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Thyrocare Technologies

BSE: 539871|NSE: THYROCARE|ISIN: INE594H01019|SECTOR: Hospitals & Medical Services
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Notes to Accounts Year End : Mar '18

1. REPORTING ENTITY

Thyrocare Technologies Limited (the “Company”) is a company domiciled in India, with its registered office situated at D/371, TTC Industrial Area, MIDC Turbhe, Navi Mumbai - 400703, Maharashtra, India. The Company has been incorporated under the provisions of the Indian Companies Act and its equity shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The Company primarily operates in healthcare segment and is primarily involved in providing quality diagnostic services at affordable costs to patients, laboratories and hospitals in India.

2. BASIS OF PREPARATION

A. Statement of compliance

These standalone Ind AS financial statements (hereinafter referred to as ‘standalone financial statements’) have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. The Company’s standalone financial statements up to and for the year ended 31 March 2017 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act. As these are the Company’s first standalone financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, Firsttime Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flows of the Company is provided in Note 39. The standalone financial statements were authorized for issue by the Company’s Board ofDirectors on 28 April 2018. The details of the accounting policies are included in Note 3.

B. Functional and presentation currency

These standalone financial statements are prepared in India Rupees (INR), which is also the Company’s functional currency. All amounts have been rounded-off to the nearest million, unless otherwise indicated.

c. basis of measurement

The standalone financial statements are prepared on the historical cost basis except for the following items :

D. use of estimates and judgments

In preparing these standalone financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

Judgments

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the standalone financial statements is included in the following notes :

Note 3(l) and Note 35 - leases : whether an arrangement contains a lease;

Note 3(l) and Note 35 - lease classification;

Note 25 - revenue from imaging services : whether the Company acts as a principal rather than as an agent in a transaction; and

Note 38 (f) - recognition of exceptional expenditure and contribution from shareholder : whether the receipt from shareholder towards reimbursement of exceptional expenditure are contribution.

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment is includedin the following notes :

Note 4 and 5 - determining an asset’s expected useful life and the expected residual value at the end of its life Note 30 - determining the provision for income taxes; Note 32 - measurement of defined benefit obligations : key actuarial assumptions;

Note 34 - Fair value measurement of financial instruments; and

Note 36 - recognition and measurement of provisions and contingencies : key assumptions about the likelihood and magnitude of an outflow of resources;

E. Measurement of fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company generally relies on the valuation certificates obtained from third party professionals for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the chief financial officer. The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as statements of asset management companies managing the mutual fund schemes, is used to measure fair values, then the Company assesses the evidence obtained from the third parties to support the conclusion that these valuation meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.

Significant valuation issues, if any, are reported to the Company’s audit committee.

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

- Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities (includes mutual funds that have quoted price/ declared NAV).

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

- Level 3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs).

When measuring the f air value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in

measuring fair values is included in the following notes :

- Note 4C - investment property;

- Note 33 - share-based payment arrangements; and

- Note 34 - financial instruments.

Notes i. capital work-in-progress

During the previous year ended 31 March 2017 the Company acquired analysers with the intention of adding more tests and technologies for providing diagnostic services. The cost of acquisition was INR 21.33 million. The Company commenced the business operations only subsequent to end of the year during the current year; cost incurred upto the reporting date totalled INR 21.33 million.

ii. Reclassification of investment property

A portion of the leasehold land and building was reclassified as investment property (see Note 3(f)) on transition to Ind AS.

Disclosre pursuant to Ind AS 40 ‘Investment Property’

Amount recognised in Statement of profit and loss account for investment property

Measurement of fair values

- As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP for all the items of property, plant and equipment, intangible assets and investment property.

- The Company has sub-let part of premises to its subsidiary for business operations after getting an approval from the regulator. Since the premises is constructed on leasehold plot of land, the sub-let part of the premises is not saleable independently. The fair value of the investment property would be difficult to determine reliably. The premises is constructed on industrial leasehold plot of land and there are very few recent transactions. In case of the observed recent transaction for transfer of plot prices, the variations in the prices indicate that the transfer price is not indicative of market prices. Also the alternative reliable measurement of fair value are not available due to the regulatory restrictions as to usage, transfer, leasing and subletting of the property within the jurisdiction. The fair value of the investment property on the basis of recently observed transfer prices for the properties within the same jurisdiction, ranges from INR 25.50 million to 30.00 million.

iii. Transfer of business undertaking

The Company, pursuant to the business transfer agreement, transferred the water testing division on 31 January 2018 on a slump sale basis and discontinued water testing operations from that date. The cost of acquisition of the plant, equipment and other assets pertaining to water testing division accordingly has been reduced from the gross block (INR 26.72 million) and the accumulated depreciation thereon (INR 12.30 million). The profit aggregating to INR 78.85 million has been disclosed under other income for the year ended 31 March 2018. The depreciation on these assets charged to profit and loss account was INR 2.85 million for the current period (31 March 2017 : INR 4.23 million).

iv. Deemed cost exemption

On transition to Ind AS, the Company has elected to continue with the carrying value of all its PPE and Investment Property recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the PPE and Investment Property.

