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Bal Pharma Ltd. Notes to Accounts
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You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 144.14 Cr. P/BV 2.26 Book Value (Rs.) 40.43
52 Week High/Low (Rs.) 132/63 FV/ML 10/1 P/E(X) 56.05
Bookclosure 25/09/2023 EPS (Rs.) 1.63 Div Yield (%) 1.10
Year End :2018-03 

1. Company Overview

Bal Pharma Limited (the company) is a Public Limited Company domiciled in India and incorporated under provisions of the Companies Act, 1956. Its shares are listed on two recognized stock exchanges in India. The company is engaged in the manufacturing and selling of pharmaceutical products. The company caters to both domestic and international markets.

1.1 Basis of Preparation of Financial Statements

a) Compliance with Ind AS

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.

For all periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

These financial statements for the year ended 31 March 2018 are the first the Company has prepared in accordance with Ind AS. Refer to note 51 for information on how the Company adopted Ind AS.

b' Historical Cost Convention

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments),

- Defined Benefits and other long term employment benefits

c) Functional and Presentational Currency

The financial statements are presented in INR which is the functional currency for the Company. All amounts disclosed in the financial statements and notes have been rounded to the nearest lakhs.

d) Use of Estimates and Judgments

The preparation of financial statements in conformity with Ind AS requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual result could differ from these estimates. Any revision to accounting estimates is recognized prospectively.

The estimates and underlying assumptions are reviewed by management at each reporting date. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of revision or future periods if the revision affects both current and future periods.

Critical accounting estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below:

Judgments

1) Recognition of Deferred Income Taxes

2) Recognition Research and Developments Costs (Note no 37)

Estimates

1) Useful lives of various of Property, Plant and Equipment (Note 3 & 4)

2) Fair Value of Financial Instruments (Note No 48)

3) Accounting for Defined Benefit Plan (Note No 43)

4) Expected Credit Losses

e) Current vs Non-Current Classification

The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:

- Expected to be realised or intended to be sold or consumed in normal operating cycle

- Held primarily for the purpose of trading

- Expected to be realised within twelve months after the reporting period, or

- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in normal operating cycle

- It is held primarily for the purpose of trading

- It is due to be settled within twelve months after the reporting period, or

- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities. The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The group has identified twelve months as its operating cycle.

c) Rights, preferences and restrictions attached to equity shares:

The Company has only one class of equity shares having par value of ' 10 each. Each holder of the equity share, as reflected in the records of the Company as of the date of the shareholders' meeting, is entitled to one vote in respect of each share held for all matters submitted to vote in the shareholders' meeting.

The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of 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.

d) There have been no buy back of shares, issue of shares by way of bonus share or issue of share pursuant to contract without payment being received in cash for the period of five years immediately preceding the balance sheet date.

A) Details of securities, repayment and interest of term loans (including current maturities of long-term debt):

(a) Loan from Exim Bank outstanding as at 31 March 2018: Rs. 2.40 Cr (31 March 2017 : Rs. 3.60 Cr : 01 April 2016: Rs. 4.80 Cr)

Security

i. The Loan is secured by first charge on the entire moveable property, Plant and equipment of the Company by way of hypothecation and pari passu first charge by way of equitable mortagage on all immovable property, Plant and equipment of Unit 1, 2, 3 and 4 of the Company.

Repayment and interest

ii. The loan was repayable in 20 equal quarterly installments of Rs. 0.30 crore each, starting from April 2015.

iii. Interest was payable on EXIM bank LTLMR plus 250 basis points which is currently at 12.70% per annum.

(b) Loan from Corporation Bank outstanding as at 31 March 2018: Rs. 9.52 Cr (31 March 2017: Rs. 10.84 Cr : 01 April 2016: Rs. 6.85 Cr)

Security

i. The loan is secured by entire moveable property, plant and equipment of the Company, both present and future, belonging to unit I, unit 2, unit 4 of the Company.

Repayment and interest

ii. The loan was repayable in 80 monthly installments starting from April 2017.

iii. Interest was payable on LTLMR plus 5.60% which is currently at 13.75% per annum

(c) Loan from Yes Bank outstanding as at 31 March 2018: Rs. 3.56 cr (31 March 2017 : Rs. 0.75 Cr : 01 April 2016: Rs. Nil)

Security

i. The loan is secured by mortagage of the property of unit 5, sangli and personal guarantee of managing director.

