Advanced Enzyme Technologies Ltd.
You can view the entire text of Accounting Policy of the company for the latest year.
ISIN No INE837H01020 52Wk High (Rs.) 324 BV (Rs.) 50.08 FV (Rs.) 2.00
Bookclosure 14/09/2018 52Wk Low (Rs.) 165 EPS (Rs.) 8.07 P/E (X) 21.55
Mkt Cap. (Rs. Cr.) 1,941.01 P/BV (X) 3.47 Div Yield (%) 0.05 Mkt Lot 1

1 Overview of the Company

Advanced Enzyme Technologies Limited ('the Company') was incorporated on 15 March 1989 under the provisions of Companies Act, 1956. The Company is engaged in the business of developing manufacturing and sales of enzymes. The equity shares of the Company were listed on National Stock Exchange of India Limited (NSE) via id ADVENZYMES and on BSE Limited (BSE) via Id 540025 on 1 August 2016.

2 Basis of preparation of financial statements

The 'Standalone Financial Statements' (hereinafter referred to as the, 'Financial Statements'), which have been prepared and presented under the historical cost convention on the accrual basis of accounting, are in accordance with the requirements of the Companies Act, 2013 ('the Act') and comply in all material aspects with the applicable Accounting Standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) rule, 2014 and also comply with the revised accounting standards notified by Companies (Accounting Standard) Amendment Rules, 2016 on 30 March 2016.

3 Use of estimates

The preparation of financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumption that affect the reported amounts of assets and liabilities, revenue and expenses and disclosure of contingent liabilities. The estimates and assumptions used in accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements and reviewed on an ongoing basis. Any revision to accounting estimates is recognized prospectively in current and future periods.

4 Significant accounting policies:

The accounting policies set out below have been applied consistently to the periods presented in the financial statements.

a. Revenue recognition

i. Revenue is recognized to the extent it is probable that economic benefits will flow to the Company and the revenue can be reliably measured.

ii. Revenue from sale of goods is recognized ,when all significant contractual obligations have been satisfied, the property in the goods is transferred for a price, significant risks and rewards of ownership are transferred to the customer/agent and no effective ownership is retained. Sales are inclusive of excise duty and net of sales tax and discounts.

iii. Income from services rendered is recognized based on agreements with the customers using the proportionate completion method, when services are performed and no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering of service. Income is recognized net of service tax, as applicable.

iv. Export incentives pursuant to the Duty Drawback Scheme are accounted on an accrual basis, to the extent it is probable that realization is certain.

v. Interest income is recognized on a time proportionate basis, taking into account the amount outstanding and the rates applicable.

vi. Dividend income is recognized when the Company's right to receive dividend is established by the reporting date.

b. Fixed assets, depreciation and amortization

i. Fixed assets, both tangible (Property, Plant and Equipment) and intangible are stated at cost of acquisition/construction less accumulated depreciation and amortization and accumulated impairment losses, if any. Cost includes taxes, duties, freight and other incidental expenses directly related to acquisition/construction and installation of the assets. Any trade discounts and rebates are deducted in arriving the purchase price. Interest on borrowings to finance acquisition of fixed assets during qualifying period is capitalized.

4 Significant Accounting Policies (Continued)

b. Fixed assets, depreciation and amortization (Continued)

ii. Subsequent expenditure related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

iii. Leasehold improvements represent expenses incurred towards civil work and interior furnishings on the leased premises.

iv. Capital work-in-progress includes fixed assets not ready for their intended use and related incidental expenses and attributable interest.

v. Costs relating to acquisition of technical know-how and software are capitalized as intangible assets. Further, the expenditure incurred towards product studies during the development of product dossiers for registration are grouped under "Intangible assets under development" to the extent such expenditure meet the criteria of intangible asset as defined in Accounting Standard (AS) 26.

Depreciation on tangible fixed assets (property, plant and equipment) other than plant and equipment has been provided on Written Down Value method and on plant and equipment on Straight Line Method. Depreciation is provided on a pro-rata basis, i.e. from the date on which asset is ready for use.

vii. Leasehold improvements and leasehold land are amortized over the unexpired primary period of lease except for lease hold land acquired under perpetual lease.

viii. Intangible fixed assets that are ready for use are amortized on a straight line basis over a period of four years.

ix. Items of fixed assets that are held for disposal are stated at the lower of their net book value and net realizable value and are shown separately under other current assets in the financial statements. Any expected loss is recognized immediately in the Statement of Profit and Loss.

x. A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Gains / losses arising from disposal of fixed assets carried at cost are recognized in the Statement of Profit and Loss.

C. Investments

Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments.