Associates

Equinox Labs Private Limited (Equinox)

The Company has acquired 30% stake in Equinox Labs Private Limited (‘Equinox’) vide the terms of the Share Subscription and Shareholder’s agreement and Business Transfer agreement executed on 15 December 2017 and 31 January 2018 respectively, partially by subscribing to 214,592 equity shares of Equinox in cash and partially by subscribing to 214,593 equity shares of Equinox for consideration other than cash for a total purchase consideration of INR 200.00 million. The equity share holding in Equinox is disclosed under Equity accounted investees as at 31 March 2018. The information for the year ended 31 March 2018 presented in the table includes the results of Equinox for the period from 24 March 2018 to 31 March 2018.

*The Company has not recognised the profit amounting to INR 0.01 million, since the management believes that this amount is insignificant/ immaterial to the Group.

As such, no additional disclosure in relation to financial information of the associate has been disclosed.”

Thyrocare International Holding Company is in the process of liquidation and already has applied to the Registrar of Companies, Mauritius to wind-up the business operations. The net worth of the associate is fully eroded. The Company has not recognised losses in relation to its interest in this associate, because the Company has no obligation in respect of these losses.

During the year ended 31 March 2018, the Company did not receive any dividend from its associates.

The associate does not have any contingent liabilities and capital commitments as at 31 March 2018.

Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets on winding up. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to his/ its share of the paid-up equity share capital of the Company. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts, in proportion to the number of equity shares held.

Employee stock option plan

Terms attached to stock options plan to employees are described in Note 33 regarding share-based payments.

Aggregate number of bonus shares issued, shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:

a. Employees stock options

During the year ended 31 March 2015, the Company has approved Employees Stock Options Scheme on 20 September 2014 pursuant to which certain employees are entitled to 33,650 equity shares of INR 10 each.

These equity shares have been issued to the ESOP Trust pursuant to the approved terms of employees stock option scheme 2014, for which only the exercise price i.e. the face value of shares has been recovered in cash (See Note 33).”

b. During the year ended 31 March 2015, the Company has allotted 37,383,507 equity shares of INR 10 each fully paid up on 24 September 2014, as bonus shares in the ratio of 3 equity shares for every share held, by capitalisation of securities premiumaccount of INR 370.81 million and capital redemption reserve of INR 3.03 million.

c. During the year 31 March 2016 and 31 March 2015, the Company has allotted 3,187,562 and 691,295 equity shares of INR 10 each fully paid up respectively, to the equity shareholders of Nueclear Healthcare Limited (‘NHL’) in consideration for 4,611,000 and 1,000,000 equity shares of NHL respectively at a premium of INR 295.95 per share.

capital reserve

Capital reserve is used to record the premium received in business combinations and to record the shareholder’s contribution for consideration other than cash. (see Note 38(f) and (h)).

Securities premium

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

Share option outstanding account

The Company has established various equity-settled share-based payment plans for certain categories of employees of the Company. (See Note 33 for further details on these plans).

General reserve

General reserve is used to record the transfer from retained earnings of the Company. It is utilized in accordance with the provisions of the Companies Act, 2013.

Dividends

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

After the reporting dates the following dividends (excluding dividend distribution tax) were proposed by the directors subject to the approval at the annual general meeting; the dividends have not been recognised as liabilities in the respective years. Dividends attract dividend distribution tax when declared or paid.

* Statutory dues include tax deducted at source, local body tax, profession tax, employees provident fund and ESIC.

# Expenses payable includes operating, administrative and marketing expenses.

Investor Education and Protection Fund (‘IEPF’) - As at 31 March there is no amount due and outstanding to be transferred to the IEPF by the Company. Unclaimed dividend, if any, shall be transferred to IEPF as and when they become due.

*The outsourcing arrangement for imaging services from the subsidiary was discontinued w.e.f. 1 January 2017, the revenue from imaging services for the previous year therefore represents revenue of nine months of the previous financial year with no revenue recognised for the current financial year after discontinuance of the arrangement.

