I First-time adoption - mandatory | exceptions, optional exemptions
3.1 Overall principle
The Company has prepared the opening standalone 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 recognizing 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 recognized assets and liabilities. However, this principle is subject to the certain exception and certain optional exemptions availed by the Company as detailed below.
3.2 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).
3.3 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 recognized 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.
3.4 Share-based payment transactions
Ind AS 101 encourages, but does not require, first time adopters to apply Ind AS 102 Share based Payment to equity instruments that were vested before the date of transition to Ind AS. The Company has elected not to apply Ind AS 102 to options that vested prior to April 1,
3.5 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,
f The Company has kept the same classification for the past business combinations as in its previous GAAP financial statements;
- The Company has not recognized assets and liabilities that were not recognized in accordance with previous GAAP in the standalone balance sheet of the acquirer and would also not qualify for recognition in accordance with Ind AS in the standalone balance sheet of the acquiree;
- The Company has excluded from its opening balance sheet those items recognized 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.
3.6 Deemed cost for property, plant and equipment, investment property, and intangible assets
The Company has elected to continue with the carrying value of all items of its plant and equipment, investment property, and intangible assets recognized 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.
3.7 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.
Explanation of material adjustments to Statement of Cash Flows:
There are no material differences between the statement of cash flows presented under Ind AS and the previous GAAP except due to various re-classification adjustments recorded under Ind AS and difference in the definition of cash and cash equivalents under these two GAAPs.
Notes to the reconciliations
a) Under previous GAAP, current investments were measured at lower of cost or fair value. Under Ind AS, these financial assets have been classified as FVTPL on the date of transition. The fair value changes are recognized in the the statement of profit and loss
On transitioning to Ind AS, these financial assets have been measured at their fair values which is higher than cost as per previous GAAP, resulting in an increase in carrying amount by '''' 61.51 Million as at March 31, 2016 and by '''' 382.29 Million as at April 1, 2015.
Accordingly, there is increase in total equity as at March 31, 2016 of '''' 61.51 Million (As at April 01, 2015: '''' 382.29 Million) and decrease in profit for the year ended March 31, 2016 of '''' 320.78 Million.
b) 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 recognized in the financial statements as a liability. Under Ind AS, such dividends are recognized when authorized by the members in a general meeting. Accordingly, the liability for proposed dividend of '''' 432.18 million as at March 31, 2016 ('''' 178.85 million as at March 31, 2015) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.
c) As per Ind AS 109, the company needs to account for the derivative over shares of another entity at it''''s fair value. The company had issued written put option to a third party with respect to the shares held by such party in one of the subsidiaries of the company Complying with the Ind AS requirement, the company has fair valued such put option and recognized liability of '''' 149.67 million ('''' 133.44 million as at April 1, 2015) towards the same. Consequently, the equity has decreased by '''' 149.67 million as at March 31, 2016 ('''' 133.44 million as at April 1, 2015) and profit for the year ended March 31, 2016 decreased by '''' 16.23 million.
d) Under Ind AS, deferred taxes are computed for temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Consequently, the deferred tax impact on hedging reserves has been recognized in Other comprehensive Income. Accordingly, there is a decrease in total equity as at March 31, 2016 of '''' 48.42 million ('''' 31.20 million as at April 1, 2015), and decrease in total profit for the year ended March 31, 2016 of '''' 17.22 million.
f) Under previous GAAP, actuarial gains and losses were recognized in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurernent of the net defined benefit liability / asset which is recognized in other comprehensive income. Consequently, the tax effect of the same has also been recognized in other comprehensive income under lnd AS instead of the statement of profit and loss.
The actuarial loss for the year ended March 31, 2016 were '''' 4.95 Million and the tax effect thereon is '''' 1.61 Million. This change does not affect total equity, but there is a increase in profit before tax of '''' 4.95 Million and in total profit of '''' 3.34 Million for the year ended March 31, 2016.
g) Under previous GAAP, there was no concept of other comprehensive income. Under Ind AS, specified items of income, expense, gains, or losses are required to be presented in other comprehensive income.
(vi) In the previous year, the Company had complied with provision on componentization of fixed assets prescribed by Schedule II of the Companies Act, 2013. In accordance with transition provision prescribed by Schedule II of the Companies Act, 2013, the Company has debited a sum of '''' 8.67 Million (net of deferred tax of '''' 4.27 Million) against the opening Surplus balance in the Statement of Profit and Loss under Reserves and Surplus.
(vii) Disposals include disposal of assets relating to discontinued operations referred to in Note 39.2 for amount of Rs, 42.90 Million(net).
