1.1 Basis for preparation of financial statements :
(a) The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions ofthe Companies Act, 1956. The financial statements
have been prepared on accrual basis under the historical cost
convention except for certain financial and other assets and
liabilities which are measured on fair value basis as permitted by:
(i) the Scheme ofArrangement approved bythe Honorable High Courts
ofJudicature (the ''Scheme'') or,
(ii) Accounting Standard (AS) 30: ''Financials Instruments: Recognition
and Measurement'' read with AS 31 ''Financial Instruments: Presentation''
and AS 32 ''Financials Instruments: Disclosure'' issued bythe Institute
of Chartered Accountants of India, to the extent such standards do not
conflict with other standards notified under Companies (Accounting
Standards) Rules, 2006(as amended).
The accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year.
1.2 Use of estimates :
The preparation ofthe financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported incomes and expenses during
the year. The Management believes that the estimates used in
preparation ofthe financial statements are prudent and reasonable.
Future results could differ due to these estimates and the differences
between the actual results and the estimates are recognised in the
periods in which the results are known/ materialise.
1.3 Inventories :
Inventories comprise raw materials, packing materials, consumables,
work in progress and finished goods. These are valued at the lower of
cost and net realisable value after providing for obsolescence and
other losses, where considered necessary. Cost is determined as
1.4 Cash flow statement:
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities ofthe Company are
segregated based on the available information.
Cash and cash equivalents (for the purpose of cash flow statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances, highly liquid investments that are
readily convertible into known amounts of cash and which are subject to
insignificant risk ofchanges in value.
1.5 Depreciation/ Amortisation :
The following assets are depreciated / amortised over the useful lives
under the straight line method.
Registrations and Brands : 5 to 10 years
Software Licenses : 5 years
In respect of all other assets, depreciation is provided under the
straight-line method at the rates and in the manner prescribed under
Schedule XIV of the Companies Act, 1956, based on technical estimates
that indicate the useful lives would be comparable with or higher than
those arrived at using these rates.
With respect to assets carried at fair value as permitted under the
Scheme, depreciation / amortisation is recorded under the straight line
method over the balance useful life ofthe respective assets.
Individual assets costing less than Rs. 5,000 are depreciated in full
in the year of purchase.
The estimated useful life ofthe intangible assets and the amortisation
period are reviewed at the end ofeach financial year and the
amortisation method is revised to reflect the changed useful life.
1.6 Revenue :
(a) Revenue from sales is recognised on transfer of significant risks
and rewards to the purchaser, which generally coincides with the
delivery of the goods in terms of the arrangement with the purchaser.
Sales include excise duty and are stated net of discounts, other taxes,
and sales returns.
(b) Revenue from product development services:
(i) In the respect of contracts where the Company undertakes to develop
products for its customers (on an end- to end basis), revenues are
recognised based on technical estimates ofthe stage of work completed
under the contracts.
(ii) In respect of other contracts where the Company performs
specifically identified services in the development ofthe products,
revenues are recognised on the basis ofthe performance milestones
provided in the contract.
(c) Revenue from contract manufacturing is recognised based on the
services rendered in accordance with the terms of the contract.
(d) Export incentives are accrued for based on fulfillment of
eligibility criteria for availing the incentives and when there is no
uncertainty in receiving the same. These incentives include estimated
realisable values/benefits from special import licenses and benefits
under Duty Entitlement Pass Book Schemes, Focus Market Schemes, and
Market-Linked Focus Product Schemes wherever applicable.
(e) Income from rendering advisory services is recognised based on
(f) Share of Profits and Royalty incomes under manufacturing and supply
agreements with Customers are accrued based on confirmation received
1.7 Other income :
Dividends are recognised whenever the right to receive dividends is
established. Interest income is recognised on accrual basis.
The Company provides corporate guarantees to subsidiaries and charges a
commission for providing such guarantees. Such incomes are accrued in
terms ofthe agreements with the parties.
1.8 Tangible fixed assets :
Fixed assets, except to the extent permitted to be fair valued under
the Scheme, are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Machinery spares which
can be used only in connection with an item of fixed asset and whose
use is expected to be irregular are capitalised and depreciated over
the useful life ofthe principal item ofthe relevant assets. Subsequent
expenditure relating to fixed assets is capitalised only if such
expenditure results in an increase in the future benefits from such
asset beyond its previously assessed standard of performance.
