1. CORPORATE INFORMATION

Kopran Limited (referred to “KL” or “the Company”) is a public company domiciled in India and is incorporated under the provisions of the Companies Act, 1956 applicable in India. Its shares are listed on BSE and NSE in India. The Company is engaged in the business of manufacturing of Formulation (Finished Dosage Form).

The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report.

The financial statements were authorised for issue by the board of directors on May 08, 2019.

(ii) Rights, Preferences and Restrictions attaching to each class of shares Equity Shares having a face value of Rs.10 As to voting

The Company has only one class of shares referred to as equity shares having a face value of Rs. 10. Each holder of the equity share is entitled to one vote per share.

As to distribution of dividends

The Shareholders are entitled to receive dividend in proportion to the amount of paid up equity shares held by them. The Company has not declared any dividend during the year.

As to repayment of capital

In the event of liquidation of the Company, the holders of equity shares are entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion of the number of shares held by the shareholders.

(iii) Shares held by Holding / Ultimate Holding Company and / or their Subsidiaries / Associates

There is no Holding Company or Ultimate Holding Company of the Company. Accordingly, disclosures pertaining to shares of the Company held by held by holding company or its ultimate holding company including shares held by subsidiaries or associates of the holding company or the ultimate holding company is not applicable.

Security, rate of interest and terms of repayment

a) Vehicle loans are secured by way of hypothecation of vehicles.

Rate of Interest - 9.71% p.a. to 10.25 % p.a.

Terms of repayment are as under:

31.03.2020 - Rs. 9.09 Lakhs

31.03.2021 - Rs. 10.05 Lakhs

31.03.2022 - Rs. 8.45 Lakhs

31.03.2023 - Rs. 6.56 Lakhs

b) Terms of redemption of preference shares

55,80,000 10% Non Convertible Non Cumulative Redeemable Preference Shares of Rs. 10 each are redeemable at par on March 15, 2025 or at any time after one year from March 31, 2012 at the option of the company.

c) Inter-corporate deposits from related parties and other parties are unsecured.

Rate of Interest - 10.50% p.a. to 13.50% p.a.

Inter corporate deposits are repayable as under:

31.03.2020 - Rs. 636.00 Lakhs

31.03.2021 - Rs. 636.00 Lakhs

31.03.2022 - Rs. 527.00 Lakhs

31.03.2023 - Rs. 524.90 Lakhs

Security and rate of interest

Cash credit / packing credit / buyers credit is secured by:

1st pari passu hypothication charge on entire stocks and receivables of the Company both present and future.

2nd pari passu charge on entire fixed assets of the Company both present and future.

Corporate Guarantee of Subsidiary Company - Kopran Research Laboratories Limited and personal guarantee of director / promoter aggregating to Rs. 3,600.00 Lakhs.

Rate of Interest on cash credit - 10.05% p.a. to 11.50% p.a.

Rate of Interest on packing credit - Libor 2.50% p.a.

Rate of Interest on buyers credit - Libor 0.50% p.a to Libor 1.50% p.a.

b) The Supreme Court in the case of Regional Provident Fund Commissioner Vs. Vicekananda Viday Mandir and Ors [LSI-62-SC-2019(NDEL)] has rendered a decision dated 28.02.2019 with reference to The Employees Provident Fund and Miscellaneous Provisions Act 1952 on a common question of law as to whether special allowance paid by an establishment to its employees would fall within the expression of ‘basic wages’ under section 2(b) (ii) read with section 6 of the Act for the purpose of computation of deduction towards provident Fund. The Supreme Court has held that in order to exclude the allowance from the ambit of basic wages, there must be evidence to show that the workman concerned has become eligible to get the extra amount beyond the normal work which he was otherwise required to put in. The test laid down by the Supreme Court will now have to be applied to each and every allowance to examine whether the allowance is excluded from the purview of wages or not. If the test for exclusion is met, then the said allowance would not form part of wages for the purpose of contribution under the Act. The Company is evaluating the impact of the decision of the Supreme Court on provident fund liability on account of various allowances to its employees. Pending necessary clarifications on the subject, no provision is considered necessary.

b) Defined benefit plan

The employees’ gratuity scheme is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognised in the same manner.

Sensitivity Analysis

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

2) Disclosure of related parties/related party transactions pursuant to Ind AS 24 “related party disclosures”

(a) Names of related parties where control exists:

Enterprises owned or controlled (wholly owned subsidiaries)

Kopran Research Laboratories Limited Kopran (H. K.) Limited

Kopran Life Science Ltd.

Key management Personnel

Surendra Somani (Executive Vice Chairman)

B. K. Soni (Chief Financial Officer)

Sunil Sodhani (Company Secretary)

Enterprises Significantly influenced by KMP or their relative

Oricon Enterprises Limited

Shinrai Auto Services Limited

Kopran Laboratories Limited

Oriental Containers Ltd.

3) Disclosures pursuant to Ind AS 108 “Segment Reporting”

The company is primarily engaged in the business of manufacturing of “Formulation (finished dosage form)” which in the context of Indian accounting standard (Ind AS) 108 on operating segments constitutes a single reportable segment.

In accordance with Ind AS 108 “operating segments”, segment information has been given in the consolidated financial statements of the company and therefore no separate disclosure on segment information is given in these financial statements.

4) In the opinion of the board, current assets and loans and advances are approximately of the value stated if realised in the ordinary course of business. The provision for all known and determined liabilities are adequate and not in excess of the amounts reasonably required. The Balances of few creditors are subject to their confirmation.

