1. Nature and purpose of other equity
- Capital reserve
Accumulated capital surplus not available for distribution of dividend and expected to remain invested permanently.
- Securities premium reserve
The unutilized accumulated excess of issue price over face value on issue of shares. This reserve is utilized in accordance with the provisions of the Act.
- Capital redemption reserve
Capital redemption reserve represents the unutilized accumulated amount set aside at the time of redemption of preference shares. This reserve is utilized in accordance with the provisions of the Act.
- Amalgamation reserve
Amalgamation reserve represents the unutilized accumulated surplus created at the time of amalgamation of another company with the Company. This reserve is not available for distribution of dividend and is expected to remain invested permanently.
- General reserve
This represents appropriation of profit by the Company and is available for distribution of dividend.
- Debenture redemption reserve
The Company is required to create a debenture redemption reserve out of the profits prior to the redemption of debentures. This reserve is available for distribution of dividend post redemption of debentures.
- Share based payment reserve
The fair value of the equity settled share based payment transactions with employees is recognized in Statement of Profit and Loss with corresponding credit to share based payment reserve. Further, equity settled share based payment transaction with employees of subsidiary is recognized in investment of subsidiaries with corresponding credit to Share based payment reserve. Corresponding balance of a share based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee, as the Company is operating the Employee Stock Option schemes through Jubilant Employees Welfare Trust, which has purchased share from the secondary market.
- Foreign Currency Monetary Item Translation Difference Account (FCMITDA)
This represent accumulated Monetary Item Translation Difference of long-term foreign currency monetary items to be amortized over the period in which long-term foreign currency monetary items is payable.
- Equity instrument through OCI
The Company has elected to recognize changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the equity instrument through OCI within equity. The Company transfers amount there from to retained earnings when the relevant equity securities are derecognized.
- Remeasurements of defined benefit obligation
Remeasurements of defined benefit obligation comprises actuarial gains and losses and return on plan assets.
2.a. Nature of security of Non-current borrowings and other terms of repayment
17(a) (i) Indian rupee term loans amounting toRs, 3,849.00 million (31 March 2016:Rs, 7,903.92 million; 1 April 2015:Rs, 10,181.53 million) from Axis Bank Limited, RBL Bank Limited and Non Convertible Debentures amounting toRs, 4,950.00 million (31 March 2016: Nil; 1 April 2015:Rs, NIL), External commercial borrowings amounting toRs, 1,199.72 million (31 March 2016:Rs, 2,318.75 million; 1 April 2015:Rs, 2,968.75 million) from DBS Bank Limited, Singapore and foreign currency loans amounting toRs, Nil ( 31 March 2016:Rs, 1,325 million; 1 April 2015:Rs, 2,187.50 million) from Export Import Bank of India are secured by a first pari-passu charge created/ to be created amongst the lenders by way of:
1) Mortgage on the immovable fixed assets, both present and future, situate at:
(a) Bhartiagram, Tehsil Dhanora, District Amroha, Uttar Pradesh, India, save and except the following immovable fixed assets from mortgage with effect from current year
i.) Land measuring 90124.24 square meters together with all the buildings and structures thereon situated in the revenue estate of Village Naipura Khadar and Tigariya Bhoor, Tehsil Dhanora, District Amroha, Uttar Pradesh, India, being under common title deeds with other group companies;
ii.) Land measuring 5.56 Acres OR 2.253 Hectares together with all the buildings and structures thereon situated in the revenue estate of Village Fazalpur Gosai, Tehsil Dhanora, District Amroha, Uttar Pradesh, India; and
iii.) Leasehold Land, being plot no. A-4/2 measuring 157509 square meters, together with all the buildings and structures thereon situated in UPSIDC Industrial Area II, Gajraula, Tehsil Dhanora, District Amroha, Uttar Pradesh, India, being under common lease deed with other group companies;
(b) Village Samlaya, Taluka Savli, District Vadodra, Gujarat, India, and
2) Hypothecation on the entire movable fixed assets, both present and future of the Company. (1 April 2015: Indian rupee loan from Axis Bank Limited was further secured by exclusive first charge created by way of hypothecation on receivable of USD 52.50 million (Rupee equivalent converted at closing rateRs, 3,281.25 million) from Jubilant Generics Limited arising on account of Business Transfer Agreement) (Refer note 50).
17(a) (ii) Indian rupee term loan amounting toRs, 1,875.00 million (31 March 2016:Rs, 1,875.00 million; 1 April 2015:Rs, 3,000.00 million) from Housing Development Finance Corporation Limited is secured by first mortgage by way of deposit of original title deeds of specified land and buildings situated at Noida, Greater Noida, Ambernath and also at Bharuch owned by one of the subsidiaries of the Company.
17(a) (iii) Non convertible debentures amounting toRs, 4,950.00 million (31 March 2016: Nil; 1 April 2015: Nil) is repayable in four yearly installments from January 2019.
17(a) (iv) Indian rupee term loan amounting toRs, 2,575.00 million (31st March 2016:Rs, 3,575.00 million repayable in ten half yearly installments from September 2017; 1 April 2015:Rs, 3,500.00 million repayable in fourteen half yearly installments commencing from September 2015) from Axis Bank Limited is repayable in five half yearly installments from March 2020.
17(a) (v) Indian rupee term loan amounting toRs, 1,274.00 million (31 March 2016: Nil; 1 April 2015: Nil) from RBL Bank Limited is repayable in nineteen quarterly installments from June 2017.
