NOTE 1 - BACKGROUND INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1 COMPANY INFORMATION
Glenmark Pharmaceuticals Limited (the “Company”) is a public limited company incorporated in Mumbai, India. The registered office of the Company is at B/2, Mahalaxmi Chambers, 22 Bhulabhai Desai Road, Mumbai - 400026, India.
The Company is primarily engaged in the business of development, manufacture and marketing of pharmaceutical products. The Company also markets active pharmaceutical ingredients. The Companies research and development facilities are located at Mahape, Sinnar, Turbhe and Taloja in India and manufacturing facilities are located at Nasik, Colvale, Baddi, Nalagarh, Ankleshwar, Mohol, Kurkumbh, Sikkim, Indore, Dahej and Aurangabad.
The Company’s shares are listed on the BSE Limited (“BSE”) and the National Stock Exchange of India (“NSE”).
2. BASIS OF PREPA RATION AND MEASUREMENT
2.1 The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. For all periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP) which is considered as “Previous GAAP”.
The financial statements for the year ended 31 March 2017 are the first Ind AS Financial statements of the Company. As per the principles of Ind AS 101, the transition date to Ind AS is 1 April 2015 and hence the comparatives for the previous year ended 31 March 2016 and balances as on 1 April 2015 have been restated as per the principles of Ind AS, wherever deemed necessary. Refer note 40 for understanding the transition from previous GAAP to Ind AS and its effect on the Company’s financial position and financial performance.
The significant accounting policies that are used in the preparation of these financial statements are summarised below. These accounting policies are consistently used throughout the periods presented in the financial statements.
3. CRITICAL ACCOUNTING ESTIMATES AND SIGNIFICANT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
When preparing the financial statements, management undertakes a number of judgments’, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.
In the process of applying the Company’s accounting policies, the following judgments have been made apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial information. Judgements are based on the information available at the date of balance sheet.
The Company has evaluated each lease agreement for its classification between finance lease and operating lease. The Company has reached its decisions on the basis of the principles laid down in Ind AS 17 “Leases” for the said classification. The Company has also used Appendix C to Ind AS 17 for determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and based on the assessment whether:
a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and
b) the arrangement conveys a right to use the asset.
The assessment of the probability of future taxable profit in which deferred tax assets can be utilized is based on the Company’s latest approved budget forecast, which is adjusted for significant non-taxable profit and expenses and specific limits to the use of any unused tax loss or credit. If a positive forecast of taxable profit indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognised in full.
The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.
Research and developments costs
Management monitors progress of internal research and development projects by using a project management system. Significant judgement is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred.
Management also monitors whether the recognition requirements for development costs continue to be met. This is necessary due to inherent uncertainty in the economic success of any product development.
4.1 Estimation Uncertainty
The preparation of these financial statements is in conformity with Ind AS and requires the application of judgment by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. Management estimates are based on historical experience and various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Estimates of life of various tangible and intangible assets, and assumptions used in the determination of employee-related obligations and fair valuation of financial and equity instrument, impairment of tangible and intangible assets represent certain of the significant judgements and estimates made by management.
Useful lives of various assets
Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the Company. The useful lives are specified in 2.5 and 2.7.
The cost of post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty. The assumptions used are disclosed in note 27.
Fair value of financial instruments
Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial instruments (note 34). In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses it’s best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.
An impairment loss is recognised for the amount by which an asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount.
To determine the recoverable amount, management estimates expected future cash flows from each asset or cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Company’s assets.
In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors.
The financial statements have been prepared using the measurement basis specified by Ind AS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies.
The estimates and underlying assumptions are reviewed on an on-going 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.
5 FIRST TIME ADOPTION OF IND AS
First Ind AS Financial statements
These are the Company’s first financial statements prepared in accordance with Ind AS applicable as at 31 March 2017.
The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet as at 1 April 2015 (the date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).
