Mar 31, 2018
(a) Change in accounting policy Classification of non-performing assets (âNPAâ)
RBI vide itâs notification no DNBR. 011/CGM (CDS)-2015 dated March 27, 2015 had revised the asset classification norms for non-performing assets (âNPAâ) and substandard assets under its prudential norms applicable to NBFCs in a phased manner commencing from financial year ended March 31, 2016. This has resulted in increase in gross non-performing assets by Rs.8,541.21 lakhs. However, there is no significant impact of this change on provision for year ended March 31, 2018.
(b) Current/ Non current classification of assets and liabilities
As required by Schedule III, the Company has classified assets and liabilities into current and non-current based on the operating cycle. An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Since in case of non-banking financial company normal operating cycle is not readily determinable, the operating cycle has been considered as 12 months.
(c) Use of estimates
The preparation of financial statements in conformity with Indian Generally Accepted Accounting Principles (âIGAAPâ) requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
(d) Change in estimates Provisioning for standard assets
The Company has accounted for provision on standard assets as per Reserve Bank of India (âRBIâ) notification no. RBI/201415/299 dated November 10, 2014, which requires increased provision on standard assets in a phased manner over a period of three years commencing from March 31, 2016. As a result of which provision for standard assets as at March 31, 2018 is higher by Rs.1,073.54 lakhs.
(e) Tangible assets
Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
(f) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS-5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
(g) Depreciation on tangible asset / amortisation of intangible asset
Depreciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The Company has used the following rates to provide depreciation on its fixed assets.
(h) Loans
Loans are stated at the amount advanced, as reduced by the amounts received up to the balance sheet date and loans assigned.
(i) Leases Operating lease
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the tenure of the lease.
(j) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assetâs net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted at the pre tax discount rate reflecting current market assessment of time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.
(k) Investments
Investments which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
Current investments are carried in the financial statements at lower of cost or market value determined on an individual investment basis. Unquoted investments in units of mutual funds are stated at net asset value.
(l) Commercial papers
Commercial paper is recognised at redemption value net of unamortized finance charges. The difference between redemption value and issue value is amortised on a time basis and is disclosed separately under finance charges.
(m) Foreign currency transactions
(i) Initial recognition
Foreign currency transactions are recorded 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 the transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
(iii) Exchange differences
Exchange differences arising on the settlement of monetary items or on reporting Companyâs monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.
(n) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Interest income
Interest income from retail loans is accounted based on applying Internal Rate of Return (âIRRâ) and from other loans is accounted based on applying interest rate implicit in the contract. In case of non-performing assets interest income is recognised on receipt basis and unrealised interest recognised as income in the previous period is reversed in the month in which the asset is classified as Non-performing, as per NBFC prudential norms.
Interest income on all other assets is recognised on time proportion basis.
Fee income
Fee income on loans is recognised as income over the tenor of the loan agreements on internal rate of return (âIRRâ) basis. The unamortized balance is being disclosed as part of liabilities. For the agreements foreclosed / transferred through assignment, balance of processing fees is recognised as income at the time of such foreclosure / transfer through assignment.
Subvention income
Subvention income on loans is recognised as income over the tenor of the loan agreements. The unamortized balance is being disclosed as part of current liabilities. For the agreements foreclosed / transferred through assignment, balance of subvention income is recognised as income at the time of such foreclosure. / transfer through assignment.
Commission and brokerage income
Commission and brokerage income earned for the services rendered are recognised as and when they are due.
Income from assignment of loans and receivables
In case of assignment of loans the loans are derecognized as all the rights, title, future receivable and interest thereof are assigned to the purchaser. On derecognition, the difference between the book value of loans assigned and the consideration to be received as reduced by the estimated provision for loss/ expenses and incidental expense related to the transaction is recognized as gain or loss arising on assignment.
Income from assignment of loans and receivables is amortised over the tenure of loans in accordance with the RBI circular âRevisions to the Guidelines on Securitisation Transactionsâ dated August 21, 2012.
Income on retained interest in the assigned asset, if any, is accounted on accrual basis except in case of non-performing assets wherein interest income is recognised on receipt basis as per NBFC prudential norms.
Dividend income
Dividend income is recognised when the shareholdersâ right to receive payment is established by the balance sheet date. Dividend from the units of mutual funds is recognized on receipt basis in accordance with the NBFC Regulation.
Profit/ loss on sale of investments
Profit or loss on sale of investments is determined on the basis of FIFO carrying amount of investments disposed off.
(o) Securities issue expenses
Security issue expenses related to issuance of equity and debt are debited against securities premium account in accordance with the provisions of Section 52 of the Companies Act, 2013.
(p) Retirement and other employee benefits
Provident fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
Gratuity
The Company provides for the gratuity benefits based on an external actuarial valuation on projected unit credit method carried out for assessing liability as at the reporting date. The plan provides for lump sum payments to employees upon death while in employment or on separation from employment after serving for the stipulated year mentioned under âThe Payment of Gratuity Act, 1972â.
Actuarial gains and losses arising from experience adjustments and change in actuarial assumptions are recognised in the statement of profit and loss in the period in which they arise.
Leave encashment
Earned leave during the financial year and remaining unutilized will be encashed at the year end based on basic salary. The company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for twelve months after the reporting date.
(q) Borrowing costs
Borrowing costs consists of interest and other ancillary cost that an entity incurs in connection with borrowing of funds. Ancillary costs incurred in connection with the arrangement of borrowings are amortised over the tenor of borrowings.
(r) Loan origination cost
Loan origination costs such as credit verification, agreement stamping, direct selling agents commission and valuation charges are recognised as expense over the contractual tenor of the loan agreements on internal rate of return (âIRRâ) basis. Full monthâs amortization is done in the month in which loans are disbursed. For the agreements foreclosed or transferred through assignment, the unamortised portion of the loan acquisition costs is recognised as charge to the Statement of Profit and Loss at the time of such foreclosure/ transfer through assignment.
(s) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset 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 (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as âMAT Credit Entitlement.â The Company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
(t) Provisioning / Write-off on assets
Provisioning/ Write-off on overdue assets
The provisioning / write-off on overdue assets is as per the management estimates, subject to the minimum provision required as per Non- Banking Financial Companies-Systemically important Non-Deposit accepting Company and Deposit accepting Company (Reserve Bank) Directions, 2016.
The Company accounts for provision for doubtful assets after taking into account the time lag between an accounts becoming overdue, its recognition as such and realisation of available security. The Company classfies non performing assets which are overdue for three months or more.
Contingent Provisions against standard assets
Contingent provision against standard assets has been made @ 0.40% which is in accordance with Reserve Bank of India (âRBIâ) guidelines.
(u) Employee stock option scheme (âESOSâ)
Employees (including senior executives) of the Company also receives remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).
