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NOTES TO ACCOUNTS

Jubilant Life Sciences Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 7119.07 Cr. P/BV 1.48 Book Value (₹) 301.91
52 Week High/Low (₹) 899/408 FV/ML 1/1 P/E(X) 12.39
Bookclosure 26/09/2018 EPS (₹) 36.07 Div Yield (%) 1.01
Year End :2018-03 

Note:

(1) These deposits have restricted use.

(2) Including due by directors and private companies having common director aggregating to ' 3.43 million (31 March 2017: ' 3.37 million).

* Including MAT credit utilization of ' 169.71 million forming part of current tax for the year ended 31 March 2018. Deferred tax liabilities:

* Including MAT credit utilization of ' 169.71 million forming part of current tax for the year ended 31 March 2018.

DTA has not been recognized on temporary differences in relation to indexation benefit of investment in subsidiaries and freehold land amounting to Rs, 3,971.99 million (31 March 2017: Rs, 3,747.98 million) and Rs, 69.03 million (31 March 2017: Rs, 81.05 million) respectively, as the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary differences will not reverse in foreseeable future. Further, DTA on temporary differences of capital nature amounting to Rs, 434.74 million (31 March 2017: Rs, 430.56 million) has not been recognized as the management believes it is probable that the temporary differences will not reverse in foreseeable future.

Terms and rights attached to equity shares:

The Company has only one class of shares referred to as equity shares having par value of Rs, 1 each. Holder of each equity share is entitled to one vote per share. 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.

Others:

a) 114,835 (31 March 2017: 1 14,835) equity shares of Rs, 1 each allotted on exercise of the vested stock options in accordance with the terms of exercise under the "Jubilant Employees Stock Option Plan, 2005". (Refer note 47).

b) Under the Jubilant Employees Stock Option 2005 Plan as at 31 March 2018 - Nil (31 March 2017: 2,867) outstanding options are convertible into Nil (31 March 2017: 14,335) shares. (Refer note 47).

c) Under the Jubilant Employees Stock Option 2011 Plan as at 31 March 2018 - 32,216 (31 March 2017: 71,185) outstanding options are convertible into 32,216 (31 March 2017: 71,185) shares. (Refer note 47).

16. Nature and purpose of other equity

- Capital reserve

Accumulated capital surplus not available for distribution of dividend and expected to remain invested permanently.

- Securities premium reserve

The unutilized accumulated excess of issue price over face value on issue of shares. This reserve is utilised in accordance with the provisions of the Act.

- Capital redemption reserve

Capital redemption reserve represents the unutilized accumulated amount set aside at the time of redemption of preference shares. This reserve is utilised in accordance with the provisions of the Act.

- Amalgamation reserve

Amalgamation reserve represents the unutilized accumulated surplus created at the time of amalgamation of another company with the Company. This reserve is not available for distribution of dividend and is expected to remain invested permanently.

- General reserve

This represents appropriation of profit by the Company and is available for distribution of dividend.

- Debenture redemption reserve

The Company is required to create a debenture redemption reserve out of the profits prior to the redemption of debentures. This reserve is available for distribution of dividend post redemption of debentures.

- Share based payment reserve

The fair value of the equity settled share based payment transactions with employees is recognized in Statement of Profit and Loss with corresponding credit to share based payment reserve. Further, equity settled share based payment transaction with employees of subsidiary is recognized in investment of subsidiaries with corresponding credit to Share based payment reserve. Corresponding balance of a share based payment reserve is transferred to general reserve upon expiry of grants or upon exercise of stock options by an employee, as the Company is operating the Employee Stock Option schemes through Jubilant Employees Welfare Trust, which has purchased share from the secondary market.

- Foreign Currency Monetary Item Translation Difference Account (FCMITDA)

This represent accumulated Monetary Item Translation Difference of long-term foreign currency monetary items to be amortized over the period in which long-term foreign currency monetary items is payable.

- Equity instrument through OCI

The Company has elected to recognize changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the equity instrument through OCI within equity. The Company transfers amount therefrom to retained earnings when the relevant equity securities are derecognized.

