Notes to financial statements for the year ended 31 March 2015

1. Corporate information

IOL Chemicals and Pharmaceuticals Limited (The Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 on 29th of September 1986. Its shares are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Organic Chemicals and Bulk Drugs. The company caters to both domestic and international market.

2. Significant accounting policies and notes on accounts

a. Basis of brparation of financial statements:

The financial statements are brpared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule 2014.

b. Use of estimates

The brparation of financial statements, in conformity with the generally accepted accounting principles, require estimates and assumptions to be made that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results known materialise.

c. Revenue Recognition

i) Sale:

Sales comprise sale of goods and export incentives. Revenue from sale of goods is recognised:

a) when all significant risks and rewards of ownership is transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods.

ii) Export Incentives

Revenue in respect of export incentives is recognised on post export basis.

iii) Dividend

Dividend income from investment is recognised when the right to receive the payment is established.

iv) Interest

Revenue from interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

v) Insurance and other claims

Revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.

d. Employee Benefits

a) Short Term Employee Benefits:

Short Term Employee Benefits are recognised as an expense on an undiscounted basis in the statement of profit and loss for the year in which the related service is rendered.

b) Post Employment Benefits:

i) Defined Contribution Plans: Provident Fund:

The Employer's Contributions to provident fund are made in accordance with the provisions of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 and is recognised as an expense in the statement of profit and loss.

ii) Defined Benefit Plans: Gratuity:

The Group Gratuity Cash Accumulation Scheme, managed by Life Insurance Corporation of India

is a defined benefit plan. The liability for gratuity is provided on basis of actuarial valuation carried out by an independent actuary as at the Balance Sheet date. The Present Value of the company's obligation is determined on the basis of actuarial valuation at the year end using the projected unit credit method and the fair value of plan assets is reduced from the gross obligations under the gratuity scheme to recognize the obligation on a net basis.

c) Leave encashment:

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the brsent value of the defined benefit obligation at the Balance Sheet date, determined based on actuarial valuation using Projected Unit Credit Method. The discount rates used for determining the brsent value of the obligation under defined benefit plan, are based on the market yields on Government Securities as at the Balance Sheet date.

d) The actuarial gain or loss:

The actuarial gain or loss is recognised in statement of profit and loss in the period in which they occur.

e. Tangible fixed assets

a) Fixed assets are stated at historical cost less accumulated debrciation.

b) The cost of fixed asset comprises of its purchase price and any attributable expenditure (directly or indirectly) for bringing the asset to its working condition for its intended use.

c) The exchange differences arising on reinstatement/ settlement of long term foreign currency borrowings related to acquisition of debrciable fixed assets are adjusted to the cost of the respective assets and debrciated over the remaining useful life of these assets.

d) Expenditure incurred on renovation/modernisation of the existing fixed assets is added to the book value of these assets where such renovation/modernisation increases the future benefit from them beyond their brviously assessed standard of performance.

f. Intangible assets

Intangible assets are stated at cost less accumulated amount of amortisation.

g. Debrciation on tangible fixed assets

i) Debrciation on tangible fixed assets is provided on Straight Line Method on the basis of useful lives of such assets specified in Schedule II to the Companies Act,  2013.

ii) Debrciation on assets costing X 5,000/- or below is charged @ 100% per annum.

iii) The lease hold land is amortised over the lease period, i.e. 99 years.

iv) Addition or deduction to the fixed assets arising from exchange rate variation is debrciated over the residual life of the respective fixed assets.

v) The Intangible fixed assets acquired prior to 1st April 2014 are amortised over the revised useful life of the assets based on the indicative useful life of the assets mandated by Schedule II to the Companies Act, 2013.

h. Amortisation

Intangible assets are amortised on straight line method. These assets are amortised over their estimated useful life.

i. Investments

Long term investments are carried at cost less provisions, if any, for diminution in the value of such investments, which is other than temporary. Current Investments are carried at lower of cost and fair value

k. Cenvat Credit

Cenvat credit on excise duty/service tax paid on inputs, capital assets and input services is recognised in accordance with the Cenvat Credit Rules, 2004.

l. Government Grants and Subsidies

Government grants available to the company are recognised when there is a reasonable assurance of compliance with the conditions attached to such grants and when benefits in respect thereof have been earned and it is reasonably certain that the ultimate collection will be made. Government subsidy in the nature of promoter's contribution is credited to capital reserve. Government subsidy related to specific fixed assets is deducted from the gross value of the assets concerned.

m. Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as a part of cost of such asset. Qualifying asset is one that takes substantial period of time to get ready for its intended use. All other borrowing costs are recognised as expenditure in the period in which these are incurred.

n. Segment information

Segment information is brpared in conformity with the accounting policies adopted for brparing and brsenting the financial of the enterprise as a whole.

o. Operating lease

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals paid for such leases are recognised as an expense on systematic basis over the term of lease.

p. Foreign currency transactions

a. Foreign currency transactions are recorded on initial

recognition in the reporting currency by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency, at the date of transaction.

b. Foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at rate different from those at which these were initially recorded during the period or reported in brvious financial statement are recognised as income or expense

in the period in which they arise except in case of long term liabilities which relate to acquisition of fixed assets, these exchange differences are adjusted to the carrying cost of such fixed assets. c. The brmium or discount arising at the inception of a forward exchange contracts is amortised as an expense or income over the life of the contract. Exchange difference on such contract is recognised in the statement of profit and loss in the reported period in which the exchange rate changes profit or loss arising on cancellation or renewal of such contracts is recognised as income or expense in the period in which they arise.

q. Accounting for taxes on income

Provision for taxation for the year comprises of current tax and deferred tax. Current tax is amount of Income-tax determined to be payable in accordance with the provisions of Income tax Act 1961. Deferred Tax is the tax effect of timing differences between taxable income and accounting income for the period that originate in one period and are capable of reversal in one or more subsequent periods.

r. Earning Per Share

Basic Earning per share is computed by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earning per share is computed by taking into account weighted average number of equity shares outstanding during the period and the weighted average number of equity shares which would be issued on conversion of all dilutive potential equity shares into equity shares.

s. Impairment of fixed assets

At each Balance Sheet date an assessment is made whether any indication exists that an asset has been impaired, if any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of account.

t. Cash flow statement

The cash flow statement has been in accordance with the Accounting Standard (AS) - 3 "Cash flow statements" issued by the Companies (Accounting Standard) Rules, 2006.

u. Provisions and Contingent Liabilities

i. Provisions are recognised (for liabilities that can be measured by using substantial degree of estimate) when;

a) the company has a brsent obligation as a result of a past event:

b) a probable outflow of resources embodying economic benefits is expected to settle the obligation; and

c) the amount of the obligation can be reliably estimated.

ii. Contingent liability is disclosed in case there is:

a)(i) Possible obligation that arises from past events and existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the enterprise; or (ii) a reliable estimate of the amount of the obligation cannot be made.

b) a brsent obligation arising from a past event but is not recognised

(i) when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) a reliable estimate of the amount of the obligation cannot be made.

2 Debt restructuring

The operations of the company adversely impacted during the year on account of damped economic sentiments, batch losses/ quality issues of Ibuprofen intermediate, working capital gap and change in economies of chemical business. On account of losses incurred due to these factors, the company faced the stretched liquidity during the period. In order to correct the scenario, the company has requested its lenders for overall restructuring of its debts through Joint Lender Forum (JLF) with cut-off date as on September 01, 2014.

Accordingly, the lenders has sanctioned the combrhensive restructuring of all debts of the company. The restructuring of facilities included restructuring of repayment schedule, interest funding, reduction in interest rates, sanction of working capital term loans. The Master Restructuring Agreement (MRA) between the Borrowers and the JLF Lenders has been executed on March 23, 2015. The impact in terms of the sanctioned restructuring has been given effect in financial statements with effect from the cut-off date being September 01, 2014.

Interest has been accounted for based upon terms of restrucuring of facilities sanctioned by the respective lenders. The Funded Interest Term Loans (FITLs) has been created on certain credit facilities. Other conditions as stipulated under the scheme are being complied with.

 3Figures in bracket indicate deductions.

4 Previous year figures have been regrouped/recasted/rearranged wherever necessary to confirm to its classification of the current year.

5 Figures have been rounded off to the nearest rupee

As per our report of even date attached

For S.c. VASUDEVA & cO.

Chartered Accountants

Firm Regn. No.000235N

Sd/- (Sanjiv Mohan)

Partner

M.No.86066

Sd/- Varinder Gupta

Managing Director DIN-00044068

For and on behalf of the board of directors

Sd/- Vijay Kumar Garg

Joint Managing Director DIN-06510248

Sd/- Vijay Singla

Director (Works) DIN-03577178

Sd/- Krishan Singla

Vice President and Company Secretary

Sd/- Rakesh Mahajan

Chief Financial Officer

Place : Ludhiana

Date : 29 May 2015