i) Provisions, contingent liabilities and contingent assets Provision
A Provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Contingent liabilities
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Contingent assets
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
j) Retirement and other employee benefits Provident fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service.
Gratuity
Gratuity, a post employment defined benefit obligation is provided on the basis of an actuarial valuation made at the end of each year/period on projected unit credit method. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
Compensated absences
The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using Projected Unit Credit method on the additional amount expected to be paid/ availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages etc. and the expected cost of ex-gratia, bonus and performance incentive are recognised in the period in which the employee renders the related service. A liability is recognised for the amount expected to be paid when there is a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
k) Foreign currencies Transactions and balances:
i. The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees.
ii. Transactions denominated in foreign currency are recorded at the exchange rate on the date of transaction where the settlement of such transactions are taking place at a later date. The exchange gain/loss on settlement / negotiation
during the year is recognised in the Statement of Profit and Loss. In case of advance payment for purchase of assets/ goods/services and advance receipt against sales of products/services, all such purchase/sales transaction are recorded at the rate at which such advances are paid/received.
iii. Foreign currency monetary transactions remaining unsettled at the end of the year are converted at year-end rates. The resultant gain or loss is accounted for in the Statement of Profit and Loss.
iv. Non-monetary items that are measured at historical cost denominated in foreign currency are translated using exchange rate at the date of transaction.
v. The overseas trading offices are non-integral operations and the overseas non trading offices are integral operations and are accounted accordingly.
l) Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
m) Financial instruments
(i) Financial assets & financial liabilities Initial recognition and measurement
All financial assets and liabilities are recognised initially at fair value other than Trade Receivables which are initially recognized at transaction value.
In the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset is treated as cost of acquisition. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For the purpose of subsequent measurement, financial assets are classified in four categories:
• Debt instruments at amortised cost.
• Debt instruments at fair value through other comprehensive income (FVTOCI).
• Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL).
• Equity instruments measured at fair value through other comprehensive income (FVTOCI).
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 7 details how the entity determines whether there has been a significant increase in credit risk. For trade
receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
De-recognition of financial instruments
A financial asset is de-recognised only when:
• The Company has transferred the rights to receive cash flows from the financial asset, or
• Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is de-recognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not de- recognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is de-recognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
A financial liability (or a part of a financial liability) is de-recognized from the Company's Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
(ii) Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement
The Company uses derivative financial instruments such as forward currency contracts, interest rate swaps to hedge its foreign currency risks, interest rate risks, respectively.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognised in the Statement of Profit and Loss.
Cash flow hedge
The company designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the Statement of Profit and Loss. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the Statement of Profit and Loss upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the Statement of Profit and Loss.
n) Investments:
Investments in Subsidiaries / Associates / Joint venture
Investments in Subsidiaries / Associates / Joint venture are carried at cost in the separate financial statements.
Investment in LLP
Investment in LLP is carried at Fair Value through OCI(FVTOCI) in the separate financial statements.
o) Revenue recognition
i) The Company derives revenues primarily from sale of products and services. Revenue from sale of goods is recognised net of returns, product expiry claims and discounts at the amount of transaction price.
Revenue is recognized on satisfaction of performance obligations upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
To recognize revenues, the Company applies the following five step approach:
1. Identify the contract with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognize revenues when a performance obligation is satisfied.
Performance obligation may be satisfied over time or at a point in time. Performance obligations satisfied over time if any one of the following criteria is met. In such cases, revenue is recognized over time.
1. The customer simultaneously receives and consumes the benefits provided by the Company's performance; or
2. The Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
3. The Company's performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date.
For performance obligations where one of the above conditions are not met, revenue is recognised at the point in time at which the performance obligation is satisfied.
Where Revenue is recognized over time, the amount of revenue is determined on the basis of contract costs incurred in relation to estimated contract expenses.
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties.