17 a Nature of security of non-current borrowings and other terms of repayment

17(a) (i) Indian rupee term loans amounting to Rs, 2,177.90 million (31 March 2017: Rs, 3,849.00 million) from Axis Bank Limited, RBL Bank Limited and Non-Convertible Debentures amounting Rs, 4,950.00 million (31 March 2017: Rs, 4,950.00 million) and External commercial borrowings amounting to Rs, Nil (31 March 2017: Rs, 1,199.72 million) from DBS Bank Limited, Singapore are secured by a first pari-passu charge created/to be created amongst the lenders by way of:

1) Mortgage on the immovable fixed assets, both present and future, situated at:

(a) Bhartiagram, Tehsil Dhanora, District Amroha, Uttar Pradesh, India, save and except the following immovable fixed assets from mortgage:

(i) Land measuring 90,124.24 square meters together with all the buildings and structures thereon situated in the revenue estate of Village Naipura Khadar and Tigariya Bhoor, Tehsil Dhanora, District Amroha, Uttar Pradesh, India, being under common title deeds with other Group companies;

(ii) Land measuring 5.56 Acres (equivalent to 2.253 Hectares) together with all the buildings and structures thereon situated in the revenue estate of Village Fazalpur Gosai, Tehsil Dhanora, District Amroha, Uttar Pradesh, India; and

(iii) Leasehold Land, being plot no. A-4/2 measuring 157,509 square meters, together with all the buildings and structures thereon situated in UPSIDC Industrial Area II, Gajraula, Tehsil Dhanora, District Amroha, Uttar Pradesh, India, being under common lease deed with other Group companies;

(b) Village Samlaya, Taluka Savli, District Vadodra, Gujarat, India; and

2) Hypothecation on the entire movable fixed assets, both present and future of the Company.

17(a) (ii) Indian rupee term loan amounting to Rs, 1,875.00 million (31 March 2017: Rs, 1,875.00 million) from Housing Development Finance Corporation Limited is secured by first mortgage by way of deposit of original title deeds of specified land and buildings situated at Noida, Greater Noida, Ambernath and also at Bharuch owned by one of the subsidiaries of the Company.

17(a) (iii) Non-convertible debentures amounting to Rs, 4,950.00 million (31 March 2017: Rs, 4,950.00 million repayable in four yearly installments) is repayable in four yearly installments as given below:

a. 8.20% Non-convertible debentures of Rs, 1,000 million repayable on 27 January 2019.

b. 8.47% Non-convertible debentures of Rs,1,000 million repayable on 27 January 2020.

c. 8.65% Non-convertible debentures of Rs, 1,500 million repayable on 27 January 2021.

d. 8.88% Non-convertible debentures of Rs, 1,450 million repayable on 27 January 2022.

17(a) (iv) Indian rupee term loan amounting to Rs, 1,575.00 million (31 March 2017: Rs, 2,575.00 million repayable in five half yearly installments from March 2020) from Axis Bank Limited is repayable in three half yearly installments from March 2021.

17(a) (v) Indian rupee term loan amounting to Rs, 602.90 million (31 March 2017: Rs, 1,274.00 million repayable in nineteen quarterly installments from June 2017) from RBL Bank Limited is repayable in eight quarterly installments from March 2020.

17(a) (vi) External commercial borrowing amounting to USD Nil (Rs, Nil) (31 March 2017: USD 18.50 million (Rs, 1,199.72 million) repayable in December 2017) from DBS Bank Limited, Singapore has been repaid during the year.

17(a) (vii) Indian rupee term loan amounting to Rs, 1,875.00 million (31 March 2017: Rs, 1,875.00 million repayable in five equal half yearly installments from September 2018) from Housing Development Finance Corporation Limited is repayable in five equal half yearly installments from September 2018.

17(a) (viii) Loans from subsidiaries are repayable at end of five years from the date of respective disbursement and carry interest rate ranging from 6.75% to 9.75% (31 March 2017: 8.25 % to 9.75% per annum).

17(a) (ix) Finance lease obligations are secured by hypothecation of specific assets taken under such lease. The same are repayable within five years.

17(a)(x) The term loans carry floating interest rate calculated in accordance with the terms of the arrangement which is a specified benchmark rate (reset at periodic intervals), adjusted for agreed spread. During the year ended 31 March 2018, the interest rate on Indian currency loans and foreign currency loans range from 7.90 % to 9.75% per annum (31March 2017: 7.95 % to 12.75% per annum) and 4.46 % to 5.16 % per annum (31 March 2017: 4.41 % to 5.18 % per annum), respectively.