Measurement and disclosure of the Employee Share-based Payment plans is done in accordance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI. The Company measures compensation cost relating to employee stock options using the intrinsic value method (i.e. excess of market value of shares over the exercise price of the option at the date of grant). Compensation cost is amortised over the vesting period of the option on a straight line basis. The options which have lapsed are reversed by a credit to Employee conpensation cost, equal to the amortised portion of value of lapsed portion and credit to Deferred employee compensation cost equal the unamortised portion.
(v) Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(w) Provisions
A provision is recognised when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
(x) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
(y) Cash and cash equivalents
Cash and Cash Equivalents for the purpose of cash flow statement comprise cash in hand and cash at bank including fixed deposit with original maturity period of three months and short term highly liquid investments with an original maturity of three months or less.
Mar 31, 2017
1. CORPORATE INFORMATION
Capital First Limited (the âCompany'' or âCFL'') is a public Company domiciled in India and incorporated on October 18, 2005 under the provisions of the Companies Act, 1956. The Company has received a Certificate of Registration from the Reserve Bank of India (âRBI'') on April 10, 2006 to commence / carry on the business of Non-Banking Financial Institution (âNBFC'') without accepting public deposits.
2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared to comply in accordance with the Accounting Standards (âAS'') notified under section 133 of the Companies Act, 2013 (the âAct'') read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016 and other accounting principles generally accepted in India (IGAAP) and as per the guidelines issued by Reserve Bank of India (âRBI'') as applicable to a Non-Banking Financial (No deposit accepting or holding) Companies (âNBFC Regulation''). The financial statements have been prepared on an accrual basis and under the historical cost convention. The notified Accounting Standards (AS) are followed by the Company insofar as they are not inconsistent with the NBFC Regulation.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Change in Accounting Policy Classification of non-performing assets (âNPAâ)
RBI vide it''s notification no DNBR. 011/CGM (CDS)-2015 dated March 27, 2015 had revised the asset classification norms for non-performing assets (âNPA'') and substandard assets under its prudential norms applicable to NBFCs in a phased manner commencing from financial year ending March 31, 2016. This has resulted in increase in gross non-performing assets by Rs, 5,342.80 lakhs. However, there is no significant impact of this change on provision for year ended March 31, 2017.
(b) Current/Non Current classification of assets and liabilities
As required by Schedule III, the Company has classified assets and liabilities into current and non-current based on the operating cycle. An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Since in case of non-banking financial Company normal operating cycle is not readily determinable, the operating cycle has been considered as 12 months.
(c) Use of estimates
The preparation of financial statements in conformity with Indian Generally Accepted Accounting Principles (âIGAAPâ) requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting year. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future years.
(d) Change in estimates
i) Provisioning on retail mortgage loans
During the year, the Company has changed its estimates related to provisioning for retail mortgage and housing loans. Consequent to the change in such estimates, provision and write off for the year ended March 31, 2017 is higher by Rs, 383.16 lakhs.
ii) Provisioning for standard assets
The Company has accounted for provision on standard assets as per Reserve Bank of India (âRBI'') notification no. RBI/2014-15/299 dated November 10, 2014, which requires increased provision on standard assets in a phased manner over a year of three years commencing from March 31, 2016. As a result of which provision for standard assets as at March 31, 2017 is higher by Rs, 736.38 lakhs.
iii) Provisioning for Subvention Debtors
During the year, the Company has changed its estimates related to provisioning for subvention debtors. Consequent to the change in such estimates, provision and write off for the year ended March 31, 2017 is higher by Rs, 296.11 lakhs.
(e) Tangible assets
Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the year during which such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
(f) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in an amalgamation in the nature of purchase is their fair value as at the date of amalgamation. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization year is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS-5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
(g) Depreciation on Tangible asset / Amortisation of Intangible asset
Depreciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The Company has used the following rates to provide depreciation on its fixed assets.
(h) Loans
Loans are stated at the amount advanced, as reduced by the amounts received up to the balance sheet date and loans assigned.
(i) Leases Operating Lease
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the tenure of the lease.
(j) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted at the pre tax discount rate reflecting current market assessment of time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.
(k) Investments
Investments which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
Quoted Current investments are carried in the financial statements at fair value determined on an individual investment basis. Unquoted investments in units of mutual funds are stated at net asset value.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
(l) Commercial Papers
Commercial paper is recognized at redemption value net of unamortized finance charges. The difference between redemption value and issue value is amortized on a time basis and is disclosed separately under finance charges.
(m) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded 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 the transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting Company''s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
(n) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Interest income
Interest income from retail loans is accounted based on applying Internal Rate of Return (âIRR'') and from other loans is accounted based on applying interest rate implicit in the contract. In case of non-performing assets interest income is recognized on receipt basis as per NBFC prudential norms.
Interest income on all other assets is recognized on time proportion basis.
Fee income
Fee income on loans is recognized as income over the tenor of the loan agreements on internal rate of return (âIRR'') basis. The unamortized balance is being disclosed as part of liabilities. For the agreements foreclosed / transferred through assignment, balance of processing fees is recognized as income at the time of such foreclosure / transfer through assignment.
Subvention income
Subvention income on loans is recognized as income over the tenor of the loan agreements. The unamortized balance is being disclosed as part of liabilities. For the agreements foreclosed / transferred through assignment, balance of subvention income is recognized as income at the time of such foreclosure / transfer through assignment.
Commission and brokerage income
Commission and brokerage income earned for the services rendered are recognized as and when they are due.
Income from Assignment of loans and receivables
Income from assignment of loans and receivables is amortized over the tenure of loans in accordance with the RBI circular âRevisions to the Guidelines on Securitization Transactionsâ dated August 21, 2012.
Income on retained interest in the assigned asset, if any, is accounted on accrual basis except in case of non-performing assets wherein interest income is recognized on receipt basis as per NBFC prudential norms.
Dividend income
Dividend income is recognized when the shareholders'' right to receive payment is established by the balance sheet date. Dividend from the units of mutual funds is recognized on receipt basis in accordance with the NBFC Regulation.
Profit/ Loss on sale of investments
Profit/ loss earned on sale of investments is recognized on trade date basis. Profit or loss on sale of investments is determined on the basis of weighted average cost method.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
(o) Securities issue expenses
Security issue expenses related to issuance of equity and debt are debited against securities premium account in accordance with the provisions of Section 52 of the Companies Act, 2013.
(p) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
Gratuity
The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan provides for lump sum payments to employees upon death while in employment or on separation from employment after serving for the stipulated year mentioned under âThe Payment of Gratuity Act, 1972''. The Company accounts for liability of future gratuity benefits based on an external actuarial valuation on projected unit credit method carried out for assessing liability as at the reporting date.
Actuarial gains and losses arising from experience adjustments and change in actuarial assumptions are recognized in the statement of profit and loss in the year in which they arise.
Leave encashment
Earned leave during the financial year and remaining unutilized will be encased at the yearend based on basic salary. The Company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for twelve months after the reporting date.
(q) Borrowing costs
Borrowing costs consists of interest and other ancillary cost that an entity incurs in connection with borrowing of funds. Ancillary costs incurred in connection with the arrangement of borrowings are amortized over the tenor of borrowings.