3 ASSETS AND LIABILITIES RELATING TO EMPLOYEE BENEFITS

A. Defined contribution plans

The Company makes Provident Fund, ESIC and Maharashtra Labour Welfare Fund contributions to defined contribution plans for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised Rs.17.96 million (31 March 2017 : Rs.14.56 million) for Provident Fund contributions, Rs.6.41 million (31 March 2017 : 3.65 million) for ESIC contributions and Rs.0.07 million for Maharashtra Labour Welfare Fund (31 March 2017 : Rs.0.07 million) in the Statement of Profit and Loss during the year (See note 28). The contributions payable to these plans by the Company are at rates specified in the rules of the schemes. The Company does not expect any further liability other than the specified contributions.

B. Defined benefit plans

The Company offers the following employee benefit schemes to its employees :

- Gratuity

The following table sets out the funded status of the defined benefit schemes and the amount recognised in the financial statements:

The sensitivity analysis 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 projected 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. Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

4 SHARE-BASED PAYMENTS

A. Description of share-based payment arrangements

During the year, the Company has offered stock options to the eligible employees under “THYROCARE EMPLOYEES STOCK OPTION SCHEME 2017” (ESOS2017) vide authorisation of shareholders in the annual general meeting held on 12 August 2017. The options may be exercised either fully or partially in four equal instalments. The employees were identified as those who had completed two years of service as on 31 March 2017, subject to their continuous service till the vesting period.

During the earlier years, the Company had offered stock options to the eligible employees under “THYROCARE EMPLOYEES STOCK OPTION SCHEME 2016” (ESOS2016), “THYROCARE EMPLOYEES STOCK OPTION SCHEME 2015” (ESOS2015) and “THYROCARE EMPLOYEES STOCK OPTION SCHEME 2014” (ESOS2014) vide authorisation of shareholders in their meetings held on 12 September 2016, 26 September 2015 and 20 September 2014 respectively. Under the respective scheme, the options may be exercised either fully or partially in four equal instalments. The employees were identified as those who had completed certain years of service subject to their continuous service till the vesting period.

Additionally, in respect of ESOS2014, the Company formed a trust, ‘Thyrocare Employee Stock Option Trust’ wherein the shares to be issued under these options were allotted to the Trust. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the compensation committee. The identified employees are also entitled to purchase additional shares proportionately from the shares of employees who are not desirous to purchase the equity shares or who have left the organisation.

B. Measurement of fair values

The Management assessed that cash and bank balances, trade receivables, trade payables and other financial assets and liabilities approximate their carrying amounts largely due to short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair value

a) The fair value of the quoted investments/units of mutual fund scheme are based on market price/net asset value at the reporting date.

b) The fair value of the remaining financial instrument is determined using discounted cash flow method. The discount rates used is based on management estimates.

c. Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- credit risk (see (C) (ii));

- liquidity risk (see (C) (iii))

- market risk (see (C) (iv)).

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 a 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 Company’s 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 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.

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 loans.

The Company has no significant concentration of credit risk with any counterparty.

Trade receivables and loans

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate.

The risk management committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment delivery terms and conditions are offered. Sale limits are established for each customer and reviewed periodically. Any sales exceeding those limits require approval from the management.

The Company limits its exposure to credit risk from trade receivables by establishing a credit limit that is linked to either category of the customer or the security deposits paid by the customer to avail the services. In monitoring customer credit risk, customers are compared according to their credit characteristics, including whether

they are individuals or legal entities, whether they are a wholesale, retails or end-user customers, their geographic locations, industry, trading history with the Company and existence of previous financial difficulties.

The Company is monitoring the credit limits and is taking actions to limit its exposure to customers including reduction in certain customer credit limits.

The Company’s exposure to credit risk for trade receivables by type of counter party was as follows -

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

As per simplified approach the Company makes provision of expected credit losses on trade receivable using a provision matrix to mitigate the risk of default payment and make appropriate provision at each reporting date wherever. At March 31, 2018, the ageing of trade receivables that were not impaired was as follows.

Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.

The Company has an exposure of INR 245 million as 31 March 2018 (31 March 2017 : INR Nil; 1 April 2016 : INR Nil) for loans given to subsidiaries. Such loans are classified as financial asset measured at amortised cost. The Company did not have any amounts that were past due but not impaired at 31 March 2018 or 31 March 2017. The Company has no collateral in respect of these loans.

Credit risk on cash and cash equivalents, deposits with banks is generally low as the said deposits have been made with the banks who have been assigned high credit rating by international and domestic credit rating agencies. Investments of surplus funds are made only with approved financial institutions. Investments primarily include investments in subsidiaries, mutual funds and preference shares. These mutual funds, preference shares and counterparties have low credit risk.

Movement in the allowance for impairment in respect of trade receivables and loans

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 assets. 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 uses product cost techniques to cost its products and services, which assists it in monitoring cash flow requirements and optimizing its cash return on investments.

