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Caplin Point Laboratories

BSE: 524742|NSE: CAPLIPOINT|ISIN: INE475E01026|SECTOR: Pharmaceuticals
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Notes to Accounts Year End : Mar '18

NOTE 1 DESCRIPTION OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

IA. Company Overview:

Caplin Point Laboratories Limited (“Caplin Point” or “the Company”) incorporated in 1990, headquartered and having its registered office in Chennai, Tamil Nadu, India. The Company is into the business of pharmaceuticals - producing, developing and marketing wide range of generic formulations and branded products and exporting to overseas market. The Company’s principal research and development facilities are located in Tamil Nadu, India; its principal manufacturing facilities are located in Puducherry and Tamil Nadu, India. The Company’s shares listed on the Bombay Stock Exchange and the National Stock Exchange in India.

b) Rights, preference & restrictions attached to shares Equity Shares

The Company has only one class of equity shares having a par value of RS.2/- per share. Each holder of equity share is entitled to one Vote per Share.

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, the equity shareholders are eligible to receive the 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 the shareholders.

(i) (a) The Scheme consists of 3,75,000 equity shares of RS.2/- each (ie 75,000 equity shares of RS.10/- each as on 1 April, 2016) of whicRs.80,250 shares of RS.2/- each granted (ie 16050 shares of RS.10 each) as on 1st April 2016.

(b) During the year ended 31st MarcRs.2017, 26,750 shares of RS.2/- each, from the above said 80,250 shares were allotted.

(c) During the year ended 31st MarcRs.2018, further 26,750 shares of RS.2/- each, from the above said 80250 shares were allotted, and 2,94,000 shares has been further granted.

(ii) The Scheme consists of 5,00,000 equity shares RS.2/- each of whicRs.76,500 granted during the year.

f) No shares have been allotted without payment being received in cash or by way of bonus shares during the period of five years immediately preceding the balance sheet date

Nature of Reserve

a) Capital Reserve

The Capital Reserve has been created on restructuring of the Capital of the Company under a scheme of amalgamation.

b) Securities Premium

Securities Premium account has been created on issue of shares under employee stock option scheme.

c) General Reserve

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

i) Foreign Currency Term Loan availed is secured by first charge on the plant & machinery of the Company’s unit at Gummidipoondi

ii) Obligations under Hire purchase are secured against relevant fixed assets obtained under Hire Purchase Finance Terms of Repayments

a) Secured Loans from Banks are repayable in equal monthly instalment.

b) Vehicle loans from Banks and other financial institutions are repayable in equal monthly instalments.

c) The rate of interest on vehicle loans vary between 10% to 12% per annum.

NOTE 2 DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES

The Company has not received information from Vendors regarding their status under the Micro, Small and Medium Enterprises Development Act 2006 and hence disclosure relating to amount unpaid as at the Financial Year end together with Interest Paid / Payable under this Act have not been provided.

NOTE 3 BALANCES WITH SCHEDULED BANKS IN DEPOSIT ACCOUNTS INCLUDES:

(a) Bank Deposit Accounts under Note no: 9 for the current year include RS. 485.68 lakhs earmarked as lien towards Margin for Letter of Credit and Bank Guarantee (as at 31.03.2017 RS.1280.91 lakhs, as at 1.04. 2016 RS.81.09 lakhs).

NOTE 4 BALANCE WITH NON SCHEDULED BANKS

Details of balances kept with non-scheduled banks as on balance sheet dates and the maximum balances kept with non-scheduled banks during the Financial Year are as follows:

NOTE 5

The Company had revalued the land, where the factory/office building is situated, during the period ended June 30, 2008 to the extent of RS.439.36 Lakhs and the gain on the revaluation of land to the extent of RS.373.38 Lakhs was credited to the Revaluation Reserve and such gain available in revaluation reserve acount has been transferred to Retained earnings account.

NOTE 6 EMPLOYEE BENEFITS (i) Defined Contribution Plan:

The Company makes monthly contribution for qualifying employees towards provident / retirement fund administered and managed by the Government of India under defined contribution plans .

The Company recognized RS.159.72 lakhs (previous year RS.132.20 lakhs ) towards provident and pension fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

The Company makes contributions to the group gratuity scheme administered by the LIC, a funded defined benefit plan for qualifying employees.

The following table sets out the status of the gratuity plan and reconciliation of opening and closing balances of the present value of defined benefit obligation.

