N Provisions
A provision is recognized 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. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
Provisions are reviewed and adjusted, when required, to reflect the current best estimate at the end of each reporting period.
The Company recognizes decommissioning provisions in the period in which a legal or constructive obligation is incurred. A corresponding decommissioning cost is added to the carrying amount of the associated property, plant and equipment, and it is depreciated over the estimated useful life of the asset.
O Contingent Liabilities
Contingent liability is disclosed in case of:
• A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation;
• A present obligation arising from past events, when no reliable estimate is possible;
• A possible obligation arising from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company where the probability of outflow of resources is not remote.
P Contingent Assets
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefits is probable. 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.
Q Fair Value Measurements
Company follows the hierarchy mentioned underneath for determining fair values of its financial instruments:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and
• Level 3 - Inputs for the asset or liability that are not based on observable market data.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting dates. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The fair value for these instruments is determined using Level 1 inputs.
The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is fair valued using level 2 inputs.
If one or more of the significant inputs is not based on observable market data, the instrument is fair valued using Level 3 inputs. Specific valuation techniques used to value financial instruments include:
• Quoted market prices or dealer quotes for similar instruments
• The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves
• The fair value of forward foreign exchange contracts is determined using forward exchange rates at the reporting dates, with the resulting value discounted back to present value
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.
R Revenue Recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
The Company recognizes revenue from contracts with customers based on a five-step model, such as to, identifying the contracts with a customer, identifying the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation at a point in time or over time.
The Company satisfies a performance obligation and recognizes revenue over time, if one of the following criteria is met:
• The customer simultaneously receives and consumes the benefits provided by the Company performance as the Company performs; or
• The Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
• The Company's performance does not create an asset with an alternative use to the Company and the entity 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 recognized at the point in time at which the performance obligation is satisfied.
S Other Income
Interest Income
For all debt instruments measured either at amortized cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
Interest income on fixed deposits is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.
Dividend income
Dividend income is recognized at the time when right to receive the payment is established, which is generally when the shareholders approve the dividend.
T Foreign currency transactions
Functional and presentation Currency
The Financial statements are presented in Indian Rupee (?) which is also the functional and presentation currency of the Company.
Transactions and Balances
Transactions in foreign currencies are translated to the functional currency at exchange rates in effect on transaction date. At each reporting date, monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate in effect at the date of financial statement.
The translation for other non-monetary assets and liabilities are not updated from historical exchange rates unless they are carried at fair value.
U Government Grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.
V Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account, the after income tax effect of interest and other financing costs associated with dilutive potential equity shares and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
W Segment Reporting
Operating segments are identified and reported in a manner consistent with the internal financial reporting provided to the chief operating decision makers, responsible for allocating resources and assessing performance of the operating segments.
X Events after reporting date:
Where events occurring after the Balance Sheet date provide evidence of conditions that existed at the end of the reporting period, the impact of such events is adjusted within the Financial Statements. Non Adjusting events after the Balance Sheet date which are material size or nature are disclosed separately in the Financial Statements.
Terms of the Borrowings
The Company has availed the Working Capital Loan, Cash Credit Facility and Term Loan from ICICI Bank Limited. The Company has availed Car Loan from Kotak Mahindra Bank. Working Capital Loans and are repayable in 48 and 60 equated monthly instalments. The loan carries interest rate of Repo Rate Spread. The loans from ICICI Bank are secured by Current Assets, Movable Fixed Assets and Immovable Fixed Assets of the Company. These loans are also guaranteed by the CVR Enterprise LLP and SRJR Lifesciences LLP (promoters of the Company). Car Loan is secured by hypothecation of the respective vehicles.
Loan received from related party is repayable after completion of one year from the end of the financial year at the option of the related party .
There is no default as on the balance sheet date in the repayment of borrowings and interest thereon.
The Company is generally regular in registering and filling of satisfaction of charges with ROC within the statutory period. However during the year ended 31st March, 2024, the Company has belated filed charge form for creation/ modification of charge against the loan obtained from ICICI Bank as on 31st March, 2024 .
The quarterly returns or statements of current assets filed by the Company with the banks or financial institutions are not in agreement with the books of accounts tabulated as follows:
*The amounts referred herein above corresponds to the claims made by the relevant statutory authorities pertaining to pre - Corporate Insolvency Resolution Process ("GRP") period. By virtue of Honourable NCLT order approving the resolution plan, the relevant claims stands extinguished. The Company has also filed writ petitions before the Honourable High Court of Madras requesting the demand to be quashed.