(r) Loan origination cost
Loan origination costs such as credit verification, agreement stamping, direct selling agents commission and valuation charges are recognized as expense over the contractual tenor of the loan agreements. Full month''s amortization is done in the month in which loans are disbursed. For the agreements foreclosed or transferred through assignment, the unamortized portion of the loan acquisition costs is recognized as charge to the Statement of Profit and Loss at the time of such foreclosure/transfer through assignment.
(s) Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset 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.
Deferred tax assets and Deferred tax liabilities are offset, if a legally enforceable right exists to set-off deferred tax assets against deferred tax liabilities. .
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified year, i.e., the year for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as âMAT Credit Entitlement.â The Company reviews the âMAT Credit Entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified year.
(t) Provisioning / Write-off on assets
Provisioning/ Write-off on overdue assets
The provisioning / write-off on overdue assets is as per the management estimates, subject to the minimum provision required as per Master Direction-Non Banking Financial Company-Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
The Company accounts for provision for doubtful assets after taking into account the time lag between an accounts becoming overdue, its recognition as such and realization of available security. The Company classifies non-performing assets which are overdue for four months or more.
Provision on standard assets
Provision on standard assets has been made @ 0.35% which is in accordance with Reserve Bank of India (âRBI'') guidelines.
(u) Employee Stock Option Scheme (âESOSâ)
Employees (including senior executives) of the Company also receives remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).
In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the intrinsic value method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting year has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a year represents the movement in cumulative expense recognized as at the beginning and end of that year and is recognized in employee benefits expense.
(v) Earnings per share
Basic earnings per share are calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
(w) Provisions
A provision is recognized when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
(x) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
(y) Cash and Cash Equivalents
Cash and Cash Equivalents for the purpose of cash flow statement comprise cash in hand and cash at bank including fixed deposit with original maturity period of three months and short term highly liquid investments with an original maturity period of three months or less.
Mar 31, 2015
(a) Change in Accounting Policy
I) Accounting for debenture issue expenses
During the year, the Company has changed its accounting policy for
recording debenture issue expenses from charging against Securities
Premium Account to charging in profit and loss account over the tenure
of debentures. Had the Company followed earlier accounting policy
profit would have been higher by Rs. 59.17 lakhs.
II) Employee stock compensation cost
Till October 27, 2014, the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999, dealt with the grant
of share-based payments to employees. Among other matter, these
guidelines prescribed accounting for grant of share-based payments to
employees. Hence, the Company being a listed entity was required to
comply with these Guidelines as well as the Guidance Note on Accounting
for Employee Share-based Payments with regard to accounting for
employee share-based payments. Particularly, in case of conflict
between the two requirements, the SEBI guidelines were prevailing over
the Institute of Chartered Accountants of India (''ICAI'') Guidance
Note.
From October 28, 2014, the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 have been replaced by
the SEBI (Share Based Employee Benefits) Regulations, 2014.The new
regulations don''t contain any specific accounting treatment; rather,
they require ICAI Guidance Note to be followed. Consequent to the
application of the new regulations, the Company has changed its
accounting for equity settled option expiring unexercised after vesting
in line with accounting prescribed in the Guidance Note, i.e., expense
is not reversed through the statement of profit and loss. The
management has decided to apply the revised accounting policy
prospectively from the date of notification of new regulation, i.e.,
October 28, 2014.
Since there are no equity settled options expiring unexercised after
October 28, 2014, the change in accounting policy did not have any
material impact on financial statements of the Company for the current
year.
(b) Current/Non-Current classification of assets and liabilities
As required by Revised Schedule III, the Company has classified assets
and liabilities into current and non-current based on the operating
cycle. An operating cycle is the time between the acquisition of assets
for processing and their realisation in cash or cash equivalents. Since
in case of non-banking financial Company normal operating cycle is not
readily determinable, the operating cycle has been considered as 12
months.
(c) Use of estimates
The preparation of financial statements in conformity with Indian
Generally Accepted Accounting Principles ("IGAAP") requires the
management to make judgements, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent liabilities, at the end of the reporting
period. Although these estimates are based on the management''s best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
(d) Change in estimates
I) Provisioning on retail loans, other than Mortgage Loans and Consumer
Loans
During the year ended March 31, 2015, the Company has changed its
accounting estimates related to provisioning for non performing retail
loans, other than Mortgage Loans and and Consumer Loans. Had the
Company followed earlier estimates, profit for the year would have been
higher by Rs. 436.50 lakhs.
II) Provision for standard assets
The Company has opted for early phased compliance with RBI notification
vide notification No. RBI/2014-15/299 dated November 10, 2014, which
requires increased provision on standard assets in a phased manner over
a period of three years. As a result of which provision for standard
assets for the year ended March 31, 2015 is higher by Rs. 431.64 lakhs.
III) Depreciation on fixed assets
(a) Pursuant to the Companies Act, 2013 (the "Act") becoming
effective from April 01, 2014, the Company has recomputed the
depreciation based on the useful life of the assets as prescribed in
Schedule II of the Act. This has resulted in additional charge of
depreciation of Rs. 343.04 lakhs for the year ended March 31, 2015.
Further, as per the transitional provision, the Company has adjusted Rs.
67.14 lakhs (net of deferred tax) in the opening balance of Surplus in
Statement of Profit and Loss.
Till the year ended March 31, 2014, Schedule XIV to the Companies Act,
1956, prescribed requirements concerning depreciation of fixed assets.
From the current year, Schedule XIV has been replaced by Schedule II to
the Companies Act, 2013. The applicability of Schedule II has resulted
in the following changes related to depreciation of fixed assets.
Unless stated otherwise, the impact mentioned for the current year is
likely to hold good for future years also.
(b) Useful lives/depreciation rates
Till the year ended March 31, 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the Company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. Schedule II
to the Companies Act, 2013 prescribes useful lives for fixed assets
which, in many cases, are different from lives prescribed under the
erstwhile Schedule XIV. However, Schedule II allows companies to use
higher/lower useful lives and residual values if such useful lives and
residual values can be technically supported and justification for
difference is disclosed in the financial statements.
Considering the applicability of Schedule II, the management has
re-estimated useful lives and residual values of all its fixed assets.
The management believes that depreciation rates currently used fairly
reflect its estimate of the useful lives and residual values of fixed
assets. This has resulted in additional charge of depreciation of Rs.
343.03 lakhs for the year ended March 31, 2015. Further, as per the
transitional provision, the Company has adjusted Rs. 67.14 lakhs (net of
deferred tax) in the opening balance of Surplus in Statement of Profit
and Loss.
(e) Tangible assets
Fixed assets, except land acquired before April 1, 2010, are stated at
cost, net of accumulated depreciation and accumulated impairment
losses, if any. The cost comprises purchase price, borrowing costs if
capitalization criteria are met and directly attributable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(f) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalised development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight-line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortises the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS-5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
(h) Loans
Loans are stated at the amount advanced, as reduced by the amounts
received up to the balance sheet date and loans assigned.
