Details of investments in subsidiary / joint venture / associate at cost
a) Ipca Pharmaceuticals, Inc. USA
This wholly owned subsidiary company was incorporated under the laws of the State of New Jersey in the United States on July 10, 2003. This subsidiary company is coordinating the development and registration of formulations developed by the Company in United States of America as well as distribution of Active Pharmaceutical Ingredients (APls) manufactured by the Company in the US market. During the year 2017-18, this subsidiary acquired 90% Share capital of Pisgah Laboratories Inc. USA. Further, during the year 2018-19, this subsidiary has acquired 80% units of Bayshore Pharmaceuticals LLC, a New Jersey limited liability company (Bayshore). During the previous year, this subsidiary has acquired the remaining 20% share capital of Bayshore and with this acquisition, Bayshore is now wholly owned by Ipca Pharmaceuticals Inc., USA. During the current year Ipca has further invested in 6,000 preference shares of Ipca Pharmaceuticals. Inc. USA.
b) Ipca Laboratories (U.K.) Ltd.,U.K.
During the financial year 2003-04, the Company incorporated this wholly owned subsidiary to apply and obtain product registrations in the United Kingdom. During the year 2011-12, this subsidiary acquired 100% share capital of Onyx Research Chemicals Ltd., holding company of Onyx Scientific Ltd. During the year 2015-16, Onyx Research Chemicals Ltd., UK merged with its holding company Ipca Laboratories (UK) Ltd. and consequent to this, Onyx Scientific Ltd. has became wholly owned subsidiary of this Company. During the year 2018-19, Onyx Scientific Ltd. has acquired 10% share capital of Pisgah Laboratories Inc. USA. During the current year Ipca has further invested in 10,00,000 preference shares of Ipca Laboratories (U.K.) Ltd.,U.K.
c) Ipca Pharma Nigeria Ltd. Nigeria
During the year 2006-07, the Company acquired the entire share capital of Ipca Pharma Nigeria Ltd. Thus, Ipca Pharma Nigeria Ltd. became wholly owned subsidiary of the Company with effect from January 31,2007. The Company was incorporated as a private company in Nigeria. It commenced commercial operations in December 2001. It is engaged in importation and marketing of formulations and APIs in the Nigerian market.
d) Ipca Pharma (Australia) Pty Ltd. Australia
This subsidiary company was acquired by the Company in the year 2007-08 and is engaged in the activities of holding formulations dossier registrations with TGA, Australia and sale of pharmaceuticals manufactured by the Company in Australia. This subsidiary company has a wholly owned subsidiary in New Zealand - Ipca Pharma (NZ) Pty Ltd.
e) Ipca Pharma (NZ) Pty Ltd., New Zealand
During the year 2007-08, the Company was incorporated to hold formulation dossier registrations in New Zealand and to distribute formulations manufactured by the Company in the New Zealand market. This company is wholly owned subsidiary of Ipca Pharma (Australia) Pty Ltd.
f) Ipca Pharmaceuticals Ltd. SA de CV. Mexico
This subsidiary Company was setup during the year 2008-09 as wholly owned subsidiary of the Company to hold formulations dossier registrations and promotion of pharmaceuticals manufactured by the Company in the Mexican market. This Company is currently in the process of being closed down subject to required approval.
g) Avik Pharmaceutical Ltd., India
During the year 2013-14 the Company had acquired 49.02% of shares in Avik Pharmaceutical Ltd. Avik is manufacturing APIs, primarily Cortico Steroids and Hormones since 1980. Avik is pioneer in the manufacturing of steroids in India. Avik's two manufacturing facilities are located at Vapi, Gujarat. During the year 2018-19, the Company has been allotted 33,000 shares under right issue. Further, during the year 2021-22, the Company has acquired additional 11,000 shares. Now Company's holding in Avik Pharma is 50.00%.
