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Company Information

Home » Market » Company Information

Novartis India Ltd.

Oct 18
783.30 -12.25 ( -1.54 %)
 
VOLUME : 4998
Prev. Close 795.55
Open Price 794.20
TODAY'S LOW / HIGH
780.00
 
 
 
797.95
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
538.05
 
 
 
1099.00
Oct 18
784.30 -10.70 ( -1.35 %)
 
VOLUME : 32038
Prev. Close 795.00
Open Price 807.70
TODAY'S LOW / HIGH
779.90
 
 
 
807.70
Bid PRICE (QTY.) 0.00 (0)
Offer PRICE (Qty.) 0.00 (0)
52 WK LOW / HIGH
530.05
 
 
 
1098.00
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Market Cap. ( ₹ ) 1936.50 Cr. P/BV 2.72 Book Value ( ₹ ) 288.04
52 Week High/Low ( ₹ ) 1098/530 FV/ML 5/1 P/E(X) 92.66
Bookclosure 27/08/2021 TTM EPS ( ₹ ) 9.23 Div Yield (%) 1.28
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2018-03 

1(b). Employee Benefit Obligations

(i) Defined Contribution Plans:

The Company's contribution to Superannuation Fund and Employees’ Pension Scheme aggregating Rs, 32.6 million (Previous yearRs,33.0 million) has been recognised as expense in the Statement of profit and loss for the year under the head Employee Benefits Expense (Refer Note 23).

(ii) Defined Benefit Plans:

General Description of Defined Benefit Plans:

(a) Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service of 5 years are eligible for gratuity. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act, 1972 or the Company scheme applicable to the employees. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The gratuity plan is a funded plan and it is recognised by the Income-tax authorities and administered through trustees and/or LIC. Liability for Gratuity is provided on the basis of Valuations, as at Balance Sheet date, carried out by an independent actuary.

(b) Provident Fund

Provident fund is Defined Benefit Plan that provides for lump sum amount to be paid to employee at the time of separation from the Company Both employee and employer (at a determined rate) contribute monthly to a Trust set up by the Company to manage the investments and distribute the amounts entitled to employees. The benefits are accumulated value of contributions made by the employee and the Company at the minimum interest rate guarantee as declared by the Employee Provident Fund Organisation for respective years.

(c) Non-Contractual Pension Plan

The Pension Scheme is a Defined Benefit Plan with a minimum pension guarantee that provides for an annuity in the form of pension amount at retirement to a select category of employees. The fund is administered by LIC of India.

(d) Post-Retirement Medical Benefits (PRMB)

The PRMB scheme is a fixed monetary amount Defined Benefit Plan that provides for a lump sum payment made after retirement when a retiree claims medical benefits. The benefits are defined on the basis of amount claimed under medical expenses (valued as premium paid by the Company to the Insurance Company) up to a maximum limit after retirement.

14(b). Employee Benefit Obligations (contd.)

calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period except for the Mortality rate which has been updated based on revised guidance.

Expected contributions to post employment benefit plans for the year ending 31 March, 2019 are Rs,107.0 million.

The weighted average duration of the Post-Retirement Medical Benefits is 11 years (2017, 9 years) while in case of other Defined Benefit Obligations it's 9 years (2017, 9 years).

Risk exposure

Through its defined benefit obligations the Company is exposed to number of risks the most significant of which are detailed below:

Interest rate risk — The defined benefit obligations calculated uses a discount rate based on Government bonds. If bond yields fall, the defined benefit obligations will tend to increase.

Salary inflation risk — Higher than expected increased in salary will increase the defined benefit obligation.

Demographic risk — This is the risk of variability of results due to unsystematic nature of decrements that include mortality, withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligations is not straight forward and depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals because in financial analysis the retirement benefit of the short career employee typically costs less per year as compared to a long service employee.

Medical inflation risk — Higher than expected increase in premium will lead to increase in defined benefit obligations. Although the risk is mitigated by capping the benefit paid by insurance Company (limiting the premium amount for the Company).

Note:

Future cash outflows in respect of the above are determinable only on receipt of judgements/ decisions pending with various authorities/forums and/or final outcome of the matters.

* Including Interest and Penalty, where applicable.

