Refer to the statement of changes in equity for movement in Other equity.
Nature and purpose of reserves
Capital Redemption Reserve
The Company has recognized Capital Redemption Reserve, on buyback or redemption of its own equity/preference shares, from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the shares bought back.
General reserve
General reserve is created from time to time by way of transfer profits from retained earnings for appropriation purposes. General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income.
Security premium
The amount received in excess of face value of the equity shares, in relation to issuance of equity, is recognized in Securities Premium Reserve.
Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to the shareholders.
Debt instruments through OCI
This represents the cumulative gains and losses arising on the revaluation of debt instruments measured at fair value through other comprehensive income that have been recognized in other comprehensive income, net of amounts reclassified to profit or loss when such assets are disposed off and impairment losses on such instruments.
Notes:
a. Vehicle loans from banks and finance companies are secured by hypothecation of respective vehicles.
b. The term loan as at March 31, 2016 is secured by first and exclusive charge over the immovable and movable assets of Solar Plant located at Modasa.
c. The term loan as at March 31, 2017 is secured by equitable mortgage on the one of the Company's immovable property.
d. Working Capital loan as at April 1, 2015 is Buyers' credit which is secured by first pari passu charge by hypothecation of all current assets of the Company (present and future); second pari passu charge by hypothecation of movable fixed assets (present and future), by mortgage on specified immovable fixed assets of the Company (present and future) and by first pari passu charge through equitable mortgage on specified immovable property of the Company.
e. Rate of interest on the above loans ranges between 10% to 14%. p.a.
Note :
The above information has been determined to the extent such parties could be identified on the basis of information available with the Company.
A. Defined contribution plans:
The Company deposits amount of contribution to government under PF and other schemes operated by government.
Amount of Rs. 33.49 Lacs (P.Y. : Rs. 33.18 Lacs) is recognized as expenses and included in Note 27 "Employee benefit expense"
B. Defined benefit plans:
The Company has following post employment benefits which are in the nature of defined benefit plans:
(a) Gratuity
The Company operates gratuity plan wherein every employee is entitled to the benefit as per scheme of the Company, for each completed year of service. The benefit vests only after five years of continuous service, except in case of death/disability of employee during service. The vested benefit is payable on separation from the Company, on retirement, death or termination.
C. Other Long term employee benefit plans Leave encashment
Salaries, Wages and Bonus include Rs.194.31 Lacs (P.Y.: Rs.71.63 Lacs) towards provision made as per actuarial valuation in respect of accumulated leave encashment/compensated absences.
Related party disclosures, as required by Ind AS 24, " Related Party Disclosures", are given below.
(A) Particulars of related parties and nature of relationships
Name of the related parties Name of the related parties
A. Holding Company D. Companies over which Key Management Personnel and
Athanas Enterprise Private Limited their relatives are able to exercise significant influence
Zivene Design and Development Private Limited
B. Subsidiary Companies (including step-down subsidiaries) Abellon Energy Limited
Claris Lifesciences Venezuela C. A Dorizoe Lifesciences Limited
Claris Produtos Farmaceuticos Do Brasil Limitada Poiesis Education Foundation
PT. Claris Lifesciences Indonesia Redbricks Education Foundation
Claris Lifesciences Colombia Limitada India Renal Foundation iCubix Infotech Limited
Catalys Venture Cap Limited E. Key Management Personnel
Claris injectables Limited (Formerly known as Claris Executive directors
Lifesciences International Limited) Mr. Arjun Handa
Claris Lifesciences Philippines Inc. Mr. Chandrasingh S. Purohit Claris Lifesciences De Mexico SA de CV
Claris Lifesciences (UK) Limited Non Executive directors
Claris Lifesciences (Aust) Pty. Limited Mr. Surrinder Lal Kapur
Claris Lifesciences Inc. Mr. Aditya S. Handa
Claris Lifesciences & CIA Chile Limitada Mr. Chetan S. Majmudar
OGEN Nutrition Limited Mr. T. V. Ananthanarayanan
Claris Infrastructure Limited Mr. Anup P. Shah
Claris Pharmaservices Ms. Milina Bose
Claris SteriOne Mr. Amish Vyas Claris Middle East FZ-LLC
ELDA |nternational DMCC Company Secretary
Claris Capital Limited Mr. Kirit H. Kanjaria
C. Associate Company F. Relatives of Key Management Personnel
Otsuka Pharmaceuticals India Private Limited Mrs. Krishna A. Handa (Formerly known as Claris Otsuka Private Limited)
(B) Related party transactions and balances
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in an arm's length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash except in case of advances. Outstanding advances are either settled through supply of goods or services. As at March 31, 2017, March 31, 2016 and April 1, 2015, the Company carries an impairment of advances given to related parties amounting to Rs. 33.75 lacs. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
The Board of Directors of the Company in their meeting held on December 15, 2016 has approved sale and transfer of the 'Injectables Business' carried on by the Company in India and overseas, through its subsidiary CIL and other identified indirect subsidiaries of the Company, through one or more transactions involving the transfer of ownership of the subsidiary(ies) to the Baxter Group at an aggregate enterprise value of approximately USD 625,000,000 (United States Dollars Six Hundred and Twenty-Five Million Only) for the said transaction relating to the sale of injectables business, subject to agreed adjustments, permitted under applicable law, including for repayment of lenders debt, certain inter-group transactions, and other closing adjustments, which may be substantial.