(viii) Refer note 20(i) for properties pledged as security towards borrowings.
(iv) Fair Value of investment properties
"The Company obtains independent valuations for its investment properties once in three years. Accordingly, the fair value of the Company''''s investment properties as at March 31, 2017 has been arrived at Rs, 830.53 Million on the basis of a valuation carried out by independent valuers not related to the Company. The said valuers are registered with the authority which governs the valuers in India and have appropriate qualifications and relevant experience in the valuation of properties in the relevant locations. The inputs used are as follows:
- Monthly market rent, taking into account the differences in location, and individual factors, such as frontage and size, between the comparables and the property; and
* Capitalization rate, taking into account the capitalization of rental income potential, nature of the property, and prevailing market condition.
(v) Refer note 20(i) for properties pledged as security towards borrowings.
(i) Figures in brackets relate to previous year.
(ii) Allocation of goodwill to cash generating units:
Goodwill has been allocated for impairment testing purposes to the following cash-generating units:
- Regulated Markets
- Emerging Markets
The recoverable amount of this cash-generating unit is determined based on a value in use calculation which use cash flow projections based on financial budgets covering a five year period and a discount rate of 15.77 % per annum (as at March 31. 2016: 15.77% per annum). The cash flows beyond five-year period have been extrapolated using a steady 2% per annum growth rate.
There is no change in the above said assumptions as compared to that of previous years''''.
The management believes that the projections used by the management for determining the "Value in use" of cash generating units reflect past experience and external sources of information and any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.
Note (ii) :- Stelis Biopharma Private Limited (Stelis) until March 31, 2016 was assessed to be a subsidiary of the Company, as the Company ("Strides") had control over its operations. The shareholding pattern as at March 31, 2016 was Strides 74.9% and GMS 25.1%. However on March 31, 2017 Stelis, in order to meet its funding requirements, entered into an agreement with the Company, Tenshi Life Sciences Private Limited (Tenshi), (a promoter group company), and the GMS group, under which the parties agreed that any further funding that Stelis needs for its growth, would be funded by Tenshi and GMS group and that Strides would not be required to make any further investments into Stelis. The arrangement also envisaged that, over a period of time, the Company will eventually hold a significant non controlling interest only in Stelis. Tenshi and GMS will have the rights to appoint majority of the directors and the Company shall have right to appoint only one director. As the Company does not have majority representation on the board, where decisions with respect to relevant activities will be taken, the directors have concluded that the Company has no longer holds control over Stelis. However, as Strides has representation on the board and holds more than 20% share capital with voting rights, Stelis is assessed to be associate of the Company pursuant to the above arrangement.
Note (iii) : In the current year , the Company sold its investment in Aponia Laboratories Inc, USA having a carrying value of Rs, 221.07 Million to Strides Acrolab International Limited, UK, a wholly-owned subsidiary of the Company, for a consideration of USD 3.45 Million (Rs, 230.06 Million). Profit arising on such sale of investment amounting to Rs, 8.99 Million has been recognized in the Statement of Profit and Loss under Exceptional Items.
Note (iv) : During the previous year ended March 31, 2016, the Company invested Rs, 52.30 Million in Strides Biologix Private Limited (Biologix), India, for 51% stake in its equity shares. Biologix was set-up as an SPV which acquired the domestic Branded Business of Medispan Limited which is engaged in sales and marketing of niche Probiotics products. In the current year, the Company sold its investment in Biologix along with the put option liability attached thereto having a carrying value of Rs, 52.30 Million, for a consideration of Rs, 27.00 Million (net of loss amounting Rs, 24.00 Million on account of disposal of put option). Loss arising on such sale of investment amounting to Rs, 25.30 Million which also includes the loss arising on account of disposal of the aforesaid put option of Rs, 24.00 Million have been recognized in the Statement of Profit and Loss under Exceptional Items.
In determining the allowance for doubtful trade receivables, the Company has used a practical expedient by computing the expected credit allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the receivables that are due and rates used in the provision matrix.
The company has availed bill discounting facilities from the banks which do not meet the derecognition criteria for transfer of contractual rights to receive cash flows from the respective trade receivables since they are with recourse to the Company. Accordingly as at March 31, 2017, trade receivables balances include Rs, 264.56 Million (As at March 31, 2016: Rs, 473.28 Million and As at April 1, 2015: Rs, 270.69 Million) and the corresponding financial liability to the banks is included as part of working capital loan under short- term borrowings.
(ii) Detail of the rights, preferences and restrictions attaching to each class of outstanding equity shares of Rs, 10/- each:
The Company has only one class of equity shares, having a par value of Rs, 10/- each. The holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the board of directors is subject to approval by the shareholders at the ensuing annual general meeting. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution to all preferential amounts. The distribution will be in proportion to number of equity shares held by the shareholders.