The Company aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflow on financial liabilities over the next twelve months. The ratio of cash and cash equivalents to outflows is 11 at 31 March 2018 (31 March 2017 : 10; 1 April 2016 : 11). The Company also monitors the level of expected cash inflows on trade receivables and loans together with expected cash outflows on trade payables and other financial liabilities. At 31 March 2018, the expected cash outflows on trade payables and loans maturing within six months are INR 16.03 millions (31 March 2017 : INR 13.20 million; 1 April 2016 : INR 21.49 million). This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disaster.

Exposure to liquidity risk

The following are remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements.

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. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

currency risk

The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales and purchases are denominated and the functional currency of Company. The functional currency for large number of transactions of the Company is INR and majority of the customers the Company dealt with operate from India only. The Company receives more than 98% of its revenue from the domestic operations only.”

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company’s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances or enter into long term arrangement with the regular vendors to mitigate the currency rate fluctuations.

Exposure to currency risk

The summary quantitative data about the Company’s exposure to currency risk as reported to the management is as follows.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the INR or US dollar at 31 March would have affected the measurement of financial instruments denominated in foreign currency 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.

5 OPERATING LEASES

See accounting policies in Note 3(l)

A. Leases as lessee

The Company has taken a number of offices and premises under operating leases. The leases typically run for a period of three to nine years, with an option to renew the lease after that period. Lease payments are renegotiated every three years to reflect market rentals. Some leases provide for additional rent payments that are based on changes in specified local price indices. The lease for the land at central processing laboratory premises was transferred in the name of the Company about 9-10 years ago. The lease premium paid to the landlord on transfer of lease rights in favour of the Company, is capitalised in the books and amortised over the period of the lease. Further, part of the property on the said leased land, since no longer required for use by the Company has been sublet to it’s subsidiary, after approval from the regulator. During the year, the Company has recovered sublease payments of INR 6.95 million (31 March 2017 : INR 6.43 million) in respect of this lease. The portion of the property thus sub-leased was recognised as investment property (see Note 3(f) and note to Note 4).

i. Future minimum lease payments

At 31 March, the future minimum lease payments to be made under non-cancellable operating leases are as follows :

B. Equipment placement arrangements

The Company uses testing equipment (analysers) under a number of reagent rental arrangements. Some of these arrangements provide the Company with option to purchase the equipment at the end of lease term at mutually negotiated price. These arrangements are not in the legal form of lease, but is accounted for as such based on its terms and conditions. The Company has recognised part of the consideration paid/ agreed to be paid to these vendors for reagents as operating lease consideration for use of equipment. The Company has recognised INR 89.76 million (31 March 2017 : INR 86.20 million) as lease rental towards use of equipment and balance towards cost of reagents.

Pending resolution of the respective proceedings, it is not practicable for the Company to estimate the timings of cash outflows, if any, in respect of the above as it is determinable only on receipt of judgments/ decisions pending with various forums/ authorities.

The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial position.

Notes :

i. Navi Mumbai Municipal Corporation (NMMC) raised a claim on the original owner of the corporate office premises at D/37 -3 located at Turbhe on account of arrears arising from retrospective amendment in the property tax rates. The Company has not received any reply to the letters filed from time to time with NMMC for the said matter. A writ petition has been filed before the H’ble High Court at Mumbai seeking intervention against the arbitrary assessment of the property tax with retrospective effect for the stated premises. The H’ble High Court vide an order directed NMMC to decide the representation as early as possible and positively within four months after granting an opportunity of hearing to the Company. However, the Company till date has not received any representation / proposal from NMMC to resolve the grievance as regards to the illegal tax demand. The total amount of dues payable to NMMC is INR 121.54 million (31 March 2017: INR 93.24 million; 1 April 2016 : INR 71.04 million). Of the total amount of dues payable, the Company has provided for property tax dues of INR 13.79 million (31 March 2017: INR 10.34 million;

1 April 2016 : INR 3.45 million) for the said premises on the basis of the constructed area and the rates charged for the adjacent plot towards property tax. The balance outstanding amount of INR 101.48 million (31 March 2017: INR 82.90 million; 1 April 2016 : INR 67.59 million) as per NMMC for the corporate office premises has not been acknowledged as debts in the books of the Company.

ii. The Company had received income tax demand of INR 368.52 million (31 March 2017 : INR 368.52 million; 1 April 2016 : INR 368.52 million) on account of TDS survey proceedings initiated by the Income tax department for the FY 2008-09 to 2011-12. The Company has filed an appeal before the H’ble High Court at Mumbai and the H’ble High Court, Mumbai vide their order dated 11 September 2017, set aside the income tax demands. The H’ble High Court, Mumbai further directed the Income Tax Tribunal to hear the Appeals afresh on merits and in accordance with law after giving complete opportunity to both sides to place their versions and arguments. The Company till date however has not received any intimation from Income Tax Tribunal for the date of hearing to decide on the stated tax demands. On the basis of the order of the H’ble High Court, in view of the management no provision is considered necessary as at 31 March 2018.

