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Apollo Hospitals Enterprises

BSE: 508869|NSE: APOLLOHOSP|ISIN: INE437A01024|SECTOR: Hospitals & Medical Services
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Notes to Accounts Year End : Mar '18

1 Corporate Information

Apollo Hospitals Enterprise Limited (‘the Company’) is a public Company incorporated in India. The address of its registered office and principal place of business is at 19, Bishop Gardens, Raja Annamalaipuram, Chennai, Tamilnadu. The main business of the Company is to enhance the quality of life of patients by providing comprehensive, high-quality hospital services on a cost-effective basis and providing / selling high quality pharma and wellness products through a network of pharmacies. The principal activities of the Company include operation of multidisciplinary private hospitals, clinics, and pharmacies.

2 Application of new and revised Ind ASs

The company has applied all the Ind ASs notified by the MCA.

Standards issued but not yet effective

I. Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (‘MCA’) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The company is in the process of assessing the impact of the said standard on its financial statements.

II. Ind AS 115- Revenue from Contract with Customers: On March 28, 2018, Ministry of Corporate Affairs (MCA) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The amendments are applicable to the Company from April 1, 2018. The company is the process of assessing the impact of the said standard on its financial statements.

3 Critical accounting judgements and key sources of estimation uncertainty

The preparation of these financial statements in conformity with recognition and measurement principles of IND AS requires the management of the company to make estimates and assumptions that affect the reported balances of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and the reported amount of income and expenses for the periods presented

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

3.1 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

3.1.1 Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

3.1.2 Fair value measurements and valuation processes

Some of the Company’s assets and liabilities are measured at fair value for financial reporting purposes. The business acquisitions made by the company are also accounted at fair values.

In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model. The Chief Financial Officer reports the findings to the board of directors of the Company every quarter to explain the cause of fluctuations in the fair value of the assets and liabilities.

3.1.3 Employee Benefits - Defined benefit obligations

The cost of defined benefit plans are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.

3.1.4 Litigations

The amount recognised as a provision shall be the management’s best estimate of the expenditure required to settle the present obligation arising at the reporting period.

3.1.5 Revenue Recognition

Revenue from fees charged for inpatient and outpatient hospital/clinical services rendered to insured and corporate patients are subject to approvals for the insurance companies and corporates. Accordingly, the Company estimates the amounts likely to be disallowed by such companies based on past trends. Estimations based on past trends are also required in determining the value of consideration from customers to be allocated to award credits for customers.

3.1.6 Useful lives of property plant and equipment

The Company reviews the useful life of property plant and equipment at the end of each reporting period. This reassessment may result in depreciation expense in future periods.

3.1.7 Recoverability of Deferred Tax Asset

The deferred tax assets recognised primarily relate to business losses, Minimum Alternate Tax (MAT) credit and other deductible temporary differences. The deferred tax asset has been recognized on the basis of management estimate that its recovery is probable in the foreseeable future.

3.1.8 Impairment of Financial Assets

The impairment provisions for trade receivables is based on assumptions about risk of default and expected loss rates. The Company uses judgements in making certain assumptions and selecting inputs to determine impairment of these trade receivables, based on the Company’s historical experience towards potential billing adjustments, delays and defaults at the end of each reporting period.

3.1.9 Impairment of Non - Financial Assets

Determining whether the asset is impaired requires to assess the recoverable amount of the asset or Cash Generating Unit (CGU) which is compared to the carrying amount of the asset or CGU, as applicable. Recoverable amount is the higher of fair value less costs of disposal and value in use. Where the carrying amount of an asset or CGU exceeds the recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Discount Rate- Management estimates discount rates using pre-tax rates that reflect current market assessments of the risks specific to the CGU, taking into consideration the time value of money and individual risk of the underlying asset that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and its operating segments and is derived from its weighted average cost of the capital (WACC).

Growth Rates- The growth rates are based on the industry growth forecasts. Management determines the budgeted growth rate based on past performance and its expectation on its market development. The weighted average growth rate used were consistent with industry reports.