17(a) (vi) Indian rupee term loan amounting toRs, 1,200.00 million (31 March 2016:Rs, 1,200.00 million repayable in eight equal quarterly installments from June 2018; 1 April 2015:Rs, 1,800.00 million repayable in twelve equal quarterly installments commencing from June 2017) from Yes Bank Limited has been fully repaid during the current year.
17(a) (vii) Indian rupee term loan amounting toRs, 1,128.92 million (31 March 2016:Rs, 1,128.92 million repayable in eight quarterly installments from June 2018; 1 April 2015:Rs, 1,881.53 million repayable in twenty quarterly installments commencing from June 2015) from IndusInd Bank Limited as on 31 March 2016 has been fully repaid during the current year.
17(a) (viii) External commercial borrowing amounting to USD 18.50 million ('''' 1,199.72 million) (31 March 2016: USD 35 million ('''' 2,318.75 million) repayable in two yearly installments from December 2016; 1 April 2015: USD 47.5 million ('''' 2,968.75 million) repayable in three yearly installments from December 2015 ) from DBS Bank Limited, Singapore is repayable in December 2017.
17(a) (ix) Term loan of USD 20 million ('''' 1,344.40 million) (31 March 2016: USD 20 million ('''' 1,325 million) repayable in one yearly installments from May 2016; 1 April 2015: USD 35 million ('''' 2,187.50 million repayable in two yearly installments from May 2015) from Export Import Bank of India has been fully repaid during the current year
17(a) (x) Indian rupee term loan amounting toRs, 1,875.00 million (31st March 2016:Rs, 1,875.00 million repayable in five equal half yearly installments from September 2018; 1 April 2015:Rs, 3,000.00 million repayable in eight equal half yearly installments commencing from March 2017.) from Housing Development Finance Corporation Limited is repayable in five equal half yearly installments from September 2018.
17(a) (xi) Indian rupee term loan amounting toRs, 2,000.00 million from IFCI Limited (31 March 2016:Rs, 2,000.00 million repayable in eight equal quarterly installments from May 2018; 1 April 2015:Rs, 3,000.00 million repayable in twelve equal quarterly installments commencing from May 2017) has been fully repaid during the current year.
17(a) (xii) Loans from subsidiaries are repayable at end of five years from the date of respective disbursement.
17(a) (xiii) Finance lease obligations are secured by hypothecation of specific assets taken under such lease. The same are repayable within five years.
17(a)(xiv) The term loans carry floating interest rate calculated in accordance with the terms of the arrangement which is a specified benchmark rate (reset at periodic intervals), adjusted for agreed spread. During the year ended 31 March 2017, the interest rate on Indian currency loans and foreign currency loans range from 7.95 % to
12.75% per annum (31March 2016: 10.75% to 13.25% per annum and 1 April 2015: 9.50% to 13.25% per annum) and 4.41 % to 5.18 % per annum (31 March 2016: 3.50% to 4.75% per annum and 1 April 2015: 3.50% to 4.50% per annum), respectively.
The composition of property, plant and equipment and current assets as mentioned above are defined in detail in the respective financing/credit arrangements.
17b. Nature of security of Current borrowings and other terms of repayment
17(b) (i) Working capital facilities (including cash credit) sanctioned by consortium of banks and notified financial institutions are secured by a first charge by way of hypothecation, ranking pari-passu inter-se banks, of the entire book debts and receivables and inventories both present and future, of the Company wherever the same may be or be held. Other working capital loans are repayable as per terms of agreement within one year
17(b) (ii) Short term loans are availed in Indian rupees and in foreign currency which carry floating interest rate calculated in accordance with the terms of the arrangement which is a specified benchmark rate (reset at periodic intervals), adjusted for agreed spread. During the year ended 31 March 2017, the interest rate on Indian currency loans range from 6.09 % to 13.00% per annum (31 March, 2016: 8.75% to 14.00% and 1 April, 2015: 9.50% to 14.00% )
The composition of property, plant and equipment and current assets as mentioned above are defined in detail in the respective financing/credit arrangements.
17c. Property, plant and equipment, inventory and other financial assets with a carrying amount of Rs, 14,035.69 million (31 March 2016:Rs, 13,983.93 million; 1 April 2015:Rs, 14,293.29 million),Rs, 4,544.40 million (31 March 2016:Rs, 4,752.63 million; 1 April 2015:Rs, 5,127.62 million),Rs, 3,856.66 million (31 March 2016:Rs, 3,412.95 million; 1 April 2015:Rs, 3,634.66 million) respectively are provided as security against borrowing at year end.
During the year ended 31 March 2017 and 31 March 2016, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence DDT paid is charged to equity. Distribution tax on dividend represents distribution tax on dividend paid during the year ended 31 March 2017 amounting to Rs, 97.28 million (31 March 2016:Rs, 97.28 million) net off, distribution tax amounting to Rs, 39.27 million on dividend received during the year ended 31 March 2017 (31 March 2016:Rs, 60.21 million) from subsidiary companies.
3. Micro, small and medium enterprises
There are no Micro, Small and Medium Enterprises, to whom the company owes dues, which are outstanding for more than 45 days as at the end of year. The information as required to be disclosed in relation to Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.
4. Employee benefits in respect of the Company have been calculated as under:
(A) Defined Contribution Plans
The Company has certain defined contribution plan such as provident fund (1), employee state insurance, employee pension scheme, employee superannuation fund wherein specified percentage is contributed to them. During the year, the Company has contributed following amounts to:
(B) Defined Benefit Plans
In accordance with Ind AS 19 “Employee Benefits”, an actuarial valuation has been carried out in respect of gratuity. The discount rate assumed is 7.50% p.a. (31 March 2016: 7.90% p.a.; 1 April 2015: 7.74% p.a.) which is determined by reference to market yield at the Balance Sheet date on Government bonds. The retirement age has been considered at 58 years (31 March 2016: 58 years; 1 April 2015: 58 years) and mortality table is as per IALM (2006-08) (31 March 2016: IALM (2006-08); 1 April 2015: IALM (200608)).
