a. (i) Change in accounting policy
Presentation and disclosure of financial statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act, 1956 has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of the revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on the presentation and disclosures made in
the financial statements. The Company has also reclassified the
previous year''s figures in accordance with the requirements applicable
in the current year
(ii) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based upon
management''s best knowledge of current events and actions, actual
results could differ from these estimates.
b. Tangible fixed assets
Fixed assets are stated at cost, except for revalued freehold land and
buildings, which are shown at estimated replacement cost as determined
by valuers less impairment loss, if any, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing costs if capitalization criteria
are met and other directly attributable cost of bringing the asset to
its working condition for the intended use. Any trade discounts and
rebates are deducted in arriving at the purchase price.
Leasehold land on a lease-cum-sale basis are capitalized at the
allotment rates charged by the Municipal Authorities.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including routine repair
and maintenance expenditure and cost of replacing parts, are changed to
the statement of profit and loss for the period during which such
expenses are incurred.
The Company adjusts exchange differences arising on translation/
settlement of long-term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of the asset and
depreciates the same over the remaining life of the asset.
Gains or losses arising from disposal of fixed assets are measured as
the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is disposed.
Assets funded by third parties are capitalized at gross value and the
funds so received are recorded as deferred revenue and amortized over
the useful life of the assets.
c. Depreciation on tangible fixed assets
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under the Schedule XIV to the Companies
Act, 1956, whichever is higher. The Company has used the following
rates to provide depreciation on its fixed assets.
Leasehold improvements are being depreciated over the lease term or
estimated useful life whichever is lower. Used assets acquired from
third parties are depreciated on a straight line basis over their
remaining useful life of such assets.
The depreciation charge over and above the depreciation calculated on
the original cost of the revalued assets is transferred from the
revaluation reserve to the statement of profit and loss.
d. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Computer Software which is not an integral part of the related hardware
is classified as an intangible asset.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
its remaining patent life or ten years, whichever is higher. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually. All other intangible assets are
assessed for impairment whenever there is an indication that the
intangible asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5, Net
Profit or Loss for the Period, Prior Period Items and Changes in
Gains or losses arising from disposal of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is disposed.
Amortization of intangible assets:
a. Intellectual Property rights /marketing rights are amortized on a
straight line basis over the estimated useful economic life of five
b. Computer Software is amortized over a period of three - five years,
being its estimated useful life.
Research and Development Costs
Research and development costs, including technical know-how fees,
incurred for development of products are expensed as incurred.
Development costs which relate to the design and testing of new or
improved materials, products or processes or for existing products in
new territories are recognized as an intangible asset to the extent
that it is expected that such assets will generate future economic
benefits. Research and development expenditure of a capital nature is
added to fixed assets.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be carried at
cost less any accumulated amortization and accumulated impairment
losses. The carrying value of the development cost is tested for
e. Borrowing Costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur
f. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. The recoverable amount is
determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre- tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. In
determining net selling price, recent market transactions are taken
into account, if available. If no such transactions can be identified,
an appropriate valuation model is used.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation
was taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s recoverable amount. A previously recognized
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset''s recoverable amount since the
last impairment loss was recognized. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable
amount, nor exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognized for the
asset in prior years. Such reversal is recognized in the statement of
profit and loss unless the asset is carried at a revalued amount, in
which case the reversal is treated as a revaluation increase.
Inventories are valued as follows:
Raw materials and packing Lower of cost and net realizable value.
However, materials and other items held for use in the production
materials of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Cost is determined on a first-in-first out
basis. Customs duty on imported raw materials (excluding stocks in the
bonded warehouse) is treated as part of the cost of the inventories.
Work-in-progress and finished Lower of cost and net realizable value.
Cost includes direct materials and labour and a proportion of goods
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty.
Traded goods Lower of cost and net realizable value. Cost includes the
purchase price and other associated costs directly incurred in bringing
the inventory to its present location.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
h. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.