h) Trophic Wellness Pvt. Ltd., India
Trophic Wellness Pvt. Ltd. was incorporated in 2010 and is headquartered in Mumbai, India. The Company has acquired shareholding to the extent of 19.26% during the year 2010-11, 20% during the year 2020-21 & additional 13.09% during the year 2021-22 in Trophic Wellness Pvt. Ltd and status of Trophic Wellness Pvt. Ltd. is changed from associate to subsidiary w.e.f 11th June 2021. Trophic Wellness Pvt. Ltd. is engaged in the manufacturing and marketing of nutraceuticals with its manufacturing unit situated in Sikkim. During the current year company has acquired additional 6.53% in Trophic Wellness Pvt. Ltd. resulting in total equity holding of 58.88%.
i) Krebs Biochemicals & Industries Ltd., India
Krebs Biochemicals and Industries Ltd. was established in 1991. During the financial year 2014-15, Krebs Biochemicals and Industries Ltd. became an associate company. Krebs undertakes both contract manufacturing and develops products for sale in global markets. Krebs is listed on NSE and BSE and is headquartered in Vishakhapatnam, India with manufacturing plants in Nellore and Vishakhapatnam. Expertise and infrastructure in the areas of chemical synthesis, fermentation and enzymatic technologies along with a focus on cost and quality makes Krebs a logical partner of the Company for the development and supply of products made using one or more of these technologies.
Equity Shares-During the year 2019-20 company has been allotted 13,70,000 equity shares resulting into increase in holding to the extent of 44.67%. Further, during the year 2021-22, the company has been allotted 19,40,000 shares upon conversion of share warrants. Now Company's holding in Krebs is 49.65%.
Preference Shares- During the year 2019-20 Company has been allotted 30,00,000, 9% preference shares (non convertible, redeemable & non cumulative) of '100/- each. Further, during the year 2021-22 company has been allotted 1,00,00,000, 9% preference shares (non convertible, redeemable & non cumulative) of ' 100/- each. Now company has 1,30,00,000, 9% preference shares (non convertible, redeemable & non cumulative) of ' 100/- each.
j) Lyka Labs Limited
Lyka Labs Limited was incorporated in 1976. In the year 2021-22 the company has acquired 26.58% shareholding & during the year Company has acquired additional shareholding to the extent of 4.78% of Lyka resulting into total holding percentage to 31.36%. Lyka Labs Limited is engaged in the business of manufacturing and marketing of injectables, lyophilized injectables and topical formulations. Lyka's Manufacturing facility is situated at Ankleshwar, Gujarat. Lyka's shares are listed at BSE & NSE. During the previous year the company had entered into a joint management control agreement with the promoters of the said company and in current year appointed independent director w.e.f 8th August 2022, with this the status of Lyka Labs Limited has been changed from associates to Joint venture w.e.f 8th August 2022.
Convertible Share Warrants (partly paid)- During the year company has also been allotted 50,00,000 convertible share warrants of ' 10 each partly paid. These warrants are convertible into equity shares in one or more tranches, at the option of the allottee, within a period of 18 months of its allotment.
k) Disclosure required under Schedule III on utilization of borrowed funds and share premium :
During the year, the Company has invested in Redeemable Preference Shares of Ipca Pharmaceuticals, Inc. USA (Ipca USA), a wholly owned subsidiary (WOS) aggregating to US$ 60,00,000 (' 48.82 crores). Such investment was made to enable the additional funding to its step down WOSs viz. Bayshore Pharmaceuticals LLC, USA (Bayshore) and Pisgah Laboratories Inc., USA (Pisgah). Subsequent to above investments, Ipca USA extended loan of US$ 15,00,000 to Bayshore. Ipca USA also invested in Redeemable Preference Shares of Pisgah aggregating to US$ 35,00,000. Other than these transactions, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
l) The Company has not received any fund from any person(s) or entity(ies), including foreign entities ("Funding party") with the understanding (whether recorded in writing or otherwise) that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding party (ultimate beneficiaries); or provide any guarantee, security or the like on behalf of the ultimate beneficiaries.
