1

1.1

1.2

Basis of Preparation of Consolidated financial statements

These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis, except for certain tangible assets which are being carried at revalued amounts. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the Standards of Accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013.

The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated March 30, 2016. The said notification read with Rule 3(2) of the Companies (Accounting Standards) Rules, 2006  is  applicable to accounting period commencing on or after the date of notification i.e. April 1, 2016

All assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current noncurrent classification of assets and liabilities.

 Principles of Consolidation

a)

b)

The consolidated financial statements have been brpared under historical cost conventions, in accordance with Accounting Standard 21 (AS 21) on Consolidated Financial Statements notified under Section 211 of the Companies Act, 1956 and on the basis of the separate audited financial statements of Emcure Pharmaceuticals Limited (the Company) and its subsidiaries and joint venture (collectively referred to as the Group).

The consolidated financial statements have been brpared on the following basis :

(i)             The financial statements of the subsidiaries and joint venture are combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully
eliminating intra-group balances and intra-group transactions and resulting unrealised profits or losses in accordance with Accounting Standard 21 (AS 21) on Consolidated Financial Statements.

(ii)            Changes are made for the effects of any differences in the accounting policies followed by each of the subsidiaries to the extent they are material to make them uniform with the accounting policies followed by the Company in brparing the Consolidated Financial Statements.

(iii)           The assets and liabilities of non-integral foreign operations are translated at the year end exchange rate and all the items in the Statement of Profit and Loss are translated at the average exchange rate brvailing during the year. The resultant translation gains or losses are shown separately as Foreign Currency Translation Reserve under Reserves and Surplus. These are transferred to the Statement of Profit and Loss on disposal of the non-integral foreign operations. The assets and liabilities of integral financial operations are translated in accordance with Note 1.4 (g).

(iv)           The difference between the cost of investment in the subsidiaries and joint ventures, and the Company's share of net assets at the time of acquisition of shares in the subsidiaries and joint ventures is recognised in the financial statements as Goodwill or Capital Reserve as the case may be.

(v)            Minority interest in the subsidiaries consists of:

a)     The amount of equity attributable to minority at the date on which investment in a subsidiary is made; and

b)     The minority share of movements in equity since the date the parent subsidiary relationship comes into existence.

(vi)           Interests in joint venture have been accounted by using the proportionate consolidation method as per Accounting Standard 27 "Financial Reporting of Interests in Joint Ventures" notified by Companies (Accounting Standards) Rules, 2006, as amended.

(vii)          Details of subsidiaries with respective holdings thereof considered for consolidated financial statements:

Sr. No

Name of Subsidiary Company

Country of Incorporation

Date of Acquisition / Incorporation

Percentage of Holding (%)  as at

March 31, 2016

March 31, 2015

Direct Subsidiaries

1

Gennova Biopharmaceuticals Limited

India

June 19, 2001

87.95

87.95

2

Zuventus Healthcare Limited

India

May 27, 2002

79.58

79.58

3

Emcure Nigeria Limited

Nigeria

July 2, 2007

100

75.84

4

Emcure Pharmaceuticals Mena FZ LLC.

Dubai

June 16, 2010

100

90

5

Emcure Pharmaceuticals South Africa (Pty) Limited

South Africa

July 19, 2010

100

100

6

Emcure Brasil farmaceutica Ltda

Brazil

January 21, 2011

100

100

7

Heritage Pharma Holdings Inc.

USA

April 29, 2011

100

100

8

Emcure Pharma UK Ltd

United Kingdom

November 6, 2012

100

100

9

Emcure Uth Healthcare Limited

India

June 19, 2013

-

63

10

Emcure Pharma Peru S.A.C.

Peru

May 14, 2014

100

100

11

Emcure Pharma Mexico S.A. DE C.V.

Mexico

November 21, 2014

100

100

12

Emcure Pharmaceuticals Pty Ltd

Australia

June 17, 2015

100

-

13

Marcan Pharmaceuticals Inc

Canada

November 9, 2015

100

-

Indirect Subsidiaries*

14

Heritage Pharma Labs Inc.