iii. The CIT (Appeals) vide its order dated 22 March 2017 dismissed an appeal filed by the Company for the Assessment year 201213 challenging the Income Tax demand of INR 3.48 million (included under contingent liability as at 1 April 2016). The Company has not preferred further appeal against the stated order and accordingly, the Company has allowed the department to adjust the unpaid demand for the said appeal against the refund due to the Company for AY 2014-15.

iv The Company received an order for Provident Fund demand of Rs.5.23 million (31 March 2017: INR 5.23 million; 1 April 2016 : INR 5.23 million) on account of an inquiry u/s 7A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The Company has already filed an appeal before the Tribunal and requested for condonation of delay and stay of the demand raised by the Regional Provident Fund Commissioner. The tribunal has passed an order dismissing the appeal in default to which the Company has filed an application for restoring the appeal. The appeal is restored back and is currently pending for hearing. As per the direction of the Provident Fund Appellate Tribunal, the Company has paid 40% of disputed amount aggregating Rs.2.09 million (31 March 2017: Rs.2.09 million; 1 April 2016 : INR 2.09 million) to the Provident Fund organisation. Meanwhile, the Regional Provident Fund Commissioner has proceeded to recover the balance amount in dispute. The Company has filed an application before the Tribunal for refunding the recovery amount, inspite of the stay granted by the Tribunal. The matter is pending for hearing and in view of the management no provision is considered necessary as at 31 March 2018.

i. The Company has entered into Reagent Rental Arrangements for periods ranging from 2 years to 6 years with some of its major reagent supplieINR As per the terms of the agreement, these reagent suppliers have placed the analysers / diagnostic equipments at no cost in the processing laboratory. The analysers / diagnostic equipments are programmed by the manufacturers to be used only against the reagent supplier’s brand of reagent kits. The commitments as per these arrangements are either purchase commitments or rate commitments based on the workloads. The value of purchase commitments for the remaining number of years are INR 3,648.77 million (31 March 2017: INR 2,631.38 million) of which annual commitment for next year is INR 856.68 million (31 March 2017 : INR 593.26 million) as per the terms of these arrangements.

Notes :

i. The key management personnel, or their related parties, hold position in other entities that result in them having control or significant influence over these entities. These entities transacted with the Company during the reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or those which might reasonably be expected to be available, in respect of similar transactions with non-key management personnel entities on an arm’s length basis.

ii. The Company was providing for royalty based on the terms of the agreement for using the trademark. During the previous year, as Dr. A. Velumani has decided to transfer the assigned trademark to the Company, he has decided to waive the royalty payable to him for use of the trademark until the transfer takes effect.

Further during the current year, vide the terms of the trademark assignment agreement, Dr. A. Velumani has tranferred the rights in the trademark - ““Whaters”“ in favour of the company [subsequently disposed off with the water testing business], for a token money of INR 1. The fair value of the trademark on the date of assignment of the trademark in favour of the Company was capitalised by crediting the fair value to capital reserves as shareholder’s contribution.

6 ADDITIONAL INFORMATION TO THE FINANciAL STATEMENTS

a. Due to Micro and Small Enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro and Small enterprises. On the basis of the information and records available with the Management, the outstanding dues to the Micro and Small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 are set out in following disclosure. This has been relied upon by the auditors.

b. The Company completed Initial Public Offer through an offer for sale of 10,744,708 equity shares of Rs.10 each at a price of Rs.446 by the Selling shareholders. Accordingly, the Company has not raised money by way of initial public offer, and hence no funds received by the Company.

The equity shares of the Company got listed on NSE and BSE on 9 May 2016.

c. In accordance with Indian Accounting Standard 108 ‘Operating Segment’, segment information has been given in the consolidated financial statements of the Company.

d. The Company’s international transactions and domestic transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2017. The Company will undertake a study for transactions upto 31 March 2018 and an independent opinion will be obtained for the same. Management believes that the Company’s international transactions and domestic transactions with related parties post 31 March 2017 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expense and that of provision for taxation.

e. 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 financial statements for the period ended 31 March 2017 has been disclosed.

Note:

1. The Company is into healthcare related services. The consideration towards diagnostic services and imaging services was received in SBN. The Company has deposited the same, without incurring any expenditure out of these received SBN into KYC complied current bank account of the group. The company has collected appropriate details including PAN etc of the patients.

2. The receipts from authorised service providers towards diagnostic services availed and as deposited directly by the service providers in the Company’s current banking account is disclosed/prepared to the extent of information available and details as provided by the bank.