An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is as follows:
5.1 Optional exemptions availed Deemed cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets and investment property covered by Ind AS 40 Investment Properties. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
Arrangement containing a lease
The Company has elected to use facts and circumstances existing at the date of transition to determine whether an arrangement contains a lease. No such assessment was done under Previous GAAP.
5.2 Mandatory exceptions applied Estimates
An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP except where Ind AS required a different basis for estimates as compared to the previous GAAP.
De-recognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has applied the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
5.3 Investments in subsidiaries
The Company has elected to measure investment in subsidiaries at cost and consider the previous GAAP carrying value as at the date of transition as deemed cost.
6 Standards issued but not yet effective:
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of cash flows’ and Ind AS 102, ‘Share-based payment.’ The amendments are applicable to the Company from 1 April 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. The effect on the financial statements is being evaluated by the Company.
In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realised. The ultimate realisation of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realisable, however, could be reduced in the near term if estimates of future taxable income during the carry forward periods are reduced.
NOTE 7 - CURRENT FINANCIAL ASSETS
(i) TRADE RECEIVABLES
The trade receivables have been recorded at their respective carrying amounts and are not considered to be materially different from their fair values as these are expected to realise within a short period from the date of balance sheet. All of the Company’s trade receivables have been reviewed for indications of impairment. Certain trade receivables were found to be impaired and an allowance for credit losses of Rs.1,558.21 (2016 - Rs.110.00) (Refer note 36) has been recorded. The movement in the expected credit losses is as follows:
(ii) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise the following:
(iii) OTHER CURRENT FINANCIAL ASSETS
Note 1 - Security deposit represent trade deposit given in the normal course of business realisable within twelve months from the reporting date.
Note 2 - Dividend accounts represent balances maintained in specific bank accounts for payment of dividends. The use of these funds is restricted and can only be used to pay dividends. The corresponding liability for payment of dividends is included in other current financial liability.
NOTE 8 - EQUITY AND RESERVES
a) Ordinary shares
The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders’ meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.
The Company has an authorised share capital of 2,370,000,000 equity shares of Rs.1 each.
Indian statutes mandate that dividends be declared out of distributable profits in accordance with the regulations. Should the Company declare and pay dividends, such dividends are required to be paid in INR to each holder of equity shares in proportion to the number of shares held. Dividend tax is borne by the Company.
The Company had declared dividend payout of Rs.2/- per share (2016 - Rs.2/- per share)
Securities premium reserve - The amount received by the Company over and above the face value of shares issued is shown under this head.
Capital redemption reserve - The Capital redemption reserve had been created as per the requirement of earlier provision of Companies Act 1956. Such reserve is not currently available for distribution to the shareholders.
General reserve - The Company has transferred a portion of the net profit of the Company before declaring dividend to general reserve pursuant to the earlier provisions of Companies Act 1956. Mandatory transfer to general reserve is not required under the Companies Act 2013.
Retained earnings - Accumulated earnings include all current and prior period profits as disclosed in the statement of profit and loss.
Stock compensation reserve - Stock compensation reserve consists of employee compensation cost allocated over the vesting period of options granted to employees. Such cost is recognised in statement of profit and loss and is credited to the reserve. Upon exercise of options, such reserves are reclassified to equity share capital and security premium.
(IV) As at 31 March 2017, pursuant to Employee Stock Option Scheme 2003, 47,000 options were outstanding, which upon exercise are convertible into equivalent number of equity shares . Pursuant to Employee Stock Options Scheme 2016, 619,757 options were outstanding, which upon exercise are convertible into equivalent number of equity shares.
(V) Right, Preference and restriction on shares
The Company presently has only one class of ordinary equity shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary equity shares, as reflected in the records of the Company on the date of the shareholders’ meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.
(VI) In the period of five years immediately preceding 31 March 2017, the Company has not allotted any shares as fully paid up pursuant to contracts without payment being received in cash. Further, the Company has neither issued bonus shares nor bought back any shares during the aforementioned period.