38.1 Merger of Shasun Pharmaceuticals Limited:
In accordance with the terms of the Scheme of Amalgamation (the Rs,Scheme'''') between the Shasun Pharmaceuticals Limited (Transferor Company) and the Company (Transferee Company) which was approved by the Honourable High Courts of Judicature, the Transferor Company was merged with the Company from an appointed date of April 01, 2015. The effective date of the Scheme (being the date on which all the requirements under the Companies Act, 2013 and as per the Scheme have been completed) was November 19, 2015 (the ''''Effective Date''''). As per the requirements of the Scheme, the merger was accounted under the “pooling of interest method" and accordingly the assets and liabilities acquired have been incorporated at their carrying amounts as of the appointed date.
Pursuant to the Scheme, the Company allotted 21,017,329 equity shares to shareholders of Transferor Company in the ratio of 5 equity shares of Rs, 10/- each of the Company for every 16 shares of Rs, 2/- each held by shareholders of erstwhile Shasun as at November 19, 2015, being the record date for issue of equity shares by the Company. These shares have been considered for the purpose of calculation of earnings per share accordingly. An amount of Rs, 75.66 Million being the excess of the share capital issued by the Company over the share capital of the Transferor Company has been debited to Capital Reserves in accordance with the accounting treatment specified in the Scheme.
Further, in accordance with the Scheme, the authorized share capital of the Transferor Company, as on the effective date is added to the authorized share capital of the Company and the preference share capital of the Company is reclassified into the equity share capital. Accordingly, the authorized share capital of the Company increased to 176.75 Million equity shares of Rs, 10 each, totaling to Rs, 1,767.50 Million.
On re-measurement of the above balances under Ind AS on the appointed date of the Scheme (after considering the adjustment made as explained in the below paragraph, to align with the accounting policies of the Transferee Company), the resulting differences have been adjusted in the equity during the previous year ended March 31, 2016. There were no material differences on account of remeasurement in Ind AS.
The Transferor Company had adopted the provisions of para 46 / 46A of AS 11 “The Effects of Changes in Foreign Exchange Rates" under the previous GAAP. Accordingly, the exchange fluctuations on all long term monetary items so far as they related to the acquisition of a depreciable capital asset, were added to or deducted from the cost of the asset and were depreciated over the balance life of such assets. In cases other than those falling under above, exchange fluctuations on long term monetary items were accumulated in ''''Foreign Currency Monetary Item Translation Difference Account'''' (FCMITDA), grouped under Reserves and Surplus, and amortized over the balance period of long-term monetary asset/liability but not beyond March 31, 2020. In order to align with the Company''''s policy, the carrying value of such exchange differences included in the tangible fixed assets (now called as property, plant and equipment) amounting '''' 163.94 Million and the accumulated balance in the FCMITDA '''' 4.22 Million in the books of the Transferor Company as at the appointed date of the Scheme of merger have been charged-off to the Statement of Profit and Loss under exceptional items.
On completion of the merger of the Transferor Company with the Company, the following entities of the erstwhile Transferor Company became part of the Company:
- Aponia Laboratories Inc., USA
- Chemsynth Laboratories Private. Limited, India
- Shasun NBI LLC, USA
- Shasun Pharma Solutions Inc., USA
- Shasun Pharma Solutions Limited, UK
- Shasun USA Inc., USA
- Stabilis Pharma Inc., USA
- SVADS Holdings SA, Switzerland
Further, the following investments of the Transferor Company became part of the Company:
- Clarion Wind Farm Private Limited, India
- Beta Wind Farm Private Limited, India
- SIPCOT Industrial Common Utilities Limited, India
- Tulysan Lec Limited, India
In accordance with the terms of the Scheme, the Company was required to issue stock options in the Company to the employees holding options issued by the Transferor Company aggregating to 156,400 as at the effective date of the Scheme in the ratio of 5 options in the Company for every 16 options held in Transferor Company. The terms and conditions applicable to new options in the Company shall be no less favorable than those provided under erstwhile Shasun ESOP scheme. However, as at March 31, 2016, pending certain regulatory approvals, such options were not issued by the Company and hence 48,875 options were reserved for issue in respect of the above as at the March 31, 2016. In the current year ended March 31, 2017, 37,438 options were issued to the eligible option holders.
With effect from November 18, 2015, the name of the Company has been changed from Strides Arcolab Limited to Strides Shasun Limited.