Repayment and interest

ii. The loan was repayable in 48 monthly installments starting from June 2017.

iii. Interest was payable on at 10.75% per annum

(d) Loan from Tata Capital outstanding as at 31 March 2018: Rs. 14.00 Cr (31 March 2017 : Rs. Nil : 01 April 2016: Rs. Nil)

Security

i. The loan is secured by mortagage of the property of unit 6, Udaipur and personal guarantee of managing director.

Repayment and interest

ii. The loan was repayable in 48 monthly installments starting from June 2017.

iii. Interest was payable on at 10.75% per annum

(e) Loan from The South India Bank Limited outstanding as at 31 March 2018: ' 4.86 Cr (31 March 2017 : Rs. 5.16 Crores :01 April 2016: Rs. Nil) "

Security

i. The loan is secured by mortagage of the Land at Vasanth Nagar

Repayment and interest

ii. The loan was repayable in 154 monthly installments starting from March 2018.

iii. Interest was payable on at 10.65% per annum

(f) Loan from The South India Bank Limited outstanding as at 31 March 2018: Rs. 3.39 Cr (31 March 2017: Rs. Nil : 01 April 2016: Rs. Nil) "

Security

i. The loan is secured by mortagage of the Land at Vasanth Nagar

Repayment and interest

ii. The loan was repayable in 180 monthly installments starting from April 2018.

iii. Interest was payable on at 10.65% per annum

(g) Loan from Kotak Mahindra Bank Limited (Unsecured) outstanding as at 31 March 2018: Rs. 0.17 Cr (31 March 2017: Rs. 0.63 " Cr : 01 April 2016: Rs. 1.01 Cr) "

Repayment and interest

i. The loan was repayable in 36 monthly installments starting from July 2015.

ii. Interest was payable on at 11.75% per annum

(h) Loan from Kotak Mahindra Bank Limited (Unsecured) outstanding as at 31 March 2018: Rs. 0.59 Crores (31 March 2017: Rs. Nil 01 April 2016: Rs. Nil)

Repayment and interest

i. The loan was repayable in 36 monthly installments starting from Aug 2017.

ii. Interest was payable on at 16.50 % per annum

B) Details of securities, repayment and interest of Other loans (including current maturities of long-term debt):

(a) Loan from Magma Fincorp Limited (Unsecured) outstanding as at 31 March 2018: Rs. 0.53 Cr (31 March 2017: Rs. Nil : 01 April 2016: Rs. Nil)

Repayment and interest

i. The loan was repayable in 24 monthly installments starting from Aug 2017.

ii. Interest was payable on at 16.00% per annum

(b) Loan from Tata Capital Financial Services Limited (Unsecured) outstanding as at 31 March 2018: Rs. 0.53 Cr (31 March 2017: Rs. Nil : 01 April 2016: Rs. Nil)

Repayment and interest

i. The loan was repayable in 24 monthly installments starting from July 2017.

ii. Interest was payable on at 15.94% per annum

(c) Loan from Capital First Limited (Unsecured) outstanding as at 31 March 2018: Rs. 0.62 Cr (31 March 2017: Rs. Nil : 01 April 2016: Rs. Nil)

Repayment and interest

i. The loan was repayable in 24 monthly installments starting from Aug 2017.

ii. Interest was payable on at 15.00% per annum

(d) Loan from Equitas Small Finance Bank Limited (Unsecured)outstanding as at 31 March 2018: Rs. 0.44 Cr (31 March 2017: Rs. Nil : 01 April 2016: Rs. Nil)

Repayment and interest

i. The loan was repayable in 36 monthly instalments starting from November 2017.

ii. Interest was payable on at 16.50% per annum

(e) Loan from Neo Growth Private Limited (Unsecured) outstanding as at 31 March 2018: Rs. 0.44 Cr (31 March 2017 : Rs. Nil : 01 April 2016: Rs. Nil)

Repayment and interest

i. The loan was repayable in 36 monthly instalments starting from May 2018.

ii. Interest was payable on at 18.00% per annum

C) The Vehicle Loans have been taken on the hypothecation of vehicles

D) There are no defaults in repayment of principal or interest to lenders as at the balance sheet date.