(VII) Employee Stock Option Scheme, 2003 and 2016 (ESOS)
The Company has formulated an Employee Stock Option Scheme 2003 and Employee Stock Option Scheme 2016 (‘ESOS’) namely ESOS 2003 and ESOS 2016 under which it has made grants on various dates from time to time. Each grant has a vesting period which varies from 1 - 2 years and up to 4 - 6 years from the date of grant depending on the terms of the grant. The grants are made at the market price of the equity shares of the Company on either the date of the grant or the closing price of the date prior to the day of the grant or the price decided by the Nomination & Remuneration Committee of the Board. As at 31 March 2017, pursuant to ESOS 2003, 47,000 options were outstanding, which upon exercise are convertible into equivalent number of equity shares . Pursuant to ESOS 2016, 619,757 options were outstanding, which upon exercise are convertible into equivalent number of equity shares.
All share based employee payments would be settled in equity. The Company has no legal or constructive obligation to repurchase or settle the options.
The fair value of options granted are determined using the Black-Scholes valuation model. Significant inputs into the calculation are:
*All figures have been accordingly adjusted for
- Split of face value from Rs.10 to Rs.2 in October 2003
- 1:1 bonus issue in April 2005 and split of face value from Rs.2 to Rs.1 in September 2007.
The underlying expected volatility was determined by reference to historical data, adjusted for unusual share price movements. No special features inherent to the options granted were incorporated into the measurement of fair value.
NOTE 9 - NON-CURRENT FINANCIAL LIABILITIES
Long term borrowings comprise of :
During the year , the Company issued U.S. $ 200,000,000 2.00% Resettable Onward Starting Equity-linked Securities (Bonds) and U.S.$ 200,000,000 4.5% Senior Notes (Notes), the brief description of the same is provided herein below:
U.S. $ 200,000,000, 2.00% Resettable Onward Starting Equity-linked Securities (Bonds):
The Company issued Bonds on 28 June 2016. The Bonds will be convertible at the option of the holders’ of the Bonds (the “Bondholders”) at any time on or after 1 December 2017 and upto the close of business on 18 June 2022 into equity shares. Each Bond will be convertible at the option of the holder thereof into fully paid equity share at an initial conversion price to be determined on 30 November 2017.
Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on 28 June 2022 (Maturity Date) at 126.42% of their principal amount, together with accrued interest (if any), calculated upto but excluding the Maturity Date. The Company may, at its own discretion, redeem the Bonds in whole, but not in part, subject to satisfaction of certain conditions.
Each Bondholder has the right to require the Company to redeem in whole or in part, such Bondholder’s Bonds, on 28 July 2021, at a price equal to 121.78% of its outstanding principal amount of Bonds, together with interest (if any) accrued but unpaid on 28 July 2021.
The Bonds are listed on the Singapore Stock Exchange.
U.S. $ 200,000,000, 4.5% Senior Notes (Notes) :
The Company issued Notes on 1 August 2016. The Notes will mature on 2 August 2021.
The interest on Notes will be payable semi-annually in arrears on 1 February and 1 August each year. The final interest payment and the payment of principal will occur on 2 August 2021.
The Notes are Redeemable at any time on or after 2 August 2019, all or part of the Notes by paying the redemption price, subject to fulfilment of certain conditions. The Company, at its discretion, may redeem all or a portion of the Notes at a redemption price equal to 100% of the principal amount, plus the applicable redemption premium, and accrued and unpaid interest and additional amounts, if any
The Notes are listed on the Singapore Stock Exchange.
NOTE 10 - CURRENT FINANCIAL LIABILITIES
Working Capital Facilities are secured by hypothecation of stocks of raw materials, packing materials, finished goods, work-in-process, receivables and equitable mortgage on fixed assets at certain locations.
The Company has not defaulted on repayment of loan and interest during the year.
The Company has taken working capital facility / term loans from banks at interest rates ranging between 0.60 % to 9.70 % p.a.
(ii) TRADE PAYABLES
Note (i) Based on the information available with the Company, no creditors have been identified as “supplier” within the meaning of “Micro, Small and Medium Enterprises Development (MSMED) Act, 2006”. Accordingly, no disclosure under the MSMED Act has been given.