The Company presents revenues net of indirect taxes in its Statement of Profit and Loss.
ii) Export benefits which are in the nature of neutralisation of duties and taxes are grouped under material costs. Other export incentives are grouped under other operating revenue.
iii) Revenue in respect of insurance/other claims, commission, etc. are recognised only when it is reasonably certain that the ultimate collection will be made.
iv) For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR).
v) Dividend from subsidiaries / associates / joint venture is recognised in the Statement of Profit and Loss in separate financial statements when the parent company's right to receive the dividend is established.
p) Taxes
Tax expenses comprise Current Tax and Deferred Tax. i) Current tax
The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
ii) Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Standalone Financial Statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
q) Leases
Company as a lessee
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. For these short-term leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease. The Company recognises lease liabilities to make lease payments and right- of-use assets representing the right to use the underlying assets as below.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
Lease Liabilities
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rate. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. Lease liabilities are remeasured with a corresponding adjustment to the related ROU asset.
Lease liabilities and ROU assets have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
r) Earnings per share
Earnings per share is calculated by dividing the net profit or loss before OCI for the year by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss before OCI for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
s) Dividend distribution
Dividend distribution to the Company's equity holders is recognized as a liability in the Company's annual accounts in the year in which the dividends are approved by the Company's equity holders.
t) Recent pronouncements
There have been no recent accounting pronouncements made by Ministry of Corporate Affairs relating to the Companies (Indian Accounting Standards) Rules, 2015.
6 Details of investments in subsidiary / joint venture / associate at cost
a) Ipca Pharmaceuticals, Inc. USA
This wholly owned subsidiary company was incorporated under the laws of the State of New Jersey in the United States on July 10, 2003. This subsidiary company is coordinating the development and registration of formulations developed by the Company in United States of America as well as distribution of Active Pharmaceutical Ingredients (APls) manufactured by the Company in the US market. During the year 2017-18, this subsidiary acquired 90% Share capital of Pisgah Laboratories Inc. USA. Further, during the year 2018-19, this subsidiary has acquired 80% units of Bayshore Pharmaceuticals LLC, a New Jersey limited liability company (Bayshore). During the year 2021-22, this subsidiary has acquired the remaining 20% share capital of Bayshore and with this acquisition, Bayshore is now wholly owned by Ipca Pharmaceuticals Inc., USA. During the year 2022-23 , the Company has invested in 6000 preference shares and in current year Ipca has further invested in 5,250 preference shares of Ipca Pharmaceuticals. Inc. USA.
b) Ipca Laboratories (U.K.) Ltd.,U.K.
During the financial year 2003-04, the Company incorporated this wholly owned subsidiary to apply and obtain product registrations in the United Kingdom. During the year 2011-12, this subsidiary acquired 100% share capital of Onyx Research Chemicals Ltd., holding company of Onyx Scientific Ltd. During the year 2015-16, Onyx Research Chemicals Ltd., UK merged with its holding company Ipca Laboratories (UK) Ltd. and consequent to this, Onyx Scientific Ltd. has became wholly owned subsidiary of this Company. During the year 2018-19, Onyx Scientific Ltd. has acquired 10% share capital of Pisgah Laboratories Inc. USA. During the year 2022-23 Ipca has invested in 10,00,000 preference shares of Ipca Laboratories (U.K.) Ltd.,U.K.
c) Ipca Pharma Nigeria Ltd. Nigeria
During the year 2006-07, the Company acquired the entire share capital of Ipca Pharma Nigeria Ltd. Thus, Ipca Pharma Nigeria Ltd. became wholly owned subsidiary of the Company with effect from January 31,2007. The Company was incorporated as a private company in Nigeria. It commenced commercial operations in December 2001. It is engaged in importation and marketing of formulations and APIs in the Nigerian market.