3. The Company has not made any direct payment, out of the SBN received, towards either permitted/non-permitted transactions. The payment towards permitted transactions have been incurred outof withdrawal of non SBN currency.

f. Pursuant to the IPO, in the previous year, Agalia Private Limited (‘APL’ or the selling shareholder) divested part of its share-holding in the Company. At the instance of APL, the Company entered into contracts for advertisements in various media with the intention to promote the ‘Thyrocare’ brand. Since these contracts aggregating Rs.304.85 million were entered into at the specific instance of APL, APL has fully reimbursed the Company in respect of the payments made towards these contracts. During year ended 31 March 2018, the Company has incurred advertising costs aggregating to Rs.21.93 million (31 March 2017 : Rs.274.33 million) in this respect. Under Ind AS, considering the nature and size of the transactions, the expenses incurred are continued to be shown as an exceptional item, however the reimbursement received from APL has been considered as capital contribution and added to Capital Reserves to the extent of reimbursement received from APL post IPO.

g. On 28 April 2018, the Board of directors has recommended a final dividend of Rs.5 per equity share for the financial year ended 31 March 2018. As per the provisions of Companies (Accounting Standards) Amendment Rules, 2016 proposed dividend is not recognised as a liability as at 31 March 2018. Post approval of proposed dividend by shareholders in the ensuing Annual General Meeting, there will be cash outflow of Rs.323.83 million including dividend distribution tax.

h. During the current year, vide the terms of the trademark assignment agreement, Dr. A. Velumani has transferred the rights in the trademark - “Whaters” in favour of the Company [subsequently disposed off with the water testing business], for no consideration. The fair value of the trademark on the date of assignment of the trademark in favour of the Company was capitalised by crediting the fair value to Capital Reserves as shareholder’s contribution.

i. Disclosure as per Regulation 53(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations

Loans and advances in the nature of loans given to subsidiaries, associates and others and investment in shares of the Company by such parties :

The above loan was given to the subsidiary for its business activities (refer note 37).

Disclosure as per Section 186 of the companies Act, 2013

The details of loans, guarantees and investments under Section 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014 are as follows :

(i) Details of investments made are given in Note 6 and Note 7.

(ii) Details of the loans given by the Company is given in Note 8A.

(iii) There are no guarantees issued by the Company in accordance with section 186 of the Companies Act, 2013 read with rules issued thereunder.

7 EXPLANATION OF TRANSITION TO IND AS

As stated in Note 2, these are the Company’s first standalone financial statements prepared in accordance with Ind AS. For the year ended 31 March 2017, the Company had prepared its standalone financial statements in accordance with Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act and other relevant provisions of the Act (‘previous GAAP’).

The accounting policies set out in Note 3 have been applied in preparing these standalone financial statements for the year ended 31 March 2018 including the comparative information for the year ended 31 March 2017 and the opening standalone Ind AS balance sheet on the date of transition i.e. 1 April 2016.

In preparing its standalone Ind AS balance sheet as at 1 April 2016 and in presenting the comparative information for the year ended 31 March 2017, the Company has adjusted amounts reported previously in standalone financial statements prepared in accordance with previous GAAP. This note explains the principal adjustment made by the Company in restating its standalone financial statements prepared in accordance with previous GAAP, and how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows.

A. Optional exemptions availed and mandatory exceptions

In preparing these consolidated financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions.

1 Business combinations

As per Ind AS 101, at the date of transition, an entity may elect not to restate business combinations that occurred before the date of transition, If the entity restates any business combinations that occurred before the date of transition, then it restates all later business combinations.

The Company has opted to restate business combinations on or after 1 April 2016.

2 Property plant and equipment, intangible assets and investment properties

As per Ind AS 101 an entity may elect to:

i) measure an item of property, plant and equipment at the date of transition at its fair value and use that fair value as its deemed cost at that date

ii) use a previous GAAP revaluation of an item of property, plant and equipment at or before the date of transition as deemed cost at the date of the revaluation, provided the revaluation was at the date of the revaluation, broadly comparable to:

- fair value;

- or cost or depreciated cost under Ind AS adjusted to reflect, for example, changes in a general or specific price index.

The elections under (i) and (ii) above are also available for intangible assets that meets the recognition criteria in Ind AS 38, Intangible Assets, (including reliable measurement of original cost); and criteria in Ind AS 38 for revaluation (including the existence of an active market).

(iii) use carrying values of property, plant and equipment, intangible assets and investment properties as on the date of transition to Ind AS (which are measured in accordance with previous GAAP and after making adjustments relating to decommissioning liabilities prescribed under Ind AS 101) if there has been no change in its functional currency on the date of transition.