As the effect of merger was recorded on April 1, 2015 being the appointed date of the Scheme, the opening balance sheet as at the transition date (which also happens to be April 1, 2015) in these financial statements do not include the balances relating to Transferor company and accordingly the figures of April 1, 2015 are not comparable with the other two balance sheet dates.
The Company entered into an agreement to acquire business of Fagris Medica Private Limited (""Fagris"") on February 7,2017 and the transaction was completed on March 31,2017. Fagris is the wholly owned subsidiary of the Company as on the date of transfer. This being a common control transaction, the assets and liabilities of Fagris has been transferred at book value, and the difference between the consideration and book value of assets transferred has been debited to Capital reserve. The operations in this entity is not significant as compared to the operations of the Company.
calculated borrowing costs on the funding levels, credit ratings and debt/equity position of the Group after the business combination; and excluded takeover defence costs of the acquire as a one-off pre-acquisition transaction.
Disposal of investments \ business
39.1 Sale of investments in entities manufacturing specialty products
The Company and its wholly owned subsidiary Strides Pharma Asia Pte Limited (“Strides Singapore") entered into definitive agreements on February 27, 2013 with Mylan Inc for sale of the Specialty products business. The transactions under the respective agreements were by way of (i) sale of investment held in Agila Specialties Private Limited (“ASPL", an erstwhile wholly owned subsidiary of the Company), to Mylan Laboratories Limited (“MLL"), a Mylan group company and (ii) the sale of investment held in Agila Specialties Global Pte Limited (“Agila Global", an erstwhile wholly owned subsidiary of Strides Singapore) to Mylan Institutional Inc, another Mylan group company. MLL and Mylan Institutional Inc together are referred to below as Mylan.
The sale of shares of ASPL was recorded by the Company in terms of the Sale and Purchase Agreement dated December 4, 2013 (the “India SPA"). The sale of shares of Agila Global was recorded by Strides Singapore in terms of another Sale and Purchase Agreement dated December 4, 2013 (the “Global SPA").
The Company has provided a corporate guarantee to Mylan Inc for USD 200 Million (valid up to December 4, 2020) on behalf of Strides Singapore which can be used for discharging specified financial obligations, if any, of Strides Singapore to Mylan, which has been included under contingent liabilities as at March 31, 2017, March 31, 2016 and April 1, 2015 in Note 42.
Further, in accordance with the terms of the India SPA and the Global SPA (together the “SPA"s), certain amounts were set aside under separate deposit / escrow accounts which were required to be utilized for specified expenses during the specified period. These included separate escrow / deposit of USD 100 Million in respect of potential claims under the SPAs in relation to certain regulatory concerns ("Regulatory escrow") and USD 100 Million in respect of potential claims in relation to the warranties and indemnities, including in relation to tax, as per the terms of SPAs and other transaction amounts ("General claims escrow"). Further, '''' 850 Million was set aside in separate Escrow for payment to certain specified senior management personnel of ASPL and its subsidiary. Any unutilized amounts from the deposit / escrow accounts after the specified period were payable to the respective entities of the Group. Given the uncertainties involved and in the absence of a right to receive, the amounts under the deposit / escrow arrangements were not included in the consideration accounted as income by the Company at the time of disposal of the investments. Receipts from these deposit / escrow accounts were recognized subsequently (net of related expenses incurred) in the period in which such amounts were received by the company.
During the year ended March 31, 2016, the Company received '''' 129.50 Million out of the escrow amount set aside under the India SPA for payment to senior management personnel of ASPL and its affiliates. This has been recognized as gain under exceptional items after adjusting related expenses of '''' 3.29 Million.
During the current and earlier years, the company received notifications of claims from Mylan under the terms of the SPAs. These included third party claims, tax claims, warranty and indemnity claims, claims against the regulatory escrows and general claims. Under the terms of the SPAs, claims against the Company / Strides Singapore can only be made under specific provisions contained in the SPAs which include the procedures and timelines for submission of notifications of claims and actual claims and commencing arbitration proceedings.
In the current year, all claims towards regulatory expenses have been settled and Strides Singapore received USD 28.33 Million as full and final settlement from out of the Regulatory Escrow account. The Company and Mylan also agreed on full and final settlement of warranty and indemnity claims which were adjusted against the General Claims Escrow. The balance available in the General Claims Escrow as at March 31, 2017 in respect of all claims is USD 62 Million.
As at March 31, 2017, the outstanding claims relate to certain tax claims and third party claims. Considering the nature of the pending claims, terms of the SPAs and the balance available in Escrow, the management believes that any further outflow of resources is not probable.
