1. COMMITMENTS AND CONTINGENT LIABILITIES
as at as at
31 march 2011 31 march 2010
i) Commitments / contingent liabilities:
(a) Guarantees issued by banks 119 94
(b) Guarantees issued by the Company on
behalf of subsidiaries,
associates and joint venture 11,070 16,527
(c) Letters of credit outstanding 437 20
(d) Contingent consideration payable in
respect of subsidiaries acquired 12 12
ii) Claims against the Company not
acknowledged as debts in respect of:
(a) Income tax matters, pending decisions
on various appeals made by the Company and
by the 431 521
Department
(b) Excise matters (including service tax),
under dispute 127 6
(c) Custom matters, under dispute 97 97
(d) Sales tax matters, under dispute 170 151
(e) The company has received demand for
payment to the credit of the Drug Prices
Equalisation Account under Drugs (Price Control)
Order, 1995 for few of its products which is
being contested. The Company has provided fully
against the potential liability in respect
of the principal amount demanded and believes
that possibility of any liability that may
arise on account of interest (including
accumulated demand to date approximately of
Rs.167) and penalty on this demand is remote.
iii) Estimated amount of contracts remaining
to be executed on capital account and not
provided for (net 3,365 2,859
of advances)
iv) Commitment under Export Promotion Capital
Goods (EPCG) scheme 9,054 3,835
v) The Company is also involved in other
lawsuits, claims, investigations and
proceedings, including patent and commercial
matters, which arise in the ordinary
course of business. However, there are no
material claims on such cases.
2. RELATED PARTY DISCLOSURES
a. The related parties where control exists are the subsidiaries, step
down subsidiaries, joint ventures and the partnership frms.
b. Related parties where control exists or where significant infuence
exists and with whom transactions have taken place during the year:
subsidiaries including step down subsidiaries DRL Investments Limited,
India;
Reddy Pharmaceuticals Hong Kong Limited, Hong Kong;
OOO JV Reddy Biomed Limited, Russia;
Reddy Antilles NV, Netherlands;
Reddy Netherlands BV, Netherlands;
Reddy US Therapeutics Inc., USA;
Dr. Reddys Laboratories Inc., USA;
Reddy Cheminor SA, France;
Dr. Reddys Farmaceutica Do Brasil Ltda., Brazil;
Cheminor Investments Limited, India;
Aurigene Discovery Technologies Limited, India;
Aurigene Discovery Technologies Inc., USA;
Dr. Reddys Laboratories (EU) Limited, UK;
Dr. Reddys Laboratories (UK) Limited, UK;
Dr. Reddys Laboratories (Proprietary) Limited, South Africa;
OOO Dr. Reddys Laboratories Limited, Russia;
Promius Pharma LLC (formerly Reddy Pharmaceuticals LLC, USA);
Dr. Reddys Bio-sciences Limited, India;
Globe Enterprises (a partnership frm in India) (dissolved on 1 July
2010);
Trigenesis Therapeutics Inc., USA;
Industrias Quimicas Falcon de Mexico, SA de CV, Mexico;
betapharm Arzneimittel GmbH, Germany;
beta Healthcare Solutions GmbH, Germany;
beta institute fur sozialmedizinische Forschung und Entwicklung GmbH,
Germany;
Reddy Holding GmbH, Germany;
Lacock Holdings Limited, Cyprus;
Reddy Pharma Iberia SA, Spain;
Reddy Pharma Italia SPA, Italy;
Dr. Reddys Laboratories (Australia) Pty. Limited, Australia;
Dr. Reddys Laboratories SA, Switzerland;
Eurobridge Consulting BV, Netherlands;
OOO DRS LLC, Russia;
Aurigene Discovery Technologies (Malaysia) Sdn Bhd;
Dr. Reddys New Zealand Limited, New Zealand (formerly Affordable
Health Care Limited);
Dr. Reddys Laboratories ILAC TICARET Limited SIRKETI, Turkey;
Dr. Reddys SRL, Italy (formerly Jet Generici SRL);
Dr. Reddys Laboratories Lousiana LLC, USA;
Chirotech Technology Limited, UK;