Long-term investments are carried at cost less any other-than temporary diminution in value. Current investments are valued at lower of cost and net realizable value. Any reduction in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

d. Foreign currency transactions

i. Initial Recognition - Transactions denominated in foreign currencies are recorded at the rates of exchange prevailing on the date of the transaction.

ii. Conversion - Monetary assets and liabilities denominated in foreign currency are converted at the rate of exchange prevailing on the date of the Balance sheet. Non-monetary assets and liabilities denominated in foreign currency are reported at the rate of exchange prevailing on the date of transaction.

iii. Exchange differences - All exchange differences arising on settlement/conversion on foreign currency transactions are included in the Statement of Profit and Loss .

e. Stock based Compensation:

Employees Stock Option Plans ("ESOPs"):

Equity-settled plans are accounted at fair value as at the grant date. The fair value of the share-based option is determined at the grant date using a market-based option valuation model (Black Scholes Option Valuation Model). The fair value of the option is recorded as compensation expense amortized over the vesting period of the options, with a corresponding increase in Reserves and Surplus under the head "Employee Stock Option Outstanding". On exercise of the option, the proceeds are recorded as share capital.

The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the Statement of Profit and Loss for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company's best estimate of the number of equity instruments that will ultimately vest."

f. Impairment of assets

In accordance with Accounting Standard 28 on 'Impairment of assets', the Company assesses at each balance sheet date, whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount of the assets (or where applicable that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life. An impairment loss is recognized whenever the carrying amount of an asset or the cash-generating unit to which it belongs, exceeds it recoverable amount. Impairment loss is recognized in the Statement of Profit and Loss or against revaluation surplus, where applicable. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is re-assessed and the asset is reflected at the recoverable amount subject to a maximum of the depreciated historical cost.

g. Inventories

i. Inventories are valued at lower of cost or net realizable value on an item-by-item basis.

ii. Cost of raw materials, consumables and packing materials is determined on first-in-first-out basis except for stock of not ordinarily interchangeable raw materials, which are determined on their specific individual costs. Cost of finished goods and stock in process is determined by considering materials, labour costs, conversion costs, including an appropriate share of fixed production overheads based on normal operating capacity and other related costs incurred in bringing the inventories to their present condition and location. Cost of finished goods and stock in process is determined on weighted average cost method.

h. Employee benefits

i Employee benefits payable wholly within twelve months of receiving employees services are classified as short-term employee benefits. The short term employee benefits are accounted on undiscounted basis during the accounting period based on services rendered by employees.

ii. Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts.

The Company contributes to statutory provident fund in accordance with Employees Provident Fund and Miscellaneous Provisions Act, 1952 that is a defined contribution plan and contribution paid or payable is recognized as an expense in the period in which the employee renders services.

Superannuation benefits, a defined contribution plan, has been funded with Life Insurance Corporation of India and the contribution is charged to Statement of profit and loss, when the contribution to the Fund is due.

iii. Defined benefit plans

The Company provides for gratuity benefit and compensated absences, which are defined benefit plans, covering all its eligible employees. Liability towards gratuity benefits and compensated absences expected to occur after twelve months, are determined using the Projected Unit Credit Method. Actuarial valuations are carried out at the balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss account in the year of occurrence of such gains and losses. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. The gratuity benefit and compensated absences scheme is funded with the Life Insurance Corporation of India (LIC).

The short term provision for compensated absences has been calculated on undiscounted basis, based on the balance of leave available over and above the maximum accumulation allowed as per the Company policy.

i. Income taxes

Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) and Minimum Alternate Tax (MAT) credit entitlement.

Current tax

Current tax is computed and provided for in accordance with the applicable provisions of the Income Tax Act, 1961.

Deferred tax

Deferred tax is recognized on timing differences, being the difference between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is a virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.

At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized.

Minimum Alternate Tax

Minimum Alternate Tax (MAT) under the provision of Income Tax Act, 1961 is recognized as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. MAT credit recognized as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.

j. Borrowing costs

Borrowing costs incurred on constructing or acquiring a qualifying asset are capitalized as cost of that asset until it is ready for its intended use . A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use . All other borrowing costs are charged to revenue and recognized as an expense in the Statement of Profit and Loss.

k. Research and development costs

Research and development costs incurred for development of products are expensed as incurred, except for development costs that relate to the design and testing of new or improved materials, products or processes, which are recognized as an intangible asset to the extent that it is technically feasible to complete the development of such asset and future economic benefits are expected to be generated from such assets.

l. Provisions and contingencies

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources embodying economic benefits and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

m. Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on straight line basis over the primary period of lease in accordance with the respective lease agreements.