During the year ended March 31, 2016, the Company had raised Rs, 11,026.62 Million on issue of 8,628,028 equity shares of Rs, 10 each at a premium of Rs, 1,268 per equity share to Qualified Institutional Buyers (QIP) in terms of SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009. The Company completed the allotment of equity shares on December 23, 2015 and expenses incurred in relation to QIP to the extent of Rs, 326.66 Million were debited to Securities Premium Account.
IN95IN9nJ Share-based payments
Details of the employee share option plan of the Company:
(a) The ESOP titled “Strides Arcolab ESOP 2011" (ESOP 2011) was approved by the shareholders on May 30, 2011 for 1,500,000 options. Each option comprises one underlying equity share of the Company. The vesting period of these options range over a period of three years. The options must be exercised within a period of 30 days from the date of vesting. No options were granted under this plan during the current year.
(b) The ESOP titled “Strides Arcolab ESOP 2015" (ESOP
2015) was approved by the shareholders on November 6, 2015 for 70,000 options. Each option comprises one underlying equity share of the Company. The vesting period of these options range over a period of four years. The options must be exercised within a period of 180 days from the date of vesting. Out of these options, 42,062 options were reserved for issue as at March 31, 2016 to employees of erstwhile Shasun Pharmaceuticals Limited pursuant to the Scheme of Amalgamation, as explained in Note 38.1. During the year ended March 31, 2017, the Company issued 37,438 options to the eligible option holders.
As at March 31, 2016, additional 6,813 options were reserved for issue to the elibile employees of Shasun Pharma Solutions Limited, UK. Pursuant to the accelerated vesting of such options on account of disposal of this entity during the year ended March 31, 2017 (refer Note 38.1), the Company recognized expenses of Rs, 3.77 Million during the year ended March 31, 2017.
(c) The ESOP titled “Strides Shasun ESOP 2016" (ESOP 2016) was approved by the shareholders on April 21, 2016. 3,000,000 options are covered under the Plan which are convertible into equal number of equity shares of the Company. The vesting period of these options range over a period of three years. The options must be exercised within a period of one year from the date of vesting. Company has granted 100,000 options under the scheme during the current year.
(d) During the current year, Employee compensation costs of Rs, 54.71 Million (for the year ended March 31, 2016: Rs, 44.83 Million) relating to the above referred various Employee Stock Option Plans have been charged to the Statement of Profit and Loss.
Fair value of share options granted in the year The fair value of the share options granted under ESOP 2015 and ESOP 2016 are Rs, 1,058.38 and Rs, 611.33 respectively. Options were priced using a Black-Scholes method of valuation as at grant date. Expected volatility is based on the historical share price volatility over the past 3 years.
INBBHN94^ Employee Benefits Plans Defined contribution plan
The Company makes contributions to provident fund and employee state insurance schemes which are defined contribution plans, for qualifying employees. Under the schemes, the company is required to contribute a specified percentage of the payroll cost to fund the benefits. The company recognized Rs, 177.14 Million (previous year: Rs, 119.45 Million) for provident fund contributions, Rs, 7.99 Million (previous year: Rs, 4.95 Million) for employee state insurance scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
Defined benefit plan
The Company offers gratuity benefits, a defined employee benefit scheme to its employees.
Composition of the plan assets
The fund is managed by LIC , the fund manager. The details of composition of plan assets managed by the fund manager is not available with the company. However, the said funds are subject to Market risk (such as interest risk, investment risk, etc).
The said benefit plan is exposed to actuarial risks such as longevity risk and salary risk.
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the Longevity risk mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''''s liability..
Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''''s liability.
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.
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 recognized in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years. There has been no change in the process used by the Company to manage its risks from prior periods.
