(ii) Torrent Investments Private Limited, the holding Company, holds 24,11,27,440 (previous year 24,11,27,440) equity shares of 15 each, equivalent to 71.25% (previous year 71.25%) of the total number of subscribed & paid up equity shares, which is the only shareholder holding more than 5 % of total equity shares.
(iii) The Company has one class of equity shares having par value of 15 each. Each shareholder is eligible for one vote per share held. The final dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount, in proportion to shareholding.
(i) Term Loans from banks referred above to the extent of :
(v) Aggregate value of Issued, Subscribed and Paid-up Share Capital as on the Balance Sheet date for the period of preceding five years includes 16,92,22,720 equity shares allotted as fully paid up bonus shares.
(a) 1398.50 crores (Previous year 1657.42 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.
(b) 171.87 crores (Previous year 1209.37 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.
(c) 1145.00 crores (Previous year 1145.00 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the company including its future line extensions.
(d) 1732.31 crores (Previous year 1749.78 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the company including its future line extensions.
(ii) Non-convertible debentures referred above to the extent of :
(a) 1285.28 crores (Previous year 1427.89 crores) are secured by first pari-passu mortgage/charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.
(b) 1 NIL (Previous year 1345.00 crores) are secured by first pari-passu mortgage/ charge on tangible immovable and movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.
(c) 1500.00 crores (Previous year 1500.00 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the company including its future line extensions.
(iii) Term Loans from others referred above to the extent of 1 NIL (previous year 1 333.33 crores) are secured by first exclusive mortgage/ charge on identified Land situated at ShiIaj-Thaltej, Ahmedabad as well as first pari-passu mortgage/ charge on certain identified trademarks of the Company including its future line extensions.
(iv) Secured working capital demand loans are secured by hypothecation of inventories and book debts.
(v) Term loans carry interest rate in the range of 7.65% to 9.60% (previous year: 6.52% to 9.60%), working capital loans carry interest rate in the range of 7.27% to 8.04% (previous year: 6.40% to 7.08%) and Non-convertible debentures carry interest rate in the range of 8.47% to 9.11% (previous year: 7.70% to 8.71%).
39 Employee Benefits
A Defined Contribution Plan
The Company’s contribution to provident fund and superannuation fund aggregating to I 96.08 crores (Previous year I 84.31 crores) has been recognised in the statement of profit and loss under the head employee benefits expenses (Refer note 31).
B Defined Benefit Plan
The accruing liability on account of retirement benefit plans (in the nature of defined benefits plan) is accounted as per Ind-AS 19 "Employee Benefits".
General description of the plan :
In accordance with Indian law, the Company operates a scheme of gratuity which is a defined benefit plan ('the Gratuity Plan') covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death and incapacitation while in employment, termination of employment. The level of benefits provided depends on the respective employees' tenure of employment and last drawn salary. The Company manages the plan through a trust. Trustees administer contributions made to the trust. The defined benefit plan exposes the company to actuarial risks such as interest rate risk, investment risk and salary risk.
Expected long term productivity gains and long term risk-free real rate of interest have been used as guiding factors to determine long term salary growth.
Future mortality rates are obtained from relevant table of Indian Assured Lives Mortality 2012-14 (Urban).
(j) Sensitivity Analysis for each significant actuarial assumption :
The significant actuarial assumptions for the determination of the defined benefit obligations are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.
Determination of fair values:
The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis :
Investment in mutual funds : The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which such units are redeemed.
Equity investments : Equity investments traded in an active market are determined by reference to their quoted market prices. Other equity investments where quoted prices are not available, fair values are determined by reference to the expected discounted cash flows from the underlying net assets or current market value of net assets.
Derivative instruments: For forward contracts, future cash flows are estimated based on forward exchange rates (from observable forward exchange rates / yield curves at the end of the reporting period) and contract forward exchange rates, discounted at a rate that reflects the credit risk of respective counterparties.
Significant Techniques and Unobservable Inputs Used for Level 2 / Level 3 Fair Valuation Measurement:
(iii) Financial risk management
The Company’s activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Company’s overall risk management program seeks to minimise potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.
(a) Market risk :
Market risk refers to the possibility that changes in the market rates may have impact on the Company’s profits or the value of its holding of financial instruments. The Company is exposed to market risks on account of foreign exchange rates, interest rates and underlying equity prices.
(a1) Foreign currency exchange rate risk :
The Company’s foreign currency risk arises from its foreign operations, investments in foreign subsidiaries, foreign currency transactions and foreign currency borrowings. The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.
Since a major part of the Company’s revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Company’s performance. Consequently, the overall objective of the foreign currency risk management is to minimise the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.
The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows upto a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The foreign exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1 based on management's current assessment. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.
With respect to the Company's derivative financial instruments which are in the form of forward contracts, a 5% increase / decrease in relation to USD & EURO of each of the currencies underlying such contracts would have resulted in increase / decrease of I 85.23 crores and I 89.31 crores in the Company's pre-tax profit or loss and I 148.03 crores and I 143.62 crores in pre-tax cash flow hedge reserve from such contracts as at March 31, 2024 and March 31, 2023 respectively.