After signing of the share purchase agreement, the said transaction was approved by the shareholders of the Company on February 17, 2017. Further, Foreign Investment Promotional Board of India has granted its approval on April 17, 2017 for the aforesaid transaction. Accordingly, the Injectables business is considered as Discontinued Operations in terms of Ind-AS 105.
The assets classified as held for sale pertains to investment in equity shares of its subsidiary CIL Rs.5 lacs. There are no associated liabilities that could be classified as held for sale.
Note 1: Segment information
The Company has presented segment information in the consolidated financial statements which are presented in this same annual report. Accordingly, in terms of Ind AS 108 'Operating segments', no disclosures relating to segments are presented in these standalone financial statements.
(1) The management assessed that cash and cash equivalents, trade receivables, loans - current, other financial assets, trade payables, working capital loan and other financial liabilities (excluding current maturities of long-term borrowings) approximate their carrying amounts largely due to the short-term maturities of these instruments.
(2) The management assessed that fair values for vehicle loan from bank would approximate their carrying values. This is due to the interest rates for similar instruments (vehicle loans) have not changed significantly as at March 31, 2017, March 31, 2016 and April 1, 2015 compared to the interest rates at which such vehicle loans have been availed.
2 Quantitative disclosures fair value measurement hierarchy for assets
Quantitative disclosures fair value measurement hierarchy for assets as at March 31, 2017 (Valuation date - March 31, 2017)
The Company's principal financial liabilities comprise of loans and borrowings, trade payables and other financial liabilities. The loans and borrowings are primarily taken to finance and support the Company's operations. The Company's principal financial assets include investments, loans, cash and cash equivalents, trade receivables and other financial assets.
The Company is exposed to market risk, credit risk and liquidity risk. The Company's senior management oversees the management of these risks. The Company's senior management ensures that financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and risk objectives. It is the Company's policy that no trading in financial instruments for speculative purposes may be undertaken.
1. Market Risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk or Net asset value("NAV") risk in case of investment in mutual funds. Financial instruments affected by market risk include investments, trade receivables, trade payables, loans and borrowings and deposits.
The sensitivity analysis in the following sections relate to the position as at March 31, 2017 and March 31, 2016.
The sensitivity of the relevant profit and loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016.
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's exposure to the risk of changes in market interest rates relates primarily to the Company's long-term debt obligations with floating interest rates.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on loans and borrowings. With all other variables held constant, the Company's profit before tax is affected through the impact on floating rate borrowings, as follows:
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities, i.e. when revenue or expense is denominated in a foreign currency.
Given below is the foreign currency exposure arising from the non derivative financial instruments:
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in EUR and USD exchange rates, with all other variables held constant. The impact on the Company's profit before tax is due to changes in the fair value of monetary assets and liabilities. The Company's exposure to foreign currency changes for all other currencies is not material.
Other market risks
The Company's investments in varous mutual funds, debentures and bonds are susceptible to market price risk arising from the uncertainty about future values / future NAV values of such mutual funds, debentures, bonds and preference shares. The Company manages such risk through diversification of such investments. Reports on the investment portfolio are submitted to the Company's senior management on a regular basis that helps the senior management to take investment decisions.
2 Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and foreign exchange transactions.
Trade receivables
Customer credit risk is managed by the Company's internal policies, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an credit rating scorecard and credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit. As at March 31, 2017, there were 8 customers with balances greater than Rs.100 lacs accounting for more than 82% of the total amounts receivables. As at March 31, 2016 and April 1, 2015, there were 8 and 7 customers, respectively, with balances greater than Rs.200 lacs and Rs.500 Lacs, respectively, accounting for more than 77% and 86%, respectively, of the total amounts receivables. These amounts are after considering allowances for expected credit losses.