Fixed assets acquired in full or part exchange for another asset are
recorded at the fair market value or the net book value of the asset
given up, adjusted for any balancing cash consideration. Fair market
value is determined either for the assets acquired or asset given up,
whichever is more clearly evident.
The Company fair valued land and machineries upon the Scheme becoming
effective (December 31, 2009) and such assets are carried at the fair
value less accumulated depreciation and impairment losses, if any.
Projects under which assets are not ready for its intended use and
other Capital Work-in-Progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
1.9 Intangible assets :
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost ofthe asset. In-house
product development costs are capitalised in accordance with paragraph
1.10 Deferred Revenue Expenditure :
The Company operates in an environment which requires the manufacturing
facilities to be approved by industry regulators in certain territories
prior to manufacture and sale of products in such territories. If the
interval between the date the facility is ready to commence commercial
production and the date at which commercial production is expected to
commence is prolonged, all expenses incurred during this period are
treated as deferred revenue expenditure and amortised over a period not
exceeding 3 years from the date of receipt of approvals.
1.11 Foreign currency transactions and translations :
Transactions in foreign currencies are accounted at the exchange rates
prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
Measurement of foreign currency monetary items at the balance sheet
Foreign currency monetary items (other than derivative contracts) at
the balance sheet date are restated at year end rates.
In the case of integral operations, assets and liabilities (other than
non-monetary items), are translated at the exchange rate prevailing on
the balance sheet date. Non-monetary items are carried at historical
cost. Revenue and expenses are translated at yearly average exchange
rates prevailing during the year.
In the case of non-integral operations, assets and the liabilities are
translated at the exchange rates prevailing on the balance sheet date.
Revenue and expenses are translated at yearly average exchange rates
prevailing during the year.
Treatment of exchange differences
Exchange differences arising on settlement / restatement of foreign
currency monetary assets and liabilities of the Company and their
integral foreign operations are recognised as income or expense in the
Statement of Profit and Loss. The exchange differences on
restatement/settlement of loans to non-integral foreign operations that
are considered as net investment in such operations are accumulated in
the Exchange reserve (on consolidation), until disposal / recovery of
the net investment.
Accounting of forward contracts
Premium/discount on forward exchange contracts, which are not intended
for trading or speculation purposes, are amortised over the period of
the contracts, if such contracts relate to monetary items as at the
balance sheet date. Refer paragraph2.23 in this Section for accounting
for forward exchange contracts relating to firm commitments and highly
probable forecast transactions.
1.12 Exceptional items :
The Company consistently classifies the following as exceptional items
in the Statement of Profit and Loss:
(a) Exchange gain / loss arising on account of restatement and
settlement of (i) long term foreign currency loans, (ii) foreign
currency loans given to (or received from) subsidiaries ofthe Company,
(iii) Foreign Currency Convertibles Bonds (FCCBs);
(b) Changes in fair value of embedded derivatives in FCCBs and option
(c) Profit / loss on sale of non-current investments and provision for
diminution in non-current investments.
1.13 Investments :
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Costs of investments include acquisition charges such as
brokerage, fees and duties.
1.14 Employee benefits:
Employee benefits include provident fund, gratuity fund and compensated
Defined contribution plans
The Company''s contribution to provident fund are considered defined
contribution plans and are charged as an expense as they fall due based
on the amount of contribution required to be made.
Defined benefit plans
Liability for gratuity is funded with SBI Life Insurance Company
Limited and Life Insurance Corporation of India. Gratuity expenses for
the year are accounted based on actuarial valuation carried out as at
the end of the fiscal year using the Projected Unit Credit method, with
actuarial valuation being carried out at each balance sheet date.
Actuarial gains and losses are recognised in the Statement of Profit
and Loss in the period in which they occur. Past service cost is
recognised immediately to the extent that the benefits are already
vested and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested. The retirement
obligation recognised in the balance sheet represents the present value
ofthe defined benefit obligation as adjusted for unrecognised past
service cost, as reduced bythe fair value ofthe scheme assets. Any
asset resulting from this calculation is limited to past service cost,
plus the present value of available refunds and reductions in future
contributions to the scheme.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the period when the employees render the service. These benefits
include performance incentives and compensated absences which are
expected to occur within twelve months after the end ofthe period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
(b) in case of non - accumulating compensated absences, when the
absences occur Long term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end ofthe period in which the employee renders the
related services are recognised as a liability at the present value
ofthe defined benefit obligation as at the balance sheet date less the
fair value ofthe plan assets out of which the obligations are expected
to be settled.