As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP for all the items of property, plant and equipment. The same election has been made in respect of intangible assets and investment property also.

3 Determining whether an arrangement contains a lease

Ind AS 101 includes an optional exemption that permits an entity to apply the relevant requirements in Appendix C of Ind AS 17 for determining whether an arrangement existing at the date of transition contains a lease by considering the facts and circumstances existing at the date of transition (rather than at the inception of the arrangement). The Company has elected to avail of the above exemption.

4 Designation of previously recognised financial instruments

Ind AS 101 permits an entity to designate particular equity investments (other than equity investments in subsidiaries, associates and joint arrangements) as at fair value through other comprehensive income (FVOCI) based on facts and circumstances at the date of transition to Ind AS (rather than at initial recognition). Other investments are classified at fair value through profit or loss (FVTPL).

B. Mandatory exceptions Ind AS

1 Estimates

As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS at the end of the comparative period presented in the entity’s first Ind AS financial statements, as the case may be, should be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error. However, the estimates should be adjusted to reflect any differences in accounting policies.

As per Ind AS 101, where application of Ind AS requires an entity to make certain estimates that were not required under previous GAAP, those estimates should be made to reflect conditions that existed at the date of transition (for preparing opening Ind AS balance sheet) or at the end of the comparative period (for presenting comparative information as per Ind AS).

The Company’s estimates under Ind AS are consistent with the above requirement; Key estimates considered in preparation of the standalone financial statements that were not required under the previous GAAP are listed below:

- Fair valuation of financial instruments carried at FVTPL.

- Impairment of financial assets based on the expected credit loss model.

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

2 Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable. Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.

Notes to reconciliation of equity as at 31 march 2017 and as at 1 April 2016 between previous GAAp to Ind AS: a classification of investment property

The Company has reclassified portion of the leasehold land and building with undetermined future use to investment property. This has resulted in decrease in the carrying value of leasehold land by INR 3.83 million (1 April 2016 : INR 3.89 million) and carrying value of buildings/ premises by INR 9.44 million (1April 2016 : INR 9.97 million). The reclassified portion of the leasehold land and building was disclosed under investment property alongwith the accumulated depreciation on the portion of the leasehold land and building on the date of transition.

b classification of equity accounted investees

The Company has reclassified the investment held in associate company Thyrocare International Holding Company (TIHC), using equity method. This has resulted in decrease in the carrying value of non-current investment by INR 16.15 million on the date of transition.

c Fair valuation of security deposits for rented premises and deferred rent

The Company has given interest free security deposits for rented premises. The interest free security deposits have been fair valued on the date of transition and the difference between the transaction amount and the fair value has been recognised as prepaid rent. The security deposits have been subsequently amortised under effective interest rate method and the prepaid rent on a straight line basis over the term of the lease. This has resulted in recognising prepaid rent of INR 1.72 million (1 April 2016 : INR 1.57 million) in other non-current assets and INR 0.61 million (1 April 2016 : INR 0.53 million) in other current assets. The security deposits have been reduced by INR 2.21 million (1 April 2016 : INR 2.14 million) in non current asset and reduction by INR 0.10 million (1 April 2016 : INR Nil). The lease payments to the lessors structured to increase in line with expected general inflation to compensate for lessor’s expected inflationary cost increases are charged to profit and loss account in respective accounting period. This has resulted in reduction in deferred rent of INR 1.67 million (1 April 2016 : INR 0.52 million) in non-current loans and INR 0.03 million (1 April 2016 : INR Nil) in other current liabilities.

d fair valuation of investment in mutual funds

The Company has invested INR 1014.83 million (1 April 2016 : INR 687.92 million) in debt oriented mutual funds. The fair value of the investment was INR 1041.59 million (1 April 2016 : INR 703.82 million) on that date The amount of investment has increased by INR 26.76 million (1 April 2016 : INR 15.90 million) under Ind AS from that under previous GAAP.

e contribution from shareholder for reimbursement of expenses

The Company has received reimbursement of advertisement expenditure of INR 274.33 million during the previous financial year, incurred at the instance, from one a shareholder. Under Ind AS, considering the nature and size of the transactions, the expenses incurred are continued to be shown as an exceptional item, however the reimbursement received from APL has been considered as capital contribution and added to the capital reserves.

f fair valuation of share-based payments

The Company granted stock options to certain employees. Under Ind AS, the related liability has been adjusted to reflect the fair value of the outstanding share-based payments. This has resulted in decrease in the carrying value of share options outstanding by INR 0.17 million (1 April 2016 : increase of INR 0.03 million).

g deferral of income related to registration fees

An amount of INR 6.57 million (1 April 2016 : INR 6.05 million) has been deferred, in respect of consideration received for one time registration fees from service providers as the same is not considered as a separate obligation and shall be recognised over the period of association of the service providers.