5) a) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

b) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

6) The figures for the comparative year / periods have been regrouped wherever necessary, to conform to the current year’s classification.

ii. Fair value measurements

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The Company has established the fair value hierarchy that categorises the values into 3 levels. For the inputs to valuation techniques used to measure fair value of financial instruments refer Note No. 2.3(b)

Notes:

There have been no transfers among Level 1, Level 2 and Level 3 during the period Financial instrument measured at amortised cost

The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Management does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

7) Disclosures pursuant to Ind AS 1 “presentation of financial statements”- capital management Capital includes issued equity capital and share premium and all other equity reserves attributable to the equity holders. The primary objective of the company’s capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations. The company monitors capital using gearing ratio, which is total debt divided by total capital plus debt.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2019 and March 31, 2018.

8) Disclosures pursuant to Ind AS 107 “Financial Instruments Disclosures”- Financial risk management objectives and policies

The Company’s principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company’s business activities expose it to a variety of financial risks, namely market risks, credit risk and liquidity risk. The Company’s senior management has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The top management is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

a) Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, borrowings, foreign currency receivables and payables.

i) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates to the Company’s long-term debt as well as short-term obligations with floating interest rates.

In order to manage it interest rate risk The Company diversifies its portfolio in accordance with the limits set by the risk management policies.

As an estimation of the approximate impact of the interest rate risk, with respect to financial instruments, the Company has calculated the impact of a 1% change in interest rates. A 1% decrease in interest rates would have led to approximately an additional Rs. 49.68 Lakhs gain for year ended March 31, 2019 (Rs. 51.34 Lakhs gain for year ended March 31, 2018) in Interest expenses. A 1% increase in interest rates would have led to an equal but opposite effect.

Interest rate sensitivity has been calculated assuming the borrowings outstanding at the reporting date have been outstanding for the entire reporting

ii) Foreign Currency Risk

Foreign currency risk is the risk of impact related to fair value or future cash flows of an exposure in foreign currency, which fluctuate due to changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the borrowings, import of raw materials, exports of Formulations and the Company’s net investments in foreign subsidiaries.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure.

The Company evaluates exchange rate exposure arising from foreign currency transactions. The Company follows established risk management policies. It uses derivative instruments like foreign currency forwards to hedge exposure to foreign currency risk.

Foreign exchange risk sensitivity:

As an estimation of the approximate impact of the interest rate risk, with respect to financial instruments, the Company has calculated the impact of a 1% change in interest rates. A 1% decrease in interest rates would have led to approximately an additional Rs.11.41 Lakhs net gain for year ended March 31, 2019 (Rs. 7.37 Lakhs net loss for year ended March 31, 2018) in Interest expenses. A 1% increase in interest rates would have led to an equal but opposite effect.

iii) Other price risk

a) Other price risk

Other price risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market traded price. Other price risk arises from financial assets such as investments in equity instruments. The Company is exposed to price risk arising mainly from investments in equity instruments recognised at FVTOCI. As at March 31, 2019, the carrying value of such equity instruments recognised at FVTOCI amounts to Rs. 1.90 Lakhs (March 31, 2018 Rs. 4.51 Lakhs). The details of such investments in equity instruments are given in Note 6(a) and 6(b).

The Company is mainly exposed to change in market rates of its investments in equity investments recognised at FVTOCI. A sensitivity analysis demonstrating the impact of change in market prices of these instruments from the prices existing as at the reporting date is given below:

If the equity prices had been higher / lower by 10% from the market prices existing as at March 31, 2019, Other Comprehensive Income for the year ended March 31, 2019 would increase / decrease by Rs. Nil Lakhs (March 31, 2018 Rs. 0.27 Lakhs) with a corresponding increase/decrease in Total Equity of the Company as at March 31, 2019. 10% represents management’s assessment of reasonably possible change in equity prices.

b) Credit Risk

Credit risk arises when a customer or counterparty does not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing / investing activities, including deposits with banks, foreign exchange transactions and financial guarantees. The Company has no significant concentration of credit risk with any counterparty.

Trade receivables:

Credit risk arising from trade receivables is managed in accordance with the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on a detailed study of credit worthiness and accordingly individual credit limits are defined/ modified.

Total Trade receivable as on March 31, 2019 is Rs. 4,459.01 Lakhs (March 31, 2018 Rs. 2,013.03 Lakhs). The average credit period on sale of goods is 90 to 180 days. No interest is charges on trade receivables.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on exchange losses historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.

The Company has used expected credit loss (ECL) model for assessing the impairment loss. For the purpose, the Company uses a provision matrix to compute the expected credit loss amount. The provision matrix takes into account external and internal risk factors and historical data of credit losses from various customers.

c) Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company’s approach to managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions.The following table shows the maturity analysis of the Company’s financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date.

Dues to micro, small and medium enterprises have been determined to the extent such parties have been identified on the basis of information collected by the management.

9) Corporate Social Responsibility

As per section 135 of the Companies Act, 2013, amount required to be spent by the Company during the year ended March 31, 2019 and 2018 is Rs. 8.77 lakhs and Rs. Nil, respectively, computed at 2% of its average net profit for the immediately preceding three financial years, on Corporate Social Responsibility (CSR). The Company incurred an amount of Rs. 8.40 lakhs and Rs. Nil during the year ended March 31, 2019 and 2018, respectively, towards CSR expenditure for purposes other than construction / acquisition of any asset.