NOTE 7 OPERATING LEASES

Operating lease commitments - Company as lessee

Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable / cancellable at the option of either of the parties.

There are no sub-leases. There are no restrictions imposed by lease arrangements. The aggregate amount of operating lease payments (includes R&D unit) recognised in the Statement of Profit and Loss is RS.114.85 Lakhs (Previous Financial Year RS.118.48 Lakhs).

The Company has entered into long term leasing arrangements for land which are in the nature of finance lease. These arrangements do not involve any material recurring payments.

NOTE 8 EARNINGS IN FOREIGN EXCHANGE (ON ACCRUAL BASIS)

FOB Value of Exports - RS.40,990.23 Lakhs. (Previous Financial year - RS.32,561.26 Lakhs)

NOTE 9 AMOUNT DUE TO INVESTOR EDUCATION AND PROTECTION FUND

The due amount of RS. 8.71 lakhs were duly credited to investor education and protection fund during the year and there is no outstanding due in this regard as of end of the Financial Year.

NOTE 10 RELATED PARTY DISCLOSURES, AS REQUIRED BY INDIAN ACCOUNTING STANDARD 24 (IND AS 24) ARE GIVEN BELOW.

(a) Related parties and nature of relationship

(b) Key managerial personnel

Dr. Sridhar Ganesan - Managing Director from 28.03.2015

Dr. B. Philip Ashok Karunakaran - Whole Time Director from 07.08.2017

Mr. M Jayapal - Whole Time Director retired on 28.03.2018

Mr. D.P.Mishra - Whole Time Director upto 30.04.2016

Mr. D Muralidharan - Chief Financial Officer from 19-02-2016

Mr. Vinod Kumar S - Company Secretary from 13-04-2015

* Provision for contribution to gratuity fund, leave encashment on retirement and other defined benefits which are made based on acturial valuation on an overall Company basis are not included in remuneration to key management personnel.

(i) Includes stock compensation expense of RS.54.25 Lakhs and RS.54.25 Lakhs for the year ended MarcRs.31, 2018 and For year ended MarcRs.31, 2017, respectively.

(ii) Mr. Dr. B. Philip Ashok Karunakaran has been appointed as Whole-time Director w.e.f. 07.08.2017

(iii) Mr. M Jayapal, Whole Time Director retired on 28.03.2018

(iv) Mr. D. P. Mishra stepped down from the position of Whole-time Director w.e.f. 01.05.2016 and continues to be a Non Executive, Non independent Director.

NOTE 11

Total Share Capital of Argus Salud Pharma LLP is RS. 99.10 Lakhs (RS. 99.10 Lakhs) out of whicRs.99.90% of shares is held by the Company and 0.10% is held by May India Property Private Limited and their profit sharing ratio is 99.90% and 0.10% respectively (Previous year 99.90% and 0.10% respectively).

NOTE 12 FINANCIAL INSTRUMENTS:

Financial Instruments - Fair value and risk management

A. Accounting classification and fair values:

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

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

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, for financial instruments measured at fair value in the statement of financial position, 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

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 framework. The Company’s risk management policies are established to set appropriate risk limits and to monitor risks and adherence to limits. Risk management policies and systems are reviewed periodically to reflect changes in market condition and the Company’s activities. The Company through its training, 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 adhoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

i. 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 credit worthiness of the customers to which the Company grants credit terms in the normal course of business.

Trade 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. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants the credit terms in the normal course of business.

Expected credit loss assessment

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 timelines of payments, available information, etc) and applying experienced credit judgement.

Exposures to the customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses, if any. Historical trends of impairment of trade receivables reflects no credit losses. Given that the macroecomic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of “no credit loss” to continue.

No allowance for impairment in respect trade and other receivables was provided during the year and immediate preceding year.

Cash and cash equivalents

As at the year end, the Company held cash and cash equivalents of RS.1139.31 lakhs (31.03.2017 RS.2695.74 lakhs, 1.04.2016 RS.1528.28 lakhs). The cash and cash equivalents are held with banks with good credit rating.

Other Bank balances

Other bank balances are held with bank with good credit rating.

Investment in mutual funds

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.