Dr. Reddys Pharma SEZ Limited, India (from 8 July 2009);
Dr. Reddys Laboratories International SA, Switzerland (from 24 March
2010);
Idea2Enterprises (India) Private Limited, India (from 30 June 2010);
Dr. Reddys Laboratories Romania SRL, Romania (from 7 June 2010);
I-VEN Pharma Capital Limited, India (from 6 October 2010);
Dr. Reddys Laboratories Tennessee, LLC, USA (from 7 October 2010);
Dr. Reddys Venezuela, CA, Venezuela (from 20 October 2010);
Macred India Private Limited, India (till 18 July 2010); and
Perlecan Pharma Private Limited, India (Amalgamated with the Company
vide order dated 12 June 2009 by the High Court of Judicature, Andhra
Pradesh, Hyderabad)
3. RELATED PARTY DISCLOSURES (CONTINUED)
associates
APR LLC, USA 100% Holding in class B equity shares
Macred India Private Limited, India (from 19 July 2010) 20% Holding in
equity shares
Joint venture
Kunshan Rotam Reddy Pharmaceutical Company Limited Enterprise over
which the Company exercises joint control with other
(Reddy Kunshan), China joint venture partners and holds 51.33 %
equity stake
enterprises where principal shareholders have control or significant
infuence (significant interest entities)
Dr. Reddys Research Foundation (Research Foundation) Enterprise over
which the principal shareholders have significant infuence
Dr. Reddys Holdings Limited Enterprise owned by principal shareholders
Institute of Life Sciences Enterprise over which principal shareholders
have significant infuence
others
Green Park Hotels and Resorts Limited Enterprise owned by relative of a
director
(formerly Diana Hotels Limited)
Ms. K Samrajyam Spouse of Chairman
Ms. G Anuradha Spouse of Vice Chairman and Chief Executive Officer
Ms. Deepti Reddy Spouse of Managing Director and Chief Operating Officer
Dr. Reddys Heritage Foundation Enterprise in which the Chairman is a
director
Dr. Reddys Foundation for Human and Social development Enterprise
where principal shareholders are trustees
S R Enterprises Enterprise in which relative of a director has
significant infuence
K K Enterprises Enterprise in which relative of a director has
significant infuence
A.R. Life Sciences Private Limited Enterprise in which relative of a
director has significant infuence
Key management Personnel represented on the Board
Dr. K Anji Reddy Chairman
Mr. G V Prasad Vice Chairman and Chief Executive Officer
Mr. K Satish Reddy Managing Director and Chief Operating Officer
non-executive and independent directors on the Board
Dr. Omkar Goswami
Mr. Ravi Bhoothalingam
Mr. Anupam Puri
Dr. J P Moreau
Ms. Kalpana Morparia
Dr. Bruce L A Carter
Dr. Ashok Sekhar Ganguly
4. EMPLOYEE STOCK OPTION SCHEME
Dr. Reddys Employees Stock Option Plan-2002 (the DRL 2002 Plan): The
Company instituted the DRL 2002 Plan for all eligible employees in
pursuance of the special resolution approved by the shareholders in the
Annual General Meeting held on 24 September 2001. The DRL 2002 Plan
covers all employees of DRL and its subsidiaries and directors
(excluding promoter directors) of DRL and its subsidiaries
(collectively, eligible employees). Under the Scheme, the
Compensation Committee of the Board (the Committee) shall administer
the Scheme and grant stock options to eligible directors and employees
of the Company and its subsidiaries. The Committee shall determine the
employees eligible for receiving the options, the number of options to
be granted, the exercise price, the vesting period and the exercise
period. The vesting period is determined for the options issued on the
date of the grant. The options issued under the DRL 2002 plan vests in
periods ranging between one and four years and generally have a maximum
contractual term of fve years.