The composition of property, plant and equipment and current assets as mentioned above are defined in detail in the respective financing/credit arrangements.

17 b. Nature of security of Current borrowings and other terms of repayment

17(b) (i) Working capital facilities (including cash credit) sanctioned by consortium of banks and notified financial institutions are secured by a first charge by way of hypothecation, ranking pari-passu inter-se banks, of the entire book debts and receivables and inventories both present and future, of the Company wherever the same may be or be held. Working capital loans are repayable as per terms of agreement within one year.

17(b) (ii) Short term loans are availed in Indian rupees and in foreign currency which carry floating interest rate calculated in accordance with the terms of the arrangement which is a specified benchmark rate (reset at periodic intervals), adjusted for agreed spread. During the year ended 31 March 2018, the interest rate on Indian currency loans and foreign currency loans range from 5.95 % to 11.65% per annum (31 March 2017: 6.09 % to 13.00% per annum) and 1.10 % to 3.78 % per annum (31 March 2017: NA), respectively.

The composition of property, plant and equipment and current assets as mentioned above are defined in detail in the respective financing/credit arrangements.

17 c. Property, plant and equipment, inventory and other financial assets with a carrying amount of Rs, 14,175.80 million (31 March 2017: Rs, 14,035.69 million), Rs, 5,855.80 million (31 March 2017: Rs, 4,544.30 million), Rs, 4,936.61 million (31 March 2017: Rs, 3,856.66 million) respectively are provided security against borrowing at year end.

During the year ended 31 March 2018 and 31 March 2017, the Company has paid dividend to its shareholders. This has resulted in payment of Dividend Distribution Tax (DDT) to the taxation authorities. The Company believes that DDT represents additional payment to taxation authority on behalf of the shareholders. Hence DDT paid is charged to equity. Distribution tax on dividend represents distribution tax on dividend paid during the year ended 31 March 2018 amounting to Rs, 97.28 million (31 March 2017: Rs, 97.28 million) net off, distribution tax amounting to Rs, 24.57 million on dividend received during the year ended 31 March 2018 (31 March 2017: Rs, 39.27 million) from subsidiary companies.

31. Micro, small and medium enterprises

There are no micro, small and medium enterprises, to whom the company owes dues, which are outstanding for more than 45 days as at the end of year. The information as required to be disclosed in relation to micro, small and medium enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.

(1) For certain employees where Provident Fund is deposited with government authority e.g. Regional Provident Fund Commissioner.

(B) Defined Benefit Plans

i. Gratuity

In accordance with Ind AS 19 "Employee Benefits", an actuarial valuation has been carried out in respect of gratuity. The discount rate assumed is 7.70% p.a. (31 March 2017: 7.50% p.a.) which is determined by reference to market yield at the Balance Sheet date on Government bonds. The retirement age has been considered at 58 years (31 March 2017: 58 years) and mortality table is as per IALM (2006-08) (31 March 2017: IALM (2006-08)).

The estimates of future salary increases, considered in actuarial valuation is 10% p.a. for first three years and 6% p.a. thereafter (31 March 2017: 10% p.a. for first three years and 6% p.a. thereafter), taking into account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The plans assets are maintained with Life Insurance Corporation of India in respect of gratuity scheme for certain employees of a unit of the Company. The details of investments maintained by Life Insurance Corporation are not available with the Company, hence not disclosed. The expected rate of return on plan assets is 7.70% p.a. (31 March 2017: 7.50 % p.a.).

ii. Provident Fund:

The Company makes monthly contributions to provident fund managed by trust for qualifying employees. Under the scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. As per Ind AS 19 on "Employee Benefits", employer established provident fund trusts are treated as defined benefit plans, since the Company is obliged to meet interest shortfall, if any, with respect to covered employees. The total liability of Rs, Nil (31 March 2017: Rs, Nil) as worked out by the actuary has been allocated to each entity based on the corpus value of each entity as at 31 March 2018. Accordingly, liability of Rs, Nil (31 March 2017: Rs, Nil) has been allocated to Company and Rs, Nil (31 March 2017: Rs, Nil) has been charged to Statement of Profit and Loss during the year.

The following methods / assumptions were used to estimate the fair values:

(a) Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.

(b) Fair valuation of non-current financial assets has been disclosed to be same as carrying value as there is no significant difference between carrying value and fair value.