(i) Leases Operating Lease
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight line basis over the
tenure of the lease."
Finance Lease
Where the Company is the lessor
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognized in the statement of profit
and loss. Initial direct costs such as legal costs, brokerage costs,
etc. are recognized immediately in the statement of profit and loss."
(j) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
at the pre tax discount rate reflecting current market assessment of
time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(k) Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. Long-term investments are carried
at cost. However, provision for diminution in value is made to
recognise a decline other than temporary in the value of the
investments.
Current investments are carried in the financial statements at fair
value determined on an individual investment basis. Unquoted
investments in units of mutual funds are stated at net asset value.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss."
(l) Commercial Papers
Commercial paper is recognized at redemption value net of unamortized
finance charges. The difference between redemption value and issue
value is amortised on a time basis and is disclosed separately under
finance charges.
(m) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded 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 the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
(n) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Interest income
Interest income from retail loans is accounted based on applying
Internal Rate of Return (''IRR'') and from other loans is accounted
based on applying interest rate implicit in the contract. In case of
non-performing assets interest income is recognized on receipt basis as
per NBFC prudential norms.
Interest income on all other assets is recognized on time proportion
basis.
Income on discounted instruments
Income on discounted instruments is recognized over the tenor of the
instrument on straight-line basis.
Fee and subvention income
Fee income on loans and subvention income is recognized as income over
the tenor of the loan agreements. The unamortized balance is being
disclosed as part of current liabilities. For the agreements
foreclosed/transferred through assignment, balance of processing fees
and subvention income is recognized as income at the time of such
foreclosure / transfer through assignment.
Commission and brokerage income
Commission and brokerage income earned for the services rendered are
recognized as and when they are due.
Income from Assignment of loans and receivables
Income from assignment of loans and receivables is amortised over the
tenure of loans in accordance with the RBI circular "Revisions to the
Guidelines on Securitisation Transactions" dated August 21, 2012.
Income on retained interest in the assigned asset, if any, is accounted
on accrual basis except in case of non-performing assets wherein
interest income is recognized on receipt basis as per NBFC prudential
norms.
Dividend income
Dividend income is recognized when the shareholders'' right to receive
payment is established by the balance sheet date. Dividend from the
units of mutual funds is recognized on receipt basis in accordance with
the NBFC Regulation.
Profit/Loss on sale of investments
Profit/loss earned on sale of investments is recognized on trade date
basis. Profit or loss on sale of investments is determined on the basis
of the weighted average cost method.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(o) Securities issue expenses
Equity issue expenses related to issuance of equity are debited against
securities premium account in accordance with the provisions of Section
52 of the Companies Act, 2013.
Debenture issue expenses are charged to profit and loss account over
the tenure of debentures.
(p) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognises
contribution payable to the provident fund scheme as an expenditure,
when an employee renders the related service. If the contribution
payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the deficit payable to the
scheme is recognized as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the contribution
due for services received before the balance sheet date, then excess is
recognized as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
Gratuity
The Company provides for the gratuity, a defined benefit retirement
plan covering all employees. The plan provides for lump sum payments to
employees upon death while in employment or on separation from
employment after serving for the stipulated year mentioned under ''The
Payment of Gratuity Act, 1972''. The Company accounts for liability of
future gratuity benefits based on an external actuarial valuation on
projected unit credit method carried out for assessing liability as at
the reporting date.
Actuarial gains and losses arising from experience adjustments and
change in actuarial assumptions are recognized in the statement of
profit and loss in the period in which they arise.
(q) Leave encashment
Earned leave during the financial year and remaining unutilised will be
encashed at the year end based on basic salary. The Company presents
the entire leave as a current liability in the balance sheet, since it
does not have an unconditional right to defer its settlement for twelve
months after the reporting date.
(r) Borrowing costs
Borrowing costs consists of interest and other ancillary cost that an
entity incurs in connection with borrowing of funds. Ancillary costs
incurred in connection with the arrangement of borrowings are amortised
over the tenor of borrowings.
(s) Loan origination cost
Loan origination costs such as credit verification, agreement stamping,
direct selling agents commission and valuation charges are recognized
as expense over the contractual tenor of the loan agreements. Full
month''s amortization is done in the month in which loans are disbursed.
For the agreements foreclosed or transferred through assignment, the
unamortised portion of the loan acquisition costs is recognized as
charge to the Statement of Profit and Loss at the time of such
foreclosure/transfer through assignment.
(t) Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss."
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable
profits.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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 (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognises MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement."
The Company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the Company does
not have convincing evidence that it will pay normal tax during the
specified period.
(u) Provisioning/Write-off on assets Provisioning/Write-off on overdue
assets
The provisioning/write-off on overdue assets is as per the management
estimates, subject to the minimum provision required as per Non-Banking
Financial Companies Prudential Norms (Reserve Bank) Directions, 2007.
The Company accounts for provision for doubtful assets after taking
into account the time lag between an accounts becoming overdue, its
recognition as such and realisation of available security. The Company
classfies non performing assets which are overdue for six months or
more.
Provision on standard assets
Provision on standard assets has been made @ 0.30% which is higher than
as prescribed by Reserve Bank of India (''RBI'') guidelines.
(v) Employee Stock Option Scheme (''ESOS'')
Employees (including senior executives) of the Company also receives
remuneration in the form of share based payment transactions, whereby
employees render services as consideration for equity instruments
(equity-settled transactions).
In accordance with the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method. 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 expense or credit recognized in 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.
(w) Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(w) Provisions
A provision is recognized when the Company has a present obligation as
a result of past event; it is probable that outflow of resources will
be required to settle the obligation, in respect of which a reliable
estimate can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
(y) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(z) Cash and Cash Equivalents
Cash and Cash Equivalents for the purpose of cash flow statement
comprise cash in hand and cash at bank including fixed deposit with
original maturity period of three months and short-term highly liquid
investments with an original maturity of three months or less.
Mar 31, 2014
(a) Current/Non Current classification of assets and liabilities
As required by Revised Schedule VI, the Company has classified assets
and liabilities into current and non-current based on the operating
cycle. An operating cycle is the time between the acquisition of assets
for processing and their realisation in cash or cash equivalents. Since
in case of non-banking financial Company normal operating cycle is not
readily determinable, the operating cycle has been considered as 12
months.