IN3teiNW4M Related party transactions : List of related parties
Wholly owned subsidiaries Direct Holding
Fagris Medica Private Limited (with effect from February 15, 2017)
Shasun USA Inc, USA
Solara Active Pharma Sciences Limited (formerly, SSL Pharma Sciences Limited, incorporated on 23 February 2017)
Strides Arcolab International Limited, UK
Strides Consumer Private Limited, India (incorporated on 06 March 2017)
Strides Pharma Asia Pte Limited, Singapore Strides Pharma International Limited, Cyprus SVADS Holdings SA, Switzerland Indirect Holding Altima Innovations Inc, USA
Arrow Pharma (Private) Limited,Srilanka (with effect from February 27, 2017)
Arrow Pharma Life Inc., Philippines (with effect from February 27, 2017)
Arrow Pharma Pte Limited, Singapore (with effect from February 27, 2017)
Arrow Pharma Pty Limited, Australia Arrow Pharmaceuticals Pty Limited, Australia
Arrow Remedies Private Limited, India (with effect from February 27, 2017)
Pharmacy Alliance Investments Pty Limited, Australia Shasun Pharma Solutions Inc, USA Stabilis Pharma Inc, USA
Stelis Biopharma (Malaysia) Sdn Bhd, Malaysia (with effect from March 1, 2017)
Sterling Pharma Solutions Limited, UK (formerly, Shasun Pharma Solutions Limited - Up to September 30, 2016)
Strides Africa Limited, BVI
Strides Arcolab (Australia) Pty Limited, Australia
Strides CIS Limited, Cyprus
Strides Emerging Markets Private Limited, India
Strides Pharma (Cyprus) Limited, Cyprus
Strides Pharma (SA) Pty Limited, South Africa
Strides Pharma Global (UK) Limited, UK (formerly, Strides Pharma (UK) Limited)
Strides Pharma Global Pte Limited, Singapore Strides Pharma Inc, USA Strides Pharma Limited, Cyprus
Strides Pharma (UK) Limited, UK (formerly, Strides Shasun (UK) Limited)
Strides Specialties (Holdings) Limited, Mauritius
Strides Pharmaceuticals (Holdings) Limited, Cyprus (merged with Strides Pharma International Limited,Cyprus with effect from October 16,2015)
Other Subsidiaries: Direct Holding:
Chemsynth Laboratories Private Limited, India (49%)
Fagris Medica Private Limited (90%) (up to February 14, 2017)
Stelis Biopharma Private Limited, India (74.90%) (up to March 31, 2017)
Strides Biologix Private Limited (51%) (up to March 31, 2017)
Strides Healthcare Private Limited (74%)
Alliance Pharmacy Pty Limited, Australia (51%)
Arrow Pharma (Private) Limited, Sri Lanka (95%) (up to February 26, 2017)
Arrow Pharma Life Inc., Philippines (95%) (up to February 26, 2017)
Arrow Pharma Pte. Limited, Singapore (up to February 26, 2017) (95%)
Arrow Remedies Private Limited, India (95%) (up to February 26, 2017)
Beltapharm SpA, Italy (97.94%)
Generic Partners (Canada) Inc., Canada (with effect from August 11, 2016) (51%)
Generic Partners (International) Pte Limited, Singapore (with effect from August 11, 2016) (51%) Generic Partners (M) Sdn Bhd, Malaysia (with effect from August 11, 2016) (51%)
Generic Partners (NZ) Limited, New Zealand (with effect from August 11, 2016) (51%)
Generic Partners (South Africa) Pty Limited, South Africa (with effect from August 11, 2016) (51%) Generic Partners Holding Co Pty Limited, Australia (with effect from August 11, 2016) (51%) Generic Partners Pty Limited, Australia (with effect from August 11, 2016) (51%)
Generic Partners UK Limited, UK (with effect from August 11, 2016) (51%)
Pharmacy Alliance Group Holdings Pty Limited., Australia (51%)
Pharmacy Alliance Pty Limited, Australia (51%)
Smarterpharm Pty Limited (with effect from January 23,2017) (51%)
Stelis Biopharma (Malaysia) SDN BHD, Malaysia (74.90%) (up to February 28, 2017)
Universal Corporation Limited, Kenya (51%) (with effect from May 1, 2016)
Indirect Holding -Hived off effective March 31, 2017 African Pharmaceutical Development S.A, Cameroon (85%)
Congo Pharma SPRL, Congo (85%)
Societe De Repartition Pharmaceutique, Burkinofaso (80%)
Strides Pharma Botswana (Proprietary) Limited (70%)
Strides Pharma Cameroon Limited (85%)
Strides Pharma Mozambique, SA (51%)
Strides Pharma Namibia Pty Limited (70%)
Strides Vital Nigeria Limited, Nigeria (74%)
Strides Foundation Trust, India Shasun Foundation Trust, India
Joint Ventures (JV) Akorn Strides LLC, USA (50%)
Shasun NBI LLC, USA (50%)
SPC Co. Limited, Sudan (51%) (up to March 31, 2017)
Strides Shasun Latina Sa De Cv, Mexico (80%) (with effect from August 23, 2016)
Oraderm Pharmaceuticals Pty Limited, Australia (50%) (with effect from June 6, 2016)
Associates Aponia Laboratories Inc, USA
Regional Bio Equivalence Centre S.C., Ethiopia (with effect from May 1, 2016)
Stelis Biopharma Private Limited (with effect from March 31, 2017)
Key Management Arun Kumar, Chairman (with effect from May 18,2017) (Executive Vice Chairman and Managing Director,
Personnel (KMP) up to May 18, 2017)
Abhaya Kumar, Executive Director (Resigned on May 18, 2017)
Shashank Sinha, Managing Director (Appointed on May 18, 2017) (Group Chief Executive Officer (with effect from October 28, 2016 and up to May18,2017)
Badree Komandur, Executive Director (Appointed on May 18, 2017) (Group Chief Financial Officer up to May 18, 2017 & Company Secretary up to February 3, 2017)
