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Advanced Enzyme Technologies

BSE: 540025|NSE: ADVENZYMES|ISIN: INE837H01020|SECTOR: Pharmaceuticals
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Mar 17
Notes to Accounts Year End : Mar '18

Note 1:

The Company has decided to sell the lease rights for one of its leasehold land situated at Jalna, Maharashtra. Accordingly, the cost of land and building appurtenant thereto along with the development costs has been classified as non-current assets held for sale under Note 17. The Company is in the process of executing a formal lease deed for the above said land with Maharashtra Industrial Development Corporation.

Note 2:

The Company has availed the deemed cost exemption in relation to the property, plant and equipment on the date of transition and hence the net block carrying amount has been considered as the gross block carrying amount on that date. Refer note below for the gross block value and the accumulated amortisation on 1 April 2016 under the previous GAAP

Note:

The Company has availed the deemed cost exemption in relation to the intangible assets on the date of transition and hence the net block carrying amount has been considered as the gross block carrying amount on that date. Refer note below for the gross block value and the accumulated amortisation on April 1, 2016 under the previous GAAP

Note:

The share issue expenses had been incurred by the Company in relation to its Initial Public Offer (the Offer or IPO) of equity shares. The Company had incurred '' 210.79 million (inclusive of service tax) as IPO expenses. Of the above IPO expenses certain expenses (such as legal counsel cost, listing fees and other cost) aggregating '' 3.84 million are directly attributable to the Company. Remaining IPO expenses aggregating '' 206.95 million have been allocated between the Company '' 25.48 million and selling shareholders '' 181.47 million in proportion to the Equity shares allotted to the public as fresh issue by the Company and under Offer for Sale by the selling shareholders. The total amount attributable to the Company has been adjusted towards the securities premium account as permissible under Section 52 of the Companies Act, 2013, to the extent any balance is available for utilisation in the securities premium account post the issue of equity shares. The share of the Selling Shareholders of such expenses has been reimbursed to the Company.

d) Shares reserved for issue under options

The Company had reserved issuance of 220,000 Equity shares of '' 2 each (31 March 2017: 44,000 shares of Rs 10 each; 1 April 2016: Nil) for offering to eligible employees of the Company under Employees Stock Option Scheme (ESOS). The option would vest on graded basis over a maximum period of 4 years or such other period as may be decided by the Employees Stock Compensation Committee from the date of grant based on specific criteria. (Refer note 43)

e) Sub-division of shares

The Shareholders vide a special resolution have approved sub-division of shares of the Company in the ratio of 5 shares of face value of '' 2 each for every existing 1 share of the face value of '' 10 each through postal ballot. The requisite approvals for modification of the Memorandum and Articles of Association of the Company had been accorded by the shareholders on 4 May 2017.

f) Initial public offering

The Company had made an Initial Public Offer (IPO) of 4,594,875 Equity shares of '' 10 each at an issue price of '' 896 per Equity share ('' 810 per Equity share for eligible employees), consisting of fresh issue of 560,405 equity shares and an Offer for Sale of 4,034,470 equity shares by Selling Shareholders. The Equity shares of the Company were listed on National Stock Exchange of India Limited (NSE) via id ADVENZYMES and on BSE Limited (BSE) via Id 540025 on 1 August 2016.

g) Utilisation of IPO proceeds

From the total proceeds of '' 4,114.88 million through an IPO, the Company received proceeds of '' 499.99 million towards fresh issue of 560,405 equity shares of '' 10/- each fully paid up at a premium of '' 886/- per share for 535,714 equity shares and '' 800/- per share for 24,691 equity shares, net of '' 3,614.89 million attributed to the selling shareholders towards 4,034,470 equity shares of '' 10/- each fully paid up at a premium of '' 886/- per share offered by them for sale.

Nature and purpose of reserves Capital reserve

The reserve comprises of profits/gains of capital nature earned by the Company and credited directly to such reserve.

Securities premium

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013

General reserve

General reserve is created out of the profits earned by the Company by way of transfer from surplus in the Statement of Profit and Loss. The Company can use this reserve for payment of dividend and issue of fully paid up and not paid up bonus shares.