(b) Use of estimates
The preparation of financial statements in conformity with Indian
Generally Accepted Accounting Principles ("IGAAP") requires the
management to make judgments, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities and the
disclosure of contingent liabilities, at the end of the reporting
period. Although these estimates are based on the management''s best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
(c) Tangible Fixed assets
Tangible Fixed assets are stated at cost less accumulated depreciation
and impairment losses, if any. Cost comprises of purchase price and any
other directly attributable costs of bringing the asset to its working
condition for its intended use. Subsequent expenditure related to an
item of fixed asset is added to its book value only if it increases the
future benefits for existing assets beyond its previously assessed
standard of performance. All other expenses on existing fixed assets,
including day to day repair and maintenance expenditure and cost of
replacing parts, are charged to the statement of profit and loss for
the period during which such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred. Subsequent expenditure
related to an item of fixed asset is added to its book value only if it
increases the future benefits for existing assets beyond its previously
assessed standard of performance. All other expenses on existing fixed
assets, including day to day repair and maintenance expenditure and
cost of replacing parts, are charged to the statement of profit and
loss for the period during which such expenses are incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. Intangible assets not yet available for
use are tested for impairment annually. All other intangible assets are
assessed for impairment whenever there is an indication that the
intangible asset may be impaired.
Gains or losses arisingfrom derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
(e) Depreciation on Tangible asset/Amortisation of Intangible asset
Depreciation on tangible assets is provided using straight line method
at the rates prescribed under Schedule XIV of the Companies Act, 1956.
Leasehold improvements are depreciated on straight line basis over
shorter of useful lives or primary period of lease agreements which
ranges from three to five years.
Intangible assets includes domain names, trademarks, copyrights and
computer software, which are acquired, capitalized and amortized on a
straight-line basis over the estimated useful lives of 5 years.
All fixed assets costing Rs. 5,000 or less individually are fully
depreciated/amortised in the year of purchase.
(f) Loans
Loans are stated at the amount advanced, as reduced by the amounts
received up to the balance sheet date and loans assigned.
(g) Leases Operating Lease
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight line basis over the
tenure of the lease.
Finance Lease
Where the Company is the lessor
Assets given under a finance lease are recognised as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the Internal Rate of
Return (''IRR'') method. The principal amount received reduces the net
investment in the lease and interest is recognised as revenue. Initial
direct costs such as legal costs, brokerage costs, etc. are recognised
immediately in the Statement of Profit and Loss.
(h) Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying a mount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
at the pre tax discount rate reflecting current market assessment of
time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(i) Investments
On Initial recognition, all investments are measured at cost.
Investments that are readily realisable and intended to be held for not
more than a year from the date on which such investments are made are
classified as current investments. All other investments are classified
as long-term investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments. Unquoted investments in units of
mutual funds are stated at net asset value.
(j) Commercial Papers
Commercial paper is recognised at redemption value net of unamortized
finance charges. The difference between redemption value and issue
value is amortised on a time basis and is disclosed separately under
finance charges.
(k) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded 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 the
transaction.
(ii) Conversion
Foreign currency monetary items are reported usingthe closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported usingthe exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(I) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Interest income
Interest income from Retail loans is accounted based on applying
Internal Rate of Return (''IRR'') and from other loans is accounted based
on applying interest rate implicit in the contract. In case of
non-performing assets interest income is recognised on receipt basis as
per NBFC prudential norms.
Interest on all other assets is recognised on time proportion basis.
Income on discounted instruments
Income on discounted instruments is recognised over the tenor of the
instrument on straight line basis.
Fee income
Fee income on loans and subvention income is recognised as income over
the tenor of the loan agreements. The unamortized balance is being
disclosed as part of current liabilities. For the agreements
foreclosed/transferred through assignment, balance of processing fees
and subvention income is recognised as income at the time of such
foreclosure/ transfer through assignment.
Commission and brokerage income
Commission and brokerage income earned for the services rendered are
recognised as and when they are due.
Income from Assignment of loans and receivables
Income from assignment of loans and receivables is amortised over the
tenure of loans in accordance with the RBI circular "Revisions to the
Guidelines on Securitisation Transactions" dated August 21, 2012.
Income on retained interest in the assigned asset, if any, is accounted
on accrual basis.
Dividend income
Dividend income is recognised when the shareholders'' right to receive
payment is established by the balance sheet date. Dividend from the
units of mutual funds is recognized on receipt basis in accordance with
the NBFC Regulation.
Profit/Loss on sale of investments
Profit/loss earned on sale of investments is recognised on trade date
basis. Profit or loss on sale of investments is determined on the basis
of the weighted average cost method.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(m) Accounting for Derivative Instruments
Derivatives are financial instruments falling under the category of
"fair value through profit and loss" as defined under Accounting
Standard (AS) 30 - Financial Instruments: Recognition and Measurement.
The Company has used derivative financial instruments such as commodity
futures for trading purpose which are initially recorded at fair value.
The same are subsequently measured at fair value at each reporting date
with their fair valuation gain/loss taken to Statement of Profit &
Loss.
On final settlement or squaring up of contracts for commodity futures,
the realised profit or loss after adjusting the unrealised loss, if
any, is recognised in the Statement of Profit & Loss.
(n) Securities issue expenses
Securities issue expenses are debited against securities premium
account in accordance with the provisions of Section 78 of the
Companies Act, 1956.
(o) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as an expenditure,
when an employee renders the related service. If the contribution
payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the deficit payable to the
scheme is recognized as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the contribution
due for services received before the balance sheet date, then excess is
recognized as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
Gratuity
The Company provides for the gratuity, a defined benefit retirement
plan covering all employees. The plan provides for lump sum payments to
employees upon death while in employment or on separation from
employment after serving for the stipulated year mentioned under The
Payment of Gratuity Act, 1972''. The Company accounts for liability of
future gratuity benefits based on an external actuarial valuation on
projected unit credit method carried out for assessing liability as at
the reporting date.
Actuarial gains and losses arisingfrom experience adjustments and
change in actuarial assumptions are recognised in the statement of
profit and loss in the period in which they arise.
(p) Leave encashment
Earned leave during the financial year and remaining unutilized will be
encashed attheyearend based on basic salary. The Company presents the
entire leave as a current liability in the balance sheet, since it does
not have an unconditional right to defer its settlement for twelve
months after the reporting date.
(q) Borrowing costs
Borrowing costs consists of interest and other ancillary cost that an
entity incurs in connection with borrowing of funds. Ancillary costs
incurred in connection with the arrangement of borrowings are amortised
over the tenor of borrowings.
(r) Loan origination cost
Loan origination costs such as credit verification, agreement stamping,
direct selling agents commission and valuation charges are recognised
as expense over the contractual tenor of the loan agreements. Full
month''s amortization is done in the month in which loans are disbursed.
For the agreements foreclosed or transferred through assignment, the
unamortised portion of the loan acquisition costs is recognised as
charge to the Statement of Profit and Loss at the time of such
foreclosure/transfer through assignment.
(s) Income Taxes
Income tax comprises of current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
taxis measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as MAT Credit Entitlement. The
Company reviews the MAT credit entitlement asset at each reporting date
and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
(t) Provisioning/Write-off on Overdue assets
The provisioning/write-off on overdue assets is as per the management
estimates, subject to the minimum provision required as per Non-
Banking Financial Companies Prudential Norms (Reserve Bank) Directions,
2007.
The Company accounts for provision for doubtful assets after taking
into account the time lag between an accounts becoming overdue, its
recognition as such and realisation of available security.