All secured loans payable on demand and secured short term loans from banks are secured by first charge by way of hypothecation of all the stocks, book debts and other current assets (both present and future) and carries interest rate @ 9.75% to 13.65%

Note: The Company is also involved in other lawsuits, claims, investigations and proceedings, which arise in the ordinary course of business, however, there are no such matters pending that the company expects to be material in relation to its business.

2 Disclosure with respect 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 in accordance with the ‘Micro, Small and Medium Enterprises Development Act, 2006' (‘the MSMED Act'). Accordingly, based on the information available with the Company, no amount is payable in respect of such entities as at 31 March 2018. (31 March 2017: Nil, 1 April, 2016: Nil)

3 Confirmations

Balances of Trade Receivables, Trade Payables, Loans and Advances, Receivables and Payables are subject to confirmation / reconciliation, if any

4 Subsequent Events

Declaration of Dividend - The Board of Directors of the Company has proposed a 10% dividend on face value of the shares, subject to the approval by Shareholders at AGM

5 Note on Suspended Activities in Unit located in Pune

The Management of the Company has decided to suspend the operations of its IV fluids and parenterals manufacturing facility at Pune as this unit has been consistently incurring operational losses due to various reasons such as higher costs of raw materials, escalation in production cost, employee cost, lack of adequate orders and thin margins on products manufactured. The above have led to a situation wherein any further efforts to restore the profitability of the unit will be furtile. This decision was taken as part of the restructuring exercise undertaken by the Company to streamline its operations and to exit from its noncore businesses, so that further deterioration of its noncore business revenues can be plugged.

6 Employee benefits

In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan). The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee's last drawn salary and the number of years of employment with the Company.

The following tables summarise the components of net benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for gratuity benefit.

7 Segment reporting

The Company is primarily engaged in a single business segment of manufacturing and marketing of pharmaceutical formulations and active pharmaceutical ingredients and is managed as ONE entity, for its various activities and is governed by a similar set of risks and returns.

In accordance with Ind AS-108 “Operating Segments”, information about geographical areas has been given in the Consolidated Financial Statements of Bal Pharma Ltd., and therefore, no separate disclosure on geographical areas is given in these financial statements.

8 Export Benefits

The Company has accounted an amount of Rs. 339.51 Lakhs (31 March 2017 : Rs. 402.30 Lakhs ) being the net amount of credit under various export incentive schemes as announced under Foreign trade Policy. The management has represented that the same will be either received in cash or utilized for off-setting customs duty on future imports. The accumulated amount outstanding on this account as on 31 March 2018 is Rs. 494.31 Lakhs (31 March 2017: Rs. 603.81 Lakhs) and the same is reflected under Balance with Government Authorities

9 Leasing Arrangements

The company's significant leasing arrangements are in respect of operating leases for premises (office, stores, godowns, residential, guest houses, etc.) Theses are cancelable operating leases and these lease agreements are normally renewed on expiry. The aggregate lease rental payable are charged as rent under note No. 34

10. Financial risk management

The Company has exposure to following risks arising from financial instruments- Market Risk

- Credit Risk

- Liquidity Risk

The Company's board of directors has overall responsibility for the establishment and oversight of the Company's risk management framework. 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'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 relations to the risks faced by the Company.

A Market Risk

1) Currency Risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services and purchases from overseas suppliers in various foreign currencies. Market Risk is the risk that changes in market prices such as foreign exchange rates will effect company's income or value of its holding financial assets/ instruments. The exchange rate between the Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company's operations are adversely affected as the Rupee appreciates/ depreciates against US dollar (USD), Euro (EUR), Dhirams (AED) and Others.

2) Cash Flows and Interest rate Risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates, in cases where the 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 investments will fluctuate because of fluctuations in the interest rates.

(a) Exposure to Interest Rate Risk

The interest rate profile of the Company's interest-bearing financial instruments as reported

(b) Fair value sensitivity analysis for fixed-rate instruments

The Company's fixed rate instruments are carried at amortised cost. They are therefore not subject to interest rate risk as defined Ind AS 107, since neither the carrying amount nor future cash flows will fluctuate because of change in market interest rates.

(c) Cash flow sensitivity analysis for variable-rate instruments

A reasonable possible change of 2% (200 basis points) in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

B Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities.

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.