Dividends

The following dividends were declared and paid by the Company during the year

b) Details of security for each type of borrowing as at 31 March 2018

(a) Term loans from banks are secured by

(i) hypothecation charge of present and future movable and immovable assets of the Company; and

(ii) first pari-passu charge by way of equitable/ registered mortgage on all the present and future land and building (immovable properties) of the Company.

(b) Vehicle loans availed from four banks and two financial institutions are secured by charge on vehicles as specified in their respective loan agreements.

c) Terms of repayment of term loans and other loans Term loan from banks

Term loan form bank carries an interest rate of base rate 1% (amounts to 10.50% both for the current and previous years) and is payable in 60 equal monthly instalments of Rs, 2.5 million each along with interest upto 9 November 2020.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered. Any changes in future taxable income would impact the recoverability of deferred tax assets.

During the year, the Company has accounted tax credits in respect of Minimum Alternative Tax (MAT credit) of Rs, 117.77 million (31 March 2017: Rs, 123.99 million, 1 April 2016: Rs, 129.70 million) of earlier years. The Company is reasonably certain of availing the said MAT credit in future years against the normal tax expected to be paid in those years.

Given that the Company does not have any intention to dispose investments in subsidiaries in the forseeable future, deferred tax asset on indexation benefit in relation to such investments has not been recognised.

b) Details of security for each type of borrowing as at 31 March 2018

(a) Loans repayable on demand from Banks (Working Capital loans) are secured by first pari passu charge on all existing and future current assets of the Company.

c) Terms of repayment of term loans and other loans Loan repayable on demand

(i) Cash Credit from bank for Rs, 113.65 million (31 March 2017: Rs, 95.37 million; 1 April 2016: Rs, 165.91 million) carries an interest rate of 9% to 12%.

(ii) Packing credit foreign currency loan from bank for Rs, 58.34 million (31 March 2017: Rs, 65.96 million; 1 April 2016: Rs, 53.61 million) carries an interest rate of Libor 100 to 125 bps (31 March 2017: Libor 80 bps; 1 April 2016: Libor 125 to 200 bps).

(iii) Packing credit in local currency from bank for Rs, 36.28 million (31 March 2017: Rs, Nil; 1 April 2016: Rs, Nil) carries an interest rate of 5.25%.

(iv) Working capital demand loan from bank for Rs, 115.00 million (31 March 2017: Rs, 50.00 million; 1 April 2016: Rs, 75.00 million) carries an interest rate in the range of 7.85% to 8.50% p.a. (31 March 2017: 8.20%; 1 April 2016: 9.60% p.a.)

Note:

Dues to micro, small and medium enterprises pursuant to section 22 of the Micro, Small and Medium Enterprises Development Act (MSMED), 2006

The Management has identified enterprises which have provided goods and services to the Company and which qualify under the definition of micro and small enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2018 has been made in the standalone financial statements based on information received and available with the Company.

36 Employee benefits

The Company contributes to the following post-employment plans in India.

(A) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund which are in the nature of defined contribution post employment benefit plans . Under the plan, the Company is required to contribute a specified percentage of payroll cost to fund the benefits.

The Company recognised Rs 10.60 million for the year ended 31 March 2018 (31 March 2017: Rs, 9.43 million) towards provident fund contribution and Rs 3.48 million for the year ended 31 March 2018 (31 March 2017: Rs, 3.15 million) towards super-annuation fund contribution in the Statement of Profit and Loss.

The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

(B) Defined Benefit Plan:

The Company provides for gratuity benefit and compensated absences, which are defined benefit plans, covering all its eligible employees. The Company has taken a Group Gratuity and Compensated Absences policy for its employees with the Life Insurance Corporation of India (LIC). Under gratuity policy, the eligible employees are entitled to receive gratuity payments upon their resignation or death (subject to completion of 4.5 years of employment) in lumpsum after deduction of necessary taxes.

The most recent actuarial valuation of the defined benefit obligation along with the fair valuation of the plan assets in relation to the gratuity scheme was carried out as at 31 March 2018. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the details of the employee benefit obligation and the plan assets as at balance sheet date:

Assumptions regarding future mortality have been based on published statistics and mortality tables.