USA

November 3, 2004

100

100

15

Heritage Pharmaceuticals Inc.

USA

April 29, 2011

100

100

16

Emcure Heritage Canada Inc.

Canada

April 10, 2013

100

100

17

Konsina Ilac Sanayi Ve Dis Ticaret Anonim Sirketi

Turkey

December 5, 2013

60

60

18

Tillomed Laboratories Ltd

United Kingdom

April 16, 2014

100

100

19

Tillomed Holdings Limited

United Kingdom

April 16, 2014

100

100

20

Bhardwaj Pharma GmbH

Germany

January 12, 2016

100

-

Sr. No

Name of Joint Venture

Country of Incorporation

Date of Acquisition / Incorporation

Percentage of Holding (%)  as at

March 31, 2016

March 31, 2015

1

Biolab Emcure Farmaceutica Comercial Ltda.

Brazil

May 24, 2013

50.00

 50.00

1.3

Use of estimates

The brparation of consolidated financial statements in conformity with accounting principles generally accepted in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

1.4

Significant Accounting Policies

a)

Tangible Assets

i)

ii)

iii)

iv)

Tangible Assets are stated at cost of acquisition or construction except in case of certain assets which have been revalued, at its revalued amount, less accumulated debrciation and amortization.  All costs relating to the acquisition and installation of assets are capitalized and include borrowing costs directly attributable to their construction or acquisition, upto the date the respective asset is put to use.

Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance.

Items of tangible assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss.

Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

v)

Debrciation on all tangible assets is provided on a pro-rata basis on the straight-line method over the estimated useful lives of the assets.

b)

Intangible Assets

Intangible assets acquired separately are measured at cost on initial recognition and amortised over the estimate of useful lives commencing from the date, the asset is available to the Group for its commercial use.

Management estimates useful life of the various intangible assets as follows

The carrying value of intangible assets is reviewed for impairment annually when events or changes in circumstances indicate that the carrying value may not be recoverable.

Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.

c)

Impairment

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an assets or cash generating units net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. An impairment loss is reversed to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had brviously been recognised.

d)

Goodwill on Consolidation

The excess of cost to the Group of its investments in the subsidiaries over its share in the equity of the subsidiaries, at the dates on which the investments in the subsidiaries are made, is recognised as Goodwill being an asset in the consolidated financial statements. Goodwill arising on consolidation is not amortised.

Goodwill is reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If impairment is indicated, the asset is written down to its fair value.

e)

Lease Accounting

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease.

The Group leases certain tangible assets and such leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the brsent value of the minimum lease payments. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The outstanding liability is included in other long-term borrowings. The finance charge is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

f)

Borrowing Costs

Borrowing costs include interest, other costs incurred in connection with borrowing and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

g)

i)

ii)

iii)

iv)

Foreign Currency Translation

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

From accounting periods commencing on or after December 7, 2006 and pursuant to the availment of choice provided under paragraph 46A of AS 11: The Effects of Changes in Foreign Exchange Rates inserted vide Notification dated December 29, 2011, the Group accounts for exchange differences arising on translation/settlement of foreign currency monetary items as below:

Exchange differences arising on long-term foreign currency monetary items related to acquisition of fixed assets are capitalised and debrciated over the remaining useful life of the asset. For this purpose, the Group treats a foreign monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of origination.

Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortised over the remaining life of the concerned monetary item.

Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit and Loss.

Forward Exchange Contracts

The brmium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/ liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognised in the Statement of Profit and Loss and gains are ignored in accordance with the Announcement of Institute of Chartered Accountants of India on Accounting for Derivatives issued in March 2008.

h)

Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

i)

Inventories

Inventories are stated at lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

j)

k)

i)

ii)

iii)

Revenue Recognition

Sales of Goods

Sales are recognised when the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, which coincides with the delivery of goods and are recognised net of trade discounts, rebates, sales taxes and excise duties.

Sale of services

In contracts involving the rendering of services, revenue is measured using the proportionate completion method when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service and are recognised net of service tax.