Based on the assessment, the management has concluded that there is no impairment of goodwill in respect of Standalone Pharmacy. The management believes that any reasonably possible further change in key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

i. Trade Receivables represent the amounts outstanding on sale of pharmaceutical products, hospital services and project consultancy fees which are considered as good by management. The entity holds no other securities other than the personal security of the debtors.

ii. Majority of the Company’s transactions are earned in cash or cash equivalents. The trade receivables comprise mainly of receivables from Insurance Companies, Corporate customers and Government Undertakings (both domestic and international). The entity’s exposure to credit risk in relation to trade receivables is low.

Average Credit Period:

The average credit period on sales of services is 30-60 days.

Customer concentration

No single customer represents 10% or more of the company’s total revenue during the year ended March 31, 2018 and March 31, 2017. Therefore the customer concentration risk is limited due to the large and unrelated customer base.

Impairment Methodology

The Company has used a practical expedient by computing the expected credit loss allowance for receivables . The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

4.1 Leasing arrangements

The Company entered into finance lease arrangements with Apollo Hospitals Education and Research Foundation (AHERF) for its Building in Hyderabad. The lease is denominated in Indian Rupees. The average term of finance lease entered into is 99 years.

The mode of valuation of inventories has been stated in note 3.15

The cost of inventories recognised as an expenses includes Rs.12,680 Million as at March 31, 2018 (Previous year Rs.1 1,824 Million).

Note (i) : Refer note 45 (iii) for amounts deposited with the statutory authorities in respect of disputed dues. Note (ii) : Includes Rs.603.65 million (Previous year Rs.615.52 million) being the upfront lease premium paid to the City and Industrial Development Corporation of Maharashtra Limited (“CIDCO”) by the Company for granting a leasehold right for a period of 60 years to use the allotted land for developing a multi speciality hospital at Navi Mumbai.

4.2 Rights, Preferences and restrictions attached to equity shares

The Company has equity shares having a nominal value of Rs.5 each. Accordingly, all equity shares rank equally with regard to dividend and share in the Company’s residual assets. Each holder of equity shares is entitled to one vote per share. The equity shares are entitled to receive dividend as declared from time to time. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by shareholders.

The company had issued 9,000,000 Global Depository Reciepts of Rs.10 (now 18,000,000 Global Depository Reciepts of Rs.5) each with two-way fungibility during the year 2005-06. Total GDRs converted into underlying Equity shares for the year ended 31st March 2018 is 762,690 (31st March 2017 is 83,138) of Rs.5 each and total Equity shares converted back to GDR for the year ended 31st March 2018 is 83,784 (31st March 2017 is 384,562) of Rs.5 each. Total GDRs outstanding as at 31st March 2018 is 423,866 (Previous year 1,102,772).

4.3 The Company has not bought back any shares during the period of five years immediately preceding the last balance sheet date.

The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in general reserve will not be reclassified subsequently to profit or loss.

Securities premium is used to record premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Indian Companies Act, 2013 (the “Companies Act”).

In respect of the year ended March 31, 2018, the directors propose that a dividend of Rs.5 per share be paid on fully paid equity shares. This equity dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. For the previous year, dividend of Rs.6 per share was paid.

The Companies Act requires that where a Company purchases its own shares out of free reserves or securities premium account, a sum equal to the nominal value of the shares so purchased shall be transferred to a capital redemption reserve account and details of such transfer shall be disclosed in the balance sheet. The capital redemption reserve account may be applied by the Company, in paying up unissued shares of the Company to be issued to shareholders of the Company as fully paid bonus shares.

Debenture Redemption Reserve is created out of the profits of the company as per the regulations of the Companies Act, 2013 and is not available for the payment of dividends and such reserve shall be utilised only for redemption of debentures.

Debenture Redemption Reserve is created out of the profits of the company as per the regulations of the Companies Act, 2013 and is not available for the payment of dividends and such reserve shall be utilised only for redemption of debentures.

(i) There is no breach of loan covenants as at March 31, 2018 and March 31, 2017

(ii) The secured listed non-convertible debentures of the company aggregating to Rs.7,000 million as on March 31, 2018 are secured by way of first mortgage/charge on the company’s properties. The asset cover on the secured, listed non-convertible debentures of the company exceeds hundred percent of the principal amount of the said debentures.

