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NOTES TO ACCOUNTS

Metropolis Healthcare Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 6137.61 Cr. P/BV 14.66 Book Value (₹) 83.41
52 Week High/Low (₹) 1360/907 FV/ML 2/1 P/E(X) 51.08
Bookclosure EPS (₹) 23.94 Div Yield (%) 0.00
Year End :2019-03 

1 BACKGROUND OF THE COMPANY AND NATURE OF OPERATION

Metropolis Healthcare Limited (the ‘Company’), was incorporated as Pathnet India Private Limited in the year 2000 and is engaged in the business of providing pathology and related healthcare services. The Company got listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on 15 April 2019 through sale of equity shares by Dr. Sushil Kanubhai Shah and CA Lotus Investments.

2 BASIS OF PREPARATION, MEASUREMENT AND SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation and measurement

a Statement of compliance:

The standalone Balance Sheet of the Company as at 31 March 2019 and the standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Changes in Equity and the standalone Statement of Cash flows for the year ended 31 March 2019 and summary of significant accounting policies and other financial information (together referred as ‘standalone financial statements’) has been prepared under Indian Accounting Standards (‘Ind AS’) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended by the Companies (Indian Accounting Standard) amendment Rules, 2018.

The standalone financial statements of the Company for year ended 31 March 2019 were authorised for issue in accordance with a resolution of the Board of Directors on 13 May 2019.

b Current vs non-current classification:

All the assets and liabilities have been classified into current and non current.

Assets:

An asset is classified as current when it satisfies any of the following criteria:

a) it is expected to be realised in, or is intended for sale or consumption in, the Company’s normal operating cycle;

b) it is held primarily for the purpose of being traded;

c) it is expected to be realised within twelve months after the reporting date; or

d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

Liabilities:

A liability is classified as current when it satisfies any of the following criteria:

a) it is expected to be settled in the Company’s normal operating cycle;

b) it is held primarily for the purpose of being traded;

c) it is due to be settled within twelve months after the reporting date; or

d) the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Operating cycle:

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 services and the time taken between acquisition of assets/inventories for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of the classification of assets and liabilities into current and non-current.

d Basis of measurement

These financial statements have been prepared on accrual and going concern basis and the historical cost convention except for the following assets and liabilities which have been measured at fair value or revalued amount:

- Certain financial assets and liabilities (including derivative instruments) measured at fair value

- Assets and liabilities assumed on business combination measured at fair value

- Equity settled share-based payments measured at fair value

- Net defined benefit asset / liability - Fair value of plan assets less present value of defined benefit obligations.

e Key estimates and assumptions

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

The areas involving critical estimates or judgements are :

i. Determination of useful lives of property, plant and equipment and intangibles; (Note 2.2(b))

ii. Impairment test of non-financial assets (Note 2.2(d))

iii. Recognition of deferred tax assets; (Note 2.2(n))

iv. Recognition and measurement of provisions and contingencies; (Note 2.2(i))

v. Fair value of financial instruments (Note 2.2(e))

vi. Impairment of financial assets (Note 2.2(e))

vii. Measurement of defined benefit obligations; (Note 2.2(i))

viii. Fair valuation of employee share options; (Note 2.2(i))

ix. Fair value measurement of consideration and net assets acquired as part of business combination (Note 2.2(a)).

f Measurement of fair values

Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values (including Level 3 fair values). The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

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

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

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

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

Further information about the assumptions made in measuring fair values is included in the following notes

- Financial instruments (Note 38)

- Share-based payment arrangements (Note 48 (c))

- Business combination

Goodwill with indefinite useful life

Carrying amount of goodwill which is allocated to the pathology division as at 31 March 2019 is Rs. 4,880.90 Lakhs. This goodwill is acquired on account of business acquisition of Sanjeevani Pathology Laboratory and on account of merger of Golwilkar Metropolis Health Services (India) Private LImited (subsidiary company) i.e. goodwill as appearing in consolidated financial statement of the Company on account of merger.

For the purpose of impairment testing, goodwill is allocated to the cash generating units (CGU) , which benefit from the synergies of the acquisition.

The recoverable amount of a CGU is based on its value in use. The value in use is estimated using discounted cash flows over a period of 5 years. We believe 5 years to be most appropriate time scale over which to review and consider annual performance before applying a fix terminal value multiple to year end cash flow.