NOTE 11 - OTHER CURRENT LIABILITIES
Other liabilities include advance from customers and other such adjustable balances
Income received in advance represents advance received from customer for future supply of materials. The Company has recognised an income of Rs.Nil (2016 - Rs.430.43) in current year.
NOTE 12 - EMPLOYEE POST- RETIREMENT BENEFITS
The following are the employee benefit plans applicable to the employees of the Company.
a) Gratuity (defined benefit plan)
In accordance with the applicable laws, the Company provides for gratuity, a defined benefit retirement plan (“the Gratuity Plan”) covering eligible employees. The Gratuity Plan provides for a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment of amounts that are based on salary and tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation.
A feature all plans have in common is that the discount rate has a significant impact on the present value of obligations. The other assumptions have varying impacts on the different plans in different geographic regions. In the breakup presented below, the varying impact of changes in the key assumptions is shown as below.
b) Compensated leave of absence plan (other long term benefit plan)
The Company permits encashment of leave accumulated by their employees on retirement and separation. The liability for encashment of privilege leave is determined and provided on the basis of actuarial valuation performed by an independent actuary at the date of the balance sheet.
The Company recognised total retirement benefit costs related to all retirement plans as follows:
c) Provident fund and others (defined contribution plan)
Apart from being covered under the gratuity plan described earlier, employees participate in a provident fund plan; a defined contribution plan. The Company makes annual contributions based on a specified percentage of salary of each covered employee to a government recognised provident fund. The Company does not have any further obligation to the provident fund plan beyond making such contributions. Upon retirement or separation an employee becomes entitled for this lump sum benefit, which is paid directly to the concerned employee by the fund. The Company contributed approximately Rs.259.29 (2016 - Rs.215.64) to the provident fund plan during the year ended 31 March 2017.
NOTE 13 - RELATED PA RTY DISCLOSURES
a) Parties where direct/indirect control exists
i) Subsidiary companies
Glenmark Pharmaceuticals (Europe) R&D Ltd., U.K.
(formerly known as Glenmark Pharmaceuticals Europe Ltd., U.K.)
Glenmark Pharmaceuticals Europe Ltd., U.K. (formerly known as Glenmark Generics (Europe) Ltd., U.K.)
Glenmark Pharmaceuticals S.R.O., Czech Republic
Glenmark Pharmaceuticals SK, s.r.o., Slovak Republic
Glenmark Pharmaceuticals S. A., Switzerland
Glenmark Holding S. A., Switzerland
Glenmark Pharmaceuticals S.R.L., Romania
Glenmark Pharmaceuticals SP z.o.o., Poland (Formerly known as Glenmark Distributors SP z.o.o.)
Glenmark Pharmaceuticals SP z.o.o., Poland
(Merged into Glenmark Distributors SP z.o.o. with effect from 2 November 2016)
Glenmark Pharmaceuticals Inc., USA (Formerly known as Glenmark Generics Inc., USA)
Glenmark Therapeutics Inc., USA
Glenmark Farmaceutica Ltda., Brazil
Glenmark Generics SA., Argentina
Glenmark Pharmaceuticals Mexico, S.A. DE C.V., Mexico
Glenmark Pharmaceuticals Peru SAC., Peru
Glenmark Pharmaceuticals Colombia SAS, Colombia
(Formerly known as Glenmark Pharmaceuticals Colombia Ltda., Colombia)
Glenmark Uruguay S.A., Uruguay
Glenmark Pharmaceuticals Venezuela., C.A , Venezuela
Glenmark Dominicana, SRL, Dominican Republic
Glenmark Pharmaceuticals Egypt S.A.E., Egypt
Glenmark Pharmaceuticals FZE., United Arab Emirates
Glenmark Impex L.L.C., Russia
Glenmark Philippines Inc., Philippines
Glenmark Pharmaceuticals (Nigeria) Ltd., Nigeria
Glenmark Pharmaceuticals Malaysia Sdn Bhd., Malaysia
