1. Material Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set
out below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
A. Basis of Preparation
(i) Compliance with Ind AS
These financial statements have been prepared in accordance with Indian Accounting
Standards (referred to as “Ind AS”) notified under the Companies (Indian Accounting
Standards) Rules, 2015 as amended from time to time, notified under section 133 of the
Companies Act, 2013 (‘Act') and other relevant provisions of the Act.
(ii) Basis of Measurement
The financial statements have been prepared on a historical cost basis, except for certain
financial instruments that are measured at fair values and net defined benefit asset/
(liability) at fair value of plan assets less present value of defined benefit obligation at the
end of each reporting period as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration in exchange for
goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date, regardless
of whether that price is directly observable or estimated using another valuation technique.
The Company uses valuation techniques that are appropriate in the circumstances and
for which sufficient data is available to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable inputs.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2,
or 3 based on the degree to which the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability
(iii) Operating Cycle
Based on the nature of products and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalents, the Company has ascertained
its operating cycle as 12 months for the purpose of current / non-current classification of
assets and liabilities.
B. Foreign Currency Translation
(i) Functional and Presentation Currency
Items included in the financial statements of the Company are recognised using the
currency of the primary economic environment in which the Company operates (‘the
functional currency'). The financial statements are presented in ‘Indian Rupees' ('), which
is the Company's functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in the Statement of Profit and Loss.
C. Property, Plant and Equipment
Items of Property Plant and Equipment are stated in the balance sheet at historical cost less
accumulated depreciation and impairment loss, if any. The historical cost of Property, Plant
and Equipment comprises of its purchase price and cost directly attributable to bringing the
assets to their working condition for their intended use. The cost of any item of PPE shall be
recognised as an asset if and only if it is probable that future economic benefits associated with
the item will flow to the Company and the cost of the item can be measured reliably
Capital Work-in-Progress represents Property Plant and Equipment that are not ready for their
intended use as at the balance sheet date.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Company and the cost of the item can be measured reliably. Property, Plant and
Equipment is derecognised upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset.
On transition to Ind AS, the Company elected to continue with the carrying value of all of its
Property, Plant and Equipment recognised as at 1st April, 2015 (“transition date”) measured as
per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Depreciation:
The Company depreciates its Property, Plant and Equipment using Straight Line Method (SLM)
over their estimated useful lives as prescribed under Part C of Schedule II to the Companies
Act, 2013 (the “Act”) and management estimates, as applicable. The estimated useful lives of
the assets are as follows:
# Based on technical evaluation, the management believes that the useful lives as given above
best represent the period over which the management expects to use these assets. Hence
the useful lives for these assets is different from the useful lives as prescribed under Part C
of schedule II of the Act.
Leasehold improvements are depreciated over the primary period of the lease agreement
or the useful life, whichever is shorter
Mobile Handsets and Mobile Devices are fully depreciated in the year of purchase.
Estimated useful lives, residual values and depreciation methods are reviewed periodically,
including at each financial year end, taking into account commercial and technological
obsolescence as well as normal wear and tear and adjusted prospectively if appropriate.
Gains or losses arising from disposal of Property, Plant and Equipment are determined
as the difference between the sale proceeds and the carrying amount of the asset and are
recognised in the Statement of Profit and Loss.
D. Impairment of Non-Financial Assets
Assets that are subject to depreciation or amortisation are tested at each balance sheet date
for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset's or
cash generating unit's (CGU) carrying amount exceeds its recoverable amount and is recognised
in the Statement of Profit and Loss. The recoverable amount is the higher of an asset's fair value
less costs of disposal and value in use. In assessing the value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risk specific to the asset for which the
estimates of the future cash flows have not been adjusted.
When an impairment loss subsequently reverses, the carrying amount of the asset or the
CGU is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment
loss is recognised immediately in the Statement of Profit and Loss.
E. Inventories
Inventories are stated at lower of cost and net realisable value. Cost is determined on moving
weighted average basis. Cost of inventory comprises cost of purchase and other cost incurred in
bringing the goods to their present condition and location. Net realisable value is the estimated
selling price in the ordinary course of business less the estimated costs necessary to make the
sale. Net realisable value comparison is made on item by item basis.
