2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation of Financial Statements

These financial statements have been brpared under the historical cost convention except certain Fixed Assets, which have been revalued on the accrual basis of accounting in accordance with Generally Accepted Accounting Principles in India ("Indian GAAP") and are in conformity with mandatory accounting standards issued by Institute of Chartered Accountants of India, as brscribed under the Section 133 of Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act")/ Companies Act 1956 ("the 1956 Act"), as applicable.

(b) Use of Estimates

The brsentation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between the actual result and estimates are recognized in the period in which the results are known / materialized.

(c) Fixed Assets

1. Tangible Fixed Assets

(i) Fixed Assets other than Land, Building and Plant & Machinery are recorded at cost of acquisition or construction.

(ii) Land, Building and Plant & Machinery:

(a) These Fixed Assets are recorded at net brsent replacement value as on 30th September, 2010.

(b) Additions to Land, Buildings and Plant & Machinery after 30th September, 2010 are recorded at cost.

Note: Cost comprises of all direct costs/ expenses (including borrowing costs referred to in 2(d)) incurred in order to bring such assets to their brsent condition and location including Indirect Taxes in the case of Land and Buildings but excluding applicable set-off in respect of Indirect Taxes relating to Plant & Machinery and Software.

(iii) Fixed Assets include assets purchased under Hire Purchase Agreement.

2. Intangible Fixed Assets

Intangible Fixed Assets include cost of acquired software, designs and contract acquisition costs. Intangible assets are initially measured at acquisition cost including any directly attributable costs of brparing the asset for its intended use.

Internally developed intangibles

Expenditure incurred in respect of "new product development and applied research" held under Capital Work-in-Progress shall be recognized as Intangibles upon successful development of respective products. Refer note note 2(d) for the policy on capitalization of borrowing costs.

(d) Borrowing Cost

Financing costs relating to deferred credits or to borrowed funds attributable to construction or acquisition or development of qualifying assets are capitalized upto the commencement of commercial production and are included in the cost of the assets to which they relate.

A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to Statement of Profit and Loss.

(e) Debrciation /Amortization

1. Tangible Fixed Assets

(i) Debrciation on tangible fixed assets is provided on straight-line method at the rates and manner in accordance with Schedule II to the Companies Act, 2013.

(ii) Leasehold land is amortized over the period of lease.

(iii) Debrciation in respect of re-valued assets is charged to Revaluation Reserve and/or to Statement of Profit & Loss after the Revaluation Reserve is exhausted.

2. Intangible Fixed Assets

Amortization of intangible fixed assets is provided on straight-line method basis over a period of 10 years from the date of implementation based on management's estimate of useful life over which economic benefit will be derived from its use.

(f) Investments

Investments are stated at cost of acquisition. Provision is made for diminution in value of long-term investments, if such diminution is other than temporary in nature.

(g) Inventories

(i) Raw Material, Packing Material, Work-in-Process and Finished Goods are valued at lower of cost or net realisable value. Cost is determined by using FIFO method. Cost comprises of all costs of purchases (net of CENVAT credit, rebates, trade discount etc.), costs of conversion and cost incurred to bring the inventories to the brsent location and condition.

(ii) Stores and Spares are charged to consumption as and when purchased.

(h) Employee Benefits

The Company's employee benefits primarily cover provident fund, superannuation, gratuity and compensated absences.

(i) Provident fund and Superannuation fund are defined contribution schemes and the Company has no further obligation beyond the contributions made to the fund. The contribution on account of Provident Fund is made to the Employees Provident Fund and that for Superannuation, is made to The Life Insurance Corporation of India. The said contributions are charged to Statement of Profit and Loss in the Year in which they accrue.

(ii) Gratuity liability is a defined benefit obligation and is recorded based on actuarial valuation on projected unit credit method made at the end of the year. The gratuity liability and net periodic gratuity cost is actuarially determined after considering discount rates, expected long term return on plan assets and increase in compensation levels. The Company makes contributions to a fund administered and managed by the Life Insurance Corporation of India (LIC) to fund the gratuity liability. Under this scheme, the obligation to pay gratuity remains with the Company, although LIC administers the scheme.

(iii) Leave encashment / compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

(i) Translation of Foreign Currency Transactions

Transactions in foreign currency are recorded at the brvalent rates of exchange in force at the time the transactions are effected. Monetary items denominated in foreign currencies are translated at year-end rates. Any income or expense on account of exchange difference either on settlement or on translation is recognized in the Statement of Profit and Loss except in cases where they relate to:

(i) Acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets; and

(ii) Other long-term foreign currency monetary items that are amortized over the remaining life of the concerned monetary item.