The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occuring at the end of the reporting period.

v. Expected future cash flows

The expected future cash flows in respect of gratuity as at 31 March 2018 were as follows

Expected contribution

The expected contributions for defined benefit plan for the next financial year will be in line with the contribution for the year ended 31 March 2018 Rs, 4.03 million

The trustees of the plan have outsourced the investment management of the fund to an insurance company. The insurance company in turn manages these funds as per the mandate provided to them by the trustees and the asset allocation which is within the permissible limits prescribed in the insurance regulations. Due to the restrictions in the type of investments that can be held by the fund, it may not be possible to explicitly follow an asset-liability matching strategy to manage risk actively in a conventional fund.

38 Segment reporting Basis of segmentation

The Company operates only in one primary business segment viz. ''manufacturing and sales of enzymes'' and hence no separate information for primary segment wise disclosure is required.

Geographic information

The geographic information analyses the Company''s revenues and non-current assets by the Company''s country of domicile and other countries. In presenting geographic information, segment revenue has been based on the selling location in relation to sales to customers and segment assets are based on geographical location of assets.

Major customer

Revenue from one customer based in U.S.A is Rs 317.15 million (Previous year: Rs, 343.19 million) out of the total revenue of the Company.

39 Earnings per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders by the weighted average number of Equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders by the weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.

40 Financial instruments 1. Financial instruments - Fair values and risk management A. Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if their carrying amount is a reasonable approximation of fair value.

B. Measurement of fair values

Valuation techniques and significant unobservable inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used:

C. Financial risk management

The Company has exposure to the following risks arising from

financial instruments:

- Credit risk;

- Liquidity risk; and

- Market risk

i. Risk management framework

The Company''s board of directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The committee reports regularly to the board of directors on its activities

The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The audit committee oversees how management monitors compliance with the company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

ii. 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 Company''s receivables from customers and investment securities. 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. 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 Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.

At 31 March 2018, the carrying amount of the Company''s most significant customer accounted for Rs 63.30 million (31 March 2017 - Rs 21.98 million; 1 April 2016 - Rs 18.18 million)

Expected credit loss assessment for customers as at 1 April 2016, 31 March 2017 and 31 March 2018

The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments, available press information etc.) and applying experienced credit judgement.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macroeconomic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue.

The impairment loss at 31 March 2018 and 31 March 2017 related to certain customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

Cash and cash equivalents

The Company held cash and cash equivalents of Rs 1.90 million at 31 March 2018 (31 March 2017: Rs 2.73 million, 1 April 2016 : Rs 5.18 million). The cash and cash equivalents are held with bank and financial institution counterparties with good credit ratings.

Derivatives

The derivatives are entered into with bank and financial institution counterparties with good credit ratings.

Investments

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

Other than trade and other receivables, the Company has no other financial assets that are past due but not impaired

iii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

The Company has obtained fund and non-fund based working capital lines from various banks. The Company invests its surplus funds in bank fixed deposit which carry no/low mark-to-market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility

* Guarantees issued by the Company on behalf of subsidiary are with respect to borrowings raised by the subsidiary. These amount will be payable on default by the subsidiary. As of the reporting date, the subsidairy has not defaulted and hence, the Company does not have any present obligation to third parties in relation to such guarantee (Refer note: 54)

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. We are exposed to market risk primarily related to foreign exchange rate risk. Thus, our exposure to market risk is a function of revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Currency risk

The Company is exposed to currency risk on account of its operations in other countries. The functional currency of the Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, the Company uses derivative instruments, i.e, foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against US dollars and Euros at March 31 would have affected the measurement of financial instruments denominated in US dollars and Euros and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Derivative instruments

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to trade receivable. The use of foreign currency forward contracts is governed by the Company''s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company''s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

* Deferred Sales Tax scheme is not included in the above since it does not bear any interest rate Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instruments

The risk estimates provided assume a change of 25 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date assuming that all other variables, in particular foreign currency exchange rates, remain constant. The period end balances are not necessarily representative of the average debt outstanding during the period.

The Company has decided to sell the lease rights for one of its leasehold land situated at Jalna, Maharashtra. Accordingly, the cost of land and building appurtenant thereto along with the development costs has been classified as non-current assets held for sale. The Company is in the process of executing a formal lease deed for the above said land with Maharashtra Industrial Development Corporation (MIDC).