Profit Share revenue

From time to time the Group enters into marketing arrangements with certain business partners for the sale of its products in certain markets. Under such arrangements, the Group sells its products to the business partners at a price agreed upon in the arrangement and is also entitled to a profit share which is over and above the agreed price. The profit share is typically dependent on the business partners ultimate net sale proceeds or net profit, subject to any reductions or adjustments that are required by the terms of the arrangement.

Revenue is an amount equal to the agreed price recognized on these transactions upon delivery of products to the business partners. The additional amount rebrsenting the profit share component is recognized as revenue in the period which corresponds to the ultimate sales made by business partners only when the collectability of the profit share becomes probable and a reliable measure of the profit share is available. In arriving at this conclusion and in measuring the amount of profit share revenue to be recognized for such period, the Group uses all available information and evidences relating to the amounts owed to the Group under these arrangements, such as confirmations provided by business partners, including those made available on or before the date of approval of financial statements.

Other Income

Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Income from duty drawback is recognised on an accrual basis.

Dividend: Dividend income is recognised when the right to receive dividend is established.

Export entitlements: Export entitlements are recognised as Income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

l)

Employee Benefits

i)

Provident Fund:

The Group has Defined Contribution Plan for Post-employment benefits in the form of Provident Fund and social security fund for eligible employees. Provident Fund and social security fund are classified as a defined contribution plans as the Group has no further obligation beyond making the contributions to the regulatory authorities. The Groups contributions to the Defined Contribution plans are charged to the Statement of Profit and Loss as and when incurred.

ii)

Gratuity:

The Group provides for gratuity, a defined benefit plan (the Gratuity Plan) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment. The Groups liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

iii)

Compensated Absences:

m)

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Groups liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

Employee Share-based Payment:

Equity settled stock options granted under Emcure ESOS 2013 are accounted for as per the accounting treatment brscribed by the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India. The intrinsic value of the option being excess of market value of the underlying share immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to employee stock option outstanding account. The deferred employee compensation is charged to Statement of Profit and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of value of lapsed portion and credit to deferred employee compensation expense equal to the un-amortised portion.

iv)

n)

Stock Apbrciation Rights

Share based payments granted under Stock Apbrciation Rights (SAR) Agreement (the "Plan") are accounted using the intrinsic value method permitted by the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India. Intrinsic Value is the amount by which the value of the underlying share, determined in accordance with the Plan, exceeds the stated base price as per the Plan. The amount of such excess on initial recognition is recognized over the vesting period on a straight line basis. The liability in respect of SAR is remeasured at each reporting date with changes recognized as employee benefits expense in the Statement of Profit and Loss over the remaining vesting period.

o)

Current and deferred tax

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws brvailing in the respective jurisdictions.

Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Group has unabsorbed debrciation or carry forward losses, all deferred taxes are recognized only if there is a virtual certainty supported by convincing evidence that they can be realised against future taxable profits. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the group reassesses unrecognised deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum Alternative Tax credit is recognised as an asset only when and to the extent there is convincing evidence that the Group will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Group will pay normal income tax during the specified period.

The tax expense is not comparable with the profit before tax, since it is consolidated on a line-by-line addition for each subsidiary company and no tax effect is recorded in respect of consolidation adjustments. This accounting treatment is as per accounting standard AS-21.

p)

Provisions and Contingent Liabilities

Provisions: Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance sheet date and are not discounted to its brsent value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Group or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability. 

q)

Cash and Cash Equivalents

In the financial statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

r)

EBITDA

The Group brsents Earnings before Interest, Tax, Debrciation and amortization, exceptional item and minority interest (EBITDA) as a separate line item on the face of the Statement of Profit and Loss. EBITDA is calculated as the profit for the year before interest, tax, debrciation and amortization, exceptional item and minority interest and is calculated consistently year over year.

s)

Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Groups earnings per share is the net profit for the period after deducting brference dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

1

1.1

1.2

Basis of Preparation of Consolidated financial statements

These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis, except for certain tangible assets which are being carried at revalued amounts. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the Standards of Accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013.