(j) Revenue Recognition

Revenue is recognised when realisation is reasonably certain in respect of:

(i) Sale of goods on transfer of significant risk and reward. Sales are inclusive of excise duty.

(ii) Processing charges are recognized on despatch basis.

(iii) Transfer of Technology fees are recognized when the related services are performed as per the agreement.

(iv) Insurance / other claims, interest, commission and royalty.

(v) Export incentives on accrual basis.

(k) Taxes on Income

(i) Current tax is determined as the amount of Income Tax in respect of taxable income for the year in accordance with the applicable tax rates and the brvailing tax laws.

(ii) Deferred Tax is recognized, subject to the consideration of prudence for deferred tax assets, on timing differences between taxable income and accounting income that originate in one period/s/ year/s and are capable of reversal in one or more subsequent years. Deferred Tax Assets and Liabilities are measured in accordance with the applicable tax rates and the brvailing tax laws.

(l) Contingent Liabilities

Contingent liabilities are not provided for and are disclosed by way of notes to accounts.

2. FIXED DEPOSITS:

The Company has not been able to repay overdue Fixed Deposits aggregating to Rs. 108,586,000 and interest due thereon Rs. 14,889,768 upto 30th June, 2015 (excluding Short Term Loans in respect of which, the Company has been legally advised that such loans are not deposits, as defined, in the Companies (Acceptance of Deposits) Rules, 2014). Consequently, the Company has not complied with the provisions of Section 74 of the Companies Act, 2013 to the extent of such non repayment of overdue Fixed Deposits.

The Company has filed a petition with the Company Law Board on 31st March, 2015 to seek extension of time for repayment of principal and interest (dues) thereon upto 31st March, 2020. The liability, if any, arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached.

3. DEBENTURES:

The Company has not been able to repay Overdue Debentures aggregating to Rs. 61,650,000 and interest due thereon Rs. 2,423,376 (dues) upto 30th June, 2015. Therefore, the Company has filed a petition with the Company Law Board, seeking extension of time for repayment of Debenture dues up to 31st March, 2020. The liability, if any, arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached.

4 BANK LOAN:

Bank of Maharashtra (Bank) has taken action under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 24th June, 2015 and called upon the Company to repay the loans aggregating to Rs. 116,117,228 plus interest thereon @ 16.50% w.e.f 1st June, 2015 within 60 days. The Company is following up with the Bank in this regard. The liability, if any, will be accounted for in the year in which finality is reached.

5. The Board of Directors at its meeting held on 14th July, 2014 resolved to sell its manufacturing facilities for formulations at Tarapur, Maharashtra as the said unit has become unviable due to various factors for a total sale consideration of Rs. 386,100,000 resulting in a gain of Rs. 85,395,586 which has been brsented as an "Exceptional Item".

6. (i) During the brvious period, fire destroyed certain Fixed Assets, at the Company's Ankleshwar Plant  aggregating to Rs. 25,423,471 (Written down value Rs. 21,087,494) and Materials-in-Process aggregating to Rs. 6,110,356. The said loss of Rs. 27,197,850 had been written off to the Statement of Profit and Loss. The company had lodged an insurance claim for an aggregate sum of Rs. 27,097,850 which had been credited to Statement of Profit and Loss.

(ii) The Company has recognized revenue by way of insurance claim aggregating to Rs. 27,097,850 on account of loss of certain fixed assets and materials due to fire. The Company has received on account payments aggregating to Rs. 20,993,310 and realized Rs. 428,571 by way of sale of scrap arising from such destroyed fixed assets. The balance of Rs. 5,675,969 is considered good for recovery by the Management. The shortfall if any, will be adjusted in the year in which finality is reached.

7. DEbrCIATION:

(i) The debrciation and amortisation charged to Statement of Profit and Loss for the year Rs. 38,326,316 (Previous Period Rs. 54,303,516) includes Rs. 8,818,670 (Previous Period Rs. 9,457,823) being debrciation relating to Revaluation of Fixed Assets carried out on 31st March, 2007.

(ii) The debrciation for the year on the Revaluation of Fixed Assets carried out in September 2010 aggregating to Rs. 6,299,038 (Previous Period Rs. 7,772,174) has been charged to Revaluation Reserve.