The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.
Trade receivables are non-interest bearing and are generally on 14 days to 90 days credit term. Credit limits are established for all customers based on internal rating criteria. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.
Cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company's treasury department in accordance with the Company's policy. Investments of surplus funds are made only with approved counterparties who meet the minimum threshold requirements under the counterparty risk assessment process. The Company monitors the ratings, credit spreads and financial strength of its counterparties. Based on its on-going assessment of counterparty risk, the group adjusts its exposure to various counterparties. The Company's maximum exposure to credit risk for the components of the Balance sheet as of March 31, 2017, March 31, 2016 & April 1, 2015 is the carrying amount as disclosed in Note 9 and
13 except for financial guarantees. The Company's maximum exposure for financial guarantee is given in Note 38.
3 Liquidity Risk
The Company monitors its risk of shortage of funds through using a liquidity planning process that encompasses an analysis of projected cash inflow and outflow.
The Company's objective is to maintain a balance between continuity of funding and flexibility largely through cash flow generation from its operating activities and the use of bank loans. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. The Company has access to a sufficient variety of sources of funding.
The table below summarizes the maturity profile of the Company's financial liabilities (including future interest payable) based on contractual undiscounted payments.
For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder's value.
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes, within net debt, interest bearing loans and borrowings, trade and other payables, less cash and short-term deposits.
In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017, March 31, 2016 and April 1, 2015.
In addition to the above, during the year ended March 31, 2015, the Company transferred its injectable business to its wholly owned subsidiary company Claris Injectable Limited ('CIL') under slump sale arrangement. Capital gains arising pursuant to sale of business was not chargeable to tax by the virtue of provisions of Section 47(iv) of the Income-tax Act, 1961. Therefore, provision for tax of approximately Rs.4,000 Lacs was not made in the books of accounts of the Company. However, as provided in Note 32 pursuant to transfer of ownership of CIL to Baxter Group, CIL shall cease to be the subsidiary company of the Claris Life sciences Limited. Therefore, the Company shall not be entitled for the benefit of capital gains tax exemption considered earlier and the capital gains shall be chargeable to tax for the year ended March 31, 2015. Upon receipt of various approvals and completion of other legal and statutory formalities, the transaction of transfer of investment in subsidiary company shall be completed and necessary provision for capital gains tax liability shall be made in the books of account of the Company.
Further, the Board of Directors of the Company has recommended a final dividend of Rs.2 per equity share of Rs.10 each for the year ended March 31, 2017 subject to the approval of shareholders at the ensuing annual general meeting.
Note 4 : Expenditure for corporate social responsibility activities
During the year ended March 31, 2017, the company has spent Rs.128.33 lacs towards Corporate Social Responsibility (CSR) under Section 135 of the Companies Act, 2013 and Rules thereon by way of contribution to various Trusts / NGOs / Societies / Agencies.
(i) On May 8, 2017, the Company has entered into a definitive agreement with Otsuka Pharmaceutical Factory, Inc. (Japan) ("Otsuka") to sell its 20% stake in the joint venture, Otsuka Pharmaceutical India Private Limited (formerly known as Claris Otsuka Private Limited), for a total consideration of US$ 20 million. The closure of the transaction is subject to regulatory approvals, including approval from Foreign Investment Promotion Board.
(ii) The Board of Directors of the Company has recommended a final dividend of Rs.2 per equity share of Rs.10 each for the year ended on March 31, 2017, subject to the approval of shareholders at the ensuing annual general meeting.
Note 5 : Other Notes
(i) The search operations under Section 132 of the Income-tax Act, 1961 were carried out at the premises of the Company by the Income-tax Department on August 4, 2015. In order to settle the above matter expeditiously, the Company filed an application with the Income-tax Settlement Commission for earlier years to conclude the final assessments for these years. With a view to avoid protracted and expensive litigation and to buy peace of mind, the Company offered additional income in its application filed with Income-tax Settlement Commission and paid tax and interest thereon. The amount of income tax and interest so paid has been provided for in the financial statements. The Income tax Settlement Commission has admitted the application and the proceeding are under progress.
(iii) The presentation requirements under previous GAAP differs from Ind AS, and hence, previous GAAP information has been regrouped for ease of reconciliation with Ind AS. The regrouped previous GAAP information is derived from the standalone financial statements of the Company prepared in accordance with previous GAAP.
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