* The Income Tax Refund amounting to ? 45.17 Lakhs has been adjusted against the previous years demand by the Income Tax Department. The Company has filed the writ petition in Honourable High Court of Madras against such demands which has been issued by the Centralized Processing Centre ("CPC"). The management of the Company is of the view that post completion of CIRP, no such demands is payable by the Company. Based on the writ petition filed by the Company, the management is confident of obtaining a favourable outcome in this regard.
**The Company has received the demand of ? 265.42 Lakhs including penalties for the period FY 2017-18 to FY 2020-21against which a liability of ? 29.95 Lakhs has been paid by the Company. The Company has disputed 235.47 lakhs and filed the appeal with CGST Appeals. Based on the management assessment, the Company is of the opinion that said demand will be set aside and there will be no liability.
34 Segment Reporting
The Company is engaged in the business of manufacturing and trading of pharmaceuticals products. The Chief Operating Decision Maker monitors the operating results of its business for the purpose of making decisions about resource allocation and performance. Manufacturing and trading of pharmaceuticals products is considered as only segment.
36 Capital Management
The objective of the Company's capital management structure is to ensure sufficient liquidity to support its business, to ensure the Company's ability to continue as a going concern and provide adequate return to shareholders.
The Company monitors capital and the long term cash flow requirements including externally imposed capital requirements of the business on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face
Management assesses the Company's capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company's various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
37 Financial Risk Management Objectives and Policies
Financial Risk Management Framework
Company's principal financial liabilities comprise of borrowings, trade payables and Other financial liabilities. The main purpose of these financial liabilities is to finance the Company's operations. The Company's principal financial assets include Trade receivables, loans, cash and bank balances and other financial assets.
Risk Exposures and Responses
The Company is exposed to market risk, credit risk and liquidity risk. The Board of Directors reviews policies for managing each of these risks, which are summarised below.
i) Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and borrowing.
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 short term borrowing with floating interest rates. The Company constantly monitors the credit markets and rebalances its financing strategies to achieve an optimal maturity profile and financing cost. The Company's exposure to interest rate risk relates primarily to interest bearing financial liabilities. Interest rate risk is managed by the Company on an on-going basis with the primary objective of limiting the extent to which interest expense could be affected by an adverse movement in interest rates. There are no hedging instruments to mitigate this risk.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign exchange risk arising from transactions i.e. import and export of materials, recognised assets and liabilities denominated in a currency that is not the Company's functional currency. The Company's foreign currency risks are identified, measured and managed at periodic intervals in accordance with the Company's policies.
Commodity Risk
Exposure to market risk with respect to commodity prices primarily arises from the Company's purchases of Active Pharmaceutical Ingredients and other direct materials, whose prices are exposed to risk of fluctuation over short period of time. The prices of the Company's raw materials generally fluctuate in line with commodity cycles, although the prices of raw materials used in the Company's active pharmaceutical ingredients business are generally more volatile. Cost of raw materials form the largest portion of the Company's cost of revenues. Commodity price risk exposure is evaluated and managed through operating procedures and sourcing policies. As of 31st March, 2024, the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.
Credit risk is the risk of financial loss to the Company if the customer or that counterparty to the financial instrument fails to meet its contractual obligations and arises principally from the Company's receivables from customers, loans and investments. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of counterparty to which the Company grants credit terms in the normal course of business.
Credit risk management
The finance function of the Company assesses and manages credit risk based on internal credit rating system. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assesses the credit risk for each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
The risk parameters are same for all financial assets for all periods presented. The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an on-going basis throughout each reporting period. In general, it is presumed that credit risk has significantly increased since initial recognition if the payments are more than 30 days past due . A default on a financial asset is when the counterparty fails to make contractual payments when they fall due. This definition of default is determined by considering the business environment in which entity operates and other macro-economic factors.
Trade Receivables: The Company has exposure to credit risk from trade receivables on sale of medicines. 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 from various customers. The Company ensures concentration of credit does not significantly impair the financial assets since the customers to whom the exposure of credit is taken are well established and reputed industries engaged in their respective field of business. The creditworthiness of customers to which the Company grants credit in the normal course of the business is monitored regularly. The Company provides for expected credit loss under simplified approach
iii. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company's reputation. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities. The Company's treasury team is responsible for liquidity, funding as well as settlement management. In addition, processes and policies related to such risks are overseen by senior management. Management monitors the Company's liquidity position through rolling forecasts on the basis of expected cash flows.