The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated March 30, 2016. The said notification read with Rule 3(2) of the Companies (Accounting Standards) Rules, 2006  is  applicable to accounting period commencing on or after the date of notification i.e. April 1, 2016

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current – noncurrent classification of assets and liabilities.

 Principles of Consolidation

a)

b)

The consolidated financial statements have been brpared under historical cost conventions, in accordance with Accounting Standard 21 (AS 21) on “Consolidated Financial Statements” notified under Section 211 of the Companies Act, 1956 and on the basis of the separate audited financial statements of Emcure Pharmaceuticals Limited (the “Company”) and its subsidiaries and joint venture (collectively referred to as the “Group”).

The consolidated financial statements have been brpared on the following basis :

(i)             The financial statements of the subsidiaries and joint venture are combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully
eliminating intra-group balances and intra-group transactions and resulting unrealised profits or losses in accordance with Accounting Standard 21 (AS 21) on “Consolidated Financial Statements”.

(ii)            Changes are made for the effects of any differences in the accounting policies followed by each of the subsidiaries to the extent they are material to make them uniform with the accounting policies followed by the Company in brparing the Consolidated Financial Statements.

(iii)           The assets and liabilities of non-integral foreign operations are translated at the year end exchange rate and all the items in the Statement of Profit and Loss are translated at the average exchange rate brvailing during the year. The resultant translation gains or losses are shown separately as “Foreign Currency Translation Reserve” under Reserves and Surplus. These are transferred to the Statement of Profit and Loss on disposal of the non-integral foreign operations. The assets and liabilities of integral financial operations are translated in accordance with Note 1.4 (g).

(iv)           The difference between the cost of investment in the subsidiaries and joint ventures, and the Company's share of net assets at the time of acquisition of shares in the subsidiaries and joint ventures is recognised in the financial statements as Goodwill or Capital Reserve as the case may be.

(v)            Minority interest in the subsidiaries consists of:

a)     The amount of equity attributable to minority at the date on which investment in a subsidiary is made; and

b)     The minority share of movements in equity since the date the parent subsidiary relationship comes into existence.

(vi)           Interests in joint venture have been accounted by using the proportionate consolidation method as per Accounting Standard 27 – "Financial Reporting of Interests in Joint Ventures" notified by Companies (Accounting Standards) Rules, 2006, as amended.

(vii)          Details of subsidiaries with respective holdings thereof considered for consolidated financial statements:

Sr. No

Name of Subsidiary Company

Country of Incorporation

Date of Acquisition / Incorporation

Percentage of Holding (%)  as at

March 31, 2016

March 31, 2015

Direct Subsidiaries

1

Gennova Biopharmaceuticals Limited

India

June 19, 2001

87.95

87.95

2

Zuventus Healthcare Limited

India

May 27, 2002

79.58

79.58

3

Emcure Nigeria Limited

Nigeria

July 2, 2007

100

75.84

4

Emcure Pharmaceuticals Mena FZ LLC.

Dubai

June 16, 2010

100

90

5

Emcure Pharmaceuticals South Africa (Pty) Limited

South Africa

July 19, 2010

100

100

6

Emcure Brasil farmaceutica Ltda

Brazil

January 21, 2011

100

100

7

Heritage Pharma Holdings Inc.

USA

April 29, 2011

100

100

8

Emcure Pharma UK Ltd

United Kingdom

November 6, 2012

100

100

9

Emcure Uth Healthcare Limited

India

June 19, 2013

-

63

10

Emcure Pharma Peru S.A.C.

Peru

May 14, 2014

100

100

11

Emcure Pharma Mexico S.A. DE C.V.

Mexico

November 21, 2014

100

100

12

Emcure Pharmaceuticals Pty Ltd

Australia

June 17, 2015

100

-

13

Marcan Pharmaceuticals Inc

Canada

November 9, 2015

100

-

Indirect Subsidiaries*

14

Heritage Pharma Labs Inc.

