviewed periodically.


The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.


In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company’s maximum exposure in this respect is the maximum amount the Company could be liable to pay if the guarantee is exercised on. As at March 31, 2017, an amount of Rs.0.39 million (as at March 31,2016: Rs.0.39 mi Hi on) has been recognised in the balance sheet as financial liabilities (see note 6). These financial guarantees have been issued to banks under the financing facilities agreements entered into with Future Parking Private Limited


12 Liquidity Risk Management


Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Note 33.2 below sets out details of additional undrawn facilities that the Company has at its disposal to further reduce liquidity risk.


12.1 Liquidity and interest risk tables


The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are based on floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.


The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.


The following table details the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non -derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.


The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.


The following table details the Company’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis.


12.2 Financing facilities


The Company has access to financing facilities as described below, of which Rs.5,067.20 million were unused at the end of the reporting period (as at March 31, 2016: Rs.6,289.54 million; as at April 1, 2015: Rs.6,705.50 million). The Company expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.


13 Fair Value of Financial Assets and Financial Liabilities


All financial assets and financial liabilities have been fair valued using Level 3 hierarchy except cash and bank balance which is fair valued using Level 1 hierarchy.


Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.


Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the- counter derivatives) 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 an 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. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.


Hetero Pharmacy


The fair value of the above acquired assets and liabilities were determined by a registered valuer. This fair value was estimated by applying an income approach. The following were the key model inputs used in determining the fair value:


- discount rate of 13.8%;


- long-term sustainable growth rates of 6%


Goodwill arose in the acquisition of Hetero Pharmacy because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of Hetereo Pharmacy. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.


None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.


14 Operating Lease arrangements


14.1 The Company as lessee Leasing arrangement


Operating leases relates to leases of land with lease terms of between 25-50 years for Hospitals and 1-3 years for Pharmacy. The Company does not have an option to purchase the leased land at the expiry of the lease periods.


15 Events after the reporting period


The Board of Directors have recommended dividend of Rs.6 per fully paid up equity share of Rs.5 each, aggregating Rs.1,004.69 million, including Rs.169.94 million Dividend Distribution Tax for the financial year 2016-17, which is based on the share capital as on 31st March 2017. The actual dividend amount will be dependant on the relevant share capital outstanding as on the record date/ book closure.


16 Approval of financial statements


The financial statements were approved for issue by the Board of Directors on May 30, 2017.


Note: Under previous GAAP, total comprehensive income was not reported. Therefore, the above reconciliation starts with profit under the previous GAAP.


a) Under previous GAAP, Financials Assets or Financial Liabilities were measured at cost. On the date of transition to Ind AS, these financial assets or Financial Liabilities have been measured at their fair value, resulting in an net increase in the carrying amount. Financial Assets includes Investments which were carried at cost under previous GAAP. As per Ind AS, these investments are carried at Fair Value through the Statement of Profit and Loss or at amortised cost.


b) Under previous GAAP, the Fixed Assets were measured at cost. As per Ind AS, the company fair valued its Buildings, Medical Equipment and Furnitures resulting in increase in the carrying value of the Property Plant and Equipment.


c) Under previous GAAP, dividends on equity shares recommended by the Board of Directors after the end of the reporting period but before the financial statements were approved for issue were recognised in the financial statements as liability. Under Ind AS, such dividends are recognised as Liability when approved by the members in a general meeting.


d) Under previous GAAP lease deposits were carried at transaction value. Whereas under Ind AS deposits lease deposits are discounted for the non-cancellable period in a lease exceeding one year at an incremental borrowing rate.


e) As part of the Ind AS assessment, building leased to Apollo Hospitals Education Research Foundation being a part of composite lease is treated as finance lease under Ind AS , whereas under previous GAAP, it was treated as an operating Lease.


f) Under Previous GAAP, on redemption of loyalty points by the customer, expense were recognised . Ind AS requires that based on award credits or loyalty points that are expected to be redeemed by customers against future goods/services, revenue be deferred based on a trend of redemption of such point.


g) Ind AS prescribes the use of a provision matrix for expected credit loss ( ECL based on past trend). Following an assessment of past settlement trends, the company has determined a fixed % of the receivables to be provided.


h) The sale of equity stake in Alliance Dental Care Limited and Alliance Medical Corp (I) Limited to Apollo Health and Lifestyle Limited is a Common Control Transactions. Since Apollo Health and Lifestyle Limited is a group company, the gain on sale of share is eliminated because of it being a common control transactions.


i) This includes the Interest income on Lease deposit, Rent on lease deposits, Deferred Income on Loyalty points and Rental income on finance lease. This adjustment is made as per previously explained Ind AS Adjustments.


j) This includes the Deferred Tax Adjustments recognised for above GAAP Adjustments.


k) Ind AS prescribes that the Actuarial gain or loss on Gratuity and leave encashment should be recognised in Other Comprehensive Income as remeasurements of the defined benefit liabilities/(assets) under items that will not be reclassified to statement of Profit and Loss.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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