Other financial asset

Other financial assets are neither past due nor impaired.

ii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure 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 not availed any fund based working capital facilities from banks and financial institutions. The Company has obtained non-fund based working capital lines from banks. The Company invests its surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds which carry no/low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintain financial flexibility.

iii) 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 receivable and payable. We are exposed to market risk primarily related to foreign exchange rate risk as the Comapny’s product is exported to variuos countries and a certain portion of its export is sourced thorough import. 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. The Company does not use any derivative to manage market risk since certain degree of a natural hedge available in the form of foregin currency realised from exports are paid against imports.

Currency risk

The Company is exposed to currency risk on account of its exoprt and import of pharmaceuticals and import of raw material, capital goods,etc . The functional currency of the Company is Indian Rupee, where as majority of its export and imports are settled through USD($).

Exposure to Currency risk

Following is the currency profile of non-derivative finnacial assets and financial liabilities

Sensitivity analysis

A reasonable strengthening /weakening of the Indian Rupee against US dollars as at MarcRs.31 would affect the measurement of financial instruments denominated in US dollars and affected equity and profit or loss by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

10% appreciation / depreciation of the respective foreign currencies with respect to functional currency of the Company would result in decrease / increase in the profit before taxes by approximately RS.785.72 Lakhs for the year ended MarcRs.31, 2018 (RS.358.98 Lakhs for the year ended MarcRs.31, 2017)

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 financial assets or borrowings because of fluctuations in the interest rates, if such assets/ borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

As on 31 MarcRs.2018 and 31 MarcRs.2017, the Company has not availed any long term borrowings except for loans on certain vehicles on fixed rate basis. Further, the Company has not availed any fund based working capital lines.

Fair value sensitivity analysis for fixed rate instruments

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

Commodity rate risk

The Company’s operating activity involve purchase of Active Pharmaceutical Ingredients (API) and other direct materials, whose prices are exposed to the risk of fluctuation over short period of time. The commodity price risk exposure is evaluated and managed through procurement and other related operating policies. As on 31 MarcRs.2018, 31 MarcRs.2017, 1 April 2016, the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

NOTE 13 CAPITAL MANAGEMENT

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on the capital as well as the level of dividends to ordinary shareholders.

As on date the Company has no borrowings except for certain vehicle loans.

NOTE 14 FIRST TIME ADOPTION TO IND AS Transition to Ind AS:

For the purposes of reporting as set out in Note 1B(a), the Company has transitioned basis of accounting from Indian generally accepted accounting principles [‘IGAAP’] to Ind AS. The accounting policies set out in Note 1B have been applied in preparing the financial statements for the year ended 31 MarcRs.2018, the comparative information presented in these financial statements for the year ended 31 MarcRs.2017 and in preparation of an opening Ind AS balance sheet as at 1 April 2016.

In preparing opening Ind AS balance sheet, the Company has adjusted amounts reported in financial statements prepared in accordance with IGAAP On transition, the Company did not revise estimates previously made under IGAAP except where required by Ind AS.

C. Reconciliation of statement of Cash Flows

There were no material differences between the Statement of Cash Flows presented under Ind AS and under IGAAP Notes to the reconciliation:

1. Proposed Dividend

Under previous GAAP, proposed dividend are recognised in the period to which they relate, irrespective of when they are declared. Under Ind AS, proposed dividend is recognised as a liability in the period in which it is declared by the Company (usually when approved by shareholders in a general meeting) or paid.

2. Fair valuation of mutual fund investment

Under previous GAAP, mutual fund investments were carried at cost and only mark to market losses were recognised in Statement of Profit and Loss. Under Ind AS, mutual fund investments are fair valued at the period end and resulting mark to market loss or gain is transferred to Statement of Profit and Loss.

3. Lease rent straight lining impact

Lease rentals straight-lined under previous GAAP, to the extent linked to inflation are (created)/reversed under Ind AS 17.

4. Fair valuation of non-current security deposits

Under previous GAAP, security deposits are carried at their book values. Under Ind AS, non-cancellable deposits (other than statutory in nature) are required to be measured at their fair values at inception using an appropriate discounting rate.

5. Fair value of Gratuity Asset

Fair value impact of Gratuity Asset under Ind AS has been accounted for.

6. Deferred Tax impact

Deferred tax impact on account of Ind AS transition as discussed above has been accounted under deferred tax.

NOTE 15

The Company operates in one segment only viz., pharmaceutical formulations.

NOTE 16

Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosure.

Source : Dion Global Solutions Limited
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