B Commitments

(i) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs,87.5 million (As at 31st March 2017 Nil).

(ii) Amount of future minimum lease payments under non-cancellable operating lease is Rs,363.6 million (previous year Rs, 66.2 million) — also Refer Note 34

Provision is made for the non-sellable sales 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-sellable sales returns is reduced from sale of products for the year. Provision for Contingencies: Provision for pricing matters and sales tax matters made for probable liabilities/claims arising out of pending dispute, litigations/commercial transactions with statutory authorities/third parties. The outflow with regard to the said matters depends on the exhaustion of remedies available to the Company under the law and hence the Company is not able to reasonable ascertain the timing of the outflow.

2. Employee Benefit Obligations — Voluntary Retirement Costs represent the actuarial value as at 31st March 2018 of compensation payable under the Voluntary Retirement Schemes. [Refer Note 14(a)].

3. Disclosures as required under section 22 of the Micro, Small and Medium Enterprises Development Act, 2006. This information and that given in Note 13(b) — Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

4. Segment Information

The Company has a single business segment namely ‘Pharmaceutical Business.

5. Related Party Disclosures

(A) Enterprise where control exists

Holding Company Novartis AG, Basel, Switzerland

(B) Other Related Parties with whom the Company had transactions during the year and/or the previous year

(i) Fellow Subsidiaries Alcon Laboratories (India) Private Limited, India

Alcon Pharmaceuticals Limited, Switzerland Befico Limited, Bermuda (up to 31st October 2017)*

Novartis Investment Limited, Bermuda Novartis (Thailand) Limited, Thailand Novartis Corporation (Malaysia), Malaysia Novartis Healthcare Private Limited, India Novartis Holding AG, Switzerland Novartis International AG, Switzerland Novartis Pharma AG, Switzerland Novartis Pharmaceuticals Australia Pty Ltd, Australia Novartis Pharmaceuticals Corporation Inc., USA Sandoz Private Limited, India * Befico Limited, Bermuda has amalgamated into Novartis Investment Limited w.e.f 1st November 2017

(ii) Subsidiary of Joint GlaxoSmithKline Consumer Private Limited, India Venture in which the

holding Company is a venturer

(iii) List of other Novartis India Limited Contractual Employees’ Pension Scheme related parties

(Post-employment

benefit plan of Novartis India Limited Employees' Provident Fund

Novartis India Limited)

(C) Key Management R. Shahani (up to 28th February 2018)

Personnel

J. Zia M. Noble

D. Charak (up to 26th May 2016)

G. Tekchandani (Up to 12th August 2016)

Dr. R. Mehrotra J. Hiremath

S. Martyres (w.e.f. 19th April 2016)

C. Snook

# Includes leave encashment paid towards leave policy harmonisation undertaken in the FY 2016-17

* Excludes charge in relation to Restricted Shares and Tradable Options to the extent not vested

Notes:

1) No amounts have been written off/provided for or written back in respect of amounts receivable from or payable to the related parties.

2) Transactions with related parties are made on terms equivalent to those that prevail in arm's length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.

6. Disclosures for Employee 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 Options' of the ultimate holding company, Novartis AG, Basel. The “Select” plan of the ultimate holding company is being managed and administered by the group company, Befico Limited, Bermuda (up to 31st October 2017), Novartis Investment Limited (w.e.f. 1st November 2017) and Novartis Holding AG (w.e.f. 1st January 2018) and the Company is compensating Befico Limited, Novartis Investment Limited and Novartis Holding AG for the grants made to the employees and accordingly, these costs are being reflected in the financial statements.

There are two schemes under which employees are granted stock options:

(A) Tradable Stock Options, as per which the employee can sell the options to market maker once it is vested. Tradable Options have a contractual life of 10 years from the date of grant.

There were no tradable stock options granted during the financial years 2016-17 and 2017-18

(B) Restricted Shares are the shares of its ultimate holding company. These do not have voting rights until vested to employees. There is no time limit to sell the Restricted Shares once these are vested.

Fair Value of the Restricted Stock Units

The Fair Value of Restricted Stock Unit is equivalent to the market price of traded stock of Novartis AG as on date of grant.