42 Related party relationships, transactions and balances

The table provides the information about the Group''s structure including the details of the subsidiaries and the holding company. The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year:

a Name of Related Parties

I Subsidiaries including step-down subsidiaries

Advanced Bio-Agro Tech Limited

Advanced Enzytech Solutions Limited

Advanced Enzymes Europe B.V. (w.e.f. 11 July 2017)

JC Biotech Private Limited (w.e.f. 1 December 2016)

Advanced Enzymes USA, Inc.

Evoxx Technologies GmbH (Wholly owned subsidiary of Advanced Enzymes Europe B. V.) (w.e.f. 15 August 2017)

Advanced Enzymes (Malaysia) Sdn. Bhd. (Subsidairy w.e.f. 3 July 2017 up to 11 March 2018) (Wholly owned subsidiary w.e.f.

12 March 2018)

Cal India Foods International (Wholly owned subsidiary of Advanced Enzymes USA, Inc.)

Advanced Supplementary Technologies Corporation (Wholly owned subsidiary of Advanced Enzymes USA, Inc.)

Enzyme Innovation, Inc. (Wholly owned subsidiary of Cal India Foods International)

Dynamic Enzymes, Inc. (Wholly owned subsidiary of Advanced Enzymes USA, Inc.)

Enzyfuel Innovation, Inc. (Wholly owned subsidiary of Advanced Enzymes USA, Inc. dissolved voluntarily w.e.f. 19 September 2017)

II Key Management Personnel (KMP)

Mr. Vasant L Rathi Chariman and Non-executive director

Mr. Chandrakumar L. Rathi Managing director

Mrs. Savita C. Rathi Whole-time director

Mr. Mukund M. Kabra Whole-time director

Mr. Piyush C. Rathi Chief Business Officer

Mr. Beni P Rauka Chief Financial Officer

Mr. Prabal Bordiya (up to 13 February 2017) Company secretary

Mr. Sanjay Basantani (w.e.f. 14 February 2017) Company secretary

Mrs. Rupa Vora (w.e.f. 15 September 2016) Independent Director

Mr. Kedar Desai Independent Director

Mr. Ramesh Mehta Independent Director

Mr. Pramod Kasat Independent Director

Mr. K V Ramakrishna (up to 15 September 2016) Independent Director

Relatives of KMP :

Mrs. Prabha V. Rathi Wife of chairman

Mr. Kishore L. Rathi Brother of Managing director

Mrs. Mangala M. Kabra Mother of Managing director

43 Employee share-based payment plans a) Description of share-based payment arrangements:

As at 31 March 2018, the Company has the following share-based payment arrangements for employees.

AETL Employee Stock Option Scheme 2015''- (AETL ESOS 2015)

AETL ESOS 2015 (amended) provides for the grant of 44,000 stock options to specified employees on 15 February 2017. The AETL ESOS 2015 had been formulated by Board of Directors which was further adopted by Nomination and Remuneration committee and recommended further changes to AETL ESOS 2015. The Shareholders approved the amended scheme on 15 September 2016. The plan entitles specified employees to purchase shares in the Company at the stipulated exercise price, subject to compliance with vesting conditions. As per the plan, holders of vested options are entitled to purchase one equity share for every option at an exercise price of Rs, 300.

220,000 Equity Shares of Face Value of Rs, 2 each (31 March 2017: 44,000 shares of Rs, 10 each; 1 April 2016: Nil) are reserved for issue under AETL Employee Stock Option Scheme 2015 (AETL ESOS-2015)

44 Capital Management

For the purpose of the Company''s capital management, capital includes issued capital and other equity reserves. The primary objective of the Company''s Capital Management is to maximise shareholders value. The Company manages its capital structure and makes adjustments in the light of changes in economic environment and the requirements of the financial covenants.

The Company monitors capital using adjusted net debt to equity ratio. For this purpose, adjusted net debt is defined as total debt less cash and bank balances.

* The amount has been included under share issue expenses under note 20

46 Capitalization of expenditure

The Company has capitalized the following expenses of revenue nature under Intangible assets. Consequently, expenses disclosed under the respective note are net of amounts capitalized by the Company.