With respect to the Company's non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EURO on the underlying would have resulted in increase / decrease of I 51.56 crores and I 62.92 crores in the company's net profit for the year ended March 31, 2024 and March 31, 2023 respectively.
(a2) Interest rate risk :
Interest rate risk refers to the possibility that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Company is exposed to fluctuations in interest rates in respect of foreign currency borrowings and rupee borrowings. The company manages its interest rate risk by closely monitoring the movements in the market interest rates.
As at March 31, 2024, the Company has outstanding rupee borrowings of I 2,935.08 crores with variable rate of interest and I 400.00 crores with fixed rate of interest.
Cash flow risk in respect of variable rate instruments :
(c) Liquidity risk :
Liquidity risk refers to 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 objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company generates cash flows from operations to meet its financial obligations, maintains adequate liquid assets in the form of cash & cash equivalents and has undrawn short term line of credits from banks to ensure necessary liquidity.
A reasonably possible change of 100 basis points in interest rates at the reporting date would have increase/ (decrease) pre-tax profit or loss and pre-tax equity by I 29.35 crores. This analysis assumes that all other variables remains constant and change occurs on reporting date. The year end balances are not representative of the average borrowings during the year.
Fair value risk in respect of fixed rate instruments :
The Company carries borrowings at amortised cost and hence, change in the interest rate at reporting date does not affect statement of profit and loss.
(b) Credit risk :
Credit risk is the risk of financial loss arising from counter party failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of the direct risk of default, the risk of deterioration of creditworthiness as well as concentration of risks. Financial instruments that are subject to concentrations of credit risk materially consists of trade receivables, investments and derivative financial instruments.
All trade receivables are subject to credit risk exposure. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through established policies, controls relating to credit approvals and procedures for continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.
The Company has used expected credit loss (ECL) model for assessing the impairment loss. For the purpose, the Company uses a provision matrix to compute the expected credit loss amount. The provision matrix takes into account external and internal risk factors and historical data of credit losses. Refer note 15 for movement in expected credit loss and trade receivables aging.
The Company does not have significant concentration of credit risk related to trade receivables. No single third party customer contributes to more than 10 % of outstanding accounts receivable (excluding outstanding from subsidiaries) as at March 31, 2024 and March 31, 2023.
(iv) Capital management
The capital structure of the Company consists of equity, debt, cash and cash equivalents. The Company’s objective for capital management is to maintain the capital structure which will support the Company’s strategy to maximise shareholder’s value, safeguarding the business continuity and help in supporting the growth of the Company. The net debt to equity ratio as at March 31,2024 stands at 0.49 (Previous year 0.71).
With respect to investments, the Company limits its exposure to credit risk by investing in liquid securities with counter parties depending on their Composite Performance Rankings (CPR) published by CRISIL. Bank deposits are placed with banks with high credit rating. The Company’s investment policy lays down guidelines with respect to exposure per counterparty, credit rating, processes in terms of control and continuous monitoring. The Company therefore considers credit risks on such investments to be negligible.
With respect to derivatives, the Company's forex management policy lays down guidelines with respect to exposure per counter party i.e. with banks with high credit rating, processes in terms of control and continuous monitoring. The fair value of the derivatives are credit adjusted at the period end.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is I 1,985.41 crores and I 2,151.14 crores as at March 31, 2024 and March 31, 2023 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.
42 Commitments and Contingencies
|
(I in crores)
|
| |
As at March 31, 2024
|
As at
March 31, 2023
|
|
Commitments:
|
|
|
|
( ) Estimated amount of contracts remaining unexecuted on capital account (net of advances) ( not provided for
|
359.33
|
431.59
|
|
(b) Uncalled liability on partly paid shares of Torrent Australasia Pty Ltd., a wholly owned ( subsidiary. (Australian Dollar (AUD) 0.06 crores (previous year AUD 0.06 crores))
|
3.20
|
3.25
|
| |
362.53
|
434.84
|
|
Guarantees of I 875.43 crores and I 863.28 crores are outstanding as at March 31,2024 (c) and March 31, 2023 respectively, which were issued to third parties on behalf of wholly owned subsidiaries for contractual obligations.
|
|
|
|
Contingent liabilities:
|
|
|
|
(a) Claims against the Company not acknowledged as debts :
|
|
|
|
Disputed demand of Income tax
|
1.60
|
1.60
|
|
Disputed Employee state insurance contribution liability under E.S.I. Act, 1948
|
16.76
|
16.08
|
|
Disputed demand of Goods and Services tax / excise duty
|
128.89
|
121.95
|
|
Disputed demand of local sales tax and C.S.T.
|
0.24
|
0.24
|
|
Disputed demand of stamp duty and registration charges
|
3.43
|
3.43
|
|
Disputed cases at labour court / industrial court
|
6.27
|
7.28
|
|
Disputed Bonus liability under Payment of Bonus (Amendment) Act, 2015
|
0.25
|
0.25
|
| |
157.44
|
150.83
|
In most of the cases, the relevant authorities have raised demand or disallowed tax claims. The Company has preferred appeals and the outcome are awaited.