h Recognition of proposed dividend

The proposed final dividend at the reporting date, unless approved by the shareholders are considered to be non-adjusting event. Accordingly, provision for proposed dividend and dividend distribution tax recognised under previous GAAP has been reversed, under IndAS.

i Rectification of prior period adjustments

On transition to IndAS and preparation of comparative standalone financial statements, the Company has identified certain errors in classification, that are not material and does not have material impact on reported standalone profit under the previous GAAP. The same are adjusted while preparing financial statements in accordance with Ind AS.

j Deferred tax

The Company has recognised a deferred tax liability of INR 43.87 million (1 April 2016 : INR 27.47 million) on the temporary differences arising on account of the above Ind AS adjustments.

Notes to reconciliation of statement of profit and loss for the year ended 31 March 2017 between previous GAAP to IndAS

a Reclassification of sales incentives and receipts of non-operating nature

Sales incentives directly attributable to sales of INR 8.02 million have been reclassified from other expenses to revenue. This has resulted in decrease of revenue and other expenses by INR 8.02 million. Receipts from service providers not directly attributable to sales of INR 14.44 million have been reclassified from revenue to other income. This has resulted in decrease of revenue and increase in other income by INR 14.44 million.

b Recognition of deemed income on interest free security deposits from service providers

An amount of INR 3.41 million has been recognised as deemed income on unwinding of interest free security deposits from service providers at fair value on initial recognition. This has resulted in increase of revenue INR 3.41 million, recognition of finance cost of INR 2.56 million and increase in other expenses of INR 0.85 million.

c Gain on change in fair value of investment in mutual funds

An amount of INR 1.69 million has been recognised as net loss on change in fair value of investment in investment in mutual funds during the financial year ended 31 March 2017. This further has resulted in decrease in other expenses by INR 12.77 million on account of reversal of provision for diminution in value of the investments due to recognition of these investments at fair value.

d Unwinding of interest income on interest free security deposits for rented premises

The Company has provided an interest free security deposits for rented premises. It has fair valued these security deposits on initial recognition and amortised the same under effective interest rate method. The Company has recognised an interest income INR 0.55 million on unwinding of such security deposits which was recognised at fair value on initial recognition.

e Reclassification of cost of consumables used for providing diagnostic services

Cost of consumables used for providing diagnostic services directly attributable to providing diagnostic services of INR 55.74 million have been reclassified from cost of traded material to cost of material consumed. This has resulted in decrease of purchase of stock-in-trade and changes in inventories of stock-in-trade by INR 55.74 million and increase in cost of material consumed by INR 55.74 million.

f Reclassification of deemed rental charges on plant and equipment held under reagent rental arrangements

The company has acquired testing equipment (analysers), under a number of reagent rental arrangements. Under Ind AS, the company has recognised part of the cost of material consumed on plant and equipment held under reagent rental agreements, on the basis of economic useful life of these equipments, apportioned on straight line basis over the period of useful life as rent. This has resulted in increase of other expenses and decrease of cost of material consumed by INR 85.40 million.

g Fair valuation of share-based payments

The Company granted stock options to certain employees. Under Ind AS, the related liability has been adjusted to reflect the fair value of the outstanding share-based payments. This has resulted in decrease in the carrying value of share options outstanding and resulted in decrease in employee benefits expense by INR 0.20 million.

i Actuarial gain and loss

Under Ind AS, all actuarial gains and losses are recognised in other comprehensive income. Under previous GAAP the Company recognised actuarial gains and losses in profit or loss amounting to INR 0.50 million.

j Amortisation of prepaid rent arising on fair valuation of security deposits on initial recognition

An amount of INR 0.81 million has been adjusted against rent expenses on account of amortisation of prepaid rent arising on fair valuation of security deposit on initial recognition.

k contribution from shareholder for reimbursement of expenses

The Company has received reimbursement of advertisement expenditure of INR 274.33 million during the previous financial year, incurred at the instance, from one a shareholder. Under Ind AS, considering the nature and size of the transactions, the expenses incurred are continued to be shown as an exceptional item, however the reimbursement received from APL has been considered as capital contribution and added to the capital reserves.

l Rectification of prior period adjustments

On transition to IndAS and preparation of comparative standalone financial statements, the Company has identified certain errors in classification, that are not material and does not have material impact on reported standalone profit under the previous GAAP. The same are adjusted while preparing financial statements in accordance with Ind AS.

m Deferred tax

The Company has recognised a deferred tax expense of INR 16.23 million on the temporary differences arising on account of the above Ind AS adjustments.

Source : Dion Global Solutions Limited
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