Notes

(i) During the year 2017-18 , the amount transferred to the Investors Education and Protection Fund of the Central Government as per the provisions of Section 124 (5) and 124 (6) of the Companies Act, 2013 is Rs.2.76 Million (Previous year Rs.2.40 Million)

(ii) The financial guarantee contract represents guarantee given to ICICI Bank Limited on behalf of Future Parking Private Limited to secure financing facilities for which the Company charges an arms’ length price. The Fair Value of the Guarantee was taken at 1% of the value of guarantee extended.

Notes:

(i) The average credit period on purchases of goods ranges from immediate payments to credit period of 45 days based on the nature of the expenditure. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

(ii) Amounts payable to related parties is disclosed in note 41.

(iii) The information pertaining to liquidity risks related to trade payable is disclosed in note 39.

5.1 Due to Micro, Small and Medium Enterprises

The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at March 31, 2018 has been made in the financial statements based on information received and available with the Company. Further in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (‘The MSMED Act’) is not expected to be material. The Company has not received any claim for interest from any supplier.

During the year, the company has capitalised borrowing costs of Rs.349 Million (Previous year Rs.575 Million) relating to projects, included in Capital Work in Progress. The capitalisation rate used is the weighted average interest of 8.59% (previous year 9.17%).

Note (i) : Consequent to the requirements of section 135 of Companies Act 2013, the company has made contributions as stated below . The same is in line with activities specified Schedule VII of Companies Act, 2013.

a) Gross amount required to be spent by the company during the year is Rs.104.02 Million (Previous year Rs.86.44 Million)

6 Segment Information

T he Board of Directors have been identified as the Chief Operting Decision Maker (CODM) by the company. Information reported to the CODM for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Healthcare, Retail Pharmacy and Others have been identified as the operating segments. No operating segments have been aggregated in arriving at the reportable segments of the Company.

Company operates mainly in India. Accordingly, there are no additional disclosures to be provided under Ind AS 108, other than those already provided in the financial statements.

The following are the accounting policies adopted for segment reporting :

a. Assets, liabilities, revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment.

b. Healthcare segment includes hospitals and hospital based pharmacies. Retail pharmacies include pharmacy retail outlets and Others Segment includes Investments and Fixed Deposits and their related Income.

c. Inter segment revenue and expenses are eliminated.

The Company has disclosed this Segment Reporting in Financial Statements as per Ind AS 108.

7.1 Segment revenues and results

The following is an analysis of the company’s revenue and results from continuing operations by reportable segment.

7.2 For the purpose of monitoring segment performance and allocating resources between segments:

(i) all assets are allocated to reportable segments other than current and deferred tax assets under unallocable assets. Goodwill is allocated to reportable segments as described in note 6.

(ii) all liabilities are allocated to reportable segments other than borrowings, current maturities, interest accrued and not due on these borrowings, current and deferred tax liabilities which are grouped as unallocated liabilities.

7.3 Refer note 8 for information on investments in associates and joint ventures accounted under equity method.

8 Earnings per Share

EPS is calculated by dividing the profit attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The earnings and the weighted average number of shares used in calculating basic and diluted earnings per share is as follows:

9 Defined Contribution Plans

Employee Benefit Plans

The Company makes contributions towards provident fund and employees state insurance as a defined contribution reirement benefit fund for qualifying employees. The provident fund is operated by the regional provident fund commissioner. The amount recognised as expense towards contribution to provident fund amount to Rs.468 Million.

The Employee state insurance is operated by the employee state insurance corporation. Under these schemes, the Company is required to contribute a specific percentage of the payroll cost as per the statute. The amount recognised as expense towards contribution to Employee State Insurance amount to Rs.208 Million.The Company has no further obligations in regard of these contribution plans.

10 Defined Benefit Plans

a) Gratuity

The Company operates post-employment defined benefit plan that provide gratuity. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/exit. The Company’s obligation in respect of the gratuity plan, which is a defined benefit plan, is provided for based on actuarial valuation carried out by an independent actuary using the projected unit credit method. The Company recognizes actuarial gains and losses immediately in the statement of profit and loss. The Company accrues gratuity as per the provisions of the Payment of Gratuity Act, 1972 as applicable as at the balance sheet date.

The company contributes all ascertained liabilities towards gratuity to the Fund. The plan assets have been primarily invested in insurer managed funds. The company provides for gratuity , a defined benefit retiring plan covering eligible employees. The Gratuity plan provides a lump sum payment to the vested employees at retirement, death,incapacitation or termination of employment based on the respective employees salary and tenure of the employment with the company.