Operating margins and growth rates for the five year cash flow projections have been estimated based on past experience and after considering the financial budgets/ forecasts approved by management. Other key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent management’s assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.

These assumptions are reviewed annually as part of management’s budgeting and strategic planning cycles. These estimates may differ from actual results. The values assigned to each of the key assumptions reflect the Management’s past experience as their assessment of future trends, and are consistent with external / internal sources of information.

As at 31 March 2019 the estimated recoverable amount of the CGU exceeded its carrying amount and accordingly, no impairment was recognised.

As at 31 March 2018, an impairment loss of Rs. 246.92 lakhs is recognised in relation to goodwill allocated to Sanket Metropolis Health Services (India) Private Limited of Rs. 216.92 lakhs and Metropolis Healthcare (Jodhpur) Private Limited of Rs. 30.00 lakhs. The Loss is mainly on account of uncontrollable adverse local market conditions which has diluted the credit worthiness of the CGUs (Refer Note 35)

The Company has also performed sensitivity analysis calculations on the projections used and discount rate applied. Given the significant headroom that exists, and the results of the sensitivity analysis performed, it is concluded that there is no significant risk that reasonable changes in any key assumptions would cause the carrying value of goodwill to exceed its value in use.

*The Company has call option on shares held by minority shareholders of its subsidiaries which gives the company right to buy such shares in future from the minority shareholders as per the agreed terms. The above values reflect the fair value of these options as on balance sheet date.

During the year ended 31 March 2019, Company has exercised call options in respect of rights to acquire balance shares from non-controlling interests (Refer Note 51(a))

A On 14 September, 2018, Dr. Sushil Kanubhai Shah entered into a deed with Dr. Duru Sushil Shah where in 1,537,772 equity shares of Rs. 10 each were transferred as a gift to Dr. Duru Sushil Shah

* Number of equity shares as on 31 March 2019 are after adjusting bonus shares issued and sub-division of equity shares during year ended 31 March 2019.

# Includes five Equity Shares each held by Mayur Shah (jointly with Meera Shah) and Dr. Nilesh Shah as nominees of Dr. Sushil Kanubhai Shah

## Includes five Equity Shares held by Ameera Sushil Shah as nominee of Metz Advisory LLP;

(d) Terms/rights attached to equity shares

The Company has only one class of Equity shares having a par value of Rs. 2 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend, if proposed by the Board of Directors, will be subject to the approval of the shareholders in the ensuing Annual General Meeting except interim dividend.

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

(e) Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date

- Issue of 3,85,990 (before spilt with face value of Rs. 10 each) bonus shares during the year ended 31 March 2019

- During the year ended 31 March 2019, 1 share (before split with face value of Rs. 10 each) has been allotted to the Shareholders of Bacchus Hospitality Services and Real Estate Private Limited pursuant to the scheme of amalgamation (Refer Note 41 (iii))

- During the year ended 31 March 2019, 64,596 shares (before split with face value of Rs. 10 each) have been allotted as consideration for swap of shares with the shareholders of subsidiary companies on acquisition of furthers take(Refer Note 51(a))

- Buy-back of 320,484 shares (before split with face value of Rs. 10 each) which was brought back pursuant to section 68 of the Companies Act, 2013 during the year ended 31 March 2016.

(g) Pursuant to Shareholder’s resolution passed at the Extraordinary General Meeting (EGM) held on 14 September 2018, the Shareholders approved issuance of Bonus shares to the existing shareholders in the ratio of 1:25 i.e. one bonus equity shares for twenty five existing equity shares.

Further in the same meeting, the equity share capital (Authorised, Issued and Paid-up) of the Company was subdivided from Rs. 10/- (Rupees ten) each to equity shares of Rs. 2/- (Rupees two) each. The capital clause of the Memorandum of Association was substituted to reflect the sub-division of Equity Shares of the Company from Rs. 5,915.08 Lakhs comprising of 59,150,803 Equity Shares of Rs. 10 each to Rs. 5,915.08 Lakhs comprising of 295,754,015 Equity Shares of Rs. 2 each. The revised authorised share capital of the Company now stands at 295,754,015 equity shares of Rs. 2/- each.