Glenmark Pharmaceuticals (Australia) Pty Ltd., Australia
Glenmark South Africa (Pty) Ltd., South Africa
Glenmark Pharmaceuticals South Africa (Pty) Ltd., South Africa
Glenmark Pharmaceuticals B.V., Netherlands (formerly known as Glenmark Generics B.V., Netherlands) Glenmark Arzneimittel Gmbh., Germany
Glenmark Pharmaceuticals Canada Inc., Canada (formerly Known as Glenmark Generics Canada Inc., Canada)
Glenmark Pharmaceuticals Kenya Ltd, Kenya
Glenmark Therapeutics AG, Switzerland
Viso Farmaceutica S.L.U., Spain
Glenmark Specialty S A, Switzerland
Glenmark Pharmaceuticals Distribution S.R.O, Czech Republic Glenmark Pharmaceuticals (Thailand) Co. Ltd., Thailand (w.e.f. 1 April 2015)
Glenmark Pharmaceuticals Nordic AB, Sweden Glenmark Ukraine LLC, Ukraine Glenmark-Pharmaceuticals Ecuador S. A., Ecuador
ii) Enterprise over which key managerial personnel excercise significant influence Glenmark Foundation
Glenmark Aquatic Foundation Trilegal
b) Related party relationships where transactions have taken place during the year
Subsidiary Companies / Enterprise over which key managerial personnel exercise significant influence
Glenmark Farmaceutica Ltda., Brazil Glenmark Philippines Inc., Philippines Glenmark Pharmaceuticals (Nigeria) Ltd., Nigeria Glenmark Pharmaceuticals S.A., Switzerland Glenmark Pharmaceuticals Malaysia Sdn.Bhd.,Malaysia Glenmark Impex L.L.C., Russia Glenmark Holding S.A., Switzerland Glenmark Pharmaceuticals Peru SAC., Peru Glenmark Pharmaceuticals Venezuela., C.A , Venezuela Glenmark Pharmaceuticals FZE., United Arab Emirates Glenmark Pharmaceuticals Egypt S.A.E., Egypt Glenmark Generics SA., Argentina Glenmark Pharmaceuticals (Europe) R&D Ltd., U.K. (formerly known as Glenmark Pharmaceuticals Europe Ltd., U.K.)
Glenmark Pharmaceuticals Europe Ltd., U.K. (formerly known as Glenmark Generics (Europe) Ltd., U.K.) Glenmark Pharmaceuticals Inc., USA (Formerly known as Glenmark Generics Inc., USA)
Glenmark Pharmaceuticals s.r.o., Czech Republic Glenmark Therapeutics Inc., USA Glenmark Pharmaceuticals (Thailand) Co. Ltd., Thailand Glenmark Dominicana SA., Dominican Republic
Glenmark Pharmaceuticals SP z.o.o., Poland (Merged into Glenmark Distributors SP z.o.o.)
Glenmark Pharmaceuticals SP z.o.o., Poland (Formerly known as Glenmark Distributors SP z.o.o.)
Glenmark Pharmaceuticals South Africa (Pty) Ltd., South Africa
Glenmark South Africa (Pty) Ltd., South Africa
Glenmark Pharmaceuticals Kenya Ltd, Kenya
Glenmark Pharmaceuticals Colombia SAS, Colombia
(Formerly known as Glenmark Pharmaceuticals Colombia Ltda., Colombia)
Glenmark Pharmaceuticals Mexico, S.A. DE C.V., Mexico Glenmark Specialty S A, Switzerland
Glenmark Pharmaceuticals Canada Inc., canada (formerly Known as Glenmark Generics Canada Inc., Canada) Glenmark Pharmaceuticals S.R.L., Romania Glenmark Therapeutics AG, Switzerland Glenmark Uruguay S.A., Uruguay
Glenmark Pharmaceuticals distribution S.R.O, Czech Republic Glenmark Foundation Glenmark Aquatic Foundation
c) Key Management Personnel
Mr. Glenn Saldanha (Chairman & Managing Director)
Mrs. Cherylann Pinto (Executive Director)
Mr. Rajesh Desai (Executive Director)
Mr. P Ganesh (President & Global Chief Financial Officer with effect from 12 May 2016)
Mr. Harish Kuber (Company Secretary & Compliance Officer with effect from 2 February 2017)
Mr. Sanjay Kumar Chowdhary (Company Secretary & Compliance Officer upto 31 October 2016)
Mrs. B. E. Saldanha (Non-executive Director)
Mr. D. R. Mehta (Non-executive Director)
Mr. Bernard Munos (Non-executive Director)
Mr. J. F. Ribeiro (Non-executive Director)
Dr. Brian W. Tempest (Non-executive Director)
Mr. Sridhar Gorthi (Non-executive Director)
Mr. Milind Sarwate (Non-executive Director)
NOTE 14- RESEARCH AND DEVELOPMENT EXPENSES
During the year, the Company’s expenses on research and development is Rs.4,623.41 (2016 - Rs.4,349.70).