Disclosures of Defined Benefit Plans based on actuarial valuation reports

The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

Each year Asset Liability matching study is performed in which the consequences of strategic investments policiies are analysed in terms of risk and returns profiles. Investments and Contributions policies are integrated within this study.

The actual return on plan assets including interest income was Rs.24.64 Million (Previous year Rs.57.49 Million).

H. Sensitivity Analysis

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years. The defined benefit obligation shall mature in next 3 years.

The Company expects to make a contribution of Rs.170 Million (Previous year Rs.148.09 Million) to the defined benefit plans during the next financial year.

11 Long Term Benefit Plans Leave Encashment

The company pays leave encashment benefits to employees as and when claimed subject to the policies of the company. The company provides leave benefits through annual contributions to the fund managed by HDFC Life.

12 Financial Instruments

12.1 Capital management

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Company consists of net debt and total equity of the Company.

The Company is not subject to any externally imposed capital requirements.

The Company’s risk management committee reviews the capital structure of the Company on a semiannual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Company has a target gearing ratio of 100% of net debt to total equity determined as the proportion of net debt to total equity. The gearing ratio at March 31, 2018 of 73% (see below) was within the target range.

12.3 Financial risk management objectives

The Company’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company seeks to minimise the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non -derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Corporate Treasury function reports quarterly to the Company’s risk management committee, an independent body that monitors risks and policies implemented to mitigate risk exposures.

The Company’s activities expose it to the financial risks of changes in foreign currency exchange rates and interest rates. For the purpose of managing its exposure to foreign currency and interest rate risk, the Company enters into a variety of derivative financial instruments, i.e. cross currency interest rate swaps.

12.4 Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Company enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk using curreny cum interest swaps.

12.5 Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.

Foreign currency sensitivity analysis

Of the above, The borrowings of USD 47.15 Million as at March 31, 2018 and USD 57.43 Million as at March 31, 2017 are completely hedged against foreiign currency fluctation using forward contracts and Interest rate swaps. Therefore the exposure of the company of foreign exchange risk is limited to unhedged borrowings for which below sensitivity is provided.

The Company is mainly exposed to currency dollars

The following table details the Company’s sensitivity to a 10% increase and decrease in the ‘ against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit or equity where the ‘ strengthens 10% against the relevant currency. For a 10% weakening of the ‘ against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below would be negative.

The Company has entered into derivative contracts with banks for its External Commercial Borrowings for interest and currency risk exposure to manage and mitigate its exposureto foreign exchange rates.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.

12.5 Interest rate risk management

The Company is exposed to interest rate risk because the Company borrow funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap contracts and forward rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s:

Profit for the year ended March 31, 2018 would decrease/increase by Rs.89.61 Million (Previous year- decrease/ increase by Rs.72.83 million). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings.

Cross Currency Interest rate swap contracts

Under interest rate swap contracts, the Company agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Company to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt and the cash flow exposures on the issued variable rate debt.The average interest rate is based on the outstanding balances at the end of the reporting period. The Cross Currency Interest Rate Swaps on External Currency Borrowings hedges the interest rate risk on the USD Borrowing.

12.6 Credit risk management

Credit risk is a risk of financial loss to the Company arising from counterparty failure to repay according to contractual terms or obligations. Majority of the Company’s transactions are earned in cash or cash equivalents. The Trade Receivables comprise mainly of receivables from Insurance Companies, Corporate customers, Public Sector Undertakings, State/Central Governments etc. The Insurance Companies are required to maintain minimum reserve levels and the Corporate Customers are enterprises with high credit ratings. Accordingly, the Company’s exposure to credit risk in relation to trade receivables is considered low.

Before accepting any new credit customer, the Company uses an internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed anually. The outstanding with the debtors is reviewed periodically.

Refer Note 10 For the credit risk exposure, ageing of trade receivable and impairment methodology for financial assets.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

In addition to the aforementioned, the company also has credit risk exposure in respect of financial guarantee for a value of Rs.35 Million issued to the bank on behalf of its subsidiary company, Future Parking Private Limited as a security to the financing facilities secured by the subsidiary company. As at March 31, 2018, an amount of Rs.0.39 Million (Previous year Rs.0.39 Million ) has been recognised as the fair value through profit/loss.