Long Term Incentive Plan (''Plan''):
Under the Plan, certain employees are eligible for retention and
performance linked payouts. These payouts are accrued as and when
services are rendered and or when the specific performance criteria are
1.15 Employee share based payments :
The Company has formulated Employee Stock Option Plans (ESOP) in
accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999. The Plans provide for grant of
options to employees of the Company and its subsidiaries to acquire
equity shares of the Company that vest in a graded manner and that are
to be exercised within a specified period. In accordance with the SEBI
Guidelines, the excess, if any, ofthe closing market price on the day
prior to the grant of the options (under ESOP) over the exercise price
is amortised on a straight line basis over the vesting period in the
Statement of Profit and Loss /Reserve for Business Restructure.
Employee stock options granted under the above ESOP on after April 1,
2005 are accounted under the ''Intrinsic Value Method'' stated in the
Guidance Note on Employee Share Based Payments issued by the Institute
of Chartered Accountants of India.
Options with a cash settlement feature are fair valued at the time of
the grant and at each reporting date. Changes in the fair value ofthe
Options at each reporting date are recognised in the Statement of
Profit and Loss.
1.16 Borrowing costs:
Borrowing costs includes interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Borrowing costs, related to acquisition for qualifying
assets, pertaining to the period from commencement of activities
relating to construction / development of the qualifying asset upto the
date of capitalisation of such asset is added to the cost of the
assets. Capitalisation of borrowing costs is suspended and charged to
the Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
1.17 Leases :
Where the Company as a lessor leases assets under finance leases, such
amounts are recognised as receivables at an amount equal to the net
investment in the lease and the finance income is based on a constant
rate of return on the outstanding net investment.
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value or the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vests with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
1.18 Earnings per share :
Basic earnings per share is computed by dividing the profit/(loss)
aftertax (including the post-tax effect of extraordinary items, if any)
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the
profit/(loss) after tax (including the post-tax effect of any
extraordinary items, if any) as adjusted for dividend, interest and
other charges to expense or income relating to the dilutive potential
equity shares, by the weighted average number of equity shares
considered for deriving basic earnings per share and also the weighted
average number of equity shares which could have been issued on the
conversion of all dilutive potential equity shares. Potential equity
shares are deemed to be dilutive if only their conversion to equity
shares would decrease the net profit per share. Potential dilutive
equity shares are deemed to be converted as at the beginning of the
period, unless they have been issued at a later date. The dilutive
potential equity shares are adjusted for the proceeds receivable had
the shares been actually issued at fair value (i.e. average market
value ofthe outstanding shares). Dilutive potential equity shares are
determined independently for each period presented. The number of
equity shares and potentially dilutive equity shares are adjusted for
share splits/reverse share splits and bonus shares, as appropriate.
1.19 Taxes on income :
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions ofthe Income-tax
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form ofadjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the balance sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantively enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carryforward of losses
are recognised only if there is virtual certainty that there will be
sufficient future taxable income available to realise such assets.
Deferred tax assets are recognised for timing differences of other
items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance sheet date for their
Current and deferred tax relating to items directly recognised in
equity, is recognised in equity and not in the Statement of Profit and
1.20 Research & Development Expenditure :
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss / Reserve for Business Restructure
unless a product''s technological feasibility and commercial viability
has been established, in which case such expenditure is capitalised.
The amount capitalised comprises expenditure that can be directly
attributed, or allocated on a reasonable and consistent basis, to
creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for tangible fixed
assets and intangible fixed assets.
1.21 Impairment of Assets :
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
ofthe net selling price and their value in use. Value in use is arrived
at by discounting the future cash flows to their present value based on
an appropriate discount factor. When there is indication that an
impairment loss recognised for an asset in prior accounting periods no
longer exists or may have decreased such reversal of impairment loss is
recognised in the Statement of Profit and Loss.