The estimates of future salary increases, considered in actuarial valuation is 10% p.a. for first three years and 6% p.a. thereafter (31 March 2016: 10% p.a. for first three years and 6% p.a. thereafter; 1 April 2015: 10% p.a. for first three years and 6% p.a. thereafter), taking into account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The plans assets are maintained with Life Insurance Corporation of India in respect of gratuity scheme for certain employees of two units of the Company. The details of investments maintained by Life Insurance Corporation are not available with the Company, hence not disclosed. The expected rate of return on plan assets is 7.50% p.a. (31 March 2016: 9.00% p.a.; 1 April 2015: 9.00% p.a.).
** In respect of one location, the plan assets were invested in insurer managed funds.
Company’s best estimate of contribution during next year is Rs, 74.52 million (31 March 2016:Rs, 68.81 million)
The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the year and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant.
ii. Provident Fund:
The Company makes monthly contributions to provident fund managed by trust for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. As per Ind AS 19 on “Employee Benefits”, employer established provident fund trusts are treated as defined benefit plans, since the Company is obliged to meet interest shortfall, if any, with respect to covered employees. The total liability of Rs, Nil (31 March 2016:Rs, Nil; 1 April 2015:Rs, Nil) as worked out by the actuary has been allocated to each entity based on the corpus value of each entity as at 31 March 2017. Accordingly, liability of Rs, Nil (31 March 2016:Rs, Nil; 1 April 2015:Rs, Nil) has been allocated to Company and Rs, Nil (31 March 2016:Rs, Nil; 1 April 2015:Rs, Nil) has been charged to Statement of Profit and Loss during the year.
*The fair value of borrowings is based upon a discounted cash flow analysis that used the aggregate cash flows from principal and finance costs over the life of the debt and current market interest rates.
(d) The fair value is determined by using the valuation model/technique with observable/non-observable inputs and assumptions.
(e) Derivatives are carried at fair value at each reporting date. The fair values of the derivative financial instruments has been determined using valuation techniques with market observable inputs. The models incorporate various inputs including the credit quality of counter-parties and foreign exchange forward rates.
There are no transfers between level 1, Level 2 and Level 3 during the year ended 31 March 2017 and 31 March 2016.
5. Financial risk management
A. Financial risk management Risk management framework
The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company, through three layers of defense namely policies and procedures, review mechanism and assurance aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit committee of the Board with top management oversee the formulation and implementation of the Risk management policies. The risk are identified at business unit level and mitigation plan are identified, deliberated and reviewed at appropriate forums.
The Company has exposure to the following risks arising from financial instruments:
- credit risk (see (i));
- liquidity risk (see (ii)); and
- market risk (see (iii)).
i. Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers, loans and investments.
The carrying amount of financial assets represents the maximum credit risk exposure.
Trade receivables and other financial assets
The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and business intelligence. Sale limits are established for each customer and reviewed annually. Any sales exceeding those limits require approval from the appropriate authority as per policy.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a institutional, dealers or end-user customer, their geographic location, industry, trade history with the Company and existence of previous financial difficulties.
Expected credit loss for trade receivables:
The Company based on internal assessment which is driven by the historical experience/ current facts available in relation to default and delays in collection thereof, the credit risk for trade receivables is considered low. The Company estimates its allowance for trade receivable using lifetime expected credit loss. The balance past due for more than 6 month (net of expected credit loss allowance), excluding receivable from group companies isRs, Nil (31 March 2016:Rs, Nil, 1 April 2015:Rs, 7.78 million)
Expected credit loss on financial assets other than trade receivables:
With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from which these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible and accordingly no provision for excepted credit loss has been provided on these financial assets. Break up of financial assets other than trade receivables have been disclosed on balance sheet.
ii. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company’s treasury department is responsible for managing the short term and long term liquidity requirements. Short term liquidity situation is reviewed daily by Treasury. Longer term liquidity position is reviewed on a regular basis by the Board of Directors and appropriate decisions are taken according to the situation.
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements.
(1) Carrying amount presented as net of unamortized transaction cost.
iii. Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates that will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the functional currency of the Company. The currencies in which the Company is exposed to risk are USD, EUR, CAD and Other.
The Company follows a natural hedge driven currency risk mitigation policy to the extent possible. Any residual risk is evaluated and appropriate risk mitigating steps are taken, including but not limited to, entering into forward contract and interest rate swap.
Exposure to currency risk
The summary quantitative data about the Company’s exposure to currency risk as reported to the management of the Company is as follows:
A reasonably possible strengthening (weakening) of the EUR, USD, CAD and other against all other currencies at 31 March would have affected the measurement of financial exposure denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact on forecast sales and purchases.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees and US dollars with a mix of fixed and floating rates of interest. The Company has exposure to interest rate risk, arising principally on changes in base lending rate and LIBOR rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.
Exposure to interest rate risk
The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows:
The following table provides a break-up of the Company’s fixed and floating rate borrowings:
The sensitivity analysis below have been determined based on the exposure to interest rates for floating rate liabilities assuming the amount of the liability outstanding at the year-end was outstanding for the whole year.
If interest rates had been 25 basis points higher / lower and all other variables were held constant, the Company’s profit for the year ended 31 March 2017 would decrease / increase byRs, 14.46 million (for the year ended 31 March 2016: decrease / increase byRs, 44.29 million). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.