The DRL 2002 Plan was amended on 28 July 2004 at the Annual General
Meeting of shareholders to provide for stock options grants in two
categories:
category a: 1,721,700 stock options out of the total of 2,295,478
reserved for grant of options having an exercise price equal to the
fair market value of the underlying equity shares on the date of grant;
and
category B: 573,778 stock options out of the total of 2,295,478
reserved for grant of options having an exercise price equal to the par
value of the underlying equity shares (i.e., Rs. 5 per option).
The DRL 2002 Plan was further amended on 27 July 2005 at the Annual
General Meeting of shareholders to provide for stock option grants in
two categories:
category a: 300,000 stock options out of the total of 2,295,478
reserved for grant of options having an exercise price equal to the
fair market value of the underlying equity shares on the date of grant;
and
category B: 1,995,478 stock options out of the total of 2,295,478
reserved for grant of options having exercise price equal to the par
value of the underlying equity shares (i.e., Rs. 5 per option).
The fair market value of a share on each grant date falling under
Category A above is defned as the average closing price (after
adjustment of Bonus issue) for 30 days prior to the grant, in the stock
exchange where there is highest trading volume during that period.
Notwithstanding the foregoing, the Compensation Committee may, after
getting the approval of the shareholders in the Annual General Meeting,
grant options with a per share exercise price other than fair market
value and par value of the equity shares.
As the number of shares that an individual employee is entitled to
receive and the price of the option are known at the grant date, the
scheme is considered as a fixed grant.
In the case of termination of employment, all non-vested options would
stand cancelled. Options that have vested but have not been exercised
can be exercised within the time prescribed under each option agreement
by the Committee or if no time limit is prescribed, within three months
of the date of employment termination, failing which they would stand
cancelled.
During the current year, the Company under the DRL 2002 Plan has issued
284,070 options to eligible employees. The vesting period for the
options granted varies from 12 to 48 months.
5. FINANCIAL INSTRUMENTS
During the year ended 31 March 2011, the Company adopted the Accounting
Standard (AS)-32 Financial Instruments: Disclosures as issued by
ICAI, to the extent that the adoption does not confict with existing
mandatory accounting standards and other authoritative pronouncements,
Company law and other regulatory requirements. The objective of this
standard is to provide information relating to various financial
instruments that the Company holds along with the nature and extent of
risks arising from financial instruments to which the Company is exposed
to. Further, the standard requires disclosure for the risk management
strategies that management adopts to address the specifc risk factors
to the extent they are considered to be material.
Cash flow hedges
The Company designates certain non-derivative financial liabilities and
derivative financial instruments, denominated in foreign currencies, as
hedges against foreign currency exposures associated with forecasted
foreign currency sales transactions.
Exchange differences arising on re-measurement of such non-derivative
liabilities and changes in the fair value of derivative hedging
instruments designated as a cash fow hedges are recognized directly in
hedging reserve and presented within reserves and surplus, to the
extent that hedging relationship is considered effective. To the extent
that the hedge is ineffective, changes in fair value are recognized in
Profit and loss account. If the hedging instrument no longer meets the
criteria for hedge accounting, expires or is sold, terminated or
exercised, then hedge accounting is discontinued prospectively. The
cumulative gain or loss previously recognized in hedging reserve,
remains there until the forecast transaction occurs. If the forecast
transaction is no longer expected to occur, then the balance in hedging
reserve is recognized immediately in Profit and loss account. In other
cases the amount recognized in hedging reserve is transferred to Profit
and loss account in the same period that the hedged item affects Profit
and loss account.
During the year 31 March 2011, the Company has designated certain
non-derivative financial liabilities as hedging instruments for hedging
of foreign currency risk associated with forecasted transactions and
accordingly, has applied cash fow hedge accounting for such
relationships. Consequently foreign exchange differences amounting to Rs.