Provision on standard assets is made as per the notification
DNBS.PD.CC.No.207/03.02.002/2010-11 issued by Reserve Bank of India.
(u) Employee Stock Option Scheme (''ESOS'')
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
"Accounting for Employee Share-based Payments" issued by The Institute
of the Chartered Accountants of India (''ICAI''). The Company measures
compensation cost relating to employee stock options using the
intrinsic value method. The compensation expense, if any, is amortised
over the vesting period of the option on a straight line basis.
(v) Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(w) Provisions
A provision is recognised when the Company has a present obligation as
a result of past event; it is probable that outflow of resources will
be required to settle the obligation, in respect of which a reliable
estimate can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
(x) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(y) Cash and Cash Equivalents
Cash and Cash Equivalents for the purpose of cash flow statement
comprise cash in hand and cash at bank including fixed deposit with
original maturity period of three months and short term highly liquid
investments with an original maturity of three months or less.
Mar 31, 2013
(a) Change in Accounting Policy
1. During the year ended March 31, 2013, the Company has changed its
accounting policy related to provisioning for non-performing gold loans
and consumer durable loans. Consequent to the change in accounting
policy, provision & write off for the year ended March 31, 2013 is
lower by Rs. 1,856.45 lakhs in respect of gold loans and higher by Rs.
129.96 lakhs in respect of consumer durable loans. As a result net
provisions and write off for the year ended March 31, 2013 is lower by
Rs. 1,726.49 lakhs. The current provision based on the revised
accounting policy meets the minimum provisioning norms as stipulated by
RBI.
2. During the year ended March 31, 2013, the Company has changed its
accounting policy related to fee income on wholesale loans and
ancillary borrowing cost. As per the new policy the Company will
amortise the fee income on wholesale loans over the tenure of loan and
ancillary borrowing cost over the tenure of borrowings. Consequent to
the change in accounting policy, the profits for the year ended March
31, 2013 is higher by Rs. 605.12 lakhs.
3. During the year ended March 31, 2013, the Company adopted the
accounting policy for assignment transactions, as notified by the RBI
in its circular "Revisions to the Guidelines on Securitisation
Transactions" issued on August 21, 2012. Accordingly, the income from
assignment transactions during the year ended March 31, 2013, is lower
by Rs. 1,284.87 lakhs on account of change in the method of deferral of
recognition of income, prescribed in the revised guidelines issued by
the RBI.
(b) Current/Non Current classification of assets and liabilities
As required by Revised Schedule VI, the Company has classified assets
and liabilities into current and non-current based on the operating
cycle. An operating cycle is the time between the acquisition of assets
for processing and their realisation in cash or cash equivalents. Since
in case of non-banking financial company normal operating cycle is not
readily determinable, the operating cycle has been considered as 12
months.
(c) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
(d) Tangible Fixed assets
Tangible Fixed assets are stated at cost less accumulated depreciation
and impairment losses, if any. Cost comprises of purchase price and any
other directly attributable costs of bringing the asset to its working
condition for its intended use.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the Statement of Profit and
Loss when the asset is derecognized.
(e) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the Statement of Profit and Loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. Intangible assets not yet available for
use are tested for impairment annually. All other intangible assets are
assessed for impairment whenever there is an indication that the
intangible asset may be impaired.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the Statement of
Profit and Loss when the asset is derecognized.
(f) Depreciation on Tangible asset / Amortisation of Intangible asset
Depreciation on tangible assets is provided using straight line method
at the rates prescribed under Schedule XIV of the Companies Act, 1956.
Leasehold improvements are depreciated on straight line basis over
shorter of useful lives or primary period of lease agreements which
ranges from three to five years.
Intangible assets includes domain names, trademarks, copyrights and
computer software, which are acquired, capitalized and amortized on a
straight-line basis over the estimated useful lives of 5 years.
All fixed assets costing Rs. 5,000 or less individually are fully
depreciated/amortised in the year of purchase.
(g) Loans
Loans are stated at the amount advanced, as reduced by the amounts
received up to the balance sheet date and loans assigned.
(h) Leases Operating Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight line basis over the
tenure of the lease.
Finance Lease
Where the Company is the lessor
Assets given under a finance lease are recognised as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the Internal Rate of
Return (''IRR'') method. The principal amount received reduces the net
investment in the lease and interest is recognised as revenue. Initial
direct costs such as legal costs, brokerage costs, etc. are recognised
immediately in the Statement of Profit and Loss.
(i) Impairment of Assets:
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
at the pre tax discount rate reflecting current market assessment of
time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(j) Investments
Investments that are readily realisable and intended to be held for not
more than a year from the date on which such investments are made are
classified as current investments. All other investments are classified
as long-term investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments. Unquoted investments in units of
mutual funds are stated at net asset value.
(k) Commercial Papers
Commercial paper is recognised at redemption value net of unamortized
finance charges. The difference between redemption value and issue
value is amortised on a time basis and is disclosed separately under
finance charges.
(l) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded 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 the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(m) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Interest income
Interest income from loans is accounted for by applying interest rate
implicit in the contract.
In case of non-performing assets interest income is recognised on
receipt basis as per NBFC prudential norms.
Income on discounted instruments
Income on discounted instruments is recognised over the tenor of the
instrument on straight line basis.
Fee income
Fee income on loans and subvention income is recognised as income over
the tenor of the loan agreements. The unamortized balance is being
disclosed as part of current liabilities. For the agreements
foreclosed/transferred through assignment, balance of processing fees
and subvention income is recognised as income at the time of such
foreclosure/ transfer through assignment.
Commission and brokerage income
Commission and brokerage income earned for the services rendered are
recognised as and when they are due.
Income from Assignment of loans and receivables
In case of assignment of loans the loans are derecognized as all the
rights, title, future receivable and interest thereof are assigned to
the purchaser. On derecognition, the difference between the book value
of loans assigned and the consideration to be received as reduced by
the estimated provision for loss/expenses and incidental expense
related to the transaction is recognized as gain or loss arising on
assignment.
The Company adopted the accounting policy for assignment transactions,
as notified by the RBI in its circular "Revisions to the Guidelines
on Securitisation Transactions" issued on August 21, 2012. As per the
new policy, the income from assignment of loans and receivables will be
amortised over the tenure of loans.
Income on retained interest in the assigned asset, if any, is accounted
on accrual basis.
Dividend income
Dividend income is recognised when the shareholders'' right to receive
payment is established by the balance sheet date. Dividend from the
units of mutual funds is recognized on receipt basis in accordance with
the NBFC Regulation.
Profit/Loss on sale of investments
Profit/loss earned on sale of investments is recognised on trade date
basis. Profit or loss on sale of investments is determined on the basis
of the weighted average cost method.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
Statement of Profit and Loss.
(n) Debenture issue expenses
Debenture issue expenses are debited against securities premium account
in accordance with the provisions of Section 78 of the Companies Act,
1956.