d) Ipca Pharma (Australia) Pty Ltd. Australia
This subsidiary company was acquired by the Company in the year 2007-08 and is engaged in the activities of holding formulations
dossier registrations with TGA, Australia and sale of pharmaceuticals manufactured by the Company in Australia. This subsidiary company has a wholly owned subsidiary in New Zealand - Ipca Pharma (NZ) Pty Ltd.
e) Ipca Pharma (NZ) Pty Ltd., New Zealand
During the year 2007-08, the Company was incorporated to hold formulation dossier registrations in New Zealand and to distribute formulations manufactured by the Company in the New Zealand market. This company is wholly owned subsidiary of Ipca Pharma (Australia) Pty Ltd.
f) Ipca Pharmaceuticals Ltd. SA de CV. Mexico
This subsidiary Company was setup during the year 2008-09 as wholly owned subsidiary of the Company to hold formulations dossier registrations and promotion of pharmaceuticals manufactured by the Company in the Mexican market. This Company is currently in the process of being closed down subject to required approval.
g) Avik Pharmaceutical Ltd., India
During the year 2013-14 the Company had acquired 49.02% of shares in Avik Pharmaceutical Ltd. Avik is manufacturing APIs, primarily Cortico Steroids and Hormones since 1980. Avik is pioneer in the manufacturing of steroids in India. Avik's two manufacturing facilities are located at Vapi, Gujarat. During the year 2018-19, the Company has been allotted 33,000 shares under right issue. Further, during the year 2021-22, the Company has acquired additional 11,000 shares post which the Company's holding in Avik Pharma is 50.00%.
h) Trophic Wellness Pvt. Ltd., India
Trophic Wellness Pvt. Ltd. was incorporated in 2010 and is headquartered in Mumbai, India. The Company has acquired shareholding to the extent of 19.26% during the year 2010-11, 20% during the year 2020-21 & additional 13.09% during the year 2021-22 in Trophic Wellness Pvt. Ltd and status of Trophic Wellness Pvt. Ltd. is changed from associate to subsidiary w.e.f 11th June 2021. Trophic Wellness Pvt. Ltd. is engaged in the manufacturing and marketing of nutraceuticals with its manufacturing unit situated in Sikkim. During the year 2022-23 Company has acquired additional 6.53% in Trophic Wellness Pvt. Ltd. resulting in total equity holding of 58.88%.
i) Krebs Biochemicals & Industries Ltd., India
Krebs Biochemicals and Industries Ltd. was established in 1991. During the financial year 2014-15, Krebs Biochemicals and Industries Ltd. became an associate company. Krebs undertakes both contract manufacturing and develops products for sale in global markets. Krebs is listed on NSE and BSE and is headquartered in Vishakhapatnam, India with manufacturing plants in Nellore and Vishakhapatnam. Expertise and infrastructure in the areas of chemical synthesis, fermentation and enzymatic technologies along with a focus on cost and quality makes Krebs a logical partner of the Company for the development and supply of products made using one or more of these technologies.
Equity Shares-During the year 2019-20 company has been allotted 13,70,000 equity shares resulting into increase in holding to the extent of 44.67%. Further, during the year 2021-22, the company has been allotted 19,40,000 shares upon conversion of share warrants. Now Company's holding in Krebs is 49.65%.
Preference Shares- During the year 2019-20 Company has been allotted 30,00,000, 9% preference shares (non convertible, redeemable & non cumulative) of ' 100/- each. Further, during the year 2021-22 company has been allotted 1,00,00,000, 9% preference shares (non convertible, redeemable & non cumulative) of ' 100/- each. Now company have 1,30,00,000, 9% preference shares (non convertible, redeemable & non cumulative) of ' 100/- each.
j) Lyka Labs Ltd., India
Lyka Labs Limited was incorporated in 1976. In the year 2021-22 the company has acquired 26.58% shareholding & during the year 2022-23 Company has acquired additional shareholding to the extent of 4.78% of Lyka resulting into total holding percentage to 31.36%. Lyka Labs Limited is engaged in the business of manufacturing and marketing of injectables, lyophilized injectables and topical formulations. Lyka's Manufacturing facility is situated at Ankleshwar, Gujarat. Lyka's shares are listed at BSE & NSE. During the year 2021-22 the company had entered into a joint management control agreement with the promoters of the said company and in the year 2022-23 appointed independent director w.e.f 8th August 2022, with this the status of Lyka Labs Limited has been changed from associates to Joint venture w.e.f 8th August 2022.