Manjula Ramamurthy, Company Secretary (with effect from February 3, 2017)
Deepak Vaidya, Non-Executive Director (with effect from May 18, 2017) (Chairman up to May 18, 2017)
A K Nair, Non-Executive Director (Resigned on May 18, 2017)
Bharat Shah, Non-Executive Director
Homi R Khusrokhan, Non-Executive Director (Appointed on May 18, 2017)
M R Umarji, Non-Executive Director (Resigned on May 18, 2017)
PMThampi, Non-Executive Director (Resigned on May 18, 2017)
S Sridhar, Non-Executive Director Sangita Reddy, Non-Executive Director Relatives of KMP Aditya Arun Kumar, son of Arun Kumar
Enterprises owned or Atma Projects, India
significantly influenced Chayadeep Properties Private Limited, India by key management Devendra Estates LLP, India
personnel and relative LifeCell International Private Limited, India
of key management Nutra Specialities Private Limited, India
personnel Tenshi Kaizen Private Limited (formerly, Higher Pharmatech Private Limited)
Strides Biologix Private Limited, India (51%) (with effect from March 31, 2017)
Sequent Scientific Limited, India Sequent Research Limited, India
Sterling Pharma Solutions Limited, UK (formerly, Shasun Pharma Solutions Limited - (with effect from September 30, 2016)
Shasun Leasing and Finance Limited, India
Fair value hierarchy
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consist of the following three levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
Fair value of the Company''''s financial assets and financial liabilities that are measured at fair value on a recurring basis Some of the Company''''s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used).
48.3.2 Foreign currency sensitivity analysis
Financial instruments affected by changes in foreign exchange rates include External Commercial Borrowings (ECBs), loans in foreign currencies to subsidiaries and joint ventures. The Company considers US Dollar and the Euro to be principal currencies which require monitoring and risk mitigation. The Company is exposed to volatility in other currencies including the Great Britain Pounds (GBP) and the Australian Dollar (AUD). The impact on account of 5% appreciation / depreciation in the exchange rate of the above foreign currencies against INR is given below:
The impact on profit has been arrived at by applying the effects of appreciation / deprecation effects of currency on the net position (Assets in foreign currency
- Liabilities in foreign currency) in the respective currencies.
For the purposes of the above table, it is assumed that the carrying value of the financial assets and liabilities as at the end of the respective financial years remains constant thereafter. The exchange rate considered for the sensitivity analysis is the exchange rate prevalent as at each year end.
The sensitivity analysis might not be representative of inherent foreign exchange risk due to the fact that the foreign exposure at the end of the reporting period might not reflect the exposure during the year.
48.4 Interest rate risk management
Interest rate risk arises from borrowings. Debt issued at variable rates exposes the company to cash flow risk. Debt issued at fixed rate exposes the company to fair value risk. The company mitigates its interest rate risk by entering into interest rate Swap contracts.
48.4.1 Interest rate sensitivity analysis
Financial instruments affected by interest rate changes include Secured Long term loans from banks, Secured Long term loans from others, Unsecured Long term loans, Secured Short term loans from banks and Unsecured Short term loans from banks and others. The impact of a 1% change in interest rates on the profit of an annual period will be Rs, 161.78 Million (March 31, 2016: Rs, 156.91 Million) assuming the loans as at each year end remain constant during the respective years.
This computation does not involve a revaluation of the fair value of loans as a consequence of changes in interest rates. The computation also assumes that an increase in interest rates on floating rate liabilities will not necessarily involve an increase in interest rates on floating rate financial assets.
"The change in sensitivity to interest rate is attributed to the following:
a. new acquisitions in the current year.
b. hedging instruments taken to fix certain variable interest loans
48.4.2 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. Such contracts enable the Company to mitigate the risk of cash flow exposures on the issued variable rate debt. The fair value of interest rate swaps at the end of the reporting period is determined by discounting the future cash flows using the curves at the end of the reporting period and the credit risk inherent in the contract, and is disclosed below. The average interest rate is based on the outstanding balances at the end of the reporting period.
The following tables detail the nominal amounts and remaining terms of interest rate swap contracts outstanding at the end of the reporting period.
All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as FVTPL.