Lease under which the Company assumes substantially all the risk and rewards of ownership are classified as finance leases. Assets taken on finance lease are initially capitalized at fair value of the asset i.e., the premium paid at the inception of the lease. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease terms so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

n. Cash and cash equivalents

Cash comprises of cash at bank and in hand and cash equivalents comprise of short-term bank deposits with an original maturity of three months or less.

o. Operating cycle

Operating cycle is the time between the acquisition of assets for processing an their realization in cash or cash equivalents. Based on the nature of products/ activities of the Company, the management has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

c) Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity share having a par value of ' 10/- per share. The final dividend, if any, proposed by Board of Directors is subject to approval by the Shareholders. All shares rank pari passu on repayment of capital in the event of liquidation. Dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing AGM except interim dividend.

d) Shares reserved for issue under options

The Company had reserved issuance of 44,000 (Previous year Nil) Equity shares of certificate 10/- each for offering to eligible employees of the Company under Employees Stock Option Scheme (ESOS). The option would vest on graded basis over a maximum period of 4 years or such other period as may be decided by the Employees Stock Compensation Committee from the date of grant based on specific criteria. (Also, refer note 40)

e) Subdivision of shares

The Shareholders vide a special resolution has approved sub division of shares of the Company in the ratio of 5 shares of face value of certificate2/- each for every existing 1 share of the face value of certificate 10/- each through postal ballot. The requisite approvals for modification of the Memorandum and Articles of Association of the Company had been accorded by the shareholders on 4 May 2017.

f) Initial public offering

The Company had made an Initial Public Offer (IPO) of 4,594,875 Equity shares of certificate 10/- each at an issue price of certificate 896/- per Equity share ( certificate 810/- per Equity share for eligible employees), consisting of fresh issue of 560,405 Equity shares and an Offer for Sale of 4,034,470 Equity shares by Selling Shareholders.

g) Utilization of IPO proceeds

From the total proceeds of certificate4,114.88 million through an IPO, the Company received proceeds of certificate499.99 million towards fresh issue of 560,405 equity shares of certificate 10/- each fully paid up at a premium of certificate 886/- per share for 535,714 equity shares and certificate 800/- per share for 24,691 equity shares , net of certificate3,614.89 million attributed to the selling shareholders towards 4,034,470 equity shares of certificate 10/- each fully paid up at a premium of certificate 886/- per share offered by them for sale.

b) Details of security for each type of borrowing as at 31 March 2017

i Term loans from banks are secured by (i) hypothecation charge of present and future movable and immovable fixed assets assets of the Company; and (ii) first pari-passu charge by way of equitable/ registered mortgage on all the present and future land and building (immovable properties) of the Company.

ii Vehicle loans availed from four banks and two financial institutions are secured by charge on vehicles as specified in their respective loan agreements.

iii Loans repayable on demand from Banks (Working Capital loans) are secured by first pari passu charge on all existing and future current assets of the Company.

c) Terms of repayment of term loans and other loans

Term loan from banks

Term loan form bank carries an interest rate of base rate 1% (amounts to 10.50% both for the current and previous year) and from date of borrowing it is payable in 60 equal monthly installments of Rs,2.5 million each along with interest up to 9 November 2020.

Loan repayable on demand

i Cash Credit from bank for ' 95.37 million (Previous Year Rs, 165.90 million) carries an interest rate of 9% to 12%.

ii Packing credit foreign currency loan from bank for Rs,65.96 million (Previous Year '53.61 million) carries an interest rate of Libor 80 bps (previous year Libor 125 to 200 bps)

iii Working capital demand loan from bank for Rs,50.00 million (Previous Year '75.00 million) carries an interest rate of 8.20% p.a. (previous year 9.60% p.a.)

c) Terms of repayment of term loans and other loans (Continued)

Deferred sales tax payment liabilities

Deferred Sales Tax Loan is interest free and payable in 5 equal annual installments after expiry of initial 10 years of moratorium year from each such year of deferral period from 1996-97 to 2006-07.

a) Employee benefits

The Company provides for gratuity benefit and compensated absences, which are defined benefit plans, covering all its eligible employees. The Company has taken a group gratuity and compensated absences policy for its employees with the Life Insurance Corporation of India (LIC). Under gratuity policy, the eligible employees are entitled to receive gratuity payments upon their resignation or death (subject to completion of 4.5 years of employment) in lumpsum after deduction of necessary taxes.

The following table set out the status of the gratuity and compensated absences plan as required under Accounting Standard (AS)- 15- Employee benefits and the reconciliation of opening and closing balances of the present value of the defined benefit obligation.

Until 31 March 2016, the Company accounted for sales returns on basis of actual returns. During the year ended 31 March 2017, in line with an opinion of Expert Advisory Committee of the Institute of Chartered Accountants of India on accounting for sales returns, the Company has revised its approach by accounting for anticipated sales returns and has recorded a cumulative provision for anticipated sales returns during the year ended 31 March, 2017, by charging it to Statement of Profit and Loss.

The Management has identified enterprises which have provided goods and services to the Company and which qualify under the definition of micro and small enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2017 has been made in the standalone financial statements based on information received and available with the Company.