Convertible Share Warrants (partly paid)- During the year 2022-23 Company has been allotted 50,00,000 convertible share warrants of Rs. 10 each partly paid. These warrants are convertible into equity shares in one or more tranches, at the option of the allottee, within a period of 18 months of its allotment. Out of this 24,00,000 warrants are converted into equity shares during the year. Now company's holding in lyka is 36.34%.During the year the Company has further invested in 24,00,000 warrants .
k) Unichem Laboratories Ltd., India
On August 2, 2023, the Company acquired 2,35,01,440 fully paid-up equity shares of Rs. 2/- each of Unichem Laboratories Ltd. representing 33.38% of its paid-up equity share capital @ Rs. 402.25 per share aggregating to Rs. 945.35 crores.The Company has also accepted 1,35,79,571 equity shares of Rs. 2/- each validly tendered in open offer by the public shareholders of Unichem Laboratories Ltd. @ Rs. 440 per equity share aggregating to Rs. 597.50 crores and representing 19.29% of the paid-up equity share capital of the said Unichem Laboratories Ltd.The Company now holds 3,70,81,011 fully paid-up equity shares of Rs. 2/- each of Unichem Laboratories Ltd., representing 52.67% of paid-up share capital of the said company.In view of this, Unichem Laboratories Ltd. has become subsidiary of the Company.Since Subsidiary's Subsidiary is also a subsidiary, 6 wholly owned Subsidiaries of Unichem Laboratories Ltd. have also become Subsidiaries of the Company.
l) Disclosure required under Schedule III on utilization of borrowed funds and share premium :
No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries except for the following:
a. During the current year, the Company has invested in Redeemable Preference Shares of Ipca Pharmaceuticals, Inc. USA (Ipca USA), a wholly owned subsidiary (WOS) aggregating to US$ 52,50,000 (? 43.32 crores). Such investment was made to enable the additional funding to its step down WOSs viz. Pisgah Laboratories Inc., USA (Pisgah) in the form of redeemable Preference Shares aggregating to US$ 52,50,000.
b. During the previous year, the Company had invested in Redeemable Preference Shares of Ipca Pharmaceuticals, Inc. USA (Ipca USA), a wholly owned subsidiary (WOS) aggregating to US$ 60,00,000 (' 48.82 crores). Such investment was made to enable the additional funding to its step down WOSs viz. Bayshore Pharmaceuticals LLC, USA (Bayshore) and Pisgah Laboratories Inc., USA (Pisgah). Subsequent to above investments, Ipca USA extended loan of US$ 15,00,000 to Bayshore. Ipca USA also invested in Redeemable Preference Shares of Pisgah aggregating to US$ 35,00,000.
The above transaction are in compliance with all requirement of FEMA & PMLA.
m) The Company has not received any fund from any person(s) or entity(ies), including foreign entities ("Funding party") with the understanding (whether recorded in writing or otherwise) that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding party (ultimate beneficiaries); or provide any guarantee, security or the like on behalf of the ultimatebeneficiaries.
Note: Investment in ABCD Technologies LLP :
During the year 2021-22, the company has made a strategic investment of Rs. 25.00 crores in ABCD Technologies LLP. ABCD Technologies LLP will, through its investment entities, engage in the objective of digitizing health care infrastructure in India. The investment is accounted as Fair Value through other comprehensive income (FVTOCI) as per Company's election in accordance with Ind AS 109-Financial Instruments. The Company has a 4.03% share of profit/loss and voting rights. In terms of the limited liability partnership agreement, the contribution made by the Company has a lock-in period of 3 years from the date of investment till April 30, 2024.