Against the claims not acknowledged as debts, the Company has paid I 3.94 crores (previous year I 3.96 crores). The expected outflow will be determined at the time of final outcome of the concerned matters. No amount is expected to be reimbursed.
(b) The Company and/or its subsidiaries ('Torrent') are involved in certain legal proceedings, including product liability matters wherein there are two Multi-District Litigations ('MDL') pending against Torrent and other manufacturers for Valsartan and Losartan in which the district court in the valsartan MDL has ordered bellwether trial in third-party payor economic loss class
action against Torrent and other two defendants, and other commercial matters, that arise from time to time in the ordinary course of business. It is difficult to ascertain the financial effect, if any, of such proceedings that will result from its ultimate disposition due to involvement of complex issues with substantial uncertainties and without any precedents. Additionally, many factors like stage of the proceedings, overall length and extent of discovery process; the entitlement of the parties to an action to appeal a decision; the extent of the claims; the possible need for further legal proceedings to establish the appropriate amount of damages, if any; the settlement posture of the other parties to the litigation; uncertainty in timing of litigation and any other factors that may have an implication on the ultimate outcome of the ongoing litigations. The Company assesses likely outcome based on internal assessment as well as considers views of legal counsel representing the Company. Moreover, Company carries product liability insurance policy of amount which it believes to be sufficient for its needs.
(c) In view of amendment in Section 37(1) of Income Tax Act, 1961 introduced in Finance Act, 2022, it is possible that the Company may get involved in the litigation on allowability of certain expenses in relation to the years for which assessment proceedings have not commenced. It is difficult to ascertain the financial effects from such future proceedings, if any, that will result in to its ultimate disposition. The Company assesses likely outcome based on internal assessment as well as considers views of external consultants representing the Company.
43 Acquisition and Amalgamation Of Curatio Health Care (I) Private Limited
During the previous year, the Company acquired 100% shares in Curatio Health Care (I) Private Limited (‘Curatio’) including its two subsidiaries for a consideration of I 2,000 crores on October 14, 2022.
The Board of Directors of the Company, at its meeting held on December 21,2022, had approved the Scheme of Arrangement in the nature of Amalgamation ('Scheme') of Curatio with the Company subject to requisite statutory and regulatory approvals. The scheme was approved by the National Company Law Tribunal (‘NCLT’), Ahmedabad Bench vide its order dated May 17, 2023 and the certified copy of said order was filed with Registrar of Companies on May 25, 2023. The management determined this as a subsequent adjusting event in accordance with Ind AS 10 and hence, the financial statements for the year ended March 31,2023 reflects the financial information of Curatio from the date of its acquisition, i.e. October 14, 2022. This business combination offers the company an opportunity to enhance its presence in dermatology segment with a portfolio of over 50 brands, marketed in India.
Identifiable assets acquired and liabilities assumed
The Company had accounted for the transaction in accordance with Ind AS 103, “Business Combinations”, and fair value of identifiable assets aquired and liabilities assumed pertaining to Curatio as at appointed date pertaining to curatio had been recognised in the standalone financial statements of the company based on purchase price allocation as determined by an independent valuer.
Measurement of fair values
Fair value of identifiable intangible assets acquired had been determined by an independent valuer. Fair value of other assets, including receivables, had been considered same as the carrying value of these assets as of the acquisition date in the books of Curatio.
Revenues and Profit or Loss of Acquiree entity
The revenue of Curatio from October 14, 2022 to March 31,2023 is I 126.35 crores with Profit before Tax of I 36.00 crores.
Revenues and Profit or Loss of combined entity
Assuming the business combination had occurred from the beginning of reporting period i.e. April 1, 2022, the combined revenue of the Company would be I 7,834.79 crores with Profit before Tax of I 1,477.84 crores.
49 Proposed Dividend
The Board of Directors of the Company, in its meeting held on May 24, 2024, has proposed a final dividend of 16 per equity share for the financial year ended March 31,2024. The proposal is subject to the approval of the shareholders of the Company at the ensuing Annual General Meeting and if approved would result in a cash outflow of approximately 1203.07 crores.
50 The financial statements for the year ended March 31,2024 were approved for issue by the Board of Directors on May 24, 2024.
46 Non-Current Assets Held for Sale
During the previous year, the company disposed off its Land at Shilaj, Ahmedabad which was classified as Non-current asset held for sale as at March 31, 2022 and recognised gain of 122.53 crores.
47 Registration of Charges
1 Debt equity ratio has improved on account of repayments of Long term debt.
2 Return on capital employed improvement is on account of better operational performance and repayments of Long term debt.
3 The improvement in the ratio is mainly due to higher yields on the investment of the surplus funds.
All the charges created or satisfied during the current year and previous year were registered with Registrar of Companies within statutory period.
48 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 person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries) other than in the ordinary course of business with its subsidiary companies. The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
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