6. Capital management
(a) Risk management
The Company’s objectives when managing capital are to:
- safeguard its ability to continue as a going concern, so that its can continue to provide returns for its shareholders and benefits for other stakeholders, and
- maintain an optimal capital structure to reduce the cost of capital.
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.
Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:
Net debt (total borrowings net of cash and cash equivalents and other bank balances) and divided by Total ‘equity’ (as shown in the Balance Sheet).
7. Segment information Business Segments
The Chairman and Co-Chairman and Managing Director of the company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, Operating Segments. Operating Segments have been defined and presented based on the regular review by the CODM to assess the performance of each segment and to make decision about allocation of resources. Accordingly, the Company has determined reportable segment by nature of its product and service, accordingly following are the reportable segments:
a. Pharmaceuticals: Indian Branded Pharmaceuticals.
b. Life Sciences Ingredients: Specialty Intermediates, Nutritional Products and Life Science Chemicals.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
No operating segments have been aggregated to form the above reportable operating segments.
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and not allocable to segments on reasonable basis have been included under ‘unallocated revenue / expenses / assets / liabilities’.
Finance costs and fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed on a Company basis.
Borrowings, current taxes, deferred taxes and certain financial assets and liabilities are not allocated to those segments as they are also managed on a Company basis.
*Non-current assets are excluding financial instruments and deferred tax assets.
8. Related Party Disclosures
1. Related parties where control exists
a) Subsidiaries including step-down subsidiaries
Jubilant Pharma Limited, Draximage Limited, Cyprus, Draximage Limited, Ireland, Draximage LLC, Jubilant DraxImage (USA) Inc., Deprenyl Inc., USA, Jubilant DraxImage Inc., 6963196 Canada Inc., 6981364 Canada Inc., DAHI Animal Health (UK) Limited, Draximage (UK) Limited, Jubilant Pharma Holdings Inc., Jubilant Clinsys Inc., Cadista Holdings Inc., Jubilant Cadista Pharmaceuticals Inc., Jubilant Life Sciences International Pte. Limited, HSL Holdings Inc., Jubilant HollisterStier LLC, Jubilant Life Sciences (Shanghai) Limited, Jubilant Pharma NV, Jubilant Pharmaceuticals NV, PSI Supply NV, Jubilant Life Sciences (USA) Inc., Jubilant Life Sciences (BVI) Limited, Jubilant Biosys (BVI) Limited, Jubilant Biosys (Singapore) Pte. Limited, Jubilant Biosys Limited, Jubilant Discovery Services Inc., Jubilant Drug Development Pte. Limited, Jubilant Chemsys Limited, Jubilant Clinsys Limited, Jubilant Infrastructure Limited, Jubilant First Trust Healthcare Limited, Jubilant Innovation (BVI) Limited, Jubilant Innovation Pte. Limited, Jubilant DraxImage Limited, Jubilant Innovation (India) Limited, Jubilant Innovation (USA) Inc., Jubilant HollisterStier Inc., Draxis Pharma LLC, Jubilant Life Sciences (Switzerland) AG, First Trust Medicare Private Limited (upto 20 August 2015), Jubilant Drug Discovery
& Development Services Inc., Vanthys Pharmaceutical Development Private Limited, Jubilant Life Sciences NV Jubilant Generics Limited, Jubilant Pharma Trading Inc., Drug Discovery and Development Solutions Limited, Jubilant Pharma Australia Pty Limited (w.e.f. 11 August 2016), Jubilant Draximage Radiopharmacies Inc. (w.e.f. 8 March 2017) Jubilant Employee Welfare Trust.
b) Other Entities:
Jubilant HollisterStier General Partnership Canada, Draximage General Partnership Canada (controlled through subsidiaries/step down subsidiaries).
2. Key Management Personnel (KMP) and related entities:
Mr. Hari S. Bhartia, Mr. S Sridhar, Ms. Sudha Pillai, Dr. Ashok Misra, Mr. Shardul S. Shroff (upto 24 May 2016), Mr. Shyamsundar Bang (Executive Director upto 7 February 2017 and continued as Non-Executive Director upto 31 March 2017) , Mr. R. Sankaraiah, Mr. Rajiv Shah.
Jubilant Enpro Private Limited, Jubilant Oil & Gas Private Limited, Jubilant FoodWorks Limited, Tower Promoters Private Limited, B&M Hot Breads Private Limited, Jubilant Industries Limited, Jubilant Agri and Consumer Products Limited, Jubilant MotorWorks Private Limited (formerly known as Jubilant Motors Private Limited), Jubilant Fresh Private Limited, Priority Vendor Technologies Private Ltd. (related to relatives of KMP), Jubilant Aeronautics Private Limited., Shardul Amarchand Mangaldas & Co., Amarchand & Mangaldas & Suresh A Shroff & Co.
Future cash outflows in respect of the above matters as well as for matters listed under 38(C) below are determinable
only on receipt of judgments/decisions pending at various stages/forums.