(c) Fair value of quoted financial instruments (listed debentures) is based on quoted market price at the reporting date. The fair value of other long-term borrowings is estimated by discounting future cash flows using current rates (applicable to instruments with similar terms, currency, credit risk and remaining maturities) to discount the future payouts.

(d) The fair value is determined by using the valuation model/technique with observable/non-observable inputs and assumptions.

There are no transfers between Level 1, Level 2 and Level 3 during the year ended 31 March 2018 and 31 March 2017.

34. Financial risk management 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 Company, through three layers of defense namely policies and procedures, review mechanism and assurance aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit committee of the Board with top management oversees the formulation and implementation of the Risk management policies. The risks are identified at business unit level and mitigation plan are identified, deliberated and reviewed at appropriate forums.

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

- credit risk (see (i));

- liquidity risk (see (ii)); and

- market risk (see (iii)).

i. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers, loans and investments.

The carrying amount of financial assets represents the maximum credit risk exposure.

Trade receivables and other financial assets

The Company has established a credit policy under which each new customer is analysed individually for creditworthiness before the payment and delivery terms and conditions are offered. The Company's review includes external ratings, if they are available, financial statements, credit agency information, industry information and business intelligence. Sale limits are established for each customer and reviewed annually. Any sales exceeding those limits require approval from the appropriate authority as per policy.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are an institutional, dealers or end-user customer, their geographic location, industry, trade history with the Company and existence of previous financial difficulties.

With respect to trade receivables, based on internal assessment which is driven by the historical experience/ current facts available in relation to default and delays in collection thereof, the credit risk for trade receivables is considered low. The Company estimates its allowance for trade receivable using lifetime expected credit loss. The balance past due for more than 6 month (net of expected credit loss allowance), excluding receivable from group companies is Rs, Nil (31 March 2017: Rs, Nil)

* Assets are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company.

Expected credit loss on financial assets other than trade receivables:

With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties, from which these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible and accordingly no provision for excepted credit loss has been provided on these financial assets. Break up of financial assets other than trade receivables have been disclosed in Balance Sheet.

ii. 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 asset. 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's treasury department is responsible for managing the short term and long term liquidity requirements. Short term liquidity situation is reviewed daily by treasury department. Longer term liquidity position is reviewed on a regular basis by the Board of Directors and appropriate decisions are taken according to the situation.

Exposure to liquidity risk

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

Note:

(1) Carrying amount presented as net of unamortized transaction cost.

iii. Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates that 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, purchases and borrowings are denominated and the functional currency of the Company. The currencies in which the Company is exposed to risk are USD, EUR, CAD and Other.

The Company follows a natural hedge driven currency risk mitigation policy to the extent possible. Any residual risk is evaluated and appropriate risk mitigating steps are taken, including but not limited to, entering into forward contract and interest rate swap.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the EUR, USD, CAD and other against all other currencies at year end would have affected the measurement of financial exposure denominated in a foreign currency and affected 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 on forecast sales and purchases.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk because funds are borrowed at both fixed and floating interest rates. Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rate. The borrowings of the Company are principally denominated in rupees and US dollars with a mix of fixed and floating rates of interest. The Company has exposure to interest rate risk, arising principally on changes in base lending rate and LIBOR rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings.

The sensitivity analysis below have been determined based on the exposure to interest rates for floating rate liabilities assuming the amount of the liability outstanding at the year-end was outstanding for the whole year.

If interest rates had been 25 basis points higher / lower and all other variables were held constant, the Company's profit before tax for the year ended 31 March 2018 would decrease / increase by Rs, 13.02 million (31 March 2017: Rs, 14.46 million). This is mainly attributable to the Company's exposure to interest rates on its floating rate borrowings.

35. Capital management

(a) Risk management

The Company's objectives when managing capital are to:

- safeguard its ability to continue as a going concern, so that it can continue to provide returns for its shareholders and benefits for other stakeholders, and

- maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Company monitors capital on the basis of the following gearing ratio:

Net debt (total borrowings net of cash and cash equivalents and other bank balances) divided by Total equity (as shown in the Balance Sheet).