7. The Company has filed a Writ Petition on 8th May 2014 before the Hon'ble Delhi High Court challenging the move of the National Pharmaceuticals Pricing Authority (“NPPA”) to include Voveran 50 GE Tablets, marketed by the Company, under price control in terms of the Drug Price Control Order 2013 (“DPCO 2013”).

During the pendency of the Writ Petition the NPPA issued a Show Cause Notice dated 24th September, 2014 to the Company alleging over charge on sales of Voveran 50 GE Tablets by the Company. The Company responded to the show cause notice vide its letters dated 13th October 2014 and 27th October 2014. The NPPA issued a Demand Notice dated 31st October 2014 directing the company to pay ' 281.8 million (including interest) by 15th November 2014. This demand has been challenged by the Company before the Hon'ble Delhi High Court by way of miscellaneous application followed by an amended writ petition. The Hon'ble Delhi High Court passed order restraining the NPPA from taking coercive steps in respect of the aforesaid demand. The matter is posted for further hearing on 19th July 2018.

In the opinion of the company, Voveran 50 GE Tablet is not covered under the category of essential medicines under the National List of Essential Medicines and, hence, is a non-scheduled drug under DPCO, 2013. Therefore, Voveran 50 GE Tablet cannot be brought under the regime of price control under Paragraph 14 of the DPCO, 2013. Accordingly, no provision is considered necessary at this stage.

38. Fair value measurements

Fair valuation techniques and inputs used

(i) Fair Value Hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard.

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available, with limited exceptions.

Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 2 inputs include:

— quoted prices for similar assets or liabilities in active markets

— quoted prices for identical or similar assets or liabilities in markets that are not active

— inputs other than quoted prices that are observable for the asset or liability, for example

— interest rates and yield curves observable at commonly quoted intervals

— implied volatilities

— credit spreads

— inputs that are derived principally from or corroborated by observable market data by correlation or other means (‘market - corroborated inputs')

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.

(ii) Valuation technique used to determine fair value

Security deposits is classified as Level 3 category item under the fair value hierarchy based on the valuation technique used to calculate the Fair value.

For the purpose of Fair valuation of Security Deposits the Company has used discounted cash flow method and considered discount rate of 9% being general bank borrowing rate prevalent in the market.

Increase in the discount rate would result in decrease in the fair value and vice-versa.

The amount of Fair value of Security deposits given and accepted is considered to be insignificant in value and hence carrying value and fair value is considered as same.

The Company considers that the carrying amount of financial assets and financial liabilities recognised in the financial statements approximate their fair value.

9. Financial risk management

The Company's activities expose it to credit risk, liquidity risk and market risk.

The Company's financial risk management is an integral part of how to plan and execute its business strategies. Market risk is the loss of future earnings, fair values or future cash flows that may result from the change of a price of a financial instrument. The value of a financial instrument may change as a result of changes in the foreign currency exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables.

The Company manages market risk through a treasury department, which evaluates and exercises independent control over the entire process of market risk management. The activities of this department include management of cash resources & ensuring compliance with market risk limits and policies.

(A) Credit Risk

The Company is exposed to credit risk, which is the risk that counterparty will default on its contractual obligation resulting in a financial loss to the company. Credit risk arises from cash and cash equivalents, deposits with banks, as well as credit exposures to customers including outstanding receivables.

(i) Credit Risk Management

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

(ii) Trade and other receivables

Credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. The Company manages credit risk 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.

At 31st March 2018, the Company had 5 customers (At 31st March 2017: 4 customers) that owed the Company more than ' 10 million each and accounted for approximately 17% (At 31st March 2017 : 14%) of all the trade receivables..

In furtherance to above, the Company has assessed the impact of the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised in respect of trade receivables.

Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macroeconomic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue.

(iv) Cash and cash equivalents and deposits with banks

Credit risk on Cash and Cash Equivalents is limited as the Company generally invests in deposits with banks with high credit ratings assigned by international and domestic credit rating agencies.