C. Other contingent liabilities as at 31 March 2017:
i. The Company’s writ petition against the levy of transport fee by the State of Maharashtra on consumption of rectified spirit and molasses within Nira factory has been allowed by the Hon’ble Bombay High Court with consequential refund. The Company has filed a refund claim for an amount of '''' 2.51 million (31 March 2016: '''' 2.51 million; 1 April 2015: '''' 2.51 million) deposited during the period when the dispute was pending before the High Court. The total amount of disputed transport fee is '''' 245.46 million (31 March 2016: '''' 227.20 million; 1 April 2015: '''' 209.13 million). The State of Maharashtra has filed a Special Leave Petition in the Supreme Court and has sought a stay on the operation of the High Court order.
ii. The Company has challenged before the Hon’ble Allahabad High Court, the increase in denaturing fee by the State of Uttar Pradesh w.e.f 1 April 2004 on denaturing of rectified spirit in the Gajraula factory and the writ petition has been admitted by the Court. The Company has deposited '''' 27.45 million (31 March 2016: '''' 26.45 million; 1 April 2015: '''' 25.55 million) under protest which is shown as deposits.
iii. Zila Panchayat at J.P Nagar (in respect of the Company''''s Gajraula plant) served a notice demanding a compensation of '''' 277.40 million (31 March 2016: '''' 277.40 million; 1 April 2015: '''' 277.40 million) allegedly for percolation of poisonous water stored in lagoons and flowing through the land of Zila Panchayat resulting in loss of crops and cattle of the farmers and for putting poisonous fly ash on national highway which caused loss to the health and damages to eyes and skin of people. District Magistrate issued a recovery certificate along with 10% collection charges inflating the demand to '''' 305.14 million (31 March 2016: '''' 305.14 million; 1 April 2015: '''' 305.14 million).
The Company has challenged the demand before the Hon''''ble Allahabad High Court, and the Court after considering Company’s submissions, stayed the demand till further orders.
iv. The State of Uttar Pradesh (UP) has imposed levy on import of denatured spirit into the State of Uttar Pradesh (UP). The Company has imported denatured spirit into the State of Uttar Pradesh and has challenged levy amounting to '''' 90.00 million (31 March 2016: '''' 90.00 million; 1 April 2015: '''' 90.00 million) before Hon’ble Allahabad High Court. The writ petition has been allowed by the High Court in favour of the Company. The State of Uttar Pradesh filed a Special Leave Petition (SLP) with Hon’ble Supreme Court. The SLP has been admitted but the Hon’ble Supreme Court has declined the request of the State of Uttar Pradesh (UP) to stay the operation of High Court Order. The Hon’ble Supreme court has ordered to list the appeal after the decision in Civil Appeal No 151 of 2007.
v. The Hon''''ble Supreme Court has quashed the levy of license fee (FL-39) by State of Uttar Pradesh on captive consumption of denatured spirit in the Gajraula factory, and has ordered the refund of the fee paid during the period of dispute subject to condition that the amount has not been collected from the Company''''s customers. Further the Court has directed the State to investigate whether the Company has collected the disputed fee from its customers to the extent bank guarantees were furnished.
The Company was entitled to a refund of '''' 84.06 million (31 March 2016: '''' 84.06 million; 1 April 2015: '''' 84.06 million) as the amount paid during the period of dispute or secured by bank guarantees was not collected from its customers. Accordingly the Company approached the State of Uttar Pradesh for the refund of the said amount. The amount paid has been shown as deposit.
Commissioner, State excise rejected the refund claim of '''' 84.06 million and directed to recover the Bank Gaurantee (B.G.) of '''' 68.00 million. Company filed a stay application/revision application against the said order before the Principal Secretary, Government of U.P The Revision Order passed has rejected our refund claim and held that the amounts secured by BG amount of '''' 68.00 million has also been recovered from the customer. Writ petition filed against the said revision order in High court of Allahabad. High court has granted stay Vide its order dated 6th January 2017, subject to furnishing of B.G. of '''' 68.00 million which has been submitted.
vi. A group of villagers from Nira in Pune District, State of Maharashtra had filled a Public Interest Litigation in the year 2009 against the Company on account of ground water contamination against which National Green Tribunal (NGT), Pune Bench passed an order on 16 May 2014. In this order, NGT has instructed the Company to comply with the recommendations of National Environmental Engineering Research Institute (NEERI), Maharashtra Pollution Control Board (MPCB) and Central Ground Water Board (CGWB) to ensure zero discharge and remediation to contaminated ground water.
NGT in its order has also instructed the district authority to form a committee to conduct an enquiry around
2 km radius of Nira unit to ascertain extent of loss and recommend the loss if any, caused to agriculturist due
to effluent discharge to Nira river and asked Company to deposit adhoc amount of '''' 2.50 million (31 March 2016: '''' 2.50 million; 1 April 2015: '''' 2.50 million) with the Collector of Pune. Company deposited the above amount with the Collector of Pune. In its report, the Committee has found that no loss was shown to have been caused to fertility of the land or the agriculturists. Company''''s compliances are being regularly monitored by MPCB and status is being informed to NGT.
NEERI has submitted its recommendations and NGT has asked some clarifications on the report from NEERI. Meanwhile, the Company has submitted its comments on the NEERI report and also made suggestions for quicker ground water aquifer remediation based on corroborative study by IIT, Delhi. In accordance with the direction of the NGT, the Company has also filed a further affidavit in March, 2017. In response to the NGT directions both NEERI & CGWB have placed before the Court their final view & comments on the proposal submitted by the Company (based on corroborative study by IIT, Delhi). The CGWB is in agreement with the improved measures stated in the Proposal and has suggested that MPCB monitors the implementation of improved measures every 6 months. The NGT has directed the Company to file an action plan to facilitate passing of the final order in the present case. The matter is pending before NGT.
vii. Uttar Pradesh Pollution Control Board served notices on 31 January 2016 upon 3 units of Company at Gajraula to appear and present their submissions in the National Green Tribunal, New Delhi (NGT) in a pending matter (M.C. Mehta vs. Union of India & Ors.) regarding pollution of Ganga and its tributaries. NGT directed all the parties to give their compliance status on Zero Liquid Discharge (ZLD). All 3 units of Company have duly filed submissions that they are compliant of the terms of consent/ ZLD.