NOTE 15 - EARNINGS PER SHARE (EPS)
The basic earnings per share for the year ended 31 March 2017 has been calculated using the net profits attributable to equity shareholders.
NOTE 16 - COMMITMENTS AND CONTINGENCIES
(a) In January 2014, the National Pharmaceutical Pricing Authority (NPPA) issued a demand notice of Rs.122.30 as overcharging liability of product “Doxovent 400 mg tab” for the period February 2010 to May 2013. The notice also envisaged a payment of Rs.33.30 towards interest @15% p.a. on the overcharged amount up to 31 January 2014. The Company has filed a petition under Article 32 with the Hon’ble Supreme Court of India (Hon’ble Court), challenging the issue of the above mentioned demand notice on various grounds. This petition has been tagged along with other petition/s filed by other pharmaceutical companies as well, pending before Supreme Court relating to the inclusion criteria of certain drugs including “Theophylline” in the schedule of the DPCO, 1995. The matters are sub-judice before the Supreme Court.
The Hon’ble Court passed an ad-interim order stating that no coercive steps be taken against the Company towards the said demand.
The Hon’ble Court has constituted a Special bench to hear the petition (along with other petitions filed in this regard) and the matter is expected to be listed in due course.
The company based on legal advice, has an arguable case on merits as well as with regard to mitigation of the demand.
(b) On 10 March 2016 Ministry of Health and Family Welfare issued notifications prohibiting manufacture for sale, sale and distribution for human use of several Fixed Dose Combination (“FDC”) with immediate effect.
Several products of the Company are also covered in the notified prohibited “FDC’s”. The Company has filed five writ petitions in Hon’ble Delhi High Court challenging the notifications issued. The Hon’ble Delhi High Court has granted interim relief to the Company by staying the notifications banning the FDC’s. The company based on legal advise, has an arguable case on merits though the liability in this case cannot be computed. In an adverse scenario, the Company would be restricted from manufacturing, selling and marketing the impacted FDC’s.
The company has revised the composition of the FDC’s and market the revised product. The matter is now clubbed with other petition with other companies before the supreme court.
(a) Estimated amount of contracts remaining to be executed on capital account, net of advances, not provided for as at 31 March 2017 aggregate Rs.727.02 (31 March 2016 - Rs.710.42, 1 April 2015 - Rs.485.18)
(b) Estimated amount of contracts remaining to be executed on other than capital account, net of advances, not provided for as at 31 March 2017 aggregate Rs.5,236.30 (31 March 2016 - Rs.2,745.76, 1 April 2015 - Rs.2,260.74)
NOTE 17 - LEASES
The Company has taken on lease/leave and licence godowns/residential & office premises at various locations.
i) The Company’s significant leasing arrangements are in respect of the above godowns & premises (including furniture and fittings therein, as applicable). The aggregate lease rentals payable are charged to the statement of profit and loss as Rent.
ii) The Leasing arrangements which are cancellable range between 11 months to 5 years. They are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally refundable interest free deposits have been given towards deposit and unadjusted advance rent is recoverable from the lessor.
iii) The Company has entered into operating lease agreements for the rental of its office premises for a period of 3 to 5 years.
iv) Future obligations on non-cancellable operating lease
NOTE 18- FAIR VALUE MEASUREMENTS
Financial instruments by category
Investment in Subsidiaries are carried at cost
Trade receivables comprise amounts receivable from the sale of goods and services.