36. Segment information Business Segments

The Chairman and Co-Chairman and Managing Director of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, Operating Segments. Operating Segments have been defined and presented based on the regular review by the CODM to assess the performance of each segment and to make decision about allocation of resources. Accordingly, the Company has determined reportable segment by nature of its product and service, accordingly following are the reportable segments:

a. Pharmaceuticals: Indian Branded Pharmaceuticals.

b. Life Sciences Ingredients: Specialty Intermediates, Nutritional Products and Life Science Chemicals.

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.

No operating segments have been aggregated to form the above reportable operating segments.

Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.

Revenue, expenses, assets and liabilities which relate to the Company as a whole and not allocable to segments on reasonable basis have been included under 'unallocated revenue / expenses / assets / liabilities'.

Finance costs and fair value gains and losses on financial assets are not allocated to individual segments as the underlying instruments are managed on a Company basis.

Borrowings, current taxes, deferred taxes and certain financial assets and liabilities are not allocated to those segments as they are also managed on a Company basis.

*Non-current assets are excluding financial instruments and deferred tax assets.

37. Related Party Disclosures

1. Related parties where control exists

a) Subsidiaries including step-down subsidiaries:

Jubilant Pharma Limited, Draximage Limited, Cyprus, Draximage Limited, Ireland, Draximage LLC (merged into Jubilant Draximage (USA) Inc. w.e.f. 1 April 2017), Jubilant DraxImage (USA) Inc., Deprenyl Inc. USA (merged into Jubilant Draximage (USA) Inc. w.e.f. 1 April, 2017), Jubilant DraxImage Inc., 6963196 Canada Inc., 6981364 Canada Inc., DAHI Animal Health (UK) Limited (liquidated w.e.f. 19 December 2017), Draximage (UK) Limited, Jubilant Pharma Holdings Inc., Jubilant Clinsys Inc., Cadista Holdings Inc., Jubilant Cadista Pharmaceuticals Inc., Jubilant Life Sciences International Pte. Limited, HSL Holdings Inc., Jubilant

HollisterStier LLC, Jubilant Life Sciences (Shanghai) Limited, Jubilant Pharma NV, Jubilant Pharmaceuticals NV, PSI Supply NV, Jubilant Life Sciences (USA) Inc., Jubilant Life Sciences (BVI) Limited, Jubilant Biosys (BVI) Limited, Jubilant Biosys (Singapore) Pte. Limited, Jubilant Biosys Limited, Jubilant Discovery Services LLC (formerly Jubilant Discovery Services Inc.), Jubilant Drug Development Pte. Limited, Jubilant Chemsys Limited, Jubilant Clinsys Limited, Jubilant Infrastructure Limited, Jubilant First Trust Healthcare Limited, Jubilant Innovation (BVI) Limited (liquidated w.e.f. 12 January 2018), Jubilant Innovation Pte. Limited, Jubilant DraxImage Limited, Jubilant Innovation (India) Limited, Jubilant Innovation (USA) Inc., Jubilant HollisterStier Inc., Draxis Pharma LLC, Jubilant Life Sciences (Switzerland) AG (liquidated w.e.f. 8 November 2017), Jubilant Drug Discovery & Development Services Inc., Vanthys Pharmaceutical Development Private Limited, Jubilant Life Sciences NV, Jubilant Generics Limited, Jubilant Pharma Trading Inc., Drug Discovery and Development Solutions Limited, Jubilant Pharma Australia Pty Limited (w.e.f. 11 August 2016), Jubilant Draximage Radiopharmacies Inc. (w.e.f. 8 March 2017), Jubilant Employee Welfare Trust.

b) Other Entities:

Jubilant HollisterStier General Partnership Canada, Draximage General Partnership Canada (controlled through subsidiaries/step down subsidiaries).

2. Key management personnel (KMP) and related entities:

Mr. Hari S. Bhartia, Mr. S Sridhar, Ms. Sudha Pillai, Dr. Ashok Misra, Mr. Shardul S. Shroff (upto 24 May 2016), Mr. Shyamsundar Bang (Executive Director upto 7 February 2017 and continued as Non-Executive Director upto 31 March 2017), Mr. R. Sankaraiah, Mr. Pramod Yadav (for the period 1 April 2017 to 16 January 2018), Mr. Rajesh Kumar Srivastava (w.e.f. 17 January 2018), Mr. Sushil Kumar Roongta (w.e.f. 23 May 2017), Mr. Vivek Mehra (w.e.f. 23 May 2017), Mr. Rajiv Shah.