Additionally, the Company''''s Distillery Unit filed a Miscellaneous Application in the matter seeking review of some of the directions of Central Pollution Control Board based on their technical and practical limitations and also requested for considering alternate technologies that are environmentally sustainable options for ZLD. On
06 March 2017, NGT further asked certain information from various industries & in compliance thereof all 3 units of the Company has filed their respective affidavits.
In this matter the NGT is assessing the causes of the pollution to the river Ganges, and the tributaries and drains flowing into the Ganges. One such drain is Bagad nadi (nalla) on the banks of which the Gajraula town is situated where about 13 industries are operating including the 3 units of the Company. By order of 24 April
2017 the NGT constituted a Special Inspection Committee to inspect all these industries and submit a report of findings. At a hearing on 2 April 2017, this committee presented its oral finding from the inspection, and based on which the NGT ordered shut down of all the 13 industries at Gajraula, despite opposition from the industries stating that they weren’t provided with the report and so no opportunity to contest. The NGT however allowed them to file their objections as well as detailed status of compliance. To comply with the NGT directions, all 3 units of the Company commenced shut down on 27 April 2017.
Based on the separate application filed by the 3 units of the Company, the NGT allowed the restart of operation of, both the Chemical units of the Company (vide order of 8 May 2017). The Company is an environmentally conscious citizen, expects to resume the distillery operation soon. The matter is pending before NGT.
viii. In 2014, CPCB direct 17 categories of highly polluting industries, CETP’s and Common Hazardous Waste and Biomedical waste incinerator sites located across India to install online treated effluent monitoring and stack monitoring with direct connection to the servers of SPCB/CPCB. Nira unit of the Company complied with these direction and installed the online effluent monitoring system at the Outlet of the ETP (Chemical Unit), Stack emission of the Boilers, Stack emission of Chemical plant furnace by 15 May 2015.
Due to server up gradation and configuration at the CPCB, the server connectivity details were not provided by CPCB till April 2016 to the Nira unit of the Company. Further, such issues of connectivity, and resultant incomplete transmission of online monitoring data to SPCB/CPCB servers, continued until March, 2017. Further, CPCB did not issue the connectivity details in spite of repeated requests of the Nira unit of the Company.
CPCB, without providing any final opportunity to any industry, uploaded, on their website on 21 April 2017, Closure Notice (letter dated 06 April 2017) stating the reason as “CPCB is not able to verify the data connectivity of the online monitoring system from the unit and hence the claim of the unit regarding installation of online monitoring system cannot be acceded” to hundreds of industries including Nira Unit’s Distillery.
Nira unit of Company successfully pursued CPCB for revocation of the closure notice with suitable submissions and proof that connection to the server of CPCB, which was poor due to technical glitches, and immediately on receipt of server connection details the connectivity was finally established on 26 April 2017 and online data was transmitted to CPCB server immediately. CPCB issued its letter of revocation of closure of Nira Unit on 15 May 2017.
Additionally, the Company is involved in other disputes, lawsuits, claims, governmental and/ or regulatory inspections, inquiries, investigations and proceedings, including commercial matters that arise from time to time in the ordinary course of business.
The company believes that none of above matters, either individually or in aggregate, are expected to have any material adverse effect on its financial statements.
9. Commitments as at year end
a) Capital Commitments:
Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs, 328.55 million (31 March 2016: Rs, 140.68 million; 1 April 2015: Rs, 147.89 million).
i) The Company’s significant operating lease arrangements are in respect of premises (residential, offices, godown etc.). These leasing arrangements, which are cancellable, range between 11 months and 3 years generally and are usually renewable by mutual agreeable terms. The aggregate lease rentals payable are charged as expenses. Rental payments under such leases are Rs, 111.65 million (31 March 2016: Rs, 93.26 million) has been included under rent expense in note 29.
ii) The Company has operating lease arrangements in respect of vehicles which are cancellable, range between 2 years and 5 years. The aggregate lease rentals payable are charged as expenses. Rental expenses recognized under such leases amounting to Rs, 6.74 million (31 March 2016: Rs, 4.65 million) has been included under vehicle running and maintenance expense in note 29.
iii) The Company has significant operating lease arrangements which are non-cancellable for a period up to 25 years. The lease rental is subject to escalation whereby the Lessor is entitled to increase the lease rental by 10% of the average lease rental of preceding three years blocked period.
Rental expenses recognized under such leases during the year are Rs, 33.12 million (31 March 2016: Rs, 32.44 million).
There is no element of contingent rent or sub lease payments. The Company has option to purchase the assets at the end of the lease term. There are no restrictions imposed by these lease arrangements regarding dividend, additional debt and further leasing.
c) Other Commitments:
i) Export obligation under Advance License Scheme/DFIA scheme on duty free import of specific raw materials, remaining outstanding is Rs, 4,624.45 million (31 March 2016: Rs, 5,608.88 million; 1 April 2015: 3,213.44 million).
ii) Outstanding export obligation amounting to Rs, Nil (31 March 2016: Rs, 5.61 million; 1 April 2015: Rs, 1,202.78 million), against equivalent supplier advance received from a step down wholly owned subsidiary.
10. Loans to subsidiary companies, including interest accrued thereon pursuant to information required to be disclosed under clause 32 of listing agreement [Refer note 37]:
The above companies have not invested in the securities of the Company.
11. Disclosure pursuant to section 186(4) of the Companies Act, 2013 in respect of unsecured loans to subsidiary companies [Refer note 37]:
(1) Included in Donation - Refer note 29
12. Donation includes Rs, 60.00 million (31 March 2016: Rs, Nil) to Satya Electoral Trust during the year.
13.(a) Government grant recoverable Rs, 185.12 million (31 March 2016: Rs, 265.18 million; 1 April 2015: Rs, 52.17 million) and Government grant recognized Rs, 304.95 million (31 March 2016: Rs, 361.43 million) in Statement of Profit and Loss.