(i) Sale of products:
Revenue from sale of products is recognized when the significant risks
and rewards of ownership of the goods have passed to the buyer. The
Company collects sales taxes and value added taxes (VAT) on behalf of
the government and, therefore, these are not economic benefits flowing
to the Company. Hence, they are excluded from revenue. Excise duty
deducted from revenue (gross) is the amount that is included in the
revenue (gross) and not the entire amount of liability arising during
(ii) Sale of services:
The Company enters into certain dossier sales, licensing and supply
Agreements relating to various products. Revenue from such arrangements
is recognized upon completion of performance obligations or on a
proportional performance basis over the period the Company performs its
obligations, under the terms of the agreements. Proportionate
performance is measured based upon the efforts/ costs incurred to date
in relation to the total estimated efforts / costs to complete the
contract. The Company monitors estimates of the total contract revenue
and cost on a routine basis throughout the contract period. The
cumulative impact of any change in estimates of the contract revenue or
costs in reflected in the period in which the changes become known. In
the event that the loss is anticipated on a particular contract,
provision is made for the estimated loss.
In respect of services, the Company collects service tax on behalf of
the government and, therefore, it is not an economic benefit flowing to
the Company. Hence, it is excluded from revenue.
(iii) Interest Income:
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head other income in the
statement of profit and loss.
(iv) Dividend income:
Dividend income is recognized when the Company''s right to receive
dividend is established by the reporting date.
Investments that are readily realizable and intended to be held for not
more than twelve months from the date on which such investments are
made are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued. If an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, whichever is
more clearly evident. Current investments are carried in the financial
statements at lower of cost and fair value determined on an individual
investment basis. Long-term investments are carried at cost. However,
provision for diminution in value is made to recognize a decline other
than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss j. Retirement benefits Retirement benefit
in the form of Provident Fund is a defined contribution scheme and the
contributions are charged to the statement of profit and loss for the
year when the contributions to the government funds are due. The
Company has no obligation other than the contribution payable to
provident fund authorities.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The gratuity benefit of the
Company is administered by a trust formed for this purpose through the
group gratuity scheme. Actuarial gains and losses for defined benefit
plan are recognized in full in the period in which they occur in the
statement of profit and loss.
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term employee benefit. The Company measures
the expected cost of such absences as the additional amount that it
expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond 12 months, as long -term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred. The Company presents the
entire leave as a current liability in the balance sheet, since it does
not have an unconditional right to defer its settlement for 12 months
after the reporting date.
k. Foreign currency translation
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items which are
carried in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction.
Non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are translated using the
exchange rates at the date when such values were determined.
From accounting period commencing on or after 7 December 2006, the
Company accounts for exchange differences arising on translation/
settlement of foreign currency monetary items as below:
(i) Exchange differences arising on a monetary item that, in substance,
forms part of the Company''s net investment in a non-integral foreign
operation is accumulated in the foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognized as income or as expenses.
(ii) Exchange differences arising on long-term foreign currency
monetary items related to acquisition of a fixed asset are capitalized
and depreciated over the remaining useful life of the asset. For this
purpose, the Company treats a foreign monetary item as long-term
foreign currency monetary item, if it has a term of 12 months or
more at the date of its origination.
(iii) Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the Foreign Currency Monetary Item
Translation Difference Account and amortized over the remaining life of
the concerned monetary item.
(iv) All other exchange differences are recognized as income or as
expenses in the period in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk
of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/ income over the
life of the contract. Exchange differences on such contracts, except
the contracts which are long-term foreign currency monetary items, are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period. Any gain/ loss arising on forward
contracts which are long-term foreign currency monetary items are
recognized in accordance with paragraph (ii) and (iii). l. Income tax
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act 1961 enacted in India. The tax rates
and tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date. Current income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred tax is measured using the tax rates and the tax laws enacted
or substantively enacted at the reporting date. Deferred tax liability
is recognized for all taxable timing differences. Deferred tax assets
are recognized only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized. In situations where the
Company has unabsorbed depreciation or carry forward tax losses, all
deferred tax assets are recognized only if there is virtual certainty
supported by convincing evidence that they can be realized against
future taxable profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be that sufficient future taxable income will be available
against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of a
deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority
Minimum Alternate Tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to
the statement of profit and loss and shown as MAT Credit Entitlement.