1.22 Provisions and Contingencies :
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimate required to settle the obligation at the balance
sheet date. These are reviewed at each balance sheet date and adjusted
to reflect the current best estimates. Contingent liabilities are not
recognised but are disclosed in the notes to the financial statement.
1.23 Financial Assets, Financial Liabilities, Financial Instruments,
Derivatives and Hedge Accounting :
(a) The Company classifies its financial assets into the following
categories: financial instruments at fair value through Statement of
Profit and Loss, loans and receivables, held to maturity investments
and available for sale financial assets.
Financial assets ofthe Company mainly include cash and bank balances,
trade receivables, loans and advances and derivative financial
instruments with a positive fair value.
Financial liabilities of the Company mainly comprise secured and
unsecured loans, trade payables, accrued expenses and derivative
financial instruments with a negative fair value.
Financial assets/ liabilities are recognised on the balance sheet when
the Company becomes a party to the contractual provisions ofthe
instrument. Financial assets are derecognised when all ofrisks and
rewards ofthe ownership have been transferred. The transfer of risks
and rewards is evaluated by comparing the exposure, before and after
the transfer, with the variability in the amounts and timing ofthe net
cash flows of the transferred assets.
Available for sale financial assets (not covered under the notified
Accounting Standards) are carried at fair value, with changes in fair
value being recognised in Equity, unless they are designated in a fair
value hedge relationship, where such changes are recognised in the
Statement of Profit and Loss. Loans and receivables, considered not to
be in the nature of short-term receivables, are discounted to their
present value. Short-term receivables with no stated interest rates are
measured at original invoice amount, if the effect of discounting is
immaterial. Non- interest-bearing deposits, meeting the criteria of
financial asset, are discounted to their present value.
Financial liabilities held for trading and liabilities designated at
fair value, are carried at fair value through Statement of Profit and
Other financial liabilities are carried at amortised cost using the
effective interest method. The Company measures the short-term payables
with no stated rate of interest at original invoice amount, if the
effect of discounting is immaterial.
Financial liabilities are derecognised when extinguished.
(b) Determining fair value
Where the classification of a financial instrument requires it to be
stated at fair value, fair value is determined with reference to a
quoted market price for that instrument or by using a valuation model.
Where the fair value is calculated using financial markets pricing
models, the methodology is to calculate the expected cash flows under
the terms of each specific contract and then discount these values back
to a present value.
(c) Hedge accounting
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to firm
commitments and highly probable forecast transactions. The Company
designates such forward contracts in a cash flow hedging relationship
by applying the hedge accounting principles set out in Accounting
Standard 30 ''Financial Instruments: Recognition and Measurement''
issued by the Institute of Chartered Accountants of India. These
forward contracts are stated at fair value at each reporting date.
Changes in the fair value of these forward contracts that are
designated as hedges of future cash flows are recognised directly in
''Hedge reserve account'' under Reserves and surplus, net of applicable
deferred income taxes, if any, to the extent such hedges are considered
effective and the ineffective portion is recognised immediately in the
Statement of Profit and Loss. Amounts accumulated in the Hedge reserve
account are reclassified to the Statement of Profit and Loss in the
same periods during which the forecasted transaction affects profit and
loss. Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. For forecasted transactions, any cumulative
exchange gain or loss on the hedging instrument recognised in ''Hedge
reserve account'' is retained until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net
cumulative exchange gain or loss recognised in Hedge reserve account is
immediately transferred to the Statement of Profit and Loss.
(d) Derivative contracts
The Company enters into derivative contracts in the nature of foreign
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Such derivative contracts which are
closely linked to the existing assets and liabilities are accounted as
per the accounting policy stated for foreign currency transactions and
Derivative contracts designated as a hedging instrument for highly
probable forecast transactions are accounted as per the policy stated
for Hedge accounting.
All other derivative contracts are marked-to-market and losses / gains
are recognised in the Statement of Profit and Loss.
Detail of the rights, preferences and restrictions attaching to each
class of shares outstanding Equity shares of Rs. 10/- each: The Company
has only one class of equity shares, having a par value of Rs.10/-. The
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 approval by the shareholders at
the ensuing Annual General Meeting. In the event of liquidation ofthe
Company, the holders ofthe equity shares will be entitled to receive
any of the remaining assets ofthe Company, after distribution to all
other parties concerned. The distribution will be in proportion to
number of equity shares held by the shareholders.