40 Leases Company as lessee
The Company has entered into certain cancellable lease agreements mainly for office premises, land and infrastructure facilities' which are renewable on mutual agreement with the parties. At the date of commencement of the lease, the Company recognises a right of use asset and a corresponding lease liability for all lease arrangements in which it is a lessee, except for short-term leases and low value leases. The Company applies the "short term lease" & "low value leases" recognition exemptions for these leases. Rent Expenses recorded for Short term and Low value lease was ? 20.99 Lakhs (31st March 2023: 20.53 Lakhs).
41 Income Tax
The Company has opted for the new tax regime U/s 115BAA of the Income Tax Act from Financial Year ended 31st March, 2023. The Company has carried forward losses and unabsorbed depreciation of earlier years. Therefore, the Company has not accounted any Income Tax on the profits earned during the year.
42 Deferred Tax
Deferred Tax assets arise on account of carried forward losses and unabsorbed tax depreciation. As a prudent measure DTA is not recognised since it is not probable that future taxable profits will be available against which carried forward losses and unabsorbed tax depreciation can be utilised.
43 Corporate Social Responsibility (CSR)
(a) As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the company. The areas for CSR activities are Promoting education, preventive healthcare, special education and employment enhancing vocation skills, rural /nationally recognised/ Paralympic and Olympic sports, and Rural Development. The funds were primarily allocated to a corpus and utilized throughout the year on those activities which are specified in Schedule VII of the Companies Act, 2013.
44 Disclosures of the transactions with Struck Off Companies
The Company did not have any material transactions with companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956 during the financial year.
45 Additional Regulatory Information Required by Schedule III to the Companies Act, 2013
(i) The Company does not have any Benami property held in its name. No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
(ii) The Company has not been declared wilful defaulter by any bank or financial institution or other lender or government or any government authority.
(iii) The Company does not hold any investments and hence provisions for compliance with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017 (as amended) are not applicable.
(iv) Utilisation of borrowed funds and share premium
A The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) 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
(b) Provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
B 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:
(a) 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
(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries
(v) The Company does not have any undisclosed income which is not recorded in the books of account that has been surrendered or disclosed as income during the year (previous year) in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961)
(vi) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(vii) No Scheme of Arrangements have been approved by the Competent Authority in terms of Sections 230 to 237 of the Act, during the year.
46 The Company's major business is with Foreign Customers. The Company has foreign currency receivables as on 31st March, 2024 of ? 174 Lakhs (31st March 2023: ? 203 Lakhs) which are outstanding beyond the stipulated time period permitted under the RBI Master Direction on Export of Goods and Services vide FED Master Direction No. 16/2015-16 dated 1st January, 2016 (as amended), issued by the Reserve Bank of India (RBI) as of 31st March, 2024. The management of the Company is in the process of obtaining approval for extension of time limits for realization and also in process of receiving the payment and in regular discussion with the Customers. The management of the Company is confident of obtaining the approval for time extension and recovery of the amount within such extended time period.
47 Disclosures required under Section 22 of MSMED Act 2006 under the Chapter on Delayed Payments to Micro, Small and Medium Enterprises
There are no Micro, Small and Medium Enterprises to whom the Company owes dues which are outstanding for more than 45 days as at 31st March 2024. These information as required to be disclosed under Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the to the extent such parties have been identified on the information available with the Company.
48 Previous year figures have been regrouped/reclassified where ever necessary, to conform to those of the current year.
49 As allowed under Schedule III of the Companies Act, 2013, Financial Statements are prepared in lakhs and rounded off to two decimals. The amounts / numbers below one thousands are appearing as zero.
In Terms of our Report of even date For and on Behalf of the Board
_ _ , „ _ Bafna Pharmaceuticals Limited
For Brahmayya & Co.
Chartered Accountants Sd/- Sd/- Sd/-
S HEMALATHA VINAYAK DINESH DENDUKURI BAFNA MAHAVEER CHAND
Firm Regn No. 000511S
[Whole-Time Director] [Whole-Time Director] [Chief Executive Officer]
[DIN • 02714329]
Sd/- [DIN: 07601309]
Lokesh Vasudevan Sd/- Sd/-
(Partner) MELAGIRI SRIDHAR MOHANACHANDRAN A
M.N°. 222320 [Chief Financial Officer] [Company Secretary]
M.No. 65827
Place : Coonoor Place : Chennai
Date : 29th May 2024 Date : 29th May 2024
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