25 arising on re-measurement of these non-derivative financial
liabilities from their initial recognized value to the value in INR
terms as at the reporting dates has been disclosed as part of Hedging
reserve. The carrying value of these non-derivative financial
liabilities amounts to Rs. 3,493 as at 31 March 2011 (as compared to Rs.
Nil as at 31 March 2010), and has been disclosed as a part of
Unsecured Loans in the Balance Sheet.
During the year 31 March 2010, the Company has designated foreign
currency options as hedging instruments against foreign currency risk
associated with forecasted transactions and accordingly, applies cash
fow hedge accounting for such relationships. The changes in the fair
value of these foreign currency options amounting to Rs. 267 have been
disclosed as part of Hedging reserve. The notional amount of the
foreign currency options and fair value of these foreign currency
options amounted to Rs. 8,082 and Rs. 295 as at 31 March 2010 respectively.
The ineffective portion of the cash fow hedges amounting to Rs. Nil and Rs.
28 have been recognised in the Profit and loss account for the year
ended 31 March 2011 and 31 March 2010 respectively.
6. FINANCIAL INSTRUMENTS (CONTINUED)
In respect of foreign currency derivative contracts designated as cash
fow hedges, the Company has transferred Rs. 263 and Rs. 75 from the hedging
reserve into sales for the year ended 31 March 2011 and 31 March 2010
respectively.
Fair value hedges
The Company does not apply hedge accounting to certain derivative
instruments that economically hedge monetary assets and liabilities
denominated in foreign currencies. Changes in the fair value of such
derivatives are recognized in Profit and loss account as part of foreign
currency gains and losses.
The Company uses derivative financial instruments such as foreign
exchange option contracts to mitigate the risk of changes in foreign
exchange rates on trade receivables and certain other assets
denominated in certain foreign currencies. The counterparty for these
contracts is generally a bank or a financial institution.
The Company recognized a net foreign exchange gain on derivative
financial instruments of Rs. 661 and Rs. 658 for the year ended 31 March
2011 and 31 March 2010 respectively. These amounts are included in
other income.
Fair Value
Fair values of the foreign currency options are determined under the
Black Scholes Merton technique by using inputs from market observable
data and other relevant terms of the contract with counter parties
which are banks or financial institutions.
7. FINANCIAL RISK MANAGEMENT
The Companys activities expose it to a variety of financial risks,
including market risk, credit risk and liquidity risk. The Companys
primary risk management focus is to minimize potential adverse effects
of market risk on its financial performance. The Companys risk
management assessment and policies and processes are established to
identify and analyze the risks faced by the Company, to set appropriate
risk limits and controls, and to monitor such risks and compliance with
the same. Risk assessment and management policies and processes are
reviewed regularly to refect changes in market conditions and the
Companys activities. The Board of Directors and the Audit Committee is
responsible for overseeing Companys risk assessment and management
policies and processes.
a. credit risk
Credit risk is the risk of financial loss to the Company if a customer
or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Companys receivables from
customers. Credit risk is managed through credit approvals,
establishing credit limits and continuously monitoring the credit
worthiness of customers to which the Company grants credit terms in the
normal course of business. The Company establishes an allowance for
doubtful debts and impairment that represents its estimate of incurred
losses in respect of trade and other receivables and investments.
Trade and other receivables
The Companys exposure to credit risk is infuenced 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 infuence on credit risk
assessment. Credit risk is managed through credit approvals,
establishing credit limits and continuously monitoring the
creditworthiness of customers to which the Company grants credit terms
in the normal course of business. As at 31 March 2011 and 31 March 2010
the maximum exposure to credit risk in relation to trade and other
receivables is Rs. 17,705 and Rs. 10,605 respectively (net of allowances).
Financial assets that are neither past due nor impaired
None of the Companys cash equivalents, including time deposits with
banks, are past due or impaired. Of the total trade receivables, Rs.
14,196 as at 31 March 2011 and Rs. 8,167 as at 31 March 2010 consists of
customers balances which were neither past due nor impaired.
b. 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 suffcient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses
or risk to the Companys reputation.