During the year based on valuation report of the registered valuer the Company has accounted for fair valuation changes i.e., loss through Other Comprehensive Income amounting to Rs 6.81 crores.
v) Disclosure as required by Ind AS 103 Business Combination During the previous year 2022-23
A Merger of Ramdev Chemical Private Limited and Tonira Exports Limited with Ipca Laboratories Limited
Pursuant to the Scheme of Merger ('the Scheme') of Ramdev Chemical Private Limited (Ramdev) and Tonira Exports Limited (Tonira) with Ipca Laboratories Limited (Ipca) under the provisions of Sections 230 to 232 of the Companies Act, 2013 which has been approved by the National Company Law Tribunal vide their order delivered on 27th April 2023, which has been filed with the Registrar of Companies on May 23, 2023, to make the Scheme effective. All the assets and liabilities, both movable and immovable, all other interest, rights and power of every kind, and all its debts, liabilities, including contingent liabilities, duties and obligations have been transferred to and vested in the Transferee company with effect from the Appointed Date 1st April 2022. Accordingly, the Scheme has been given effect to in these accounts. Since the Business Combination is of entities under common control in accordance with the Appendix C of Ind AS 103, the financial information in the financial statements in respect of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. Accordingly, the Company has accounted for the Scheme in its books of accounts with effect from 1st April 2021 as required by Appendix C of Ind AS 103 "Business Combination". Figures for financial year 2021-22 are accordingly restated to give effects of the merger.
B Issue of Shares/Consideration: Since Ramdev Chemical Private Limited and Tonira Exports Limited are the wholly owned subsidiaries of the Company, there was no exchange/issue of shares by the Company to the shareholders of Ramdev Chemical Private Limited and Tonira Exports Limited.
C Salient Features of the Scheme of Merger by Absorption
(i) Description of Company and Background of Ramdev Chemical Private Limited
Ramdev Chemical Private Limited (CIN: U24200MH1999PTC120863) is a Private Limited Company incorporated under the Companies Act, 1956 having its registered office at Plot No.142-AB, Kandivali Industrial Estate, Kandivali (West) Mumbai City MH 400067 IN.The Transferor Company is a pharmaceutical company manufacturing in all forms, heavy chemicals of all kinds, (Solid, liquid, gaseous), bulk drugs, medicinal and pharmaceuticals products. The products of the Company are sold in and outside India. The Company has a manufacturing unit in India at Tarapur (Maharashtra) for manufacturing of Active Pharmaceutical Ingredients (Bulk Drugs) (APIs).
(ii) Description of Company and Background of Tonira Export Limited
Tonira Export Limited (CIN: U51909MH1995PLC248308) is a Private Limited Company incorporated under the Companies Act, 1956 having its registered office at142AB, Kandivali Industrial Estate Kandivali (West) Mumbai City MH 400067 IN. The Transferor Company currently is not engaged in any active business. The Company was the wholly owned subsidiary of Tonira Pharma Ltd. and became wholly owned subsidiary of Ipca laboratories Limited (Transferee Company)upon merger of the said Tonira Pharma Ltd. with Ipca Laboratories Ltd. (Transferee Company) in April, 2012.
(iii) Appointed date
The appointed date for the purpose of this amalgamation is 1st April 2022.
(iv) Accounting Treatment
In accordance with the scheme approved, the accounting for this amalgamation has been done in accordance with the "Pooling of Interest Method" referred to in Appendix C - Business combinations of entities under common control of Indian Accounting Standard 103- "Business Combination" of the Companies (Indian Accounting Standards) Rules, 2015.
D Ipca has accounted for the Scheme in its books of accounts with effect from 1st April 2021 as explained in para (vi) A above and accordingly has restated prior period comparative.