Jubilant Enpro Private Limited, Jubilant Oil & Gas Private Limited, Jubilant FoodWorks Limited, B&M Hot Breads Private Limited, Jubilant Industries Limited, Jubilant Agri and Consumer Products Limited, Jubilant Motor Works Private Limited, Jubilant Consumer Private Limited (formerly Jubilant Fresh Private Limited), Priority Vendor Technologies Private Ltd. (related to relatives of KMP).

3. Others:

Vam Employees Provident Fund Trust, Jubilant Bhartia Foundation, Vam Officers Superannuation Fund.

Additionally, the Company is involved in other disputes, lawsuits, claims, governmental and/ or regulatory inspections, inquiries, investigations and proceedings, including commercial matters that arise from time to time in the ordinary course of business.

The Company believes that none of above matters, either individually or in aggregate, are expected to have any material adverse effect on its financial statements.

4. Commitments as at year end

a) Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account (net of advances) ' 1,137.35 million (31 March 2017: ' 328.55 million).

b) Leases:

(i) The Company's significant operating lease arrangements are in respect of premises (residential, offices, go down etc.). These leasing arrangements, which are cancellable, range between 11 months and 3 years generally and are usually renewable by mutual agreeable terms. The aggregate lease rentals payable are charged as expenses. Rental payments under such leases are Rs, 103.87 million (31 March 2017: Rs, 111.65 million) has been included under rent expense in note 29.

(ii) The Company has operating lease arrangements in respect of vehicles which are cancellable, range between

2 years and 5 years. The aggregate lease rentals payable are charged as expenses. Rental expenses recognized under such leases amounting to Rs, 5.81 million (31 March 2017: Rs, 6.74 million) has been included under vehicle running and maintenance expense in note 29.

(iii) The Company has significant operating lease arrangements which are non-cancellable for a period up to 25 years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

Rental expenses recognized under such leases during the year are Rs, 36.35 million (31 March 2017: Rs, 33.12 million).

There is no element of contingent rent or sub lease payments. The Company has option to purchase the assets at the end of the lease term. There are no restrictions imposed by these lease arrangements regarding dividend, additional debt and further leasing.

c) Other Commitments:

Export obligation under Advance License Scheme on duty free import of specific raw materials, remaining outstanding is Rs, 2,418.53 million (31 March 2017: Rs, 4,624.45 million).

5. Disclosure pursuant to section 186(4) of the Companies Act, 2013 in respect of unsecured loans to subsidiary companies [Refer note 37]:

6. Donation includes Rs, Nil (31 March 2017: Rs, 60.00 million) to Satya Electoral Trust during the year.

7. Government grant recoverable Rs, 181.84 million (31 March 2017: Rs, 185.12 million) and government grant recognized Rs, 360.94 million (31 March 2017: Rs, 304.95 million) in the Statement of Profit and Loss.

8. During the year, finance costs amounting to Rs, 57.68 million (31 March 2017: Rs, 34.58 million) has been capitalized, calculated using capitalisation rate of 8.0% (31 March 2017: 9.2%).

9. During year ended 31 March 2018, the Company has capitalised exchange gain amounting to Rs, 4.94 million (31 March 2017: Rs, 3.80 million) to the cost of property, plant and equipment and exchange gain of Rs, 1.81 million (31 March 2017: exchange loss of Rs, 18.01 million) to foreign currency monetary item translation difference account (FCMITDA). During the year Rs, 5.26 million (31 March 2017: Rs, 61.67 million) has been amortized to the Statement of Profit and Loss and balance of Rs, Nil (31 March 2017: Rs, 7.07 million) is carried in Balance Sheet as at 31 March 2018.

10. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income-tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation for the specified domestic transactions entered into with the specified persons and the international transactions entered into with the associated enterprises during the financial year and expects such records to be in existence before the due date of filing of income tax return. The management is of the opinion that its specified domestic transactions and international transactions are at arm's length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

11. Employee Stock Option Scheme

The Company has two stock option plans in place namely:

- Jubilant Employees Stock Option Plan, 2005 ("Plan 2005")

- JLL Employees Stock Option Plan, 2011 ("Plan 2011")

The Nomination, Remuneration and Compensation Committee ('Committee') of the Board of Directors which comprises a majority of Independent Directors is responsible for administration and supervision of the Stock Option Plans.