Note: Investment in ABCD Technologies LLP :
During the previous year the company has made a strategic investment of ' 25 crores in ABCD Technologies LLP. ABCD Technologies LLP will, through its investment entities, engage in the objective of digitizing health care infrastructure in India. The investment is accounted as Fair Value through other comprehensive income (FVTOCI) as per Company's election in accordance with Ind AS 109- Financial Instruments. The Company has a 4.03% share of profit/loss and voting rights. In terms of the limited liability partnership agreement, the contribution made by the Company has a lock-in period of 3 years from the date of investment till April 30, 2024.
b) Disclosure u/s 186(4) of the Companies Act 2013 is made under Investment schedule vide Note reference - 4C
c) Investment by the loanee in the shares of the Company:
None of the loanees have, per se , made investments in the shares of the Company.
d) Loans or Advances in the nature of loans which are granted to promoters, directors, KMPs and the related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are repayable on demand or without specifying any terms or period of repayment are as under:
Note: No amount is due from any of the Directors or Officers of the Company, severally or jointly with any other person; or from firms where such director is a partner or from private companies where such director is a member.
The Company uses a provision matrix to determine impairment loss on portfolio of its trade receivable. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward- looking estimates. At every reporting date, the historically observed default rates are updated and changes in forward-looking estimates are analyzed. The Company estimates the following matrix at the reporting date which is calculated on overdue amounts.
iii) Rights and obligations of shareholders
The Company has only one class of share referred as equity shares having a par value of ' 1/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after payment of external liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders. The dividend if recommended by management is subject to shareholders' approval at the Annual General Meeting.
v) Pursuant to the approval of the shareholders accorded in the Extraordinary General Meeting (EGM) of the Company held on December 16, 2021, each equity share of face value of ' 2/- (Two) per share was subdivided into two equity shares of face value of ' 1/- (One) per share, with effect from January 11,2022.
vi) Disclosure as required by Ind AS 103 Business Combination
A Merger of Ramdev Chemical Private Limited and Tonira Exports Limited with Ipca Laboratories Limited
Pursuant to the Scheme of Merger ('the Scheme') of Ramdev Chemical Private Limited (Ramdev) and Tonira Exports Limited (Tonira) with Ipca Laboratories Limited (Ipca) under the provisions of Sections 230 to 232 of the Companies Act, 2013 which has been approved by the National Company Law Tribunal vide their order delivered on 27th April 2023, which has been filed with the Registrar of Companies on May 23, 2023, to make the Scheme effective. All the assets and liabilities, both movable and immovable, all other interest, rights and power of every kind, and all its debts, liabilities, including contingent liabilities, duties and obligations have been transferred to and vested in the Transferee company with effect from the Appointed Date 1st April 2022. Accordingly, the Scheme has been given effect to in these accounts. Since the Business Combination is of entities under common control in accordance with the Appendix C of Ind AS 103, the financial information in the financial statements in respect of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. Accordingly, the Company has accounted for the Scheme in its books of accounts with effect from 1st April 2021 as required by Appendix C of Ind AS 103 "Business Combination". Figures for financial year 2021-22 are accordingly restated to give effects of the merger.
B Issue of Shares/Consideration: Since Ramdev Chemical Private Limited and Tonira Exports Limited are the wholly owned subsidiaries of the Company, there was no exchange/issue of shares by the Company to the shareholders of Ramdev Chemical Private Limited and Tonira Exports Limited.
C Salient Features of the Scheme of Merger by Absorption
(i) Description of Company and Background of Ramdev Chemical Private Limited
Ramdev Chemical Private Limited (CIN: U24200MH1999PTC120863) is a Private Limited Company incorporated under the Companies Act, 1956 having its registered office at Plot No.142-AB, Kandivali Industrial Estate, Kandivali (West), Mumbai City, MH 400067 IN.The Transferor Company is a pharmaceutical company manufacturing in all forms, heavy chemicals of all kinds, (Solid, liquid, gaseous), bulk drugs, medicinal and pharmaceuticals products. The products of the Company are sold in and outside India. The Company has a manufacturing unit in India at Tarapur (Maharashtra) for manufacturing of Active Pharmaceutical Ingredients (Bulk Drugs) (APIs).
(ii) Description of Company and Background of Tonira Export Limited
Tonira Export Limited (CIN: U51909MH1995PLC248308) is a Private Limited Company incorporated under the Companies Act, 1956 having its registered office at142AB, Kandivali Industrial Estate Kandivali (West), Mumbai City, MH 400067 IN. The Transferor Company currently is not engaged in any active business. The Company was the wholly owned subsidiary of Tonira Pharma Ltd. and became wholly owned subsidiary of Ipca laboratories Limited (Transferee Company)upon merger of the said Tonira Pharma Ltd. with Ipca Laboratories Ltd. (Transferee Company) in April, 2012.
(iii) Appointed date
The appointed date for the purpose of this amalgamation is 1st April 2022.
(iv) Accounting Treatment
In accordance with the scheme approved, the accounting for this amalgamation has been done in accordance with the "Pooling of Interest Method" referred to in Appendix C - Business combinations of entities under common control of Indian Accounting Standard 103- "Business Combination" of the Companies (Indian Accounting Standards) Rules, 2015.
D Ipca has accounted for the Scheme in its books of accounts with effect from 1st April 2021 as explained in para (vi) A above and accordingly has restated prior period comparative.
(i) With effect from 01st April 2021, all assets and liabilities appearing in the books of accounts of Ramdev and Tonira have been transferred to and vested in Ipca and have been recorded by Ipca at their respective carrying values.
(ii) The difference between the carrying values of net identifiable assets and liabilities of Ramdev Chemical Private Limited transferred to Ipca Laboratories Limited pursuant to this scheme and the value of investments in the books of Ipca Laboratories Limited has been disclosed as Amalgamation Adjustment Deficit Account as per the provisions of Appendix C of Ind AS 103.
In the case of Tonira Exports Limited, there was no difference between the carrying values of net identifiable assets and liabilities and the equity. However the existing reserves have retained their character on merger with Ipca.
(iii) All inter company transactions have been eliminated on incorporation of the accounts of Ramdev Chemical Private Limited and Tonira Exports Limited in Ipca Laboratories Limited.
Nature and purpose of each reserve
(a) Capital Reserve
During amalgamation / merger / acquisition, the excess of net assets taken, over the consideration paid, if any, is treated as capital reserve.
(b) Securities Premium
The amount received in excess of face value of the equity shares is recognized in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve. This reserve is utilized in accordance with the provisions of the Companies Act, 2013.
(c) Capital Redemption Reserve
The Company has recognized Capital Redemption Reserve on buy-back of equity shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the equity shares bought back.
(d) General Reserve
The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to the statement of profit and loss.
(e) Retained Earnings
Retained earnings are the profits that the Company has earned till date and is net of amount transferred to other reserves such as general reserves, debenture redemption reserve etc., amount distributed as dividend and adjustments on account of transition to Ind AS.
(f) Amalgamation adjustment deficit
The difference between the carrying values of net identifiable assets and liabilities of the transferor Company transferred to the transferee Company pursuant to the Scheme and the value of consideration paid, has been disclosed as Amalgamation Adjustment Deficit Account as per the provisions of Appendix C of Ind AS 103, Business Combination of Entities under common control.
(g) Effective portion of cash flow hedges
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on the changes of the fair value of the designated portion of the hedging instruments that are recognized and accumulated under the cash flow hedge reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basic adjustment to the non-financial hedged item.
(h) Other items of OCI
This reserve represents exchange differences arising on account of conversion of foreign operations to Company's functional currency and fair value of investments.
b) Details of securities and repayment terms of secured loans stated above;
(i) Foreign Currency Term Loans (Secured)
1 JP Morgan Chase Bank, Singapore
This facility is secured by way of an exclusive charge on Solar and Wind projects of the company.
Repayable in 16 quarterly equal installments of USD 9,37,500 starting from May 23, 2023.
2 Citibank N.A., Jersey
Secured by first pari-passu charge over movable assets of the Company except assets at Unit - II at Sikkim plant and specific machines at Athal and Ratlam which are financed under buyer's credit.
Repayable in 16 equal quarterly installments from June 15, 2019.
The entire loan from Citi bank is repaid in the current year.
f) Registration of charges or satisfaction with Registrar of Company
Registration of charges
As at March 31st, 2023, the company has registered all charges duly with Registrar of the Companies in favor of the lenders except in respect of term loan from HDFC bank Ltd sanctioned and disbursed in March 2023. As per sanction letter, the security shall be created within 6 months from the date first disbursement.
Satisfaction of charges
As per the records of the Registrar of Companies, Maharashtra, available on their website, various charges are yet to be satisfied, however, as per records of the Company, such loans have been fully repaid and none of the lenders have communicated or demanded any outstanding amount from the Company. The summarized details are as under:
16.2 Disclosure in accordance with Ind AS - 19 "Employee Benefits", of the Companies (Indian Accounting Standards) Rules, 2015.
Gratuity
The company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement / termination is the employee's last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity plan is a funded plan and the company makes contributions to recognized funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected gratuity payments.
These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk. Investment risk
For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
Market risk (discount risk)
Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.
Longevity Risk
The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the benefits paid on or before the retirement age , the longevity risk is not very material.
Actuarial risk
Salary Increase Assumption: Actual Salary increase that are higher than the assumed salary escalation , will result in increase to the obligation at a rate that is higher than expected.
The following table summarizes the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the Balance Sheet.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would clear in isolation of one another as some of the assumptions may be correlated.
Further more, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
The gratuity liability for employees who are transferred under the scheme of merger is unfunded. The closing liability for the transferred employees is ' 1.49 Crores. (Current- ' 0.09 Crores and Non -current- ' 1.40 Crores).
* The Government of India had issued the Taxation Laws (Amendment) Act, 2019, which provides domestic companies an option to pay corporate tax at reduced rates effective from April 1, 2019 subject to certain conditions. The Company, in the quarter ended June 30, 2022, has decided to opt for a lower tax regime under section 115BAA (New Scheme) with effect from this financial year. In view of the same, outstanding MAT credit balance, which would not be available for set-off in future under the lower tax regime, has not been considered and the liability is reassessed at the new tax regime rate. As a result of the adoption of the New Scheme, net charge to the profit and loss is ' 8.76 crores (MAT credit charged off ' 72.46 Crores and Rate change impact ' 63.70 Crores) which has been effected in the year ended March 31, 2023. Provision for Current tax and deferred tax has been considered accordingly.
a) * Working capital loan from banks are secured by first charge by way of hypothecation of all the stocks, book debts and all other movable current assets of the Company and second charge by way of mortgage of the specific immovable properties of the Company and hypothecation of plant & machinery of the Company.
b) Quarterly statements of stocks and other current assets filed by the Company with banks are in agreement with the books of
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34 Segment Reporting
Disclosure as required by Ind AS 108 "Operating Segment", of the Companies (Indian Accounting Standards) Rules, 2015.
Based on the "management approach" as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Company's performance in accordance with Ind AS "Operating Segment", the Company has only one reportable operating segment i.e. Pharmaceuticals. The additional disclosure is being made in the consolidated financial statements.
The management assessed that fair value of cash and short-term deposits, trade receivables, trade payables, book overdrafts and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the financial assets and liabilities is 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.
39 Fair Value Hierarchy
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognized and measured at fair value and (b) measured at amortized 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. An explanation of each level follows underneath the table.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
40 Financial Risk Factors
The Company's business activities are exposed to a variety of financial risks: market/business risk, credit risk, exchange risk, etc. The Company's focus is to foresee the unpredictability of financial and business risks and seek to minimize potential adverse effects of these risks on its business and financial performance.
i. Business/Market Risk
The primary business/market risk to the Company is the price risk and its ability to pass on the same to its customers. The Company's operations extend to a number of countries across the globe and its products pricing competitiveness is a primary factor for the acceptability of Company's products in those markets. The Company has a robust procurement process, which ensures that its pricing power is not adversely affected by price changes in the market place for its raw materials. The backward integration into manufacturing of several API's for its own use in the formulations manufacturing also works as a mitigating strategy for price risk faced by the Company.
The other business risk is regulatory risk and regulatory audits of its manufacturing facilities by the regulators to ensure that the manufacturing facilities meet the current Good Manufacturing Practices (cGMP) requirements. The Company is already exposed to certain audit observations from the US FDA for 3 of its manufacturing plants and has taken the necessary corrective measures to redress those US FDA audit observations so as to be able to market all its products once again in the US market. While the stringent regulatory requirements and audits works as a business risk, the successful audit of its facilities by regulators coupled with price competitiveness results in higher business and margins for the Company.
The Company's products are also subjected to product liability claims/litigations. To mitigate these risks, the Company has obtained adequate Product Liability Insurance.
The Company, however, has a reduced risk from dependence on any single customer as no single customer or customer group accounts for more than 10% of Company's annual revenue. The Company also continuously forays into different markets/countries to reduce its dependence on any particular country or customer group. The Company also has a diversified therapeutic product portfolio and therefore no single product account for more than 10% of Company's annual revenue.
ii. Credit risk
The Company has exposure to credit risks associated with sales to various developing markets/countries. To mitigate these credit risks arising out of this, the Company obtains credit insurance on a regular basis after evaluating the credit risk associated with a country/customer. Country/customer where no credit insurance is available, the Company monitors such risk by continuously monitoring its exposure to such country/customer. There was no historically significant credit risk in the domestic market for the Company. Based on the historical data, the Company has made adequate provisions for expected loss because of credit risk, which is neither significant nor material.
iii. Interest risk
The Company has borrowings mainly in foreign currencies which is linked to SOFR. The Company mitigates these risks associated with floating SOFR rates by entering into interest rate swaps to move them to fixed SOFR rates. The domestic interest risk is exposed to the changes in the RBI bank rate. The Company manages this risk by managing its working capital effectively.
iv. Foreign currency risk
The Company continuously manages its risks associated with foreign currency by adopting various hedging strategies in consultation with internal and external experts. The Company has a system of regularly monitoring its currency wise exposures. The significant part of Company's receivables and borrowings are in US Dollars which operates as a natural hedge against each other. The Company has a policy not to borrow in a currency where it has no business exposure.
The Company has entered into various derivatives transactions, which are not intended for trading or speculative purpose but to hedge the export receivables included in ((II) a) above and future receivables and foreign currency loan interest rate risks.
vi. Other Price Risk
The Company is mainly exposed to the price risk due to its investment in mutual funds. However, the Company is investing only in debt funds. The price risk arises due to uncertainties about the future market values of these investments. At March 31,2023, the investments in mutual funds is ' 323.32 crores (Previous year ' 719.31 crores).These are exposed to price risk. In order to minimize price risk arising from investments in mutual funds, the Company predominately invest in liquid fund where price risk is minimum.
41 Capital Management
For the purpose of the Company's capital management, capital includes paid-up equity share capital, 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 shareholders' value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust its dividend payment ratio to shareholders, return capital to shareholders or issue fresh shares. The Company monitors capital using a gearing ratio, which is net debt divided by its total capital. The Company includes within its net debt the interest bearing loans and borrowings, trade and other payables less cash and cash equivalents.
In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets the financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the lending institutions to immediately call back the loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
No changes were made in the objectives, policies or processes for managing the capital during the years ended March 31, 2023 and March 31, 2022.
Till previous year ended March 31,2022, the Company had designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related transactions for the balance in the cash flow hedging reserve are expected to occur and reclassified to revenue in the Statement of Profit and Loss. During the current year, there are no transactions to be routed through the hedge reserve account and hence all the exchange gain / loss are taken to statement of profit & loss account.
Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and the hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be re-balanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedged ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted in the Statement of Profit and Loss at the time of hedge relationship re-balancing.
The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the Company intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. During the year the Company has not settled any such transactions.
44 Figures for the previous year have been regrouped / reinstated, wherever considered necessary.
45 The balance sheet, statement of profit and loss, cash flow statement, statement of changes in equity, statement of significant accounting policies and the other explanatory notes forms an integral part of the financial statements of the Company for the year ended March 31,2023.
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