(i) With effect from 01st April 2021, all assets and liabilities appearing in the books of accounts of Ramdev and Tonira have been transferred to and vested in Ipca and have been recorded by Ipca at their respective carrying values.
(ii) The difference between the carrying values of net identifiable assets and liabilities of Ramdev Chemical Private Limited transferred to Ipca Laboratories Limited pursuant to this scheme and the value of investments in the books of Ipca Laboratories Limited has been discolsed as Amalgamation Adjustment Deficit Account as per the provisions of Appendix C of Ind AS 103. In the case of Tonira Exports Limited, there was no difference between the carrying values of net identifiable assets and liabilities and the equity. However the existing reserves have retained their character on merger with Ipca.
(iii) All inter company transactions have been eliminated on incorporation of the accounts of Ramdev Chemical Private Limited and Tonira Exports Limited in Ipca Laboratories Limited.
Nature and purpose of each reserve
(a) Capital Reserve
During amalgamation / merger / acquisition, the excess of net assets taken, over the consideration paid, if any, is treated as capital reserve.
(b) Securities Premium
The amount received in excess of face value of the equity shares is recognized in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve. This reserve is utilized in accordance with the provisions of the Companies Act, 2013.
(c) Capital Redemption Reserve
The Company has recognized Capital Redemption Reserve on buy-back of equity shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the equity shares bought back.
(d) General Reserve
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to the statement of profit and loss.
(e) Retained Earnings
Retained earnings are the profits that the Company has earned till date and is net of amount transferred to other reserves such as general reserves, debenture redemption reserve etc., amount distributed as dividend and adjustments on account of transition to Ind AS.
(f) Amalgamation adjustment deficit
The difference between the carrying values of net identifiable assets and liabilities of the transferor Company transferred to the transferee Company pursuant to the Scheme and the value of consideration paid, has been disclosed as Amalgamation Adjustment Deficit Account as per the provisions of Appendix C of Ind AS 103, Business Combination of Entities under common control.
(g) Other items of OCI
This reserve represents exchange differences arising on account of conversion of foreign operations to Company's functional currency and fair value of investments.
16.2 Disclosure in accordance with Ind AS - 19 "Employee Benefits", of the Companies (Indian Accounting Standards) Rules, 2015.
Gratuity
The company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement / termination is the employee's last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity plan is a funded plan and the company makes contributions to recognized funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk. Investment risk
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
Market risk (discount risk)
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.
Longevity Risk
The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the benefits paid on or before the retirement age , the longevity risk is not very material.
Actuarial risk
Salary Increase Assumption: Actual Salary increase that are higher than the assumed salary escalation , will result in increase to the obligation at a rate that is higher than expected.
41 Fair Value Hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognized and measured at fair value and (b) measured at amortized cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
42 Financial Risk Factors
The Company's business activities are exposed to a variety of financial risks: market/business risk, credit risk, exchange risk, etc. The Company's focus is to foresee the unpredictability of financial and business risks and seek to minimize potential adverse effects of these risks on its business and financial performance.
i. Business/Market Risk
The primary business/market risk to the Company is the price risk and its ability to pass on the same to its customers. The Company's operations extend to a number of countries across the globe and its products pricing competitiveness is a primary factor for the acceptability of Company's products in those markets. The Company has a robust procurement process, which ensures that its pricing power is not adversely affected by price changes in the market place for its raw materials. The backward integration into manufacturing of several API's for its own use in the formulations manufacturing also works as a mitigating strategy for price risk faced by the Company.
The other business risk is regulatory risk and regulatory audits of its manufacturing facilities by the regulators to ensure that the manufacturing facilities meet the current Good Manufacturing Practices (cGMP) requirements.While the stringent regulatory requirements and audits works as a business risk, the successful audit of its facilities by regulators coupled with price competitiveness results in higher business and margins for the Company.
The Company's products are also subjected to product liability claims/litigations. To mitigate these risks, the Company has obtained adequate Product Liability Insurance.