As at 31 March 2011 and 2010, the Company had unutilized credit limits
from banks of Rs. 13,089 and Rs. 7,850, respectively.
As at 31 March 2011, the Company had working capital of Rs. 23,456
including cash and cash equivalents of Rs. 662 and current investments of
Rs. 3. As at 31 March 2010, the Company had working capital of Rs. 14,604,
including cash and cash equivalents of Rs. 3,680 and current investments
of Rs. 3,577.
The table below provides details regarding the contractual maturities
of significant financial liabilities (other than obligations under fnance
leases which have been disclosed in Note 27 and Bonus Debentures which
have been disclosed in Note 29).
c. market risk
Market risk is the risk of loss of future earnings or 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 and other market changes that affect market risk- sensitive
instruments. Market risk is attributable to all market risk-sensitive
financial instruments including foreign currency receivables and
payables and long-term debt. The Company is exposed to market risk
primarily related to foreign exchange rate risk, interest rate risk and
the market value of its investments. Thus, the Companys exposure to
market risk is a function of investing and borrowing activities and
revenue generating and operating activities in foreign currencies.
Foreign exchange risk
The Companys exchange risk arises from its foreign operations, foreign
currency revenues and expenses, (primarily in U.S. dollars, British
pound sterling and euros) and foreign currency borrowings (in U.S.
dollars and euros). A significant portion of the Companys revenues are
in these foreign currencies, while a significant portion of its costs
are in Indian rupees. As a result, if the value of the Indian rupee
appreciates relative to these foreign currencies, the Companys
revenues measured in rupees may decrease. The exchange rate between the
Indian rupee and these foreign currencies has changed substantially in
recent periods and may continue to fuctuate substantially in the
future. Consequently, the Company uses derivative financial instruments,
such as foreign exchange forward and option contracts, to mitigate the
risk of changes in foreign currency exchange rates in respect of its
forecasted cash flows and trade receivables.
The details in respect of the outstanding foreign exchange forward and
option contracts are given in Note 17 above.
In respect of the Companys forward, option contracts and
non-derivative financial liabilities, a 10% decrease / increase in the
respective exchange rates of each of the currencies underlying such
contracts would have resulted in an approximately Rs. 349 increase /
decrease in the Companys hedging reserve and an approximately Rs. 1,014
increase / decrease in the Companys net Profit as at 31 March 2011.
In respect of the Companys forward and option contracts, a 10%
decrease / increase in the respective exchange rates of each of the
currencies underlying such contracts would have resulted in an
approximately Rs. 821 increase / decrease in the Companys hedging
reserve and an approximately Rs. 745 increase / decrease in the Companys
net Profit as at 31 March 2010.
8. DIVIDEND REMITTANCE IN FOREIGN CURRENCY
The Company does not make any direct remittances of dividends in
foreign currencies to American Depository Shares (ADS) holders. The
Company remits the equivalent of the dividends payable to the ADS
holders in Indian Rupees to the depositary bank, which is the
registered shareholder on record for all owners of the Companys ADS.
The depositary bank purchases the foreign currencies and remits
dividends to the ADS holders.
9. RESEARCH AND DEVELOPMENT ARRANGEMENTS
I-VEN Pharma arrangement
During the year ended 31 March 2005, the Company had entered into an
agreement with I-VEN Pharma Capital Limited (I-VEN) for the joint
development and commercialization of a portfolio of 36 generic drug
products. As per the terms of the agreement, I-VEN has a right to fund
up to 50% of the project costs (development, registration and legal
costs) related to these products and the related US Abbreviated New
Drug Applications (ANDA) fled or to be fled, subject to a maximum
contribution of US$ 56 millions. Upon successful commercialization of
these products, the Company is required to pay I-VEN a royalty on net
sales at agreed rates for a period of 5 years from the date of
commercialization of each product.