(B) Liquidity Risk

(i) Liquidity risk management

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding to meet obligations when due and to close out market positions. Company's treasury maintains flexibility in funding by maintaining sufficient cash and bank balances available to meet the working capital requirements. Management monitors rolling forecasts of the company's liquidity position (comprising the unused cash and bank balances along with temporary investments in fixed deposits) on the basis of expected cash flows. This is generally carried out at Company level in accordance with practice and limits set by the Company. These limits vary to take into account the liquidity of the market in which the Company operates.

(ii) Maturities of financial liabilities

The tables below analyse the Company's financial liabilities into relevant maturity based on their remaining contractual maturities for all non-derivative financial liabilities.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances equal their carrying balances as the impact of discounting is not significant.

Sensitivity interest rate increase by 1%; Profit will decrease by ' 0.2 million for the year ended 31st March 2018 ( Rs,0.2 million for the year ended 31st March 2017).

Sensitivity interest rate decrease by 1%; Profit will increase by ' 0.2 million for the year ended 31st March 2018 (Rs, 0.2 million for the year ended 31st March 2017)

(iii) Maturities of financial assets:

The following table details the Company's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company's liquidity risk management as the liquidity is managed on a net asset and liability basis.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances equal their carrying balances as the impact of discounting is not significant.

(C) Market Risk - Foreign Exchange:

The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD, CHF and EUR. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company's functional currency ('). The risk is measured through a forecast of highly probable foreign currency cash flows. The objective of the Company is to minimise the volatility of the ' cash flows of highly probable forecast transactions.

The company actively monitors and seeks to reduce, where it deems it appropriate to do so, fluctuations in these exposures.

10. Capital management

Risk management

The Company's objectives when managing capital are to safeguard the company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure.

11. During the financial year ended 31st March 2016, the Company had entered into Consignment Sales Agency Agreements (CSA) and Transitional Distribution Service Agreements (TDSA) with various parties. Pursuant to the above agreements, payable (net of deductibles) as at March 31, 2018 aggregating Nil (as at March, 2017 ' 22.3 million) have been included in ‘Other Current Financial Liabilities' [Refer Note 13(a)] and receivable as at March 31, 2018 aggregating Nil (as at March, 2017 ' 9.1 million) have been included in ‘Other Financial Assets' [Refer Note 3(b)].

12. Buyback of Shares

In accordance with Sec 68, 69, 70 and other applicable provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 (as amended) (“SEBI Buy Back Regulations”), the Company concluded during the year, the buyback of 3,450,000 (previous year 3,820,000) equity shares of Rs, 5/- each fully paid up, as approved by the Board of Directors on 25th September 2017 (previous year 26th May, 2016) by way of tender offer through stock exchange mechanism for cash at price of Rs,670/- (previous year Rs,760/-) per equity share. This has resulted in a total cash outflow of Rs, 2,311.6 million (previous year Rs,2,903.2 million).

Pursuant to buyback the Company has adjusted premium on buyback of Rs, 665/- (previous year Rs,755/-) per share aggregating Rs, 2,294.3 million (previous year Rs,2,884.1 million), out of Securities Premium Reserve Nil (previous year Rs,228.8 million), from General Reserve Rs, 774.7 million (previous year Rs, 2,655.3 million) and from Retained earnings Rs,1,519.6 million (previous year Nil). Further, an amount of Rs,17.3 million (previous year Rs, 19.1 million) (equivalent to the face value of shares) has been transferred to Capital Redemption Reserve from the Retained earnings (previous year from the General Reserve). Buy-back expenses of Rs, 17.8 million (net of tax of Rs,9.4 million) have also been debited to the Retained earnings (previous year ' 23.8 million debited to the General Reserve).

13. Note on Income Tax Refund

During the year the Company has received interest on refund of Income tax for AY 1995-96. Interest income of Rs, 981.3 million received on such income tax refund is recognized as income in the Financial Statements (Refer Note 21) based on the management estimate of the amount the Company is entitled to receive in accordance with the provisions of the Income Tax Act, 1961. The Company has sought clarification with appropriate authorities for interest working. Pending receipt of clarification, balance amount of interest received has been included under other current liabilities (Refer Note 18).

14. The Ind AS financial statements of the Company for the year ended 31st March 2017, were audited by the Lovelock & Lewes, Chartered Accountants, the predecessor auditor.

15. Previous year figures have been regrouped/restated where necessary.