KRBL Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Mar 2020

1. The above financial results of KRBL Limited (“the Company”) have been reviewed by the Audit Committee and approved by the Board of Directors at their respective meetings held on 9 June 2020 and have been audited by the statutory auditors of the Company.

2. The financial results have been prepared in accordance with the Indian Accounting Standards ('Ind AS') notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time, specified in Section 133 of the Companies Act, 2013.

3. During the year ended 31 March 2019, the Company had received demand notices under section 153A/143(3) of the Income-tax Act, 1961, with respect to assessment years 2010-11 to 2016-17, amounting to Rs. 75,744 lakh and interest thereon Rs. 51,176 lakh, against which Company had filed appeals with CIT (Appeals), New Delhi. During the quarter and year ended 31 March 2020, CIT(Appeals) granted partial relief on certain matters in favor of the Company, vide orders dated 11 March 2020, and correspondingly, income tax demand has been reduced by Rs. 69,612 lakh and interest thereon by Rs. 47,424 lakh respectively. The Company is in the process of filing appeals before Income Tax Appellate Tribunal (‘ITAT’) for remaining matters confirmed by CIT(Appeals) in respect of income tax demand of Rs. 6,132 lakh and interest thereupon of Rs. 3,752 lakh, shown under contingent liabilities. As at 31 March 2020, the Company had already paid Rs. 21,900 lakh, under protest against the demand. The management, based on legal assessment, is confident that it has a favorable case and the remaining demand shall also be deleted at the ITAT level.

The auditors of the Company have invited attention to the aforementioned issue in their audit report for the quarter and year ended 31 March 2020.

4. Ind AS 116, Leases, is mandatory for reporting periods beginning on or after 1 April 2019 (being transition date) and has replaced earlier leases accounting and reporting requirements under Ind AS 17 "Leases". The Company has adopted revised reporting i.e. Ind AS 116 with effect from 1 April 2019 using "Modified Retrospective Approach". There is no impact of adoption of Ind AS 116 on the retained earnings of the Company on transition date as the Company has availed practical expedients available in the revised reporting standard for transition.

5. The Board of Directors of the Company vide Resolution by Circulation dated 27 February 2020 have declared and paid an interim dividend for the financial year ended 31 March 2020, of Rs. 2.80 (280%) per paid up equity share of Re.1/- each, aggregating to Rs. 6,591 lakh (excluding dividend distribution tax) and the same shall be considered as total dividend for the year ended 31 March 2020.

6. Amounts for the quarters ended 31 March 2020 and 31 March 2019 are the balancing amounts between audited amounts for the full financial year and the published year to date amounts upto third quarter of the repective financial year, which were subjected to limited review.

7. The outbreak of Coronavirus (Covid 19) has severally impacted business globally including India. On 24 March 2020, Government of India (“GOI”) has declared this pandemic a health emergency and ordered temporary closure of all non-essential business, though essential category business were allowed to operate adhering to the guidelines issued by GOI.

As the nature of business performed by the Company falls under the essential category and the Company continued to operate its manufacturing facilities and distribute its products in accordance with the said guidelines. Though, there have been some operational difficulties due to lock down imposed in various regions, the impact on overall operations have not been significant. Further, the management of the Company has also assessed the impact of the situation on the capital, profitability, liquidity positions etc., and based on their assessment, the pandemic doesn’t have any material impact on the financial results of the Company. The management will continue to closely monitor any material change to future economic conditions and would take necessary actions accordingly.

8. The Enforcement Directorate (“ED”) had provisionally attached a portion of land parcels and building thereupon, situated at Dhuri, Tehsil Sangrur District of Punjab, to the extent of value of Rs. 1,532 lacs in connection with its money laundering investigation vide order dated 3 July 2019. The Adjudicating Authority vide their order dated 12 December 2019 has confirmed the said attachment. The Company filed an appeal with Appellate Tribunal, PMLA (Government of India), New Delhi, (“Appellate Tribunal”) and vide its order dated 17 January 2020, the Appellate Tribunal ordered to restore the possession in favor of the Company, however, aforesaid attachment may continue till the conclusion of the matter. Against the order of Appellate Tribunal, the ED has filed an appeal before Hon’ble High Court of Delhi, which is pending for hearing.

As at 31 March 2020, the possession of the said land parcels and building has not been restored physically to Company and therefore, the Company has filed an application with Hon’ble High Court of Delhi on 29 May 2020, for execution of the Appellate Tribunal order. The Company based upon the legal assessments, is confident that it has a favorable case and the said attachment shall be vacated.

The auditors of the Company have invited attention to the aforementioned issue in their audit report for the quarter and year ended 31 March 2020.

9. Effective from 1 April 2019, the Company has designated certain forward contracts and borrowings as eligible hedging instruments for hedge of foreign currency forecast sales. Pursuant to this, the effective portion of change in value of the hedging instruments has been recognised in ‘cash flow hedge reserve’ in other comprehensive income. Such amount is reclassified to profit or loss as and when the forecast transaction occurs or the hedges are no longer effective.

10. The Company had exercised the option permitted under Section 115BAA of the Income-tax Act, 1961 (“Act”) as introduced by the Taxation Laws (Amendment) Ordinance, 2019 in quarter ended 30 September 2019, which had resulted in lower tax rate of 25.17% as compared to 34.94% on the taxable profits, computed without any exemption/incentives under the different provisions of the Act. Consequent to such change, the accumulated deferred tax liabilities (net) has been remeasured, which has resulted in a onetime additional charge of Rs. 788 lakh recognised in the Statement of Profit and loss for the year ended 31 March 2020.

11. The figures for the corresponding previous periods/year have been regrouped/reclassified, wherever necessary, to make them comparable.