The Company had incurred the above expenditure on toxicity studies, product characterization, identification, evaluation, technical analysis of data and consultancy services for the purpose of registration of product dossiers under European Food Safety Authority (EFSA) and Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) Authority, which is mandatory requirement for export of food and non-food enzymes, food flavourings and additives to European countries. The Company will be permitted to sell its registered products; therefore it is considered as product permits to sell in European market. Since the final approvals for product dossiers filed with EFSA are currently awaited, such expenditure has been capitalized as Intangible assets under development in the standalone financial statements. Cost have also been incurred towards filing of product dossiers with US Food Drug Authorities (US FDA) for Generally Regarded As Safe (GRAS) for acceptability of food enzymes in the USA. The Company is yet in the process of filing the product dossier which US FDA, such expenditure has been capitalized as Intangible assets under development in the standalone financial statements.

This information also complies with the terms of the recognition granted up to 31 March 2019 to the Company''s In- House Research and Development Activities by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India, vide their letter No. TU/IV-RD/2159/2016 dated 4 July 2016.

48 Specified Bank Notes Disclosure

The disclosure regarding details of specified bank notes held and transacted during 8 November 2016 to 30 December 2016 has not been made since the requirement does not pertain to financial year ended 31 March 2018. Corresponding amounts as appearing in the audited standalone financial statements for the year ended 31 March 2017 has been disclosed as under:

49 Corporate Social Responsibility

As required by section 135 of Companies Act, 2013 and Rules therein, a Corporate social responsibility committee has been formed by the Company. The Company has spent the following amount during the year towards corporate social responsibility (CSR) for activities listed under schedule VII of the Companies Act, 2013.

(a) Gross amount required to be spent by the Company during the year Rs 5.86 million (Year 2016-17 '' 3.78 million).

(b) Amount spent by the Company during the year on purpose other than construction/ acquisition of assets is '' 5.62 million (previous year '' 3.9 million)

50 Acquisition of JC Biotech Pvt. Ltd.

On 1 December 2016, the Company acquired 70% stake JC Biotech Pvt. Ltd. for a total upfront consideration of '' 500.85 million approved by the Board of Directors in its meeting held on 28 October 2016. The Company has funded the acquisition through internal accruals. The Company has paid stamp duty and other related charges amounting to '' 2.25 million, which has been added to the cost of acquisition.

51 Acquisition of Advanced Enzymes (Malaysia) Sdn. Bhd.

(AEM)

On 3 July 2017, the Company completed its acquisition of Advanced Enzymes (Malaysia) Sdn. Bhd. (AEM) formerly known as Palm Techno Ventures Enzyme Sdn Bhd (PTVE), Malaysia by way of an investment of 200,000 Malaysian Ringitt (RM), equivalent to Rs, 3.14 Million, in 200,000 ordinary shares of RM 1.00 each of PTVE i.e. 80% of the paid-up share capital of PTVE. On 13 March 2018, the Company purchased 150,000 ordinary shares of RM 1.00 each of AEM by way of rights issue, equivalent to Rs, 2.60 Million, i.e. 87.50% of the paid-up share capital of AEM. On 30 March 2018, the Company acquired balance 12.50% of the share capital of AEM by way of an investment of

50,000 Malaysian Ringitt (RM), equivalent to Rs, 0.87 Million, in 50,000 ordinary shares of RM 1.00 each, thereby making it a wholly owned subsidiary.

52 Formation of new subsidiary Advanced Enzymes Europe B. V.

On 11 July 2017, the Company has incorporated a wholly owned subsidiary; Advanced Enzymes Europe B.V. in Amsterdam, Netherlands registered with Chamber of Commerce having a paid up share capital of Euro 2 million, equivalent to Rs, 149.85 Million.

53 Proposed Dividend

The Board of Directors recommended a final dividend for the financial year 2017-18 of Rs, 0.50 (31 March 2017: Rs, 0.40) per equity share of the face value of Rs, 2/- each, and the same will be paid after approval of shareholders in the Annual General Meeting of the Company.

For the purposes of reporting as set out in Note 1, we have transitioned our basis of accounting from Indian generally accepted accounting principles (IGAAP) to Ind AS. The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2018, the comparative information presented in these financial statements for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the transition date). In preparing our opening Ind AS balance sheet, we have adjusted amounts reported in financial statements prepared in accordance with IGAAP. An explanation of how the transition from IGAAP to Ind AS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables.