13 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

13.1 Liquidity and interest risk tables

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period.

The contractual maturity is based on the earliest date on which the Company may be required to pay.

The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.

The following table details the Company’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will he earned on those assets. The inclusion of information on non -derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

The following table details the Company’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted gross outflows on settlement of these derivatives. These derivatives are taken by the company as against the External Commercial Borrowings (ECB) which have already been included as part of the Fixed rate instruments under the financial liabilities section.

14 Financing Facilities

The Company has access to financing facilities as described below. The Company expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.

15 Fair Value Measurements

Fair Value of Company’s financial assets and liabilities that are measured at fair value on a recurring basis

The following guidance has been followed for classification and measurement of financial assets that are measured at fair value :

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the- counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

Note (i): Included above cost of investments amounting to Rs.107.70 million as disclosed in note 8.1 whose fair value approximates to Nil (previous year nil).

15.1 Fair Value of Financial Assets and Financial Liabilities that are not measured at fair value (but fair value disclosure are required)

The company considers that the carrying amounts of financial assets and financial liabilities recognised in the financial statements at amortized cost will reasonably approximate their fair values..

16 Operating Lease Arrangements

16.1 The Company as lessee - Leasing arrangement

The company has taken various medical equipment, hospital premises, office and residential premises under Operating leases. The leases typically run for a term ranging from 25-30 years for Hospitals and 1-3 years for Pharmacy with an option to renew the lease after term completion. The escalation clause range from 5 to 10% per annum effectively.

Note (i) With respect to the proceedings pending before the relevant income tax authority for the assessment years 2009-10 to 2016-17, the Company is of the opinion that no additional provision for tax expense is considered necessary in the financial statements.

Note (ii) : Details of comfort letters issued on behalf of related parties are as follows:

The purpose of the above comfort letters issued was towards securing financing facilities to the above mentioned related parties.

Note (iii): Out of the total amount of contingent liability disclosed against Service Tax, value added tax and Income, Rs.101.31 million has been deposited before the respective statutory authorities as at March 31, 2018 and Rs.110.55 million as at March 31, 2017.

17 Scheme of A rrangements

The Proton Therapy System equipment which represents the latest advancement in Oncology Care was originally planned to be imported and procured from Ion Beam Applications S.A. Belgium by Apollo Healthcare Technology Solutions Limited (“AHTSL”),a wholly owned subsidiary of Apollo Hospitals Enterprise Limited[AHEL].

The Board of the AHTSL has subsequently decided to enterinto a Scheme of Compromise and Arrangement with Apollo Hospitals Enterprise Limited (“AH EL”) with a view to transfer the ProtonTherapy System under the ownership of AH EL. The National Company Law Tribunal sanctioned the Scheme of Compromise of Arrangement on June 23, 2017 and the scheme was given effect to in the books of accounts during the financial year 2017-18, effectively involving the transfer of the ownership of the Proton Therapy System from Apollo Healthcare Technology Solutions Limited to Apollo Hospitals Enterprise Limited.

Accordingly the Non-Cumulative Redeemable Preference Shares amounting to Rs.957.50 million subscribed in AHTSL by AHEL and the Unsecured Loan of Rs.100 million provided by AHEL for financing the equipment related advances paid by AHTSL to the supplier, has been settled by transferring the advance paid by AHTSL towards the Purchase of Proton Beam Therapy amounting to Rs.1,040.44 Million and bank balance of Rs.944.28 Million reflected in the books of account of AHTSL, with such assets vesting in AHEL as part of full and final settlement of AHEL’s outstanding investment and loan made to AHTSL.

18 The Company has advanced loans to its subsidiary companies. The disclosures pursuant to Regulation 34(3) read with para A of Schedule V to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

19 Particulars of Loans, Guarantees & Investments

Details of loans, Guarantees and Investments covered under the provisions of section 186 of the Companies Act, 2013 are provided in notes 8,9,11,17 and 41 to the financial statements.

20 Events after the Reporting Period

There are no subsequent events after the reporting period.

21 Figures for the previous year are reclassified / regrouped wherever necessary.

Source : Dion Global Solutions Limited
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