USA

November 3, 2004

100

100

15

Heritage Pharmaceuticals Inc.

USA

April 29, 2011

100

100

16

Emcure Heritage Canada Inc.

Canada

April 10, 2013

100

100

17

Konsina Ilac Sanayi Ve Dis Ticaret Anonim Sirketi

Turkey

December 5, 2013

60

60

18

Tillomed Laboratories Ltd

United Kingdom

April 16, 2014

100

100

19

Tillomed Holdings Limited

United Kingdom

April 16, 2014

100

100

20

Bhardwaj Pharma GmbH

Germany

January 12, 2016

100

-

Sr. No

Name of Joint Venture

Country of Incorporation

Date of Acquisition / Incorporation

Percentage of Holding (%)  as at

March 31, 2016

March 31, 2015

1

Biolab Emcure Farmaceutica Comercial Ltda.

Brazil

May 24, 2013

50.00

 50.00

1.3

Use of estimates

The brparation of consolidated financial statements in conformity with accounting principles generally accepted in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

1.4

Significant Accounting Policies

a)

Tangible Assets

i)

ii)

iii)

iv)

Tangible Assets are stated at cost of acquisition or construction except in case of certain assets which have been revalued, at its revalued amount, less accumulated debrciation and amortization.  All costs relating to the acquisition and installation of assets are capitalized and include borrowing costs directly attributable to their construction or acquisition, upto the date the respective asset is put to use.

Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance.

Items of tangible assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss.

Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

v)

Debrciation on all tangible assets is provided on a pro-rata basis on the straight-line method over the estimated useful lives of the assets.

b)

Intangible Assets

Intangible assets acquired separately are measured at cost on initial recognition and amortised over the estimate of useful lives commencing from the date, the asset is available to the Group for its commercial use.

Management estimates useful life of the various intangible assets as follows –

The carrying value of intangible assets is reviewed for impairment annually when events or changes in circumstances indicate that the carrying value may not be recoverable.

Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.

c)

Impairment

Assessment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset’s or cash generating unit’s net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. An impairment loss is reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had brviously been recognised.

d)

Goodwill on Consolidation

The excess of cost to the Group of its investments in the subsidiaries over its share in the equity of the subsidiaries, at the dates on which the investments in the subsidiaries are made, is recognised as ‘Goodwill’ being an asset in the consolidated financial statements. Goodwill arising on consolidation is not amortised.

Goodwill is reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If impairment is indicated, the asset is written down to its fair value.

e)

Lease Accounting

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease.

The Group leases certain tangible assets and such leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the brsent value of the minimum lease payments. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The outstanding liability is included in other long-term borrowings. The finance charge is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

f)

Borrowing Costs

Borrowing costs include interest, other costs incurred in connection with borrowing and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred.

g)

i)

ii)

iii)

iv)

Foreign Currency Translation

On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

From accounting periods commencing on or after December 7, 2006 and pursuant to the availment of choice provided under paragraph 46A of AS 11: The Effects of Changes in Foreign Exchange Rates inserted vide Notification dated December 29, 2011, the Group accounts for exchange differences arising on translation/settlement of foreign currency monetary items as below:

Exchange differences arising on long-term foreign currency monetary items related to acquisition of fixed assets are capitalised and debrciated over the remaining useful life of the asset. For this purpose, the Group treats a foreign monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of origination.

Exchange differences arising on other long-term foreign currency monetary items are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortised over the remaining life of the concerned monetary item.

Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit and Loss.

Forward Exchange Contracts

The brmium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/ liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognised in the Statement of Profit and Loss and gains are ignored in accordance with the Announcement of Institute of Chartered Accountants of India on ‘Accounting for Derivatives’ issued in March 2008.

h)

Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

i)

Inventories

Inventories are stated at lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

j)

k)

i)

ii)

iii)

Revenue Recognition

Sales of Goods

Sales are recognised when the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract, which coincides with the delivery of goods and are recognised net of trade discounts, rebates, sales taxes and excise duties.

Sale of services

In contracts involving the rendering of services, revenue is measured using the proportionate completion method when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service and are recognised net of service tax.

Profit Share revenue

From time to time the Group enters into marketing arrangements with certain business partners for the sale of its products in certain markets. Under such arrangements, the Group sells its products to the business partners at a price agreed upon in the arrangement and is also entitled to a profit share which is over and above the agreed price. The profit share is typically dependent on the business partner’s ultimate net sale proceeds or net profit, subject to any reductions or adjustments that are required by the terms of the arrangement.

Revenue is an amount equal to the agreed price recognized on these transactions upon delivery of products to the business partners. The additional amount rebrsenting the profit share component is recognized as revenue in the period which corresponds to the ultimate sales made by business partners only when the collectability of the profit share becomes probable and a reliable measure of the profit share is available. In arriving at this conclusion and in measuring the amount of profit share revenue to be recognized for such period, the Group uses all available information and evidences relating to the amounts owed to the Group under these arrangements, such as confirmations provided by business partners, including those made available on or before the date of approval of financial statements.

Other Income

Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Income from duty drawback is recognised on an accrual basis.

Dividend: Dividend income is recognised when the right to receive dividend is established.

Export entitlements: Export entitlements are recognised as Income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

l)

Employee Benefits

i)

Provident Fund:

The Group has Defined Contribution Plan for Post-employment benefits in the form of Provident Fund and social security fund for eligible employees. Provident Fund and social security fund are classified as a defined contribution plans as the Group has no further obligation beyond making the contributions to the regulatory authorities. The Group’s contributions to the Defined Contribution plans are charged to the Statement of Profit and Loss as and when incurred.

ii)

Gratuity:

The Group provides for gratuity, a defined benefit plan (the “Gratuity Plan”) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. The Group’s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

iii)

Compensated Absences:

m)

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Group’s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

Employee Share-based Payment:

Equity settled stock options granted under “Emcure ESOS 2013” are accounted for as per the accounting treatment brscribed by the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India. The intrinsic value of the option being excess of market value of the underlying share immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit to employee stock option outstanding account. The deferred employee compensation is charged to Statement of Profit and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to employee compensation expense, equal to the amortised portion of value of lapsed portion and credit to deferred employee compensation expense equal to the un-amortised portion.

iv)

n)

Stock Apbrciation Rights

Share based payments granted under Stock Apbrciation Rights (SAR) Agreement (the "Plan") are accounted using the intrinsic value method permitted by the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India. Intrinsic Value is the amount by which the value of the underlying share, determined in accordance with the Plan, exceeds the stated base price as per the Plan. The amount of such excess on initial recognition is recognized over the vesting period on a straight line basis. The liability in respect of SAR is remeasured at each reporting date with changes recognized as employee benefits expense in the Statement of Profit and Loss over the remaining vesting period.

o)

Current and deferred tax

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws brvailing in the respective jurisdictions.

Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Group has unabsorbed debrciation or carry forward losses, all deferred taxes are recognized only if there is a virtual certainty supported by convincing evidence that they can be realised against future taxable profits. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the group reassesses unrecognised deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum Alternative Tax credit is recognised as an asset only when and to the extent there is convincing evidence that the Group will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Group will pay normal income tax during the specified period.

The tax expense is not comparable with the profit before tax, since it is consolidated on a line-by-line addition for each subsidiary company and no tax effect is recorded in respect of consolidation adjustments. This accounting treatment is as per accounting standard AS-21.

p)

Provisions and Contingent Liabilities

Provisions: Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance sheet date and are not discounted to its brsent value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Group or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability. 

q)

Cash and Cash Equivalents

In the financial statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

r)

EBITDA

The Group brsents Earnings before Interest, Tax, Debrciation and amortization, exceptional item and minority interest (EBITDA) as a separate line item on the face of the Statement of Profit and Loss. EBITDA is calculated as the profit for the year before interest, tax, debrciation and amortization, exceptional item and minority interest and is calculated consistently year over year.

s)

Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Group’s earnings per share is the net profit for the period after deducting brference dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.