The Company, however, has a reduced risk from dependence on any single customer as no single customer or customer group accounts for more than 10% of Company's annual revenue. The Company also continuously forays into different markets/countries to reduce its dependence on any particular country or customer group. The Company also has a diversified therapeutic product portfolio and therefore no single product account for more than 10% of Company's annual revenue.
ii. Credit risk
The Company has exposure to credit risks associated with sales to various developing markets/countries. To mitigate these credit risks arising out of this, the Company obtains credit insurance on a regular basis after evaluating the credit risk associated with a country/customer. Country/customer where no credit insurance is available, the Company monitors such risk by continuously monitoring its exposure to such country/customer. There was no historically significant credit risk in the domestic market for the Company. Based on the historical data, the Company has made adequate provisions for expected loss because of credit risk, which is neither significant nor material.
iii. Interest risk
The Company has borrowings mainly in foreign currencies which is linked to SOFR. The Company mitigates these risks associated with floating SOFR rates by entering into interest rate swaps to move them to fixed SOFR rates. The domestic interest risk is exposed to the changes in the RBI bank rate. The Company manages this risk by managing its working capital effectively.
iv. Foreign currency risk
The Company continuously manages its risks associated with foreign currency by adopting various hedging strategies in consultation with internal and external experts. The Company has a system of regularly monitoring its currency wise exposures. The significant part of Company's receivables and borrowings are in US Dollars which operates as a natural hedge against each other. The Company has a policy not to borrow in a currency where it has no business exposure.
vi. Other Price Risk
The Company is mainly exposed to the price risk due to its investment in mutual funds. However, the Company is investing only in debt funds. The price risk arises due to uncertainties about the future market values of these investments. At March 31,2024, the investments in mutual funds is ' 410.60 crores (Previous year ' 323.32 crores).These are exposed to price risk. In order to minimize price risk arising from investments in mutual funds, the Company predominately invest in liquid fund where price risk is minimum.
43 Capital Management
For the purpose of the Company's capital management, capital includes paid-up equity share capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company's capital management is to maximize the shareholders' value.
The Company manages its capital structure and makes adjustments 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 its dividend payment ratio to shareholders, return capital to shareholders or issue fresh shares. The Company monitors capital using a gearing ratio, which is net debt divided by its total capital. The Company includes within its net debt the interest bearing loans and borrowings, trade and other payables less cash and cash equivalents.
46 Audit Trail Disclosure
The Ministry of Corporate Affairs (MCA) by the Companies (Accounts) Amendment Rules 2021 and vide notification dated 24 March 2021 has issued the "Companies (Audit and Auditors) Amendment Rules, 2021" has prescribed a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted requiring companies, which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
As required under above rules, the company uses in-house developed software for its financial accounting and MIS which works along with Database - Oracle as accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded and the audit trail feature has not been tampered with.
However, the audit trail feature was not enabled at the database level for Database - Oracle to log any direct data changes, used for maintenance of all accounting records by the Company.
47 Figures for the previous year have been regrouped / reinstated, wherever considered necessary.
48 The balance sheet, statement of profit and loss, cash flow statement, statement of changes in equity, statement of material accounting policy Information and the other explanatory notes forms an integral part of the financial statements of the Company for the year ended March 31, 2024.
As per our report of even date attached For and on behalf of the Board of Directors
For Natvarlal Vepari & Co Premchand Godha
Chartered Accountants Executive Chairman (DIN 00012691)
Firm's Registration No. 106971W Ajit Kumar Jain
Managing Director and CFO (DIN 00012657)
Pranay Godha
N. Jayendran Managing Director and CEO (DIN 00016525)
Partner Prashant Godha
Membership No. 40441 Executive Director (DIN 00012759)
Harish P. Kamath
Mumbai Company Secretary (ACS - 6792)
May 29, 2024 May 29, 2024
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