(h) Change in authorised share capital : During the year ended 31 March 2019, the authorised share capital of the Company has increased as per clause 15 of the scheme of amalgamation. (Refer note 41 for further details). The authorised capital of the Company was increased from Rs. 5,550 Lakhs comprising of 55,000,000 Equity Shares of Rs. 10 each to Rs. 5,915.08 Lakhs comprising of 59,150,803 Equity Shares of Rs. 10 each;

Nature and purpose of Reserves Securities Premium

The amount received in excess of face value of the equity shares is recognised in Securities Premium. It can be used to issue bonus shares, to purchase of its own shares, to provide for premium on redemption of shares or debentures, write off equity related expenses like underwriting costs, etc.

General Reserve

General Reserve is free reserve which is created by transferring funds from retained earnings to meet future obligations or purposes.

Capital Redemption Reserve

The Company recognises the capital redemption reserve from its retained earnings as per the provisions of Companies Act, 2013, as applicable.

Employee stock options reserve

The Company has established equity settled share based payment plan for certain categories of employees. Refer Note 48(c) )

Retained Earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders. Retained Earnings is a free reserve available to the Company.

Debt instruments fair valued through OCI

This comprises changes in the fair value of debt instruments recognised in other comprehensive income and accumulated within equity. The Company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered. Any changes in future taxable income would impact the recoverability of deferred tax assets.

(e) Tax losses carried forward

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry forward of unabsorbed depreciation and tax losses can be utilised. Accordingly, in view of uncertainty, Deferred tax assets have not been recognised in respect of the following items, because it is not probable that future capital gains profit will be available against which the Company can use the benefits therefrom.

3 EARNINGS PER SHARE (EPS)

Basic EPS calculated by dividing the Net profit for the year attributable to equity holders by the weighted average number of Equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders (after adjusting profit impact of dilutive potential equity shares, if any) by the aggregate of weighted average number of Equity shares outstanding during the year and the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.

* Following share options and share warrants were excluded from the calculation of diluted weighted average number of equity shares as their effect is anti-dilutive:

For the year ended 31 March 2018 - 10,80,400 share options Note:

Pursuant to Shareholder’s resolution passed at the Extraordinary General Meeting (EGM) held on 14 September 2018, the Shareholders approved issuance of Bonus shares to the existing shareholders in the ratio of 1:25 i.e. one bonus equity shares for twenty five existing equity shares. Further in the same meeting, the equity share capital (Authorised, Issued and Paid-up) of the Company was subdivided from Rs. 10/- (Rupees ten) each to equity shares of Rs. 2/- (Rupees two) each. Accordingly, the exercise price and the outstanding employee stock options would be adjusted proportionately.

Ind AS 33 ‘Earnings per share’, requires an adjustment in the calculation of basic and diluted earnings per share for all the periods presented if the number of equity or potential equity shares outstanding change as a result of share sub-division and bonus. The weighted average numbers of shares and consequently the basic and diluted earnings per share have accordingly been adjusted in the financial statements.

4 FINANCIAL INSTRUMENTS - FAIR VALUES

A. Accounting classification and fair values

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

**The fair value in respect of the unquoted equity investments cannot be reliably estimated. The Company has currently measured them at their cost, i.e. Rs. 175.28 Lakhs (31 March 2018: Rs. 175.28 Lakhs)

The Fair value of cash and cash equivalents, other bank balances, trade receivables, trade payables approximated their carrying value largely due to short term maturities of these instruments.

Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual creditworthiness of the counterparty. Based on this evaluation, allowances are taken to account for expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.

The call options are fair valued at each reporting date through statement of profit and loss.

B. Fair value hierarchy

Ind AS 107, ‘Financial Instrument - Disclosure’ requires classification of the valuation method of financial instruments measured at fair value in the Balance Sheet, using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurements). The hierarchy gives the highest priority to un-adjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to un-observable inputs (Level 3 measurements). The three levels of the fair-value-hierarchy under Ind AS 107 are described below:

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level. This is the case for unlisted equity securities included in level 3.

Financial instruments measured at fair value

The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments measured at fair value in the balance sheet as well as the significant unobservable inputs used.

(C) Financial risk management

The Company’ Board of Directors has overall responsibility for the establishment and oversight of the company’ risk management framework.

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

- Credit risk

- Liquidity risk

- Market risk 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 trade and other receivables and cash and cash equivalents. The maximum exposure to credit risk in case of all the financial instruments covered below is restricted to their respective carrying amount.

a. Trade receivables and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

The Company does not have any significant concentration of credit risk. Further, company has one customer (31 March 2018 one customer) which accounts for 10% or more of the total trade receivables at each reporting date.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix.

b. Cash and cash equivalents and Other bank balances

The Company held cash and cash equivalents and other bank deposits as at 31 March 2019 Rs. 3,452.68 Lakhs (31 March 2018: Rs. 3,726.25 Lakhs). The cash and cash equivalents and other bank balances are held with bank with good credit ratings.

c. Investments

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

d. Other loans and advances

Loans and advances mainly consist security deposit and advances to related parties.