The factors that the Company considers in determining the provision for slow moving, obsolete
and other non-saleable inventory include estimated shelf life, planned product discontinuances,
price changes and ageing of inventory to the extent each of these factors impact the Company's
business and markets. The Company considers all these factors and adjusts the inventory
obsolescence to reflect its actual experience on a periodic basis.
F. Non-Current/Current Assets Held for Sale
Non-current/current assets are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use, the asset is
available for immediate sale in its present condition and a sale is considered highly probable.
Non-current/current assets are not depreciated or amortised while they are classified as held
for sale and are measured at lower of their carrying amount and fair value less cost to sell.
Non-current/current assets and liabilities classified as held for sale are presented separately
from the other assets and liabilities in the balance sheet.
G. Trade Receivables
Trade receivables are amounts due from customers for sale of goods or services performed in
the ordinary course of business. Trade receivables without a significant financing component
are initially measured at the transaction price and subsequently measured at amortised cost
less provision for impairment by applying the expected credit loss method.
H. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cheques on hand, demand deposits with
banks and other short-term, highly liquid investments with original maturities of three months
or less, that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of change in value.
I. Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to
the contractual provisions of the instruments.
Financial assets (unless it is a trade receivable without a significant financing component)
and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are recognised immediately in the
Statement of Profit and Loss.
Financial Assets
The Company classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss), and
• those measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets
and the contractual terms of the cash flows. Financial assets are not reclassified subsequent to
their initial recognition unless the Company changes its business model for managing financial
assets, in which case all affected financial assets are reclassified on the first day of the first
reporting period following the change in the business model.
Amortised Cost:
Financial assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost. The
amortised cost of a financial asset is the amount at which the financial asset is measured at
initial recognition minus principal repayments, plus or minus the cumulative amortisation using
the effective interest method of any difference between that initial amount and the maturity
amount adjusted for any Loss allowance. A gain or loss on a financial asset that is subsequently
measured at amortised cost is recognised in the Statement of Profit and Loss when the asset
is derecognised or impaired. Interest income from these financial assets is included in other
income using the effective interest rate method. The Company does not have financial assets
that are subsequently measured either at fair value through other comprehensive income or at
fair value through the Statement of Profit and Loss.
Impairment of Financial Assets:
The Company applies the expected credit loss model for recognising impairment loss on its
financial assets.
The Company measures the loss allowance for financial instruments at an amount equal to the
lifetime expected credit losses if the credit risk on that financial instruments has increased
significantly since initial recognition. If credit risk on financial instruments has not increased
significantly since initial recognition, the Company measures the loss allowance for that financial
instrument at an amount equal to 12 months expected credit losses.
For trade receivables, the Company always measures the loss allowance at an amount equal to
lifetime expected credit losses. Further for the purpose of measuring lifetime expected credit
loss allowance for trade receivables the Company has used practical expedient as permitted
under Ind AS 109. The expected credit loss allowance is computed based on provision matrix
which take into account historical credit loss experience and adjusted for forward looking
information.
Derecognition of Financial Assets:
The Company derecognises a financial asset when the contractual rights to the cash flows
from the asset expire, or when it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another party. If the Company neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred
asset, the Company recognises its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Company retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Company continues to recognise the financial
asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset, the difference between the asset's carrying amount and
the sum of the consideration received/receivable is recognised in Statement of Profit and Loss.
Financial Liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest
method. The interest expense is included in finance costs line item. The Company derecognises
financial liabilities when, and only when, the Company's obligations are discharged, cancelled or
have expired. The Company also derecognises a financial liability when its terms are modified
and the cash flows of the modified liability are substantially different, in which case a new
financial liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished
and the consideration paid (including any non-cash assets transferred or liabilities assumed) is
recognised in the Statement of Profit and Loss.
J. Revenue Recognition
Sale of Traded goods
Revenue from contracts with customers is recognised when the Company satisfies a performance
obligation which is to deliver products to customers based on purchase orders received.