Maturities of financial liabilities:

The tables below analyse the Company's financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

C Credit Risk

Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. The Company's exposure to credit risk is limited to the carrying amount of financial assets recognised at the date of the balance sheet, as summarised in the table below. The Company periodically assesses the financial reliability of the counter party taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Individual customer limits are set accordingly.

Credit risk on cash and cash equivalents is limited as generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Advances to Related Parties are for business purposes and The Company assesses the credit risk on the these advances on a regular basis and does not for see any event of default.

Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers. Credit risk has always been managed by each business segment through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company is exposed to credit risk in the event of non-payment by customers. Credit risk concentration with respect to trade receivables is mitigated by the Company's large customer base. Adequate expected credit losses are recognized as per the assessments and as such has provided for a expected credit loss of Rs. 15.50 Lakhs ( 31 March 2017 : Nil, 1 April 2016: Nil )

11 Capital Management

For the purpose of the Company's capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans and long term and other strategic investment plans. In order to maintain or adjust its capital structure, the Company may adjust the amount of dividends paid, return the capital to shareholders, issue new shares or adjust its short term borrowings. The current capital structure of the Company is equity based backed with short term borrowings.

12. First-time adoption of Ind AS

The Company's financial statements for the year ended March 31, 2018 are the first financial statements prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015. The adoption of Ind AS was carried out in accordance with Ind AS 101, using April 1, 2016 as the transition date. Ind AS 101 requires that all Ind AS standards and interpretations that are effective for the first Ind AS financial statements for the year ended March 31, 2018, be applied consistently and retrospectively for all fiscal years presented.

All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and Indian GAAP as at the transition date have been recognized directly in equity at the transition date.

Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

1. Ind AS optional exemptions

a. Deemed Cost

As per Ind AS 101, a Company 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 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:

a. Fair Value

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

(iii) se carrying value 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 property, plant and equipment. The same election has been made in respect of intangible assets also.

2. Ind AS mandatory exemptions

a. Estimates

An entity's estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for Impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP

b. Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition.

c. Derecognition of financial assets and liabilities

As per Ind AS 101, an entity should apply the derecognition requirements in Ind AS 109, Financial Instruments, prospectively for transactions occurring on or the after the date of transition to Ind AS. However, an entity may apply the derecognition requirements retrospectively from a date chosen by it if the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.

d. Excise Duty

Under the previous GAAP excise duty was netted off against sale of products. However, under Ind AS, excise duty is included in sale of products and is separately presented as expense in the statement of profit and loss.

1 Property, Plant and Equipment

Under Ind AS, Property Plant and Equipment and Capital Work in Progress is reduced by the processing fees value amortised as per Effective Interest Rate (EIR) method.

2 Investment

Under the previous GAAP investments in equity instruments of subsidiaries were classified as longterm investments and were carried at cost less provision for other than temporary decline in the value of such investments. Ind AS, allow first-time adopters to use a ‘deemed cost' of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries in the separate financial statements. The Company has elected to measure investment in Lifezen Healthcare Pvt Ltd at fair value as of the transition date. The resulting fair value changes of these investments amounting to Rs. 116.00 have been recognised in retained earnings as at the date of transition. This decreased the retained earnings by Rs. 116.00 as at 1st April, 2016.

3 Proposed Dividend

Under the previous GAAP dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events and accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. As a result, liability for dividend is a non-adjusting event. Accordingly, the liability for proposed dividend as at 1st April, 2016 included under provisions in the previous GAAP has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity has been increased by an equivalent amount.

4 Retained Earnings

Retained earnings as at 1st April, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

5 Re-measurements of Post Employment Benefit Obligation

Under Ind AS, re-measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit and loss. Under the previous GAAP these remeasurements were forming part of the Statement of Profit and Loss for the year.

6 Revenue from operations and Excise

Under previous GAAP revenue from sale of goods was presented net of excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as a separate line item. This has resulted in an increase in the revenue from operations and expenses for the year ended 31st March, 2017. The total comprehensive income for the year ended and equity as at 31st March, 2017 has remained unchanged.

7 Deferred Tax

Deferred tax under Ind AS has been recognized for temporary differences between tax base and the book base of the relevant assets and liabilities. Under IGAAP the deferred tax was accounted based on timing differences impacting the profit or loss for the period.


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