As per the agreement, in April 2010 and upon successful achievement of
certain performance milestones specifed in the agreement (e.g.
successful commercialization of a specifed number of products, and
achievement of specifed sales milestones), I-VEN has a one-time right
to require the Company to pay I-VEN a portfolio termination value
amount for such portfolio of products. In the event I-VEN exercises
this portfolio termination value option, then it will not be entitled
to the sales- based royalty payment for the remaining contractual
years.
The Company and I-VEN reached an agreement to settle the portfolio
termination value option available to I-VEN at a consideration of Rs.
2,680 to be paid by the Company.
On 1 October 2010, the Company, DRL Investments Limited (a wholly owned
subsidiary of Dr Reddys) and I-VEN entered into an agreement regarding
the medium of settlement for the portfolio termination value. Pursuant
to such arrangement, controlling interest in I-VEN has been acquired by
DRL Investments Limited; thereby making I-VEN a wholly owned subsidiary
of the Company as of 1 October 2010. In connection with the
transaction, the Company has advanced an amount of Rs. 2,680 to DRL
Investments Limited and which has been disclosed as part of loans and
advances as of 31 March 2011.
10. SChEmE OF AmALgAmATION OF PERLECAN PhARmA PRIvATE LImITED wITh ThE
COmPANy UNDER SECTION 391 AND 394 OF ThE COmPANIES ACT, 1956
In October 2008, the Board of Directors approved a scheme of
amalgamation (the Scheme) of Perlecan Pharma Private Limited
(transferor Company) with the Company (transferee Company) under
section 391 and 394 of the Companies Act, 1956. In January 2009, the
Company fled a petition for approvals of the Scheme with the Honble
High Court of Andhra Pradesh (the Court). The Court approved the
Scheme vide its order dated 12 June 2009 with the appointed date as 1
January 2006.
From the effective date, the authorised share capital of the transferor
Company shall stand combined with the authorised share capital of the
transferee Company. Upon the Scheme becoming fully effective, the
authorised share capital of the Company would be Rs. 1,200 divided into
240,000,000 equity shares of Rs. 5/- each.
The amalgamation which was in the nature of a merger was accounted for
as prescribed by the Accounting Standard 14 – Accounting for
Amalgamation (hereinafter referred to as AS-14) and in accordance
with the requirements of the approved Scheme in the previous year
2009-10.
Although the scheme of amalgamation required retrospective accounting
from the period 1 January 2006, since the court approvals were received
after the earlier year financial statements were authorised, the
amalgamation was accounted in 2009-10 and in accounting for such
amalgamation the net results of transactions of the transferor Company
for the years ended 31 March 2006, 31 March 2007, 31 March 2008 and 31
March 2009 were included in 2009-10 financial statements of the Company
as a single line item. The Profit and loss account of the Company for
the aforesaid years would have been as disclosed below, had the effect
of the Scheme been given in the respective years:
11. Investments include an equity investment of Rs. 16,146 (previous
year: Rs. 15,428) in Lacock Holdings Limited, Cyprus (Lacock), a
wholly-owned subsidiary of the Company. As at 31 March 2011, the
Company has also extended advances aggregating to Rs. 3,687 (previous
year: Rs. 3,640) to Lacock. The Company participates in the German
generics business through step-down subsidiaries of Lacock, i.e. Reddy
Holdings GmbH and betapharm Arzneimittel GmbH (betapharm).
Pursuant to the significant changes in the German generics market over
the past 2 years, the Company had initiated various measures in the
previous year to improve the Profitability. The German business has
benefted from the positive growth arising out of the significant cost
saving measures undertaken in the previous year. Further, the business
had a steady growth in the tender driven market and is expected to
continue this trend.
In view of the above, the Company believes that advances granted to
Lacock would be recovered and there is no diminution other than
temporary in the value of investment in Lacock as at 31st March 2011.
Accordingly, the Companys advances to and investment in Lacock have
been carried at cost.