The management consider that the carrying amount of trade and other receivables approximates their fair value.
Bank balances and cash comprise cash and short-term deposits held by the Company. The carrying amount of these assets approximates their fair value.
Trade and other payables principally comprise amounts outstanding for trade purchases and on-going costs. The management consider that the carrying amount of trade payables approximates to their fair value.
Fair value hierarchy :
Level 2 : All FVPL financial assets and liabilities are classified as level 2 inputs except certain investments amounting to Rs.1.35 which are classified as level 1 inputs.
Level 3 : All amortised cost financial assets and liabilities are classified as level 3 inputs.
NOTE 19 - NOTE ON EXPENDITURE ON CORPORATE SOCIAL RESPONSIBILITY
Following is the information regarding projects undertaken and expenses incurred on CSR activities during the year ended 31 March 2017:
i Gross amount required to be spent by the Company during the year - Rs.232.23 (2016 - Rs.141.07)
ii Amount spent during the year on: (by way of contribution to the trusts and projects undertaken)
NOTE 20- EXCEPTIONAL ITEMS
Exceptional items for year ended 31 March 2017 represents impairment loss relating to Investment, Share application money and Trade receivables from the Company’s subsidiary Glenmark Pharmaceuticals Venezuela., C.A in Venezuela. The Company has not received approvals from the Venezuelan government to repatriate any amounts during the year ended 31 March 2017 and considering the uncertainty around repatriation, the Company believes it is appropriate to impair such investments, share application money and trade receivables pertaining to the said subsidiary.
NOTE 21 - RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company is exposed to a variety of financial risks which results from the Company’s operating and investing activities. The Company focuses on actively securing its short to medium term cash flows by minimising the exposure to financial markets.
The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options.
Financial assets that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, accounts receivables, other receivables, investment securities and deposits. By their nature, all such financial instruments involve risk including the credit risk of non-performance by counter parties.
The Company’s cash equivalents and deposits are invested with banks.
The Company’s trade and other receivables are actively monitored to review credit worthiness of the customers to whom credit terms are granted and also avoid significant concentrations of credit risks.
The Company’s interest-rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the Company to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Company to fair value interest-rate risk.
Foreign Currency sensitivity
The foreign currency sensitivity analysis has been performed in relation to US Dollar (USD), Euro (EUR) and Russian ruble (RUB).
US Dollar conversion rate was Rs.66.20 at the beginning of the year and scaled to a high of Rs.68.57 and to low of Rs.64.72. The closing rate is Rs.64.72. Considering the volatility in direction of strengthening dollar upto 10% , the sensitivity analysis has been disclosed at 10% movements on strengthening and weakening effect for presenting comparable movement due to currency fluctuations.
EUR conversion rate was Rs.75.37 at the beginning of the year and scaled to a high of Rs.76.60 and to low of Rs.69.13. The closing rate is Rs.69.13. Considering the volatility in direction of strengthening EUR upto 10% , the sensitivity analysis has been disclosed at 10% movements on strengthening and weakening effect for presenting comparable movement due to currency fluctuations.
RUB conversion rate was Rs.0.98 at the beginning of the year and scaled to a high of Rs.1.17 and to low of Rs.0.96. The closing rate is Rs.1.15. Considering the volatility in direction of strengthening RUB upto 10%, the sensitivity analysis has been disclosed at 10% movements on strengthening and weakening effect for presenting comparable movement due to currency fluctuations.
Interest rate sensitivity
The Company’s policy is to minimise interest rate cash flow risk exposures on long-term borrowing. The Company has taken several short term borrowings on fixed rate of interest. Since, there is no interest rate cash outflow associated with such fixed rate loans; an interest rate sensitivity analysis has not been performed.