The Company reviews the MAT credit entitlement asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
m. Employee stock compensation costs
Employees (including senior executives) of the Company also receive
remuneration in the form of share based payment transactions, whereby
employees render services as consideration for equity instruments
In accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method and recognized, together with a corresponding increase in the
Stock options outstanding account in reserves. The cumulative
expense recognized for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting
period has expired and the Company''s best estimate of the number of
equity instruments that will ultimately vest. The expense or credit
recognized in the statement of profit and loss for a period represents
the movement in cumulative expense recognized as at the beginning and
end of that period and is recognized in employee benefits expense. n.
Earnings Per Share (EPS)
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the year is adjusted
for events such as bonus issue, bonus element in a rights issue to
existing shareholders, share split, and reverse share split
(consolidation of shares) that have changed the number of equity shares
outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
o. Operating lease
Where the Company is a Lessee
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases.
Lease payments under operating leases are recognized as an expense on a
straight-line basis over the lease term.
Where the Company is a Lessor
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases Assets subject to operating leases are included in
fixed assets. Lease income is recognized on a straight line basis over
the lease term. Costs, including depreciation are recognized as an
expense. Initial direct costs such as legal costs, brokerage costs, etc
are recognized immediately in the statement of profit and loss. p.
Segment reporting Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and services to different markets. The analysis of
geographical segments is based on the areas in which major operating
divisions of the Company operates.
The Company generally accounts for inter-segment sales and transfers at
an agreed marked-up price.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
The Corporate and other segment include general corporate income and
expense items which are not allocated to any business segment. Segment
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole. q. Provisions
A provision is recognized when the Company has a present obligation as
a result of past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Where the Company expects some or all of a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented
in the statement of profit and loss net of any reimbursement.
r. Contingent liability
A contingent liability is a possible obligation that arises 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 or a present obligation that is not recognized because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognized because it
cannot be measured reliably. The Company does not recognize a
contingent liability but discloses its existence in the financial
s. Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalized.
Indirect expenditure incurred during construction period is capitalized
as part of the indirect construction cost to the extent to which the
expenditure is directly related to construction or is incidental
thereto. Other indirect expenditure (including borrowing costs)
incurred during the construction period which is not related to the
construction activity nor is incidental thereto is charged to the
statement of profit and loss. Income earned during construction period
is deducted from the total of the indirect expenditure. All direct
capital expenditure on expansion is capitalized. As regards indirect
expenditure on expansion, only that portion is capitalized which
represents the marginal increase in such expenditure involved as a
result of capital expansion. Both direct and indirect expenditure are
capitalized only if they increase the value of the asset beyond its
original standard of performance.
t. Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
u. Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
v. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present Earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit / (loss) from continuing
operations. In its measurement, the Company does not include
depreciation and amortisation expense, finance costs and tax expense.
(b) Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs
5 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividends in Indian Rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended March 31, 2012, the amount of interim dividend
per share recognized as distributions to equity shareholders was Rs Nil
(March 31, 2011 - Rs 1.50) and final dividends proposed for distribution
to equity shareholders was Rs 5 (March 31, 2011 - Rs 3).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts, if any. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
(c) Aggregate number of bonus shares issued during the period of five
years immediately preceding the reporting date On September 15, 2008,
the Company issued 100,000,000 equity shares of Rs 5 each as fully paid
bonus shares by capitalization of balance in the securities premium
account of Rs 500.
As per records of the Company, including its register of
shareholders/members. The above shareholding represents both legal and
beneficial ownerships of shares.
(e) Shares reserved for issue under options
For details of shares reserved for issue under the employee stock
option (ESOP) plan of the Company, please refer to note 30.
(a) On February 9, 2000, the Company obtained an order from the
Karnataka Sales Tax Authority for allowing deferment of sales tax
(including turnover tax) for a period upto 12 years with respect to
sales from its Hebbagodi manufacturing facility for an amount not
exceeding Rs 649. This is an interest free liability The amount is
repayable in 10 equal half yearly installments of Rs.65 each starting
from February 2012.