12. SEGMENT INFORMATION
In accordance with AS-17 Segment Reporting, segment information has
been given in the consolidated financial statements of DRL and therefore
no separate disclosure on segment information is given in these
financial statements.
13. ISSUANCE OF BONUS DEBENTURES
Pursuant to a scheme of arrangement sanctioned by the High Court of
Andhra Pradesh, Hyderabad, India on 19 July 2010 and subsequent
approval of the Reserve Bank of India (on 18 January 2011) and
no-objection from the Indian income-tax authorities (on 1 February
2011), the Company has, on 24 March 2011, allotted 1,015,516,392, 9.25%
Unsecured Redeemable Non-convertible Bonus Debentures (aggregating to Rs.
5,078) in the ratio of 6 debentures of the face value of Rs. 5/- each
fully paid up for every equity share ofRs. 5/- each held as on the record
date i.e. 18 March 2011. The interest is payable at the end of 12, 24
and 36 months from the initial date of issuance. The bonus debentures
are redeemable at the end of 36 months from the initial date of
issuance. These debentures have been listed on the Bombay Stock
Exchange Limited and National Stock Exchange of India Limited
In terms of the scheme, the Company delivered the aggregate value of
the debentures to an on-shore escrow account of a merchant banker
appointed by the Board of Directors. The merchant banker received the
aforesaid amount in the escrow account for and on behalf of and in
trust for the members entitled to receive the debentures as deemed
dividend within the meaning of section 2 (22) of the Income-tax Act,
1961. The merchant banker has also immediately following the receipt of
funds in the escrow account, for and on behalf of the members, paid by
way of subscription for allotment of the requisite number of debentures
issued under the scheme
In terms of accounting treatment set out in the scheme, the issuance of
the aforesaid debentures (with an aggregate face value of Rs. 5,078) and
the dividend distribution tax paid thereon (aggregating to Rs. 843) have
been refected by transferring the corresponding amounts from the
General Reserve of the Company. The costs associated in relation to the
aforesaid scheme (primarily comprising directly attributable
transaction costs aggregating toRs. 51) have been expensed along with a
corresponding transfer from the General Reserve account. Pursuant to
the scheme and as per the requirements of the Companies Act, 1956, the
Company has also created a Debenture Redemption Reserve aggregating to
Rs. 19 for the year ended 31 March 2011
14. VENEZUELA CURRENCY DEVALUATION
The Companys Venezuela operations are conducted as an extension of the
parent company. On 30 December 2010, the Foreign Exchange
Administration Commission of Venezuela (commonly referred to as the
CADIVI) enacted a decree (exchange agreement No.14) to unify the
offcial exchange rates at a single rate of 4.3 Venezuela Bolivars
(VEB) per US$ by abolishing the preferential rate of 2.6 VEB per US$
effective from 1 January 2011
Further, on 13 January 2011, the CADIVI issued another decree to
interpret the transitional requirements for the use of the new offcial
exchange rate and described that if the following conditions were to be
satisfed, the use of the pre-devaluation rate of 2.6 VEB per US$ would
be permissible
For fund repatriation - to the extent the CADIVI has issued approvals
in the form of approvals of Autorización de Liquidación de Divisas
(ALD) and which have been sent to and received by the Banco Central
de Venezuela by 31 December 2010;
For foreign currency acquisition - to the extent the CADIVI had issued
an Authorization of Foreign Currency Acquisition (AAD) by 31 December
2010 and the approval relates to imports for the health and food
sectors or certain other specifed purposes.
Based on the authorizations received by the Company, and in light of
the above announcements, the Company believes that it is eligible for
the usage of the preferential rate of 2.6 VEB per US$ in relation to
the total value of monetary items denominated in VEB as on 31 March
2011. Accordingly, all monetary items in the Companys Venezuelan
operations are translated into the reporting currency at the
preferential rate of 2.6 VEB per US$
15. COMPARATIVE FIGURES
Previous years fgures have been regrouped / reclassifed wherever
necessary to conform to current years classifcation
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