Under Plan 2005, as amended, and under Plan 2011, up to 1,100,000 Stock Options and up to 5,352,000 Stock Options, respectively, can be issued to eligible directors (other than promoter directors) and other specified categories of employees of the Company/ subsidiaries. Options are to be granted at market price. As per the SEBI guidelines, the market price is taken as the closing price on the day preceding the date of grant of options, on the stock exchange where the trading volume is the highest. Under Plan 2005, each option, upon vesting, shall entitle the holder to acquire five equity shares of ' 1 each. Options granted up to 28 August 2009 will vest entirely within two years from the grant date, with certain lock-in provisions. Options granted after 28 August 2009 will vest gradually over a period of 5 years from the grant date, without any lock-in provisions.

Under Plan 2011, each option, upon vesting, shall entitle the holder to acquire one equity share of ' 1 each. Options granted will vest gradually over a period of 3 years from the grant date. Vesting of Options is a function of achievement of performance criteria or any other criteria, as specified by the Committee and communicated in the grant letter.

There were no options granted during the year ended 31 March 2018 and 31 March 2017, accordingly disclosures as required under Ind AS 102 w.r.t. weighted average fair value of stock options granted during the year is not applicable.

In 2008-09, members approved constitution of Jubilant Employees Welfare Trust ('Trust') for the purpose of acquisition of equity shares of the Company from the secondary market or subscription of shares from the Company, to hold the shares and to allocate/transfer these shares to eligible employees of the Company/subsidiaries from time to time on the terms and conditions specified under respective Plans. The members authorized grant of loan(s) from time to time to the Trust in one or more tranches, up to Rs, 1,000 million either free of interest or at interest agreed between the Board and the Trust. The outstanding loan to the Trust as at 31 March 2018 is Rs, 92.99 million (31 March 2017: Rs, 111.99 million).

Up to 31 March 2018, the Trust has purchased 6,363,506 equity shares of the Company from the open market, out of interest free loan provided by the Company, of which 2,856,689 (31 March 2017: 2,814,555) shares were transferred to the employees on exercise of Options. The Trust is also holding 170,364 (31 March 2017: 170,878) equity shares of Jubilant Industries Limited issued to it in accordance with the Scheme of Amalgamation and Demerger amongst the Company, Jubilant Industries Limited and others.

* Represents options outstanding out of options granted to employees of the Company which were transferred to Jubilant Generics Limited on account of sale of businesses.

Pursuant to stock option granted to certain employees of the subsidiary under plan 2005, as amended, and under plan 2011, share based payment transaction with employees of subsidiary amounting to Rs, Nil (31 March 2017: Rs, Nil) is recognized in investment in subsidiaries with corresponding credit to share based payment reserve.

Fair value of option granted

The weighted average fair value of options granted for Plan 2005 and Plan 2011 were Rs, 94.18 per option and Rs, 84.90 per option respectively. The fair value at grant date is determined using the Black-Scholes-Merton model which takes into account the exercise price, the term of the option, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The following tables list the inputs to models used for fair valuation of two plans:

Expected volatility has been based on an evaluation of the historical volatility of the share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour.

Expense arising from share-based payment transaction

The expenses arising from share-based payment transaction recognized in profit or loss as part of employee benefit expense for the year ended 31 March 2018 and 31 March 2017, were Rs, Nil and Rs, 0.01 million respectively.

12. During the year ended 31 March 2017, the Company acquired 186,620,000 12% convertible non-cumulative redeemable preference shares of Rs, 10 each of Jubilant Biosys Limited ("JBL") at par in lieu of loan of equivalent amount which was granted to the JBL and derecognized through written off in year prior to transition date of Ind-AS. Accordingly, applying Ind AS 101 assumption for such earlier derecognized financial instrument, the initial recognized value of these shares was considered as Rs, Nil.

13. During the year the National Company Law Tribunal Allahabad Branch has approved a capital reduction scheme in respect of Jubilant Clinsys Limited (JCL), an indirect wholly owned subsidiary of the Company, resulting in realisation of investment amounting to Rs, 270.50 million made by the Company in 6,200,000 8% convertible non-cumulative redeemable preference shares of Rs,10 each and 20,850,000 6% convertible non-cumulative redeemable preference shares of Rs, 10 each amounting to Rs, 62.00 million and Rs, 208.50 million, respectively of JCL.

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