Revenue from sales of products is recognized at a point in time when control of the products
is transferred to the customer, generally upon delivery, which the Company has determined
is when physical possession, legal title and risks and rewards of ownership of the products
transfer to the customer and the Company is entitled to payment. Revenue towards satisfaction
of a performance obligation is measured at the amount of the transaction price (net of variable
consideration) allocated to that performance obligation. The transaction price of goods sold
and services rendered is net of variable consideration on account of various discounts and
schemes offered by the Company as part of the contract.
Provision is made for the non-saleable returns of goods from the customers estimated on the
basis of historical data of sales return trends with respect to the shelf life of various products.
Such provision for non-saleable sales returns is reduced from sale of products for the year
Sale of Services
Service revenue is measured based on the consideration specified in a contract with a customer
Service revenue is recognised at a point in time when the Company satisfies performance
obligations by transferring the promised services to its customers. Service income is accounted
for net of goods and services tax.
Commission Income
Commission income from customers is recognised in line with the contractual terms with the
customer
K. Interest Income
Interest income is recognised using the effective interest method.
L. Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to offset the recognised amounts and there is an intention
to settle on a net basis, or realise the asset and settle the liability simultaneously The legally
enforceable right must not be contingent on future events and must be enforceable in the normal
course of business and in the event of default, insolvency or bankruptcy of the Company or the
counterparty
M. Income Tax
Income tax expense comprises current tax expense and the net change in the deferred tax asset
and liability during the year Current and deferred taxes are recognised in the Statement of Profit
and Loss, except to the extent they relate to items that are recognised in other comprehensive
income or directly in equity; in which case, the tax is also recognised in other comprehensive
income or directly in equity respectively.
Current Tax
The current tax charge for the year is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period as adjusted for taxes in respect of
previous years. Management periodically evaluates positions taken in tax returns, including
assessment orders received during the year, with respect to situations in which applicable tax
regulation is subject to interpretation. The amount of current tax payable or receivable is the
best estimate of the tax amount expected to be paid or received that reflects uncertainty related
to income taxes, if any It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities. Current tax assets and liabilities are offset only if
there is a legally enforceable right to set off the recognised amounts, and it is intended to realise
the asset and settle the liability on a net basis or simultaneously
The Company has determined that interest and penalties related to income taxes, including
uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted
for them under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets.
Deferred Tax
Deferred tax is recognised, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. Deferred tax is also
recognised in respect of carried forward tax losses and tax credits. Deferred tax assets are
recognised to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry forward of unused tax credits and unused tax
losses can be utilised. Future taxable profits are determined based on the reversal of relevant
taxable temporary differences. If the amount of taxable temporary differences is insufficient
to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of
existing temporary differences, are considered, based on the business plans.
Deferred tax assets and liabilities are measured based on the tax rates that are expected to
apply in the period when the asset is realised or the liability is settled, based on tax rates and
tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax
asset is reviewed at the end of each reporting period and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such reductions are reversed when
the probability of future taxable profits improves.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax balances relate to the same taxation authority
The Government of India, on September 20, 2019, vide the Taxation Laws (Amendment)
Ordinance 2019, inserted a new Section 115BAA in the Income Tax Act, 1961, which provides an
option to the Company for paying Income Tax at reduced rates as per the provisions/conditions
defined in the said section. The Company has decided to take benefit of the reduced tax rate as
permitted in the said section.
The Company previously accounted for deferred tax on leases by applying the “integrally linked”
approach, resulting in a similar outcome as under the amendments, except that the deferred
tax asset or liability was recognized on a net basis. Following the amendments, the Company
has recognized a separate deferred tax asset in relation to its lease liabilities and a deferred tax
liability in relation to its right-of-use assets as at 1st April 2022 and thereafter
N. Employee Benefits
(i) Short-Term Employee Benefits
Liabilities for wages and salaries that are expected to be settled wholly within 12 months
after the end of the annual reporting period in which the employees render the related
service are recognised and measured at the undiscounted amount expected to be paid in
exchange for the related service.