(iii) Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing on or after 1st April, 2014, the Company has re-worked debrciation with reference to the useful lives of tangible fixed assets brscribed by PART 'C' of Schedule II to the Act; where the remaining useful life of tangible fixed asset is nil, the carrying amount of the assets after retaining the residual value, as at 1July, 2014 amounting to Rs. 26,390,697 has been adjusted to the balance of General Reserve. In other cases, the carrying values have been debrciated over the remaining useful lives of the assets and recognized in the Statement of Profit and Loss. As a result, the charge for debrciation is higher by Rs. 3,581,006 for the year ended 30th June, 2015.

8. Rs. 50,250,000 (Previous Period Rs. 50,250,000) placed with the Managing Director, as security deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The company is legally advised that the provisions of section 185 of the Companies Act, 2013 are not attracted in respect of the same.

9. Loans and Advances include Rs. 22,686,339 (Previous Period Rs. 52,321,737), granted to a Company as interest free financial assistance is considered good for recovery by the management.

10. Sundry Debtors aggregating to Rs. 288,327,248 (Previous Period Rs. 253,550,238) include debtors of Rs. 129,639,709 (Previous Period Rs. 112,999,170) outstanding for more than six months which are considered good for recovery by the management.

11. The balances relating to Sundry Debtors, Sundry Creditors, Fixed Deposits, Group Companies and Loans & Advances as on 30th June, 2015 are subject to confirmation and adjustments, if any on reconciliation of accounts. Since the extent to which these balances are subject to confirmation is not ascertainable, the resultant impact of the same on the accounts cannot be ascertained.

12. The investments in unquoted shares of Lyka BDR International Ltd., Lyka Exports Ltd. and Lyka Healthcare Ltd., have been acquired at par/brmium respectively. Though their brsent book values are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its values is required to be made at this juncture taking into consideration intrinsic value of their business.

13. The Company has incurred direct expenditure and allocable indirect expenditure in respect of "new product development and applied research" aggregating to Rs. 121,622,302 (Previous Period Rs. 121,790,478) including finance cost of Rs. 23,210,133 (Previous Period Rs. 25,614,668).

Of the above:

• Rs. 9,354,720 (Previous Period Rs. 168,869) has been transferred to "Self-Generated Intangible assets" on successful development including finance cost of Rs. 602,577 (Previous Period Rs. Nil).

• During the year in fructuous development expenditure relating to certain products aggregating to Rs. 2,624,399 (Previous Period Rs. 24,363,762) including finance cost of Rs. 519,586 (Previous Period Rs. 2,404,535) has been expensed.

• Balance of Rs. 109,643,183 (Previous Period Rs. 97,257,847), including finance cost of Rs. 22,087,970 (Previous Period Rs. 23,210,133), being balance of expenditure is carried forward under "Capital Work-in-Progress - Intangibles" which shall be recognized as "Self-Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the Period in which development is abandoned.

14. Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs. 10,585,575 (Previous Period Rs. 9,499,875).

15. Inventories include slow/non-moving materials procured during the earlier years aggregating to Rs. 12,560,316 (Previous Period Rs. 7,998,296). The Company is in the process of evaluating the quantum of usable materials.

16. The Company has provided Rs. 10,302,279 being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

17. Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, (MCA), relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation of Rs. 27,647,974. Accordingly, the Company charged Rs. 13,823,987 during the brvious period ended 30th September, 2010 to the Profit & Loss Account. Subsequently, pursuant to Notification dated 29th December, 2011, the Company exercised its option to amortize the balance loss of Rs. 13,823,987 on or before 31st March, 2020.

18. Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on 'Segment Reporting' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

19. The figures for the Current Year ended 30th June, 2015 being for a period of 12 months are not comparable with those of the Previous Period for 15 months.

20. The Company has regrouped and reclassified the Previous Period's figures in order to conform to the figures of the Current Year.

In terms of our report of even date attached,

For M.A.PARIKH & CO.

Chartered Accountants

Firm Registration No. 107556W

MUKUL PATEL

Partner

Membership No. 32489

For and on behalf of the Board of Lyka Labs Limited

N. I. Gandhi

DIN: 00021530

V. S. Shanbhag

DIN: 00555709

Y. B. Shah  

Chairman & Managing Director Director

P. G. Hindia

Chief Financial Officer Company Secretary

Place : Mumbai

Date : 29th August 2015