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Notes to Accounts of Bajaj Finance Ltd.

Mar 31, 2015

1 General information

The Company is a registered non-banking finance company engaged in the business of providing finance. The Company is registered with the Reserve Bank of India as a Non-Banking Finance Company (NBFC) with effect from 5 March 1998, with Registration No.A-13.00243. The Company primarily deals in the financing of two and three wheelers, consumer durables, small business loans, personal loan cross-sell, mortgage loans and loan against securities etc. The RBI vide its letter dated 7 October 2010, has re-classified the Company as a ''Loan Company'' from ''Asset Finance Company''.

b) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors and approved by the shareholders in the Annual General Meeting is paid in Indian Rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. Equity shares allotted on conversion of preferential warrants, i.e. 1,310,000 equity shares are restricted from transfer other than inter se promoter group up to 10 December 2015.

c) Shares reserved for issue under Employee Stock Option Plan 2,507,116 (1,829,803) equity shares (i.e. 5% of the paid up equity share capital) have been approved/reserved for issue under Employee Stock Option Plan, 2009 of the Company drawn in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (SEBI guidelines)), of which 1,890,680 (up to 31 March 2014:- 1,609,080) equity shares have been granted as per the scheme and 791,925 (up to 31 March 2014:- 787,000) thereof have been issued and alloted to ESOP trust, viz. BFL Employee Welfare Trust, up to 31 March 2015. Consequent to the opinion expressed by the ''Expert Advisory Committee'' of the Institute of Chartered Accountants of India on the applicability of clause 22A.1 of the SEBI Guidelines, the balance unexercised equity shares held by the trust at the close of the year amounting to 146,861 (as at 31 March 2014-393,581) have been reduced against the Share Capital of the Company as if the trust is administered by the Company itself. The Securities Premium related to the unexercised equity shares held by the trust as at the close of the year aggregating Rs. 103,110,017 (as at 31 March 2014:- Rs. 290,098,680) has also been reduced from securities premium account and adjusted against the loans outstanding from the trust. See note no. 29 for further details.

3 Computation of Earnings per Share (EPS)

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company''s earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating the diluted earnings per share, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

4 Contingent liability not provided for

(Rs. In Crore) As at 31 March

Particulars 2015 2014

VAT matters under Appeal 6.86 3.43

ESI matters under appeal 5.14 5.14

Service tax matters under appeal 1.19 0.95

Income tax matters:

Appeals by the Company 9.66 15.85

Appeal by the Income Tax department 12.86 22.31

Guarantees given on behalf of the Company 2.24

5 The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard-17 as prescribed by Companies (Accounting Standards) Rules, 2006, dealing with Segment Reporting.

6 Liability for long-term employee benefits has been determined by an actuary, appointed for the purpose, in conformity with the principles set out in the Accounting Standard 15 (Revised) as prescribed by Companies (Accounting Standards) Rules, 2006, the details of which are as hereunder.

C) Provident fund

In case of certain employees, the Provident Fund contribution is made to Bajaj Auto Limited Provident Fund Trust. In terms of the guidance note issued by the Institute of Actuaries of India, the actuary has provided a valuation of Provident Fund liability based on the assumptions listed below and determined that there is no shortfall as of 31 March 2015. The assumptions used in determining the present value of obligation of interest rate guarantee under deterministic approach are:

7 Employee stock option plan

The Board of Directors at its meeting held on 14 October 2009, approved an issue of Stock Options up to a maximum of 5% of the issued equity capital of the Company aggregating to 1,829,803 equity shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 subject to the approval of the shareholders under section 81(1A) of the Companies Act, 1956. The shareholders of the Company vide their special resolution passed through postal ballot on 15 December 2009 approved the issue of Equity Shares of the Company under one or more Employee Stock Option Scheme(s). The shareholders, at the Annual General Meeting held on 16 July 2014, approved an additional issue of 677,313 equity shares under the Stock Options schemes of the Company, i.e., Employee Stock Option Plan 2009.

Method used for accounting for share based payment plan

The Company has elected to use intrinsic value method to account for the compensation cost of stock options to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option.

The fair value of options used to compute pro-forma net profit and earnings per share have been estimated on the date of grant using the Black - Scholes Model. The key assumptions used in Black - Scholes Model for calculating fair value as on the date of grant are:

8 The disclosures required by various Reserve Bank of India Regulations, to the extent applicable, pertaining to Non-Banking Financial Companies are set out in Annexure to and forming an integral part of these Financial Statements.

9 On the basis of information available with the Company as regards the registration of its vendors under the Medium, Small and Micro Enterprises Development Act 2006, there are no dues outstanding beyond the prescribed credit period and consequently no interest payable under the said Act.

10 Previous year''s figures have been regrouped, wherever necessary, to make them comparable with those of the current period.

11 Amounts less than Rs. 50,000 have been shown at actual against respective line items statutorily required to be disclosed.


Mar 31, 2014

1. Contingent liability not provided for

(Rs. In Crore) As at 31 March

Particulars 2014 2013

Disputed claims against the Company not acknowledged as debts 6.56 4.57

VAT matter under appeal 3.43 6.05

ESI matter under appeal 5.14 5.14 Service tax matter under appeal 0.95 - Income tax matters:

- Appeals by the Company 15.85 29.59

- Appeals by the income tax department 22.31 5.74

Guarantees given on behalf of the Company - 4.44

2. The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard-17 as prescribed by Companies (Accounting Standards) Rules, 2006, dealing with Segment Reporting.

3. Employee stock option plan

The Board of Directors at its meeting held on 14 October 2009, approved an issue of Stock Options upto a maximum of 5% of the issued equity capital of the Company aggregating to 18,29,803 equity shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 subject to the approval of the shareholders under section 81(1A) of the Companies Act, 1956. The shareholders of the Company vide their special resolution passed through postal ballot on 15 December 2009 approved the issue of equity shares of the Company under one or more Employee Stock Option Scheme(s).

4. The disclosures required in terms of Paragraph 13 of the Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 are given in the Annexure forming part of these Financial Statements.

5. On the basis of information available with the Company as regards the registration of its vendors under the Medium, Small and Micro Enterprises Development Act 2006, there are no dues outstanding beyond the prescribed credit period and consequently no interest payable under the said Act.

6. Previous year''s figures have been regrouped, wherever necessary, to make them comparable with those of the current period.

7. Amounts less than Rs. 50,000/- have been shown at actual against respective line items statutorily required to be disclosed.


Mar 31, 2013

1. Contingent liability not provided for

(Rs. In Crore)

2013 2012

Disputed claims against the Company not acknowledged as debts 4.57 3.51

VAT matters under appeal 6.05 3.49

ESI matters under appeal 5.14 5.14

Income tax matters under appeal 35.33 41.51

Guarantees given on behalf of the Company 4.44 -

2. The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard-17 as prescribed by Companies (Accounting Standards) Rules, 2006, dealing with Segment Reporting.

3. Liability for employee benefits has been determined by an actuary, appointed for the purpose, in conformity with the principles set out in the Accounting Standard 15 (Revised) as prescribed by Companies (Accounting Standards) Rules, 2006, the details of which are as hereunder.

a) Provident fund

In case of certain employees, the provident fund contribution is made to Bajaj Auto Limited Provident Fund Trust.

In terms of the guidance note issued by the Institute of Actuaries of India, the actuary has provided a valuation of provident fund liability based on the assumptions listed below and determined that there is no shortfall as at 31 March 2013. The assumptions used in determining the present value of obligation of the interest rate guarantee under deterministic approach are:

The guidance note on implementing AS 15 "Employee benefits" issued by the Accounting Standards Board of the Institute of Chartered Accountants of India states that provident funds set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by the employer would be defined benefit plans in accordance with the requirements of paragraph 26(b) of AS 15. The current year is the first year in which the actuary has given the disclosures in the actuarial valuation report, in view of the issuance of the guidance note by the Institute of Actuaries of India. Accordingly, the compliance with the disclosure requirements of paragraph 120(n) of AS 15 "Employee benefits" have been done prospectively from this year onwards.

4. Employee stock option plan

The Board of Directors at its meeting held on 14 October 2009, approved an issue of stock options up to a maximum of 5% of the issued equity capital of the Company aggregating to 1,829,803 equity shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 subject to the approval of the shareholders under section 81(1A) of the Companies Act, 1956. The shareholders of the Company vide their special resolution passed through postal ballot on 15 December 2009 approved the issue of equity shares of the Company under one or more Employee Stock Option Scheme(s).

5. During the year, the Company transferred assets through direct assignment of cash flows and the underlying securities to two banks. The disclosure as required by the revised Guidelines on Securitisation Transactions issued by RBI on 21 August 2012 is given as under:

6. The disclosures required in terms of paragraph 13 of the Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 are given in the annexure forming part of these financial statements.

7. Previous year''s figures have been regrouped, wherever necessary, to make them comparable with those of the current period.

8. Amounts less than Rs. 50,000/- have been shown at actual against respective line items statutorily required to be disclosed.


Mar 31, 2012

Basis of preparation

These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material aspects with the accounting standards notified under section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and the other relevant provisions of the Companies Act, 1956 and Reserve Bank of India Regulations in relation to Non Banking Finance Companies to the extent applicable to the company.

All assets and liabilities have been classified as current or non-current as per the criteria set out in the Revised Schedule VI to the Companies Act, 1956.

a. Terms/rights attached to equity shares

The company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the board of directors and approved by the shareholders in the annual general meeting is paid in Indian rupees. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

b. Shares reserved for issue:

i. Under Employee Stock Option Plan:

1,829,803 equity shares (i.e. 5% of the then paid up equity share capital) have been approved under Employee Stock Option Plan Scheme, 2009 of the company drawn in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ii. For warrant conversion:

6,000,000 preferential warrants convertible into equivalent number of equity shares of Rs 10/- each had been issued to Bajaj Finserv Limited (promoter) by the company on 28 July 2011 from whom 25% of the issue price amounting to Rs 97.65 crore has been received in advance entitling the warrant holder to apply for an equivalent number of equity shares on payment of balance 75% of the issue price within 18 months from the date of allotment of warrants. Bajaj Finserv Limited has exercised its option to convert 4,690,000 warrants against which an equivalent number of equity shares of Rs 10/- each at a premium of Rs 641/- per share ranking pari passu with the existing equity shares of the company have been allotted on 29 March 2012. As of 31 March 2012, the balance 1,310,000 warrants are outstanding and an equivalent number of equity shares are reserved for issue against the same. The balance amount against these outstanding warrants amounts to Rs 21.32 crore.

1. The company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard-17 as prescribed by Companies (Accounting Standards) Rules, 2006, dealing with Segment Reporting.

a) Provident fund:

In case of certain employees, the provident fund contribution is made to Bajaj Auto Limited Provident Fund Trust. In terms of the guidance note issued by the Institute of Actuaries of India, the actuary has provided a valuation of provident fund liability based on the assumptions listed below and determined that there is no shortfall as at 31 March 2012.

The assumptions used in determining the present value of obligation of the interest rate guarantee under deterministic approach are:

Remaining term of maturity - 12.05 years Expected guaranteed interest rate - 8.25%

Discount rate for the remaining term of maturity of interest portfolio - 8.55%

2. Employee Stock Option Plan

The board of directors at its meeting held on 14 October 2009 approved an issue of Stock Options up to a maximum of 5% of the issued equity capital of the company aggregating to 1,829,803 equity shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 subject to the approval of the shareholders under Section 81(1A) of the Companies Act, 1956. The shareholders of the Company vide their special resolution passed through postal ballot on 15 December, 2009 approved the issue of equity shares of the company under one or more Employee Stock Option Scheme(s).

3. Employee Stock Option Plan (Contd.)

Method used for accounting for share based payment plan

The company has elected to use intrinsic value method to account for the compensation cost of stock options to employees of the company. Intrinsic Value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option.

4. The disclosures required in terms of paragraph 13 of the Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 are given in the Annexure forming part of these financial statements.

5. Till the year ended 31 March 2011, the company was using pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act 1956, has become applicable to the company. The company has reclassified previous year figures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of balance sheet.

6. Amounts less than Rs 50,000/- have been shown at actual against respective line items statutorily required to be disclosed.


Mar 31, 2010

1) Warrants issued with debentures to the shareholders in 2006-07 have lapsed on 8 January 2010 with no options of conversion being exercised.

2) Debenture Redemption Reserve has been created in accordance with the Circular No.9/2002 dated 18 April 2002, issued by Department of Company Affairs, Ministry of Law, Justice & Company Affairs, Government of India & Section 117 C of Companies Act. The balance in the reserve on redemption /extinguishment of the debentures has been transferred to the Profit and Loss Account.

3) Deferred Tax Adjustment:

As required by the Accounting Standard 22 "Accounting for Taxes on Income" as prescribed by Companies (Accounting Standards) Rules, 2006, which is mandatory in nature, the company has recognized Deferred Taxes, which result from the timing differences between the Book Profits and Tax Profits, for the year ended 31 March 2010 of Rs.208,022,542 /- as deferred tax credit in the Profit and Loss Account, the details of which are as under:

4) (a) Based on past and current experience keeping in mind the economies of recovery / repossession of financed assets having a low ticket value, the company has assessed the value of underlying securities/assets in respect of certain lines of financing with a more practical approach leading to a provision against non - performing assets /overdue receivables being, made during the year, at an amount higher than that required under prudential norms stipulated by the Reserve Bank of India by Rs. 46,682,475/-.

(b) In respect of lines of business where the management has decided to wind down the portfolio / book due to adverse experiences, the company has determined an amount of expected loss based on experience and circumstances, which amount is higher than that required under the prudential norms stipulated by the Reserve Bank of India by Rs. 226,317,061/-.

(c) As a measure of prudence, for longer tenor loans, the company has proactively chosen to create a general provision for mortgages in the current year estimated at Rs. 25,700,000/- for the year.

5) The company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard-17 as prescribed by Companies (Accounting Standards) Rules, 2006, dealing with Segment Reporting.

6) Employee Stock Option Plan:

The Board of Directors at its meeting held on 14 October 2009, approved an issue of Stock Options up to a maximum of 5% of the issued equity capital of the company aggregating to 1,829,803 equity shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 subject to the approval of the shareholders under Section 81(1 A) of the Companies Act, 1956. The shareholders of the Company vide their special resolution passed through postal ballot on 15 December 2009 approved the issue of Equity Shares of the Company under one or more Employee Stock Option Scheme(s).

Method used for accounting for share based payment plan:

The Company has elected to use intrinsic value method to account for the compensation cost of stock options to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option. The company issued grants on 12 January 2010 at Rs. 358.70 which was the closing price of previous date on the stock exchange with the highest trading volume for the day.

The fair value of options used to compute proforma net profit and earnings per share have been estimated on the date of grant using the Black - Scholes Model.

7) The disclosures required in terms of Paragraph 13 of the Non Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 are given in the Annexure forming part of these Financial Statements.

8) Previous years figures have been regrouped, wherever necessary, to make them comparable with those of the current period.

 
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