(ii) Other Long-term Employee Benefit Obligations
The employees of the Company are entitled to other long-term benefits in the form of Long
Service Awards as per the policy of the Company and leave obligations. Liability for such
benefits is provided on the basis of valuation, as at the Balance Sheet date, carried out by
an independent actuary The actuarial valuation method used by the independent actuary
for measuring the liabilities is the projected unit credit method.
(iii) Post-Employment Obligations
The Company has the following post-employment schemes:
a) Defined benefit plans such as Provident Fund, Gratuity Non-Contractual Pension Plan
and Post Retirement Medical Benefits.
b) Defined contribution plans such as Superannuation Fund and Employees' Pension
Scheme.
Defined Benefit Plans
The Company has Defined Benefit Plans for post employment benefits in the form of
Provident Fund, Gratuity, Non-Contractual Pension Plan and Post Retirement Medical
Benefits.
Provident Fund and Gratuity fund are recognised by the Income-tax authorities and
administered through trustees and/or Life Insurance Corporation of India (LIC).
The defined benefit obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the defined benefit obligation
is determined by discounting the estimated future cash outflows using a discount rate
(interest rates of government bonds) that have terms to maturity approximating the
terms of the related Provident Fund, Gratuity, Non-contractual Pension Plan and Post
Retirement Medical Benefits liabilities.
Remeasurement gains and losses arising from experience adjustments, changes in actuarial
assumptions and the return on plan assets (excluding net interest) are recognised in the
period in which they occur, directly in other comprehensive income. They are included in
retained earnings in the statement of changes in equity and in the balance sheet.
Net interest is calculated by applying the discount rate to the net defined benefit
liability or asset.
Defined Contribution Plan
The Company has Defined Contribution Plans for post-employment benefits in the
form of Superannuation Fund and Employees' Pension Scheme which are recognised
by the Income-tax authorities and administered through trustees and/or LIC.
Superannuation Fund which constitutes an insured benefit and Employees' Pension
Scheme are classified as Defined Contribution Plans as the Company has no further
obligation beyond making the contributions. The Company's contributions to Defined
Contribution Plans are charged to the Statement of Profit and Loss as incurred.
(iv) Termination Benefits
Termination benefits are expensed at the earlier of when the Company can no longer
withdraw the offer of those benefits and when the Company recognises costs for a
restructuring.
(v) Share-Based Payments
The Company offers its employees, share based payments in the form of a “Select” plan.
The Equity Plan “Select” is a global equity incentive plan for eligible employees. This plan
allows its participants to choose the form of their equity compensation in “Restricted
Shares” or “Tradable Shares” of the ultimate holding Company, Novartis AG, Basel.
Unvested restricted shares are conditional on the provision of services by the plan
participant during the vesting period. They are valued using their fair value (market
price of traded stocks of Novartis AG) on the grant date. The fair value of these grants
are expensed on a straight-line basis over the respective vesting period.
The total expense (adjusted for estimated forfeitures) is recognised over the vesting
period, which is the period over which all of the specified vesting conditions are to be
satisfied. At each reporting date, the Company revises its estimates of the number
of shares that are expected to vest based on the non-market vesting conditions. It
recognizes the impact of the revision to original estimates, if any in the Statement of
Profit and Loss with a corresponding adjustment to equity/prepayments.
Group Company recharges to the Company for the share based payments made/to be
made by them to the Company's employees and the payment is adjusted against the
Share Options Outstanding Account classified under other equity/prepayments by the
Company
(vi) Employee Share Purchase Plan (ESPP)
I n the year ended 31st March 2024 Novartis AG started to grant shares under the
Employee Share Purchase Plan (ESPP). The ESPP enables employees to voluntarily
purchase Novartis AG shares through payroll deductions at a 15% discounted price.
The shares are not subject to a vesting period.
(vii) Bonus Plans
Short-term employee benefits are measured on an undiscounted basis and expensed
as the related service is provided. A liability is recognised for the amount expected
to be paid under short-term cash bonus, if the Company has a present legal or
constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably
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