The line-item in the balance sheet that includes the above instruments is "Other financial liabilities (Refer note 21(ii)".
The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is the local interbank rate in the currency of the loan. The Company will settle the difference between the fixed and floating interest rate on a net basis.
48.5 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. Credit Risk to the company primarily arises from trade receivables. Credit risk also arises from cash and cash equivalents, financial instruments and deposits with banks and financial institutions and other financial assets.
The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. The Company has an internal mechanism of determining the credit rating of the customers and setting credit limits. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
The credit risk arising from receivables is subject to currency risk in that the receivables are predominantly denominated in USD, AUD and GBP and any appreciation in the INR will affect the credit risk. Further, the Company is not significantly exposed to geographical distribution risk as the counterparties operate across various countries across the Globe.
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.
48.6 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 short term and long term cash flows, and by matching the maturity profiles of financial assets and liabilities. A portion of the company''''s surplus cash is retained as investments in Liquid Mutual Funds to fund short term requirements.
48.6.1 Liquidity analysis for Non-Derivative Liabilities
The following table details 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 table include both interest and principal cash flows. To the extent that interest flows are 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.
Liquidity analysis for derivative financial instruments-
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, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. Outflows are represented in brackets in table below:
IN33S9B3 Capital management
The Company manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in notes 20 and 21(ii) offset by cash and bank balances) and total equity.
The Company reviews the capital structure on a semi-annual basis to ensure that it in compliance with the required covenants. The Company has a target gearing ratio of 1:1 determined as the proportion of net debt to total equity. The gearing ratio at March 31, 2017 is 0.07.
The Company is not subject to any externally imposed capital requirements.
Since the Company prepares consolidated financial statements, segment information has not been provided in these standalone financial statements.
- Scheme of Arrangement under I Section 391 - 394 of the Companies |Act, 1956
The Scheme of Restructuring approved by the shareholders on April 13, 2009 included a Scheme of Arrangement that envisaged the creation of a Reserve for Business Restructuring as set out in the Scheme. The Reserve was to be utilized by December 31, 2012 for specified purposes by either the Company or its subsidiaries. The balance of Rs, 3,846.38 Million identified under the Securities Premium Account represents amounts utilized by the subsidiaries of the Company from the Reserve prior to December 31, 2012 and have been earmarked for set off on consolidation.
1390939153 Other Matters
(a) In respect of freehold land to the extent of 7.20 acres (as at March 31, 2017 gross block and net block amounting to Rs, 257.67 Million) capitalized in the books of the Company, the title deeds are under dispute. The Company has been legally advised that it has title deed in its name and that it will be able defend any counter claims to such parcel of land under dispute.
(b) The title deeds of freehold land and building admeasuring 52.01 acres (as at March 31, 2017 gross block Rs, 1,302.05 Million and net block of Rs, 1,052.40 Million) capitalized in the books of the Company are in the name of erstwhile Companies which were merged with the Company under Section 391 to 394 of the Companies Act, 1956 in terms of the approval of the Honorable High Courts of judicature. The Company is in the process transferring the title deeds of such properties in its name.
(c) In respect of freehold land admeasuring 0.6 acres (as at March 31, 2017 gross block and net block amounting to Rs, 0.81 Million) capitalized in the books of the Company, the title deeds are not in the name of the Company. The Company is in the process of transferring the title deeds of such land in its name.
(d) In respect of building admeasuring 750 sq. ft. (as at March 31, 2017 gross block of Rs, 3.55 Million and net block Rs, 1.30 Million) capitalized in the books of the Company, the title deeds are not in the name of the Company. The Company is in the process of transferring the title deeds of such building in its name
The detailed Transfer Pricing regulations (''''regulations'''') for computing the income from “domestic transactions" with specified parties and international transactions between ''''associated enterprises'''' on an ''''arm''''s length'''' basis is applicable to the Company. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant which is to be filed with the Income tax authorities.
The Company has undertaken necessary steps to comply with the Transfer Pricing regulations. The Management is of the opinion that the transactions with associated enterprises and domestic transactions are at arm''''s length, and hence the aforesaid legislation will not have any material impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.
IN95IN9E^ Proposed dividend
In respect of the current year, the directors propose that a dividend of Rs, 4.50 per share be paid on equity shares. This equity dividend is subject to approval by shareholders at the Annual General Meeting (AGM) and has not been included as a liability in these financial statements. The proposed equity dividend is payable to all shareholders on the Register of Members on the date of AGM. The total estimated equity dividend to be paid is Rs, 402.40 Million. The payment of this dividend is estimated to result in payment of dividend tax @ 20.36% on the amount of dividends grossed up for the related dividend distribution tax.