Reconciliation of Statement of Cash Flow

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

A Notes to the reconciliation: 1. Security deposits recognised at amortised cost

Under previous GAAP, the interest free security deposits and advances were accounted for at transaction price. Under Ind AS, security deposits are to be measured at fair values at inception, with reference to market rates (i.e. fixed deposit rate), and the difference is to be recognised as prepaid rentals.

2. Provision for sales returns

Under previous GAAP, the Company accounted for sales return as and when the goods were recevied back from the customers.

Under Ind AS, the Company is required to recognise a provision for sales return as a reduction from revenue.

3. Trade and other receivables

Under Indian GAAP, the Group has created provision for impairment of receivables consists only in respect of specific amount for incurred losses. Under Ind-AS, impairment allowance has been determined based on Expected Loss model (ECL).

4. Land Indexation

Under Ind AS, deferred tax is determined with reference to the balance sheet approach. Accordingly, the Company will be required to recognise deferred tax on account of indexation benefit on freehold land.

5. Other deferred tax adjustments :

Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temprorary differences which was not required under Indian GAAP.

6. Actuarial gain and loss

Under previous GAAP, the Company recognised remeasurement of defined benefit plans under profit or loss. Under Ind AS, remeasurement of defined benefit plans are recognised in Other Comprehensive Income.

7. Revenue

Under Ind AS, revenue is recognised at the fair value of the consideration received or receivable, after deduction of any trade discounts, volume rebates and any taxes or duties collected on behalf of the government such as sales tax and value added tax except excise duty. Discounts given include rebates and incentives given to customers which have been reclassified from other expenses under Previous GAAP and netted from revenue under Ind AS.

8. Excise duty on sales

Under previous GAAP, revenue from sale of goods was presented net of the excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as an expense.

9. Rent

Under previous GAAP, the land leased in Prithampur was treated as Leasehold Land. Under Ind AS, the same has been classified as an Operating Lease. Accordingly the land has been reclassified from PPE to Prepaid rentals.

10. Others

Other Ind AS adjustments include share based payment charge back to subsidiaries and depreciation on lease hold land,etc

B. Exemptions and exceptions availed B.1 Ind AS mandatory exceptions B.1.1 Estimates

The estimates at 1st April 2016 and 31st March 2017 are consistent with those made for the same dates in accordance with the Indian GAAP (after adjustments to reflect any differences if any, in accounting policies). The Company has made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

1. Investment in equity instruments carried at FVTPL;

2. Determination of the discounted value for financial instruments carried at amortised cost.

B.1.2 De-recognition of financial assets and liabilities

Ind AS 101 requires a first-time adopter to apply the derecognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity''s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions. The Company has elected to apply the de-recognition provisions prospectively

B.1.3 Classification and measurement of financial assets

The Company has classified and measured the financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

B.2 Ind AS optional exemptions B.2.1 Deemed cost

The Company has elected to continue with the carrying value for all of its property, plant and equipment and intangible assets as recognised in the financial statements as the deemed cost at the date of transition to Ind AS, measured as per the previous GAAP

B.2.2 Deemed cost for investments in subsidiaries

The Company has elected to continue with the carrying value of its investments in subsidiaries as recognised in the financial statements as at the date of transition to Ind AS.

Accordingly, the Company has measured its investments in subsidiaries at their previous GAAP carrying value.

56 Disclosure under Section 186 of the Companies Act, 2013

Note 1:

Purpose of utilisation of above loans 1) Advanced Enzymes USA, Inc.: For repayment/pre-payment of certain loans availed by

Advanced Enzymes USA, Inc.

2) Advanced Enzymes Europe B.V.: For acquisition of evoxx technologies GmbH Loan repayment terms

1) Advanced Enzymes USA, Inc.: 5 quarterly instalments of Rs, 80 million each commencing from quarter ended 30 September 2016. However, the loan was fully repaid by 20 December 2016.

2) Advanced Enzymes Europe B.V.: 18 month moratorium period from August 2017 and January 2018 and then 14 quarterly instalments including interest starting from April 2019 and September 2019 respectively.

Rate of Interest 1) Advanced Enzymes USA, Inc.: 10.50%

2) Advanced Enzymes Europe B.V.: 9.00%

Maximum amount outstanding during the year is Rs, 279.88 million (31 March 2017: Rs, 400.00 million; 1 April 2016: Rs, Nil) as per additional disclosures pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015

Source : Dion Global Solutions Limited
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