(o) Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as an expenditure,
when an employee renders the related service. If the contribution
payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the deficit payable to the
scheme is recognized as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the contribution
due for services received before the balance sheet date, then excess is
recognized as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
Gratuity
The Company provides for the gratuity, a defined benefit retirement
plan covering all employees. The plan provides for lump sum payments to
employees upon death while in employment or on separation from
employment after serving for the stipulated year mentioned under ''The
Payment of Gratuity Act, 1972''. The Company accounts for liability of
future gratuity benefits based on an external actuarial valuation on
projected unit credit method carried out for assessing liability as at
the reporting date.
Actuarial gains and losses arising from experience adjustments and
change in actuarial assumptions are recognised in the Statement of
Profit and Loss in the period in which they arise.
(p) Leave encashment
Earned leave during the financial year and remaining unutilized will be
encashed at the yearend based on basic salary. The Company presents the
entire leave as a current liability in the balance sheet, since it does
not have an unconditional right to defer its settlement for twelve
months after the reporting date.
(q) Borrowing costs
Borrowing costs consists of interest and other ancillary cost that an
entity incurs in connection with borrowing of funds. Ancillary costs
incurred in connection with the arrangement of borrowings are amortised
over the tenor of borrowings.
(r) Loan origination cost
Loan origination costs such as credit verification, agreement stamping,
direct selling agents commission and valuation charges are recognised
as expense over the contractual tenor of the loan agreements. Full
month''s amortization is done in the month of booking of loan. For the
agreements foreclosed or transferred through assignment, the
unamortised portion of the loan acquisition costs is recognised as
charge to the Statement of Profit and Loss at the time of such
foreclosure/ transfer through assignment.
(s) Income Taxes
Income tax comprises of current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the Statement of Profit and Loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the Statement
of Profit and Loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
Statement of Profit and Loss and shown as "MAT Credit Entitlement."
The Company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the Company does
not have convincing evidence that it will pay normal tax during the
specified period.
(t) Provisioning/write-off of assets
Non-performing loans are written off/provided for, as per management
estimates, subject to the minimum provision required as per Non-
Banking Financial Companies Prudential Norms (Reserve Bank) Directions,
2007.
Provision on standard assets is made as per the notification
DNBS.PD.CC.No. 207/ 03.02.002 /2010-11 issued by Reserve Bank of India.
The Company accounts for provision for doubtful assets after taking
into account the time lag between an accounts becoming non-performing,
its recognition as such and realization of available security.
The provision on non-performing loans created by the Company is higher
than as prescribed by the NBFC Regulation.
Provision on other than Retail loans
Provision in respect of other non-performing assets is made in
accordance with the NBFC Regulations.
(u) Employee Stock Option Scheme (''ESOS'')
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
"Accounting for Employee Share-based Payments" issued by The
Institute of the Chartered Accountants of India (''ICAI''). The Company
measures compensation cost relating to employee stock options using the
intrinsic value method. The compensation expense, if any, is amortised
over the vesting period of the option on a straight line basis.
(v) Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(w) Provisions
A provision is recognised when the Company has a present obligation as
a result of past event; it is probable that outflow of resources will
be required to settle the obligation, in respect of which a reliable
estimate can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
(x) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(y) Cash and Cash Equivalents
Cash and Cash Equivalents for the purpose of cash flow statement
comprise cash in hand and cash at bank including fixed deposit with
original maturity period of three months and short term highly liquid
investments with an original maturity of three months or less.
Mar 31, 2012
(a) Change in Accounting Policy
Presentation and Disclosure of 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, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
As per the Guidance Note issued by the Chartered Accounts of India on
Accounting for Employee Share-based payment which requires that shares
allotted to a trust but not transferred to the employees be reduced
from Share Capital and Reserves. Accordingly during the year, the
Company has reduced the Share Capital by Rs. 3,000,000 and Securities
Premium by Rs. 109,635,000 in respect of 300,000 shares held by the trust
pending for transfer into the beneficiary accounts of the eligible
employees.
(b) Current/ Non Current classification of assets and liabilities
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the Company has ascertained its operating cycle as up to
twelve months for the purpose of current à Non Current classification
of assets and liabilities.
(c) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
(d) Tangible Fixed assets
Tangible Fixed assets are stated at cost less accumulated depreciation
and impairment losses, if any. Cost comprises the purchase price and
any other directly attributable costs of bringing the asset to its
working condition for its intended use.
Leasehold improvements are depreciated on straight line basis over
shorter of useful lives or primary period of lease agreements of 5
years.
(e) Intangible Fixed assets
Intangible assets includes domain names, trademarks, copyrights and
computer software, which are acquired, capitalized and amortized on a
straight-line basis over the estimated useful lives of 5 years.
(f) Depreciation
Depreciation is provided using straight line method at the rates
prescribed under Schedule XIV of the Companies Act, 1956.
Tangible assets and intangible assets costing Rs. 5,000 or less
individually are fully depreciated / amortized in the year of purchase.
(g) Loans
Loans are stated at the amount advanced, as reduced by the amounts
received up to the balance sheet date and loans assigned.
(h) Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease payments are recognized as an expense
in the profit and loss account on a straight line basis over the lease
period.
(i) Impairment of Assets:
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
at the pre tax discount rate reflecting current market assessment of
time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(j) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the investments.
Unquoted investments in units of mutual funds are stated at net asset
value.
(k) Commercial Papers
Commercial paper is recognised at redemption value net of unamortized
finance charges. The difference between redemption value and issue
value is amortised on a time basis and is disclosed separately under
finance charges.
(l) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded 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 the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting Company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
(m) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Interest income
Interest income from loans is accounted for by applying interest rate
implicit in the contract.
In case of non performing assets interest income is recognised on
receipt basis as per NBFC prudential norms.
Income on discounted instruments
Income on discounted instruments is recognised over the tenor of the
instrument on straight line basis.
Fee income
Fee income on wholesale loans is recognised as and when they are due.
Fee income on retail loans and subvention income is recognised as
income over the tenor of the loan agreements. The unamortized balance
is being disclosed as part of current liabilities. However, if the
agreement is foreclosed / transferred through assignment, balance of
processing fees and subvention income is recognised as income at the
time of such foreclosure / transfer through assignment.
Commission and brokerage income
Commission and brokerage income is recognised as and when they are due.
Income from Assignment of loans and receivables
In case of assignment of loans the loans are derecognized as all the
rights, title, future receivable and interest thereof are assigned to
the purchaser. On derecognition, the difference between the book value
of loans assigned and the consideration to be received as reduced by
the estimated provision for loss/ expenses and incidental expense
related to the transaction is recognized as gain or loss arising on
assignment.
Income on retained interest in the assigned asset, if any, is accounted
on accrual basis.
Dividend income
Dividend income is recognised when the shareholders' right to receive
payment is established by the balance sheet date. Dividend from the
units of mutual funds is recognized on receipt basis in accordance with
the NBFC Regulation.