(b) On March 31, 2005, the Company entered into an agreement with the
Council of Scientific and Industrial Research (''CSIR''), for an
unsecured loan of Rs 3 for carrying out part of the research and
development project under the New Millennium Indian Technology
Leadership Initiative (''NMITLI'') Scheme. The loan is repayable over 10
equal annual installments of Rs 0.3 starting from April 2009 and carry
an interest rate of 3 percent per annum.
(c) (i) On March 31, 2009, the Department of Scientific and Industrial
Research (''DSIR'') sanctioned financial assistance for a sum of Rs 17 to
the Company for part financing one of its research projects. The
assistance is repayable in the form of royalty payments for three years
post commercialization of the project in five equal annual installments
of Rs 4 each. The said projects have been completed during the year
ended March 31, 2010 and the repayments would commence from April 1,
(ii) In addition, during the FY 2010-11, the Company has further
received Rs 4 towards a development project out of sanctioned amount of
Rs 12. The assistance is repayable in the form of royalty payments for a
period of five years post commercialization of the project in five
equal annual installments of Rs 3 each. The said product has not yet
been commercialized as at March 31, 2012.
(d) On November 3, 2009, the Department of Biotechnology (''DBT'') under
the Biotechnology Industrial Partnership Programme (''BIPP'') has
sanctioned financial assistance for a sum of Rs 53 to the Company for
financing one of its research projects. Of the said sanctioned amount,
the Company had received a sum of Rs 37 during year ended March 31, 2011
and the remaining amount of Rs 16 during the year. The loan is repayable
over 10 half yearly installments of Rs 5 after two years from date of
completion of the project and carries an interest rate of 2 percent per
In addition, on May 23, 2011, the DBT under the BIPP has sanctioned
financial assistance of Rs 40 to the Company for financing another
research project. Of the sanctioned amount, the Company has received a
sum of Rs 12 during the year. The loan is repayable over 10 half yearly
installments of Rs 4 after one year from date of completion of the
project and carries an interest rate of 2 percent per annum.
(e) On August 25, 2010, the Department of Science and Technology
(''DST'') under the Drugs and Pharmaceutical Research Programme (''DPRP'')
has sanctioned financial assistance for a sum of Rs 70 to the Company
for financing one of its research projects. Of the said sanctioned
amount, the Company has received the first installment of Rs 14 during
the year ended March 31, 2011 and the remaining amount during the year
ended March 31, 2012. The loan is repayable over 10 annual installments
of Rs 7 each starting from July 1, 2012, and carries an interest rate of
3 percent per annum.
(f) In respect of the financial assistance received under the aforesaid
programmes (refer note (b) to (e) above), the Company is required to
utilize the funds for the specified projects and is required to obtain
prior approvals from the said authorities for disposal of assets /
Intellectual property rights acquired / developed under the above
(a) Land includes land held on leasehold basis: Gross Block Rs 226
(March 31, 2011 - Rs 226) ; Net Block Rs 226 (March 31, 2011- Rs 226)
(b) On December 5, 2002, Karnataka Industrial Areas Development Board
(''KIADB'') allotted land aggregating to 26.75 acres to the Company for Rs
64 on a lease-cum-sale basis for a period of 6 years, extended
subsequently for further period of 14 years. During the year ended
March 31, 2005, the Company acquired an additional 41.25 acres of land
for Rs 99 from KIADB. During the quarter ended June 30, 2005, the
Company paid an advance of Rs 56 towards allotment of additional 19.68
acres of land, offered to the Company by KIADB on December 20, 2003.
The Company has received the possession certificate from KIADB in
January 2006 and entered into an agreement with KIADB to acquire this
plot of land on lease-cum-sale basis for a period of 20 years during
the year ended March 31, 2007. The registration for a part of the land
under this lease is pending settlement of certain disputes in respect
of claims made against KIADB.
(c) Additions to fixed assets during the year ended March 31, 2012,
include assets of Rs 214 (March 31, 2011 - Rs 173) of which, Rs 52 (March
31, 2011 - Rs 86) has been funded by the co-development partner. The
Company has capitalized and depreciated the gross cost of these assets.
The funding received from the co-development partner is reflected as a
part of Deferred revenues in note 7 & 10 and the depreciation charge
for the year has been adjusted for the proportionate amount recovered
from the co-development partner. Also refer note 27.
(d) Also refer note 35 (ii)(b) for assets given on lease.
(e) Plant and equipment include Computer and Office equipments.
(a) The Company acquired patents relating to certain technologies
(collectively IPs) from M/s Nobex Inc. During the year ended March 31,
2007, the Company licensed out the IP-Apaza for further development and
commercialization. Effective October 2006, the Company commenced
amortization of Apaza over a period of 5 years, being the estimated
useful life of the IPs.
During the year ended March 31, 2010, the Company transferred the right
to develop and commercialize Oral Insulin to Biocon Research Ltd
(''BRL''), a wholly owned subsidiary for a consideration of Rs 673. As the
development and marketing rights of Oral Insulin have certain
obligations of the parties to conclude the arrangements, the same has
been treated as deferred revenues by the Company.
(b) During the year ended March 31, 2009, the Company acquired
marketing rights of hR3 and EPO from Biocon Biopharmaceuticals Private
Limited (''BBPL'') for a sum of Rs 129. These rights give the Company an
exclusive right of marketing the products in certain territories.
Effective April 2010, the Company commenced amortization of these
rights over a period of 5 years, being the estimated useful life of
(a) During the year ended March 31, 2009, Biocon Research Limited
(''BRL'') was incorporated as a wholly owned subsidiary for undertaking
research in novel and innovative drug products. BRL commenced
commercial activities during the year ended March 31, 2010 and as at
March 31, 2012 has a negative net worth of Rs 776 (March 31, 2011- Rs
373) due to its early stage of operations and research activities. BRL
is a research & development company and of strategic importance to the
Company. Accordingly, the management is of the view that there is no
diminution in the value of the investment. The Company has committed to
support BRL to fund its operations. The Company has granted an
interest-free unsecured long-term loan of Rs 117 as at March 31, 2012.
The Company also has receivables of Rs 2,068 (March 31, 2011 - Rs 1,441)
towards the research and development support extended by the Company.
(b) During the year ended March 31, 2009, Biocon SA a wholly owned
subsidiary was incorporated in Switzerland for development and
marketing of biopharmaceutical products in various markets outside
India. As at March 31, 2009, Biocon SA held 78% equity interest in
AxiCorp GmbH, Germany and subsequently in April 2011, Biocon SA
divested its entire shareholding, consequent to an offer made by
minority shareholders of Axicorp.
(c ) BBPL is a wholly owned subsidiary and is engaged in research,
development, manufacturing and marketing of biopharmaceuticals. As at
March 31, 2012, BBPL''s networth is Rs 73 ( March 31, 2011 - Rs 17).
Further, the Company has committed to support BBPL to fund its
operations and granted an unsecured long-term loan of Rs 1,377 (March
31, 2011 - Rs 1,343) which is repayable by March 2014. BBPL is of
strategic importance to the Company and accordingly, the management is
of the view that there is no diminution in the value of the investment.
(d) NeoBiocon was incorporated in Abu Dhabi as a 50% joint venture
between the Company and Mr. B R Shetty and is engaged in marketing and
distribution of biopharmaceuticals in the Middle-East region. As at
March 31, 2012, the aggregate amount of Biocon''s interest in the
assets, liabilities, income and expenses of NeoBiocon is Rs 102 (March
31, 2011 - Rs 47), Rs 46 (March 31, 2011 - Rs 23), Rs 114 (March 31, 2011 -
Rs 60) and Rs 81 (March 31, 2011 - Rs 38) respectively. The share of the
Company in the accumulated profit of NeoBiocon as at March 31, 2012
stood at Rs 50 (March 31, 2011 - Rs 17).
(e) As on March 31, 2012, the ESOP Trust held 4,091,721 shares (March
31, 2011 - 4,457,536) of the Company towards grant / exercise of shares
to / by employees of the Company and its subsidiaries under the ESOP
Scheme. Also refer note 30.
(f) Vaccinex Inc., USA (''Vaccinex'') is engaged in research and
development activities and has been incurring losses and has a negative
net worth. As Vaccinex is a development stage enterprise and of
strategic importance to the Company, management believes that there is
no other than temporary diminution in the value of this investment.
(g) The Company has 30% (March 31, 2011 - 30%) voting rights in IATRICa
(h) During the year ending March 31, 2011 Biocon Sdn.Bhd was
incorporated as a wholly owned subsidiary in Malaysia for development
and manufacture of biopharmaceuticals. Biocon Malaysia is setting up a
biopharmaceutical manufacturing facility in Malaysia and is yet to
commence commercial operations as at March 31, 2012.
(i) During the year ended March 31, 2012, the Company transferred its
entire shareholding in Clinigene International Limited, a wholly owned
subsidiary to Syngene International Limited, another subsidiary for a
consideration of Rs 1 based on a valuation performed by an independent
valuer. As on the date of transfer, Clinging had a negative networth
of Rs 46.
(j) The Company has invested in National Savings Certificates
(unquoted) which are not disclosed above since amounts are rounded off
to Rupees million.
30. Employee stock compensation
On September 27, 2001, Biocon''s Board of Directors approved the Biocon
Employee Stock Option Plan (''ESOP Plan 2000'') for the grant of stock
options to the employees of the Company and its subsidiaries / joint
venture company. A Compensation Committee has been constituted to
administer the plan through a trust established specifically for this
purpose, called the Biocon India Limited Employee Welfare Trust (ESOP
The ESOP Trust shall make additional purchase of equity shares of the
Company using the proceeds from the loan obtained from the Company,
other cash inflows from allotment of shares to employees under the ESOP
Plan and shall subscribe, when allotted to such number of shares as is
necessary for transferring to the employees. The ESOP Trust may also
receive shares from the promoters for the purpose of issuance to the
employees under the ESOP Plan. The Compensation Committee shall
determine the exercise price which will not be less than the face value
of the shares.
In September 2001 , the Company granted 71,510 options (face value of
shares Rs 5 each) under the ESOP Plan 2000 to be exercised at a grant
price of Rs 10 (before adjusting bonus and share split). The options
vested with the employees equally over a four year period.
In January 2004, the Company granted 142,100 options (face value of
shares - Rs 5 each) under ESOP Plan 2000 to be exercised at a price of Rs
5 per share. The options vest with the employees equally over a four
In January 2004, the Board of Directors announced the Biocon Employee
Stock Option Plan (ESOP Plan 2004) for the grant of stock options to
the employees of the Company and its subsidiaries / joint venture
company, pursuant to which the Compensation Committee on March 19, 2004
granted 422,000 options (face value of shares - Rs 5 each) under the
ESOP Plan 2004 to be exercised at a grant price of Rs 315 being the
issue price determined for the IPO through the book building process.
The options vest with the employees equally over a four year period.
In July 2006, the Company approved the grant of 3,478,200 options (face
value of shares - Rs 5 each) to its employees under the existing ESOP
Plan 2000. The options under this grant would vest to the employees as
25%, 35% and 40% of the total grant at the end of first, second, third
year from the date of the grant, respectively, with an exercise period
of three years for each grant. The vesting conditions include service
terms and performance grade of the employees. These options are
exercisable at a discount of 20% to the market price of Company''s
shares on the date of grant.
In April 2008, the Company approved the grant of 813,860 options (face
value of shares - Rs 5 each) to its employees under the existing ESOP
Plan 2000. The options under this grant would vest to the employees as
25%, 35% and 40% of the total grant at the end of first, second, third
year from the date of grant, respectively, with an exercise period of
three years for each grant. The vesting conditions include service
terms and performance grade of the employees. These options are
exercisable at the market price of Company''s shares on the date of