The bank deposits are placed on fixed rate of interest of approximately 4% to 6.35%. As the interest rate does not vary unless such deposits are withdrawn and renewed, sensitivity analysis is not performed.
Credit risk analysis
The Company’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the date of the balance sheet, as summarised below:
Trade receivables are usually due within 60-180 days. Generally and by practice most customers enjoy a credit period of approximately 180 days and are not interest bearing, which is the normal industry practice. All trade receivables are subject to credit risk exposure. However, the Company does not identify specific concentrations of credit risk with regard to trade and other receivables, as the amounts recognised represent a large number of receivables from various customers.
The Company continuously monitors defaults of customers and other counter parties, identified either individually or by the Company, and incorporates this information into its credit risk controls. The Company’s policy is to deal only with creditworthy counter parties.
The Company’s management considers that all the above financial assets that are not impaired for each of the reporting dates and are of good credit quality, including those that are past due. None of the Company’s financial assets are secured by collateral or other credit enhancements.
In respect of trade and other receivables, the Company’s credit risk exposure towards any single counter party or any group of counter parties having similar characteristics is considered to be negligible. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counter parties are reputable banks with high quality external credit ratings.
Liquidity risk analysis
The Company manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly.
The Company maintains cash and marketable securities to meet its liquidity requirements for up to 30-day periods. Funding in regards to long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
NOTE 21- CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company’s capital management objectives are:
- to ensure the Company’s ability to continue as a going concern; and
- to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the balance sheet. Capital for the reporting periods are summarised as follows:
The Company’s goal in capital management is to maintain a capital-to-overall financing structure ratio as low as possible.
The Company sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
Notes: 1 Intangible assets
As at the date of transition, Company has elected to consider the previous GAAP carrying value of all the items of intangible assets as deemed cost. So, there is no impact on equity as at the date of transition. There are few items of intangible assets which has been amortised in previous GAAP considering the useful life of five years. Under Ind AS, these assets has been considered as having infinite useful life and amortisation charges is nil on these assets after the date of transition. Instead, these assets has been tested for impairment on an annual basis. The adjustment on account of change in useful life have a positive impact of Rs.122.91 on equity reported under previous GAAP as at 31 March 2016.
2 Deferred tax
Deferred tax assets and liabilities under Indian GAAP were recorded only on timing differences. However, on transition to Ind AS, deferred tax assets and liabilities are recorded on temporary differences. On transition to Ind AS, the carrying values of assets and liabilities have undergone a change as a result of the adjustments indicated above, and accordingly, the deferred tax position has been recomputed after considering the new carrying amounts.
3 Proposed dividend
In preparation of the financial statements in accordance with Previous GAAP, the Company provided for proposed dividend and tax thereon to comply with the schedule III requirements of the Companies Act, 2013. On transition to Ind AS, proposed dividend is recognised based on the recognition principles of Ind AS 37- ‘Provisions, Contingent Liabilities and Contingent Assets’. Considering that the dividend has been proposed after the date of financial statements and becomes payable only after approval by the shareholders, there is no present obligation to pay this dividend as at the date of statement of balance sheet. Accordingly, the liability for proposed dividend and tax thereon has been reversed.
4 Remeasurement benefits
Under previous GAAP, remeasurement benefits on defined benefit obligation has been recognised in the statement of profit and loss. Ind AS 19 - Employee benefits required these remeasurement benefits to be recognised in other comprehensive income instead of statement of profit and loss.
5 Presentation differences
In the preparation of these Ind AS financial statements, the Company has made several presentation differences between Previous GAAP and Ind AS. These differences have no impact on reported profit or total equity. Accordingly, some assets and liabilities have been reclassified into another line item under Ind AS at the date of transition. Further, in these financial statements, some line items are described differently (renamed) under Ind AS as compared to Previous GAAP, although the assets and liabilities included in these line items are unaffected.
NOTE 22 - AUTHORISATION OF FINANCIAL STATEMENTS
The financial statements for the year ended 31 March 2017 were approved by the Board of Directors on 11 May 2017.