14(b). During the year, finance costs amounting to Rs, 34.58 million (31 March 2016: Rs, 17.71 million) has been capitalized.
15. Subsequent to the year end, a wholly owned subsidiary of the Company, Jubilant Pharma Limited (“JPL”), through one of its wholly owned subsidiaries, signed an Asset Purchase Agreement with Triad Isotopes Inc. and its parent Isotope Holdings, Inc. (“Triad”), to acquire substantially all of the assets which comprise the radio pharmacy business of Triad. The closing of the transaction is subject to customary closing conditions, including contract, regulatory and other approvals. The acquisition will be funded through JPLRs,s internal accruals.
16. Hedging and derivatives instruments:
(i) The Company uses various derivative instruments such as foreign exchange forward contracts, currency and interest rate swaps to selectively hedge its exposures to movement in foreign exchange rates and interest rates. These derivatives instruments are not used for speculative or trading purposes.
(ii) Mark to market loss amounting to Rs, Nil (31 March 2016: Rs, 4.02 million) in respect of currency and interest rate swaps contracts have been credited/ charged to the Statement of Profit and Loss. The accumulated mark to market losses on currency swaps (including currency and interest rate swaps) and forward contract outstanding as at 31 March 2017 is Rs, Nil (31 March 2016: Rs, 4.02 million).
17. Disclosure on Specified Bank Notes
During the year, the company had Specified Bank Notes (SBNs) or other denomination notes as defined in the MCA notification, G.S.R.308(E), dated 31 March 2017. The details of SBNs held and transacted during the period from 8 Nov 2016 to 30 Dec 2016, the denomination-wise SBNs and other notes as per the notification are as follows:
(1) For the purpose of this clause, the term “Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated 8 Nov 2016.
18. During year ended 31 March 2017, the Company has capitalized exchange gain amounting to Rs, 3.80 million (31 March 2016: exchange loss of Rs, 136.03 million) to the cost of property, plant and equipment and accumulated exchange loss of Rs, 18.01 million (31 March 2016: Rs, 152.31 million) to foreign currency monetary item translation difference account (FCMITDA). During the year Rs, 61.67 million (31 March 2016: Rs, 251.90 million) has been amortized to the Statement of Profit and Loss and balance of Rs, 7.07 million (31 March 2016: Rs, 50.73 million) is carried in Balance Sheet as at 31 March 2017.
19. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the specified domestic transactions entered into with the specified persons and the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence before the due date of filing of income tax return. The management is of the opinion that its specified domestic transactions and international transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.
20. During the year ended 31 March 2015, the Company had transferred, with effect from 1 July 2014, its Active Pharmaceutical Ingredients and Dosage Forms business to Jubilant Generics Limited (JGL), a wholly owned Subsidiary of JPL, by way of a slump sale on going concern basis.
21. Employee Stock Option Scheme
The Company has two stock option plans in place namely:
- Jubilant Employees Stock Option Plan, 2005 (“Plan 2005”)
- JLL Employees Stock Option Plan, 2011 (“Plan 2011”)
The Nomination, Remuneration and Compensation Committee (‘Committee’) of the Board of Directors which comprises a majority of Independent Directors is responsible for administration and supervision of the Stock Option Plans.
Under Plan 2005, as amended, and under Plan 2011, up to 1,100,000 Stock Options and up to 5,352,000 Stock Options, respectively, can be issued to eligible directors (other than promoter directors) and other specified categories of employees of the Company/ subsidiaries. Options are to be granted at market price. As per the SEBI guidelines, the market price is taken as the closing price on the day preceding the date of grant of options, on the stock exchange where the trading volume is the highest. Under Plan 2005, each option, upon vesting, shall entitle the holder to acquire five equity shares of '''' 1 each. Options granted up to 28 August 2009 will vest entirely within two years from the grant date, with certain lock-in provisions. Options granted after 28 August 2009 will vest gradually over a period of 5 years from the grant date, without any lock-in provisions.
Under Plan 2011, each option, upon vesting, shall entitle the holder to acquire one equity share of '''' 1 each. Options granted will vest gradually over a period of 3 years from the grant date. Vesting of Options is a function of achievement of performance criteria or any other criteria, as specified by the Committee and communicated in the grant letter.
There were no options granted during the year ended 31 March 2017 and 31 March 2016, accordingly disclosures as required under Ind AS 102 w.r.t. weighted average fair value of stock options granted during the year is not applicable.
In 2008-09, members approved constitution of Jubilant Employees Welfare Trust (‘Trust’) for the purpose of acquisition of equity shares of the Company from the Secondary market or subscription of shares from the Company, to hold the shares and to allocate/transfer these shares to eligible employees of the Company/subsidiaries from time to time on the terms and conditions specified under respective Plans. The members authorized grant of loan(s) from time to time to the Trust in one or more tranches, up to '''' 1,000 million either free of interest or at interest agreed between the Board and the Trust. The outstanding loan to the Trust as at 31 March 2017 is '''' 111.99 million (31 March 2016: '''' 200.99 million;, 1 April 2015: '''' 410.39 million).
Up to 31 March 2017, the Trust has purchased 6,363,506 equity shares of the Company from the open market, out of interest free loan provided by the Company, of which 2,814,555 (31 March 2016: 2,458,980; 1 April 2015: 1,530,010) shares were transferred to the employees on exercise of Options. The Trust is also holding 170,878 (31 March 2016: 171,802; 1 April 2015: 192,086) equity shares of Jubilant Industries Limited issued to it in accordance with the Scheme of Amalgamation and Demerger amongst the Company, Jubilant Industries Limited and others.