The security deposit pertains to rent deposit given to lessors as at 31 March 2019 Rs. 1,483.85 Lakhs (31 March 2018 Rs. 965.63 Lakhs). The Company does not expect any losses from non-performance by these counter-parties; The parties which have defaulted in the past is mainly on account of uncontrollable adverse local market conditions which has diluted parties credit worthiness.

The loans and advances majorly pertains to loans to subsidiaries, joint venture and associates. These loans and advances which are outstanding as at 31 March 2019 Rs. 1,308.42 Lakhs (31 March 2018: Rs. 1,390.72 Lakhs), have been generally regular in making payments and hence it does not expect significant impairment losses on its current profile of outstanding advances. The advances which have defaulted in the past is mainly on account of uncontrollable adverse local market conditions which has diluted parties credit worthiness.

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. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities. 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.

Maturities of financial liabilities

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities:

Market risk:

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. The Company is exposed to market risk primarily related to foreign exchange rate risk and interest rate risk. The objective of market risk management is to avoid excessive exposure in foreign currency revenues and costs.

a. Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has foreign currency trade payables and receivables and is therefore exposed to foreign exchange risk.

Exposure to currency risk (Exposure in different currencies converted to functional currency i.e. INR)

The currency profile of financial assets and financial liabilities as at 31 March 2019 are as below:

Sensitivity analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against foreign currencies at 31 March 2019 and 31 March 2018 would have affected the measurement of financial instruments denominated in foreign currencies and affected Statement of profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

b. Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

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

The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

5 CAPITAL MANAGEMENT

The objective of the Company’s capital management is to ensure that it maintains an efficient capital structure and healthy capital ratios to support its business and maximise shareholder value.

The Company has equity capital and other reserves attributable to the equity shareholders, as the only source of capital and the company does not have any interest bearing borrowings/ debts as on the reporting date. Hence, the Company is not subject to any externally imposed capital requirements.

6 RELATED PARTY DISCLOSURES, AS REQUIRED BY INDIAN ACCOUNTING STANDARD 24 (IND AS 24) ARE GIVEN BELOW:

A. Relationships -

Category I: Subsidiaries:

Desai Metropolis Health Services Private Limited

Sudharma Metropolis Health Services Private Limited

R.V. Metropolis Diagnostics & Health Care Center Private Limited

Dr. Patel Metropolis Healthcare Private Limited

Mulay Metropolis Healthcare Private Limited (upto 26 September 2017)

Micron Metropolis Healthcare Private Limited Ekopath Metropolis Lab Services Private Limited Metropolis Healthcare (Mauritius) Limited

Amin’s Pathology Laboratory Private Limited (Formerly known as Metropolis Wellness Products Private Limited)

Lab One Metropolis Healthcare Services Private Limited

Metropolis Healthcare Lanka (Pvt) Limited (Formerly known as Nawaloka Metropolis Laboratories Private Limited, Sri Lanka)

Bokil Golwilkar Metropolis Healthcare Private Limited Raj Metropolis Healthcare Private Limited

Step down Subsidiary companies

Metropolis Bramser Lab Services (Mtius) Limited Metropolis Healthcare Ghana Limited Metropolis Star Lab Kenya Limited

Category II: Joint Venture:

Metropolis Histoxpert Digital Services Private Limited Category III: Associates:

Star Metropolis Health Services Middle East LLC, Dubai Category III: Key Management Personnel (KMP)

Dr. Sushil Kanubhai Shah, Chairman and Executive Director Ms. Ameera Sushil Shah, Managing Director Mr Vijender Singh, Chief Executive Officer Mr Tushar Karnik, Chief Financial Officer Mr Jayant Prakash, Company Secretary

Dr. Duru Sushil Shah, Non-Executive Director (upto 7 September 2018)

Mr. Mihir Jagdish Doshi, Independent Director (upto 7 September 2018)

Mr. Rajiv Devinder Sahney, Independent Director (upto 7 September 2018)

Mr. Neeraj Bharadwaj, Non-Executive Director (upto 24 September 2018)

Mr. Mihir Jagdish Doshi, Non-Executive Director (w.e.f. 7 September 2018)

Mr. Milind Shripad Sarwate, Independent Director (w.e.f. 7 September 2018)

Mr. Vivek Gambhir, Independent Director (w.e.f. 7 September 2018)

Mr. Sanjay Bhatnagar, Independent Director (w.e.f. 7 September 2018)

Category IV: Relatives of KMP

Dr. Duru Sushil Shah Mr. Hemant Sachdev

Category V: Companies in which key management personnel or their relatives have significant influence (Other related parties)

Metz Advisory LLP

Metropolis Health Products Retail Private Limited Chogori Distribution Private Limited

Centre for Digestive and Kidney Disease (India) Private Limited

7 MERGER OF SUBSIDIARY COMPANIES

(i) Pursuant to the Scheme of Amalgamation (the Scheme) sanctioned by the Hon’ble National Company Law Tribunal (NCLT) vide its order dated 30 August 2018, Bacchus Hospitality Services and Real Estate Private Limited and Wholly owned Subsidiary Companies - Metropolis Healthcare (Chandigarh) Private Limited, Metropolis Healthcare (Jodhpur) Private Limited, Final Diagnosis Private Limited, Sanket Metropolis Health Services (India) Private Limited and Golwilkar Metropolis Health Services (India) Private Limited have been merged with the Company with effect from 1 April 2018 (the appointed date). The Scheme of Amalgamation came into effect on 8 September 2018 which was the date on which a certified copy of the order of the NCLT, Mumbai bench sanctioning the Scheme of Amalgamation was filed with the RoC (“Effective Date”),

(ii) Pursuant to scheme of Amalgamation, as approved by the Hon’ble National Company Law Tribunal (NCLT); Mumbai bench vide its Order dated 30 August 2018, wholly owned subsidiaries, has been transferred to Company w.e.f. 1 April 2018, Consequently, effect of the scheme has given in the financial statements in accordance with Ind AS 103 “Business Combinations”. The previous year have been restated to give effect to the merger; Book value of assets and liabilities related to the wholly owned subsidiaries transferred to the company i.e. 1 April 2018 are as under;

(iii) Bacchus holds 2,657,730 fully paid up equity shares of Rs. 10 each of the Company i.e. 27.85% of the total outstanding equity share capital of the Company. Pursuant to the scheme, 957,713 fully paid up equity shares of Rs. 10 each of the Company has been issued and allotted, credited as fully paid up, for every 10,00,000 equity shares of Rs. 10 each held in the Company. Shares held by Bacchus in the Company will be cancelled and any difference on cancellation of shares over the issue of new equity shares shall be adjusted with Security Premium arising, if any, on issue of new equity shares.

(iv) All the companies merged as part of business combination were in the business of providing pathology and related healthcare services.

(v) Raj Metropolis Healthcare Services Private Limited and Bokil Golwilkar Metropolis Healthcare Private Limited were the subsidiaries of Sanket Metropolis Health Services (India) Private Limited and Golwilkar Metropolis Health Services (India) Private Limited respectively. During current year Sanket Metropolis Health Services (India) Private Limited and Golwilkar Metropolis Health Services (India) Private Limited merged with Metropolis Healthcare Limited (refer (i) above) and consequently these two companies become direct subsidiary of Metropolis Healthcare Limited.

Other commitments:

The Company has entered into reagent agreement for a period ranging from 3 to 6 years with some of its major raw material suppliers to purchase agreed value of raw materials.

The value of purchase commitments for the remaining number of years are Rs. 42,855.62 Lakhs (31 March 2018 Rs. 14,573.26 Lakhs) of which annual commitment for next year is Rs. 15,694.49 Lakhs (31 March 2018 Rs. 4,871.23 Lakhs) as per the terms of these arrangements.

*Company has entered into a share purchase agreement to buy remaining 30% stake of Golwilkar Metropolis Health Services (India) Private Limited. For purchase of remaining stake, consideration to be paid as per valuation of Golwilkar has been determined to be Rs. 3,037.51 Lakhs. However, on account of a breach of non-compete provision as per the terms of the shareholder’s agreement dated 14 October 2005, the Company has filed an application before a sole arbitrator-Justice A.V. Nirgude (Retired) at Mumbai against Dr. Ajit S. Golwilkar, Dr. Awanti T. Mehendale and Dr. Vinanti N. Patankar (“Respondents”), claiming 25% of consideration determined i.e. Rs. 759.38 Lakhs as damages. This matter is currently pending before the arbitrator.

8 OPERATING LEASE OBLIGATIONS

The Company has taken various commercial properties on leases for its offices, laboratories and staff accommodation. The lease expenses in the current year amounts to Rs. 4,368.22 Lakhs (31 March 2018, Rs. 3,097.72 Lakhs). Future minimum rentals payable under non-cancellable operating leases are as follows:

9 MICRO AND SMALL ENTERPRISES

There are no micro and small enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31 March 2019. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006, has been determined to the extent such parties have been identified on the basis of information available with the Company.

10 EMPLOYEE BENEFITS

(a) Defined benefits plan

The Company has gratuity as defined benefit retirement plan for its employees. Details of the same as at year end are as follows:

H. Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

(b) Defined contribution plan

The Company contributes towards statutory provident fund as per the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and towards employee state insurance as per the Employees’ State Insurance Act, 1948. The amount of contribution to provident fund and Employee State Insurance Scheme recognised as expenses during the year is Rs. 612.56 Lakhs (31 March 2018 Rs. 516.76 Lakhs).

(c) Employee Stock Option Schemes

Description of share-based payment arrangements:

As at 31 March 2019 and 31 March 2018 Company had following share-based payment arrangements:

MESOS2007 -

In the earlier years, Company had instituted an Employees Stock Option Scheme called “Metropolis Employee Stock Option Scheme, 2007 (MESOS -2007)” and subsequently adopted a revised scheme on 2 June 2009 titled “MESOS - 2007 revised” as approved by the Board of directors and Nomination and Remuneration Committee. All the options which were granted under this scheme are vested as of 1 April 2016.

The Company has elected not to apply Ind AS 102 Share-based payment to equity instruments that vested before the date of transition to Ind AS. Accordingly, the Company has measured only the unvested stock options on the date of transition as per Ind AS 102.

MESOS 2015 -

The Company has instituted “Metropolis Employee Stock Option Plan 2015 “(MESOP 2015) for eligible employees. In terms of the said plan, options to the employees shall vest at the rate of 30% of Grant on 36 months from Grant Date, 35% of Grant on 48 months from Grant Date and 35% of Grant on 60 months from Grant Date. The vested options can be exercised on earlier of Listing of Company Shares on an Indian Stock Exchange or 60 month from the date of the grant. Further option can only be exercised during the exercise window specified by the Company. Each Option carries with it the right to purchase one equity share of the Company at the exercise price determined by Nomination and Remuneration Committee.

On 19 September 2017, consent was given by the Nomination and Remuneration Committee, where in vesting schedule was modified to grant options under Metropolis Employee Stock Options Scheme, 2015 (MESOS 2015). As per modified terms, option to

- Existing employees (person who is in continuous employment with the Company since 1 January 2016 or prior thereto) shall vest at the rate of 50% of Grant on 1 January 2018, 25% of Grant on 1 January 2019 and 25% of Grant on 1 January 2020.

- New employees (person who is in continuous employment with the Company after 1 January 2016.) shall vest at the rate of 50% of Grant on completion of 2 years from date of joining, 25% of Grant on completion of 3 years from date of joining and 25% of Grant on completion of 4 years from date of joining.

- No additional options to be granted to stock options under MESOS 2015 as per the resolution dated 24 September 2018, passed by the Nomination & Remuneration Committee

During the year ended 31 March 2019, 32,800 options were exercised by the employees (including ex-employees) against equity shares. Expense arising from surrender of 9,875 options against cash under MESOS 2007 scheme during the year ended 31 March 2019 Rs. 355.45 Lakhs.

* On account of split and bonus with conversion factor of 5:2

The options outstanding at 31 March 2019 have an exercise price of Rs. 705.77 (31 March 2018 Rs. 3,670) and a weighted average remaining contractual life of 6 months to 2 years (31 March 2018: 1 to 3 years)

The expense arising from MESOS 2015 scheme during the year is Rs. 88.44 Lakhs (31 March 2018 Rs. 166.01 Lakhs); Measurement of Fair value

The fair value of employee share options has been measured using Black Scholes Option Pricing Model and is charged to the standalone statement of Profit and Loss. The fair value of the options and the inputs used in the measurement of the grant date fair values of the equity settled share based payment plans are as follows:

11 SEGMENT REPORTING

The Company has presented segment information in the consolidated financial statements which are presented in the same financial statements. Accordingly, in terms of Ind AS 108 ‘Operating Segments’, no disclosures related to segments are presented in this standalone Ind AS financial statements

12 CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has spent Rs. 79.45 Lakhs (31 March 2018 Rs. 64.10 Lakhs) Lakhs towards various schemes of Corporate Social Responsibility as prescribed under section 135 of the Companies Act, 2013. The details are:

a) Gross amount required to be spent by the Company during the year is Rs. 223.33 Lakhs (31 March 2018 Rs. 190.90 Lakhs);

b) Amount spent during the period on;

13 (a) DISCLOSURE UNDER SECTION 186 (4) OF THE COMPANIES ACT, 2013

All the loans given by the Company to its subsidiary companies are under section 293 of the Companies Act, 1956, accordingly, section 186 of the Companies Act, 2013 is not applicable to the Company.

Investments :

Details of investments made during the year are as under:

* Investment of Rs. 0.35 Lakhs sold off during the year ended 31 March 2018

# During the year 31 March 2019, out of total investment for acquisition of additional stake in following subsidiary companies -Desai Metropolis Health Services Private Limited - Rs. 895.86 Lakhs,

-Sudharma Metropolis Health Services Private Limited Rs. 524.15 Lakhs,

-R.V. Metropolis Diagnostics & Healthcare Centre Private Limited - Rs. 824.61 Lakhs and

-Lab One Metropolis Healthcare Services Private Limited Rs. 389.61 Lakhs is settled by way of issue of 64,596 equity shares of the company at value of Rs. 4,078 per share and remaining balance is settled by cash.

13 (b) DEFERRED PAYMENT CONSIDERATION

During the earlier years, the Company has entered into a business purchase agreement to acquire Sanjeevani Pathology Laboratory located at Rajkot for an initial purchase consideration of Rs. 4,104.00 Lakhs, an amount of Rs. 2,300.00 Lakhs is to be paid by the Company to Dr. Kiritkumar Patel, owner of Sanjeevani Pathology Laboratory in 7 tranches starting from February 2017 to March 2021.

The deferred consideration of Rs. 2,300.00 Lakhs has been meaured at fair value (Rs. 2,100.96 Lakhs) on initial recognition and the difference of Rs. 199.04 Lakhs (31 March 2018 : Rs. 199.04 Lakhs) will be recognise as finance cost on EIR basis over the payment tenure; During year ended 31 March 2019 Rs. 36.88 Lakhs (31 March 2018 Rs. 115.60 Lakhs) charged to statement of profit and loss (refer note 33).

A In case of investment in Dr. Patel Metropolis Healthcare Private Limited during year ended 31 March 2019, out of total consideration of Rs. 868.92 Lakhs, an amount of Rs. 100 Lakhs is to be paid by Company in 2 tranches (Rs. 80 Lakhs to be paid on 14 September 2021 and remaining Rs. 20 Lakhs to be paid on 14 September 2023)

The deferred consideration of Rs. 100 Lakhs has been measured at fair value (Rs. 80.40 Lakhs) on initial recognition and the difference of Rs. 19.60 Lakhs will be recognise as finance cost on EIR basis over the payment tenure; During year ended 31 March 2019 Rs. 2.92 Lakhs (31 March 2018 ‘ Nil) charged to statement of profit and loss (refer note 33).

a During the year company made investment in Bokil Golwilkar Metropolis Healthcare Private Limited for a consideration of Rs. 192 Lakhs, of which an amount of Rs. 60 Lakhs is to be paid by Company in 2 tranches (Rs. 40 Lakhs to be paid on 25 August 2019 and remaining Rs. 20 Lakhs to be paid on 25 February 2022)

The deferred consideration of Rs. 60 Lakhs has been measured at fair value (Rs. 55.22 Lakhs) on initial recognition and the difference of Rs. 4.78 Lakhs will be recognise as finance cost on EIR basis over the payment tenure; During year ended 31 March 2019 Rs. 0.33 Lakhs (31 March 2018 ‘ Nil) charged to statement of profit and loss (refer note 33).

14 SALE OF INVESTMENT

During the previous year ended 31 March 2018 the company sold its investments in Mulay Metropolis Healthcare Private Limited, for aggregate considration of Rs. 62.16 Lakhs. Loss on disposal of said investment aggregating to Rs. 73.28 Lakhs has been recorded as other expenses (Refer Note 35)

15 INVESTMENT AND RECEIVABLE FROM STAR METROPOLIS HEALTH SERVICES MIDDLE EAST LLC, DUBAI

As at 31 March 2019, the Company has an investment of Rs. 129.85 Lakhs (31 March 2018 Rs. 129.85 Lakhs) and receivable of Rs. 640.88 Lakhs (31 March 2018 Rs. 640.88 Lakhs) from Star Metropolis Health Services Middle East LLC (‘Star Metropolis’), an associate of the Company. Due to non availability of financial information from the associate entity, the value of the investment and receivables cannot be determined. Hence, Management on prudent basis, has provided for its investments and receivable from the said associate.

16 SHARE WARRANT

On 31 December 2015, the Company had issued 1 warrant on preferential basis to Metz Advisory LLP which forms part of the public shareholders of the Company. At the time of subscription, Rs. 0.20 Lakhs has been paid and the balance is payable at the time of exercising the warrant.

As per the terms, warrant shall upon occurrence of a Warrant Exercise Event and payment of Warrant Exercise Price of Rs. 2,579/- is convertible into 8,703 equity or 11,778 shares of face value of Rs. 10 depending on the occurrence of qualifying merger up to 31 March 2016.

Since, as on 31 March 2016, the warrants are convertible into variable number of shares at a predetermined fixed price at the time of warrant exercise event, such warrants will meet the definition of liability as per Ind AS 32. Accordingly, the Company has classified money received on issue as liability as on 31 March 2016.

As per the terms as on 1 April 2016, such warrant shall upon occurrence of a Warrant Exercise Event and payment of Warrant Exercise Price of Rs. 2,579/- is convertible into 8,703 equity shares of face value of Rs. 10.

Since, the warrants are converted into fixed number of shares at a predetemined fixed price at the time of warrant exercise event, such warrants will meet the definition of an equity instrument as per Ind AS 32. Accordingly, the Company has classified money received on issue as Equity as on 1 April 2016.

During the year ended 31 March 2019, such Share warrants were exercised by payment of warrant exercise price of Rs. 2,579/- per share.

17 TRANSFER PRICING

The Company’s management is of the opinion that its international and domestic transactions are at arm’s length as per the independent accountants report for the year ended 31 March 2018. Management continues to believe that its international transactions post March 2018 and the specified domestic transactions are at arm’s length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expense and that of provision of taxation.

18 Metropolis Healthcare Lanka Private Limited (Metropolis Lanka) has bought back 250,000 ordinary shares held by Nawaloka Hospitals PLC (“Nawaloka”) in Metropolis Lanka pursuant to memorandum of understanding (MOU) dated 31 March 2017. As per the MOU, the buy-back consideration payable by Metropolis Lanka was adjusted against certain receivables payable by Nawaloka to Metropolis Lanka. As a 31 March 2019, Nawaloka is yet to surrender physical share certificates for cancellation to Metropolis Lanka. Currently, the shareholding records in the books of Metropolis Lanka assumes that the buy-back has been effectuated as per the MOU and Metropolis Healthcare Limited is reflected as 100% owner of Metropolis Lanka.

19 SUBSEQUENT EVENT

The Company has completed Initial Public Offering (IPO) of 13,685,095 Equity Shares of Rs. 2/- each at an issue price of Rs. 880.00 per equity share aggregating to Rs. 1,20,428.84 Lakhs consisting of an Offer for Sale of 62,72,335 Equity Shares by Dr. Sushil Kanubhai Shah (the “Promoter Selling Shareholder”) and of 74,12,760 Equity Shares by CA Lotus Investments (the “Investor Selling Shareholders”). All the expenses in connection with the IPO were borne by the Selling Shareholders. The equity share of Company were listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE) on 15 April 2019.

20 As at balance sheet date, the Company is awaiting response from the relevant regulatory authorities for the application filed under section 441 of the Companies Act, 2013, for compounding of the non - compliance committed under section 134(3)(o) read with section 135 of the Companies Act, 2013 in respect of disclosure regarding corporate social responsibility in the Boards’ Report for the year ended on 31 March 2015.

However, the management has provided the amount of potential penalty in the books of accounts and believes that the additional penalty, if any, that may arise due to the default would not be material.

21 Consequent to the issuance of “ Guidance Note on Division -II - Ind AS Schedule III to the Companies Act, 2013 certain items of the financial statements have been regrouped/reclassified.

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