RPG Life Sciences Limited (the ‘Company’) was incorporated on 29th March, 2007 as RPG Pharmaceuticals Limited. The name of the Company was subsequently changed to RPG Life Sciences Limited on 13th February, 2008. RPG Life Sciences Limited is engaged in the manufacturing and marketing of Formulations (Finished Dosage Forms) and Active Pharmaceutical Ingredients (APIs).
Pursuant to a Scheme of Arrangement, the Company has acquired the pharmaceuticals business of Brabourne Enterprises Limited (formerly RPG Life Sciences Limited) with retrospective effect from the appointed date of 2nd April, 2007.
2. Significant Accounting Policies
(a) Basis of Preparation
“These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to Section 133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014, till the standards of accounting or any addendum thereto are prescribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] of the Companies Act, 1956 and other relevant provisions of the Companies Act, 2013.
The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated 30th March,2016. The said notification read with Rule 3(2) of the Companies (Accounting Standards) Rules, 2006 is applicable to accounting period commencing on or after the date of notification i.e. 1st April, 2016.”
All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.
(b) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation/ amortization and impairment loss. Cost comprises of purchase/acquisition price, taxes (net of CENVAT availed), borrowing costs and any directly attributable cost for bringing the asset to its working condition for its intended use.
Depreciation is provided on a pro-rata basis on the straight line method over the estimated useful lives of the assets specified in Schedule II to the Companies Act, 2013 except for Vehicles and Servers which are depreciated at higher than the rates prescribed under the Schedule II to the Companies Act, 2013. Further the fixed assets acquired under the Scheme of Arrangement [Refer Note 1] are depreciated/ amortized over estimated useful lives as per the Scheme of Arrangement. The estimated useful lives of the fixed assets acquired under the Scheme of Arrangement are as under:
Leasehold Lands are amortized on Straight Line Method, pro-rata to the period of use, over the remaining lease terms.
Assets costing Rs, 5,000 or less are fully depreciated in the year of acquisition.
Fixed assets retired from active use and held for disposal are stated at the lower of net book value and net realizable value and are disclosed under Other Current Assets. Any expected loss is recognized immediately in the Statement of Profit and Loss.
Assessment is carried out at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. Impairment loss is provided to the extent the carrying amount of assets exceed their recoverable amount. Recoverable amount is the higher of an asset’s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and form its disposal at the end of its useful life. Net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.
Inventories are valued at lower of cost and net realizable value. Raw and Packing Material cost is determined on weighted average basis. Cost of work-in-progress and finished goods includes labor and manufacturing overheads, where applicable.
(d) Foreign Currency Transactions
Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction. Gains and losses arising out of subsequent fluctuations are accounted for on actual payment or realization. Monetary items denominated in foreign currency as at the Balance Sheet date are converted at the exchange rates prevailing on that date. Exchange differences are recognized in the Statement of Profit and Loss.
(e) Forward Contracts
Premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/ liability is amortized as expense or income over the life of the contract. Exchange difference on forward contract is recognized in the Statement of Profit and Loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward contract is recognized as income or expense in the Statement of Profit and Loss.
(f) Revenue Recognition
Sales are recognized when the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognized net of trade discounts, rebates, sales taxes and excise duties.
Revenue from Product development services are recognized on the basis of contractual arrangements as related services are performed.
(g) Employee Benefits
(i) Defined Contribution Plans
The Company has Defined Contribution Plans for post employment benefits in the form of Superannuation Fund, Provident Fund, Employees’ Pension Scheme and Employees State Insurance Scheme which are administered through Government of India and/ or trustees. Superannuation Fund, Provident Fund, Employees’ Pension Scheme and Employees’ State Insurance Scheme are classified as Defined Contribution Plans as the Company has no further obligation beyond making the contributions. The Company’s contributions to Defined Contribution Plans are charged to the Statement of Profit and Loss as incurred.
(ii) Defined Benefit Plan
The Company has Defined Benefit Plan for post employment benefits in the form of Gratuity. Gratuity scheme of the Company is administered through trustees. Liability for Defined Benefit Plan is provided on the basis of valuation, as at the Balance Sheet date, carried out by independent actuary. The actuarial valuation method used by independent actuary for measuring the liability is the Projected Unit Credit method.
(iii) Other Long-term Employee Benefits
(a) Accumulated Compensated Absences which are expected to be availed or encased within 12 months from the end of the year are treated as short-term employee benefits. The obligation towards the same is measured at the expected cost of Accumulating Compensated Absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
(b) Accumulated Compensated Absences which are expected to be availed or encased beyond 12 months from the end of the year are treated as other long-term employee benefits. Liability for such benefits is provided on the basis of valuation, as at the Balance Sheet date, carried out by independent actuary. The actuarial valuation method used by independent actuary for measuring the liability is the Projected Unit Credit Method.
(iv) Termination benefits are recognized as an expense as and when incurred.
(v) Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the Statement of Profit and Loss as income or expense.
(h) Expenditure on Research and Development
Revenue expenditure is recognized as expense in the year in which it is incurred and the expenditure on capital assets is depreciated over the useful lives of the assets.
(i) Borrowing Costs
Borrowing costs include interest, other direct cost incurred in connection with the borrowing and exchange difference arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. General and specific borrowing cost directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expense in the year in which they are incurred.
Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in the statement of profit and loss over the lease term.
(k) Provisions and Contingent Liabilities
The Company recognizes a provision when there is a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and in respect of which reliable estimate can be made. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation and the likelihood of outflow of resources is remote, no provision or disclosure is made.
(l) Taxes on Income
Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws.
Deferred tax is recognized, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax asset can be realized. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. In situations, where the Company has an unabsorbed depreciation or carry forward losses under tax laws, all deferred tax assets are recognized only to the extent that there is a virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each Balance Sheet date, the Company reassesses unrecognized deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.
Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit entitlement asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
*Amount is below the rounding off norm adopted by the Company.
(b) The Company has only one class of shares i.e. equity shares having a face value of '''' 8 each. Each shareholder is entitled to one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
(c) List of shareholders holding more than 5% shares as at the Balance Sheet date:
(d) Shares reserved for issue under options:
Refer Note 29 for details of shares to be issued under the Employee Stock Option Plan.
Repayable in 36 Equated Monthly Installments beginning from the time loan is taken along with interest ranging from 10.25% to 10.75%. Repayable in 12 Equated quarterly Installments beginning from the month of taking the lease along with interest at 14.09% to 14.36% per annum.