** Represents options outstanding out of options granted to employees of the Company which were transferred to Jubilant Generics Limited on account of sale of businesses as explained in note 37.
Pursuant to stock option granted to certain employees of the subsidiary under plan 2005, as amended, and under plan 2011, share based payment transaction with employees of subsidiary amounting to '''' Nil (31 March 2016: '''' 1.50 million) is recognized in investment in subsidiaries with corresponding credit to share based payment reserve.
Fair value of option granted
The weighted average fair value of options granted as at the year ended 31 March 2017 for Plan 2005 and Plan 2011 were '''' 94.18 per option and '''' 84.90 per option respectively. The fair value at grant date is determined using the Black Scholes Merton which takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The following tables list the inputs to models used for fair valuation of two plans:
Expense arising from share-based payment transaction
The expenses arising from share-based payment transaction recognized in profit or loss as part of employee benefit expense for the year ended 31 March 2017 and 31 March 2016, were '''' 0.01 million and '''' 3.81 million respectively.
22. During the year ended 31 March 2016, the Hon’ble Allahabad High Court vide its order dated 17 August 2015 (“Order”) sanctioned the Scheme of Amalgamation, Compromise and Arrangements (“the Scheme”) between two subsidiaries of the Company viz. Jubilant First Trust Healthcare Limited (“JFTHL”) and First Trust Medicare Private Limited (“FTMPL”). The Scheme became effective on 4 September 2015 on filing of the certified true copy of the Order with the Registrar of Companies. As per the provisions of the Scheme, FTMPL merged into JFTHL and the shareholders of FTMPL received 6.5 fully paid up equity shares of the JFTHL against each fully paid up share of FTMPL with effect from the appointed date, i.e. 1 April 2014. Subsequently, as per the provisions of the Scheme, equity share capital of JFTHL amounting to Rs, 135.63 million (i.e. 13,563,171 equity shares of face value Rs, 10 each) held by the Company along with the securities premium amounting to Rs, 540.49 million was cancelled with effect from the appointed date, i.e. 1 March 2015. The consequent impact on value of investment has been recorded in the books of account of the Company during the year ended 31 March 2016.
23. During the year, the Company acquired 186,620,000 12% Optionally Convertible Non-Cumulative Redeemable Preference Shares of Rs, 10 each of Jubilant Biosys Limited (“JBL”) at par in lieu of loan of equivalent amount which was granted to the JBL and derecognized through written off in year prior to transition date of Ind-AS. Accordingly, applying Ind AS 101 assumption for such earlier derecognized financial instrument, the initial recognized value of these shares is considered as Rs, Nil.
24. During the year, the capital reduction scheme in respect Jubilant Clinsys Limited (subsidiary) was admitted by National Company Law Tribunal (NCLT).
25. First-time adoption of Ind AS Transition to Ind AS
These are the Company’s first financial statements prepared in accordance with Ind AS.
The significant accounting policies set out in note 2 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 at 1 April 2015 (the Company’s 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 set out in the following tables and notes.
(A). Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
Ind AS optional exemptions
1. Business combinations
Ind AS 101 provides the option to apply Ind AS 103 “Business Combinations” prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.
The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.
2. 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 recognized 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. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.
Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
3. 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 “Financial Instruments” 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 derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS Refer Note - 53.
Ind AS mandatory exceptions
An entity’s estimates in accordance with Ind ASs 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 The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
- Investment in equity instruments carried at FVOCI.
- Impairment of financial assets based on expected credit loss model.
- Determination of the discounted value for financial instruments carried at amortized cost.
2. Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification of financial assets on the basis of the facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortized cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.
Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortized cost has been done retrospectively except where the same is impracticable.
* Others include adjustments resulting from differences in accounting for employee stock option plans, classification of actuarial gain/loss to other comprehensive income, reversal of lease equalization reserve, depreciation/amortization on incremental borrowing cost and insurance spares capitalized, etc.
26.(E). Statement of Cash Flows
Other than effect of certain reclassifications due to difference in presentation, there was no other material effect of cash flow from operating, financing, investing activities for all periods presented.
Note 27: Incremental capitalization of finance cost
Under the previous GAAP capitalization of finance cost by applying avoidable interest cost method on certain specific borrowings was not permitted. Under Ind AS, the same is eligible for capitalization. The resulting capitalization of interest in property, plant and equipment, capital work-in-progess and intangible assets under development have been recognized in the Statement of Profit and Loss for the year ended 31 March 2016. This increased the retained earnings by '''' 17.71 million as at 31 March 2016.
Note 28: Fair valuation of investments
Under the previous GAAP investments in equity instruments and other instruments were classified as long-term investments or current investments based on the intended holding period and reliability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognized in FVOCI - Equity instruments through OCI as at the date of transition and subsequently in the other comprehensive income for the year ended 31 March 2016. This increased total equity by '''' 2.20 million as at 31 March 2016 (1 April 2015: '''' 1.82 million) and other comprehensive income for the year ended 31 March 2016 by '''' 0.38 million.
Note 29: Deferred taxes
Previous GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP
Also deferred tax have been recognized on the adjustment made on transition to Ind AS. On the date of transition, the net impact on deferred tax liabilities is of Rs, 329.71 million (1 April 2015: Rs, 323.83 million).
Note 30: Proposed dividend
Under the previous GAAP dividends proposed by the board of directors after the Balance Sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed