Granules India Limited (the company) is a public domiciled in India and
incorporated under the Companies Act, 1956. Its shares are listed on
two Stock exchanges in India. The company is engaged in the
manufacturing and selling of Active Pharmaceutical Ingredients (APIs)
and Pharmaceutical Formulation intermediates (PFIs) and Finished
Dosages (FDs). The company caters to both domestic and international
1.1 Basis of preparation
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
Section 133 of the Companies Act, 2013, read with paragraph 7 of the
Companies (Accounts) Rules 2014. The financial statements have been
prepared on accrual basis under the historical cost convention. The
accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year.
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates. Difference between the actual
results and the estimates are recognized in the periods in which the
results are known / materialize.
1.3 Tangible Fixed Assets:
a. Tangible fixed assets are stated at cost less accumulated
depreciation and impairment losses, if any. The cost of fixed asset
comprises of its purchase price, non-refundable taxes and levies,
freight and other incidental expenses related to the acquisition and
installation of the respective assets. Borrowing costs attributable to
acquisition or construction of qualifying fixed assets is capitalized
to respective assets when the time taken to put the assets to use is
substantial. Exchange differences arising on restatement / settlement
of long-term foreign currency borrowings relating to acquisition of
depreciable fixed assets are adjusted to the cost of the respective
assets and depreciated. Subsequent expenditure relating to fixed assets
is capitalized only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
b. Pre-operative expenditure comprising of revenue expenses incurred
in connection with project implementation during the period up to
commencement of commercial production are treated as part of project
costs and are capitalized. Such expenses are capitalized only if the
project to which they relate, involve substantial expansion of capacity
1.4 Depreciation on tangible fixed assets:
Depreciation on fixed assets is provided on a straight-line method
based on the useful lives estimated by the management which are in
accordance with Schedule II to the Companies Act, 2013.
The management believes that depreciation rates currently used fairly
reflect its estimate of the useful lives and residual values of fixed
1.5 Capital Work-in-progress:
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
1.6 Intangible assets:
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and the
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Software costs are capitalized and recognized as intangible assets
based on materiality, accounting prudence and significant economic
benefits expected to flow there from for a period longer than one year.
Intangible assets are amortized on a straight line basis over the
estimated useful lives. The company uses a rebuttable presumption that
the useful life of an intangible asset will not exceed ten years from
the date when the asset is available for use. All intangible assets are
assessed for impairment whenever there is an indication that the
intangible asset may be impaired.
The amortization period and the amortization method are reviewed
periodically. If the expected useful life of the asset is significantly
different from previous estimates, the amortization period is changed
accordingly. If there has been a significant change in the expected
pattern of economic benefits from the asset, the amortization method is
changed to reflect the changed pattern.
Gains or losses arising from de recognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Long-term investments and investments in subsidiary companies are
carried at cost less provision for other than temporary diminution in
the carrying value of each investment.
Current investments are carried at lower of cost and fair value.
Diminution in value is charged to the statement of profit and loss.
1.8 Valuation of Inventories:
Inventories are valued at the lower of cost and net realizable value.
Net realizable value (NRV) is the estimated selling price in the
ordinary course of the business, less the estimated costs of completion
and the estimated costs necessary to make the sale. Cost of inventories
comprises all cost of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition. The cost of all categories of inventory is determined using
weighted average cost method.
a) Inventories of raw material, packing material, consumables and
stores and spares are valued at cost as per weighted average method.
Cost does not include duties and taxes that are subsequently
b) Cost for the purpose of finished goods and material in process is
computed on the basis of cost of material, labour and other related
c) Goods in transit are stated at costs accrued up to the date of
d) Stocks with consignment agents are stated at costs accrued up to the
date of the Balance sheet.
1.9 Government grants:
Grants received by way of investment subsidy scheme in relation to
total investment are credited to capital reserve.
1.10 Foreign currency transactions and balances:
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non- monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
(iii) Exchange differences
The Company accounts for exchange differences arising on translation /
settlement of foreign currency monetary items as below:
a) Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset.
b) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
1.11 Revenue Recognition:
a. Revenue from sales is recognized when significant risk and rewards
in respect of ownership of the products are transferred, recovery of
the consideration in reasonably certain.
b. Revenue from sale of goods include excise duty, sales tax and is
net of sales returns.
c. Export entitlements are recognized as income when right to receive
credit as per the terms of the scheme is established in respect of the
d. Dividend income is recognized when the unconditional right to
receive dividend is established.
e. Interest income is recognized using the time proportionate method,
based on rates implicit in the transaction.
f. Revenue in respect of other income is recognized when a reasonable
certainty as to its realization exists.
1.12 Research and development expenses:
a. Research costs not resulting in any tangible property/equipment are
charged to revenue as and when incurred.
b. Know-how / product development costs incurred on an individual
project are carried forward when its future recoverability can
reasonably be regarded as assured. Any expenditure carried forward is
amortized over the period of expected future benefits from the related
project, not exceeding ten years.
c. The carrying value of know-how / product development costs are
reviewed for impairment annually when the asset is not yet in use and
otherwise when events or changes in circumstances indicate that the
carrying value may not be recoverable.
1.13 Employee Retirement Benefits:
a. Defined Contributions Plan: Contributions paid/payable to the
defined contribution plan of Provident Fund for certain employees
covered under the scheme are recognized in the Profit and Loss account
b. The Company makes contributions to a State operated contribution
scheme for certain employees at a specified percentage of the
employees'''' salary. The Company has an obligation only to the extent of
the defined contribution.
c. Defined Benefit Plan: Gratuity for employees is covered under a
scheme of Life Insurance Corporation of India (LIC). The cost of
providing the benefits under this plan is determined on the basis of
actuarial valuation at each year-end. Actuarial gains and losses for
defined benefits plan is recognized in full in the period in which they
occur in the statement of profit and loss.
d. Other long term employee benefits: Other long term employee
benefits comprise of leave encashment which is provided on the basis of
actuarial valuation carried out in accordance with revised Accounting
Standard 15 as at the end of the year/period.
1.14 Borrowing costs:
Borrowing costs incurred in relation to the acquisition and
constructions of assets are capitalized as part of the cost of such
assets up to the date when such assets are ready for intended use.
Other borrowing costs are charged as an expense in the year in which
they are incurred.
1.15 Income tax expense:
a. Current Tax
The Current charge for income tax is calculated in accordance with the
relevant tax regulations applicable to the Company.
b. Deferred Tax
Deferred tax charge or credit reflects the tax effects of timing
difference between accounting income and taxable income for the period.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have been
enacted or substantially enacted by the balance sheet date. Deferred
tax assets are recognized only to the extent there is reasonable
certainly that the assets can be realized in future, however, where
there is unabsorbed depreciation or carry forward of losses, deferred
tax assets are recognized only if there is a virtual certainly of
realization of such assets.
Deferred tax assets are reviewed at each balance sheet date and are
written-down or written-up to reflect the amount that is
reasonably/virtually certain (as the case may be) to be realized.
The company presents earnings before interest, tax, depreciation and
amortization (EBITDA) as a separate line item on the face of the
statement of profit and loss. The company measures EBITDA on the basis
of profit/ (loss) from continuing operations. In its measurement, the
company does not include depreciation and amortization expense, finance
costs and tax expense.
1.17 Earnings per share
The basic earnings per share (EPS) is computed by dividing the profit
after tax for the year by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, profit after tax for the year and the weighted
average number of shares outstanding during the year are adjusted for
the effects of all dilutive potential equity shares. The dilutive
potential equity shares are deemed converted as of the beginning of the
period, unless they have been issued at a later date. The diluted
potential equity shares have been adjusted for the proceeds receivable
had the shares been actually issued at fair value (i.e., the average
market value of the outstanding shares).
1.18 Provisions and contingent liabilities and contingent assets
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation.
Provisions are measured at the best estimate of the expenditure
required to settle the present obligation at the balance sheet date.
Contingent liabilities and contingent assets
A disclosure for a contingent liability is made when there is a
possible obligation or a present obligation that may, but probably will
not, require an outflow of resources. Where there is a possible
obligation or a present obligation in respect of which the likelihood
of outflow of resources is remote, no provision or disclosure is made.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognised in the period in which the
The Company assesses at each reporting date whether there is an
indication that an asset/cash generating unit may be impaired. If any
indication exists the Company estimates the recoverable amount of such
assets and if carrying amount exceeds the recoverable amount,
impairment is recognised. The recoverable amount is the higher of the
net selling price and its value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using
an appropriate discount factor. When there is indication that
previously recognised impairment loss no longer exists or may have
decreased such reversal of impairment loss is recognised in the
Statement of Profit and Loss.
The Company''''s significant leasing arrangements are in respect of
operating leases for premises that are cancellable in nature. The lease
rentals under such agreements are recognised in the Statement of Profit
and Loss as per the terms of the lease.
1.21 CENVAT Credit
CENVAT (Central Value added tax) credit in respect of excise, customs
and service tax is accounted on accrual basis on purchase of eligible
inputs, capital goods and services. The balance of CENVAT credit is
reviewed at the end of each year and amount estimated to be un
utilizable is charged to the statement of profit and loss for the year.
1.22 Cash and Cash equivalents
Cash and cash equivalents consist of cash on hand, demand deposits and
short term, highly liquid investments that are readily convertible into
known amounts of cash and which are subject to insignificant risk of
changes in value. For this purpose, short term means investments having
maturity of three months or less from the date of investment.