Profit/ Loss on sale of investments
Profit or loss on sale of investments is determined on the basis of the
weighted average cost method.
(n) Retirement and other employee benefits
Gratuity
The Company provides for the gratuity, a defined benefit retirement
plan covering all employees. The plan provides for lump sum payments to
employees upon death while in employment or on separation from
employment after serving for the stipulated year mentioned under 'The
Payment of Gratuity Act, 1972'. The Company accounts for liability of
future gratuity benefits based on an external actuarial valuation on
projected unit credit method carried out for assessing liability as at
the reporting date.
Leave Encashment
Accumulated leave, which is expected to be utilized within the next
twelve months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
reporting date. Actuarial gains/losses are immediately taken to the
statement of profit and loss and are not deferred.
The Company presents the entire leave as a current liability in the
balance sheet, since it does not have an unconditional right to defer
its settlement for twelve months after the reporting date.
(o) Borrowing costs
Borrowing costs consists of interest and other cost that an entity
incurs in connection with borrowing of funds. Borrowing costs are
recognized as an expense in the period in which these are incurred.
(p) Loan origination cost
Loan origination costs such as credit verification, agreement stamping,
direct selling agents commission and valuation charges are recognised
as expense over the contractual tenor of the loan agreements. Full
month's amortization is done in the month of booking of loan. The
unamortized balance is being disclosed as part of loans and advances.
However, if the case is foreclosed or transferred through assignment,
the unamortised portion of the loan acquisition costs is recognised as
charge to the Statement of Profit and Loss at the time of such
foreclosure.
(q) Income Taxes
Income tax comprises of current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in the income statement in the period of enactment of the
change. Deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. In situation where the Company has unabsorbed depreciation
and carry forward tax losses, deferred tax assets are recognised only
if there is virtual certainty supported by convincing evidence that
such deferred tax assets can be realised against future taxable
profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised 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 realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
(r) Provisioning / write-off of assets
Non performing loans are written off / provided for, as per management
estimates, subject to the minimum provision required as per Non-
Banking Financial Companies Prudential Norms (Reserve Bank) Directions,
2007. Delinquencies on assets securitized / assigned are provided for
based on management estimates of the historical data.
Provision on standard assets is made as per the notification
DNBS.PD.CC.No.207/ 03.02.002 /2010-11 issued by Reserve Bank of India.
The Company accounts for provision for doubtful assets after taking
into account the time lag between an accounts becoming non performing,
its recognition as such and realization of available security.
Provisions and write off are made against overdue retail loans as
under:
Provision on other than Retail loans
Provision in respect of other non performing assets is made in
accordance with the NBFC Regulations.
(s) Employee Stock Option Scheme ('ESOS')
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
"Accounting for Employee Share-based Payments" issued by The Institute
of the Chartered Accountants of India ('ICAI'). The Company measures
compensation cost relating to employee stock options using the
intrinsic value method. The compensation expense, if any, is amortised
over the vesting period of the option on a straight line basis.
(t) Segment Reporting Policies
Identification of segments
The Company has organized its operations into two major businesses:
Retail Financial Services and Wholesale credit & Treasury services. The
Company's operating businesses are organised and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Unallocated items
It includes income and expense items which are not allocated to any
business segment.
Segment Policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(u) Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(v) Provisions
A provision is recognised when the Company has a present obligation as
a result of past event; it is probable that outflow of resources will
be required to settle the obligation, in respect of which a reliable
estimate can be made. Provisions are not discounted to its present
value and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
(w) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(x) Cash and Cash Equivalent
Cash and Cash Equivalents for the purpose of cash flow statement
comprise cash in hand and cash at bank including fixed deposit with
original maturity period of three months and short term highly liquid
investments with an original maturity of three months or less.
Mar 31, 2011
1. Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Notified Accounting Standard by Companies Accounting
Standards Rules, 2006 and the accounting of the effects for the Scheme
has been done in accordance with the terms of the Scheme as approved by
the High Court and the relevant provisions of the Companies Act, 1956
('the Act'). The financial statements have been prepared under the
historical cost convention on an accrual basis, except for dividend
from mutual fund units recognised on receipt basis and valuation of
unquoted units of mutual funds at net asset value, which is in
accordance with Non-Banking Financial (Non-deposit accepting or
holding) Companies Prudential Norms (Reserve Bank) Direction 2007
('NBFC Regulation'). The accounting policies have been consistently
applied by the Company and are consistent with those used in the
previous year.
2. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the
reporting period end. Although these estimates are based upon
management's best knowledge of current events and actions, actual
results could differ from these estimates.
3. Fixed assets and Depreciation
Tangible Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
other directly attributable costs of bringing the asset to its working
condition for its intended use.
Leasehold improvements are depreciated on straight line basis over
shorter of useful lives or primary period of lease agreements of 5
years.
Intangible Assets
Intangible assets include domain names, trademarks, copyrights and
computer software, which are acquired, capitalized and amortized on a
straight-line basis over the estimated useful lives of 5 years.
Depreciation
Depreciation is provided using Straight Line Method at the rates
prescribed under Schedule XIV of the Companies Act, 1956.
Tangible assets and intangible assets costing Rs 5,000 or less
individually are fully depreciated / amortized in the year of purchase.
Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
at the pre tax discount rate reflecting current market assessment of
time value of money and risks specific to asset.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
4. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Interest income
Interest income is recognised on the time proportionate basis.
In case of non performing assets interest income is recognised on
receipt basis as per NBFC Prudential norms.
Interest income on retail loans
Income from retail finance operations is accounted for by applying the
Internal Rate of Return (IRR), implicit in the agreement on the
diminishing balance of the financed amount, so as to provide a
constant periodic rate of return on the net investment outstanding on
the agreements.
Interest on retail portfolio buyout is recognised on accrual basis at
agreed rate of interest on diminishing balance of outstanding loan.
In case of non performing assets interest income is recognised on
receipt basis as per NBFC prudential norms.
Pre EMI interest received from customers is recognised as income on
accrual basis.
Income on discounted instruments
Income on discounted instruments is recognised over the tenor of the
instrument on straight line basis.
Interest income on discounted instruments is recognised on a time
proportion accrual basis.
Upfront fees on loans
Upfront fees on loans are recognised as and when they are due.
Processing fees, Subvention income (net of service tax)on retail loans
Processing fees received from customers and Subvention income received
from manufacturers and dealers is recognised as income over the tenor
of the loan agreements. The unamortized balance is being disclosed as
part of current liabilities. However, if the agreement is foreclosed /
transferred through assignment, balance of processing fees and
subvention income is recognised as income at the time of such
foreclosure / transfer through assignment.
Fees and commission income
Fees and commission income is recognised as and when they are due.
Income from Assignment of loans and receivables.
In case of assignment of loans the loans are derecognized as all the
rights, title, future receivable and interest thereof are assigned to
the purchaser. On derecognition, the difference between the book value
of loans assigned and the consideration received as reduced by the
estimated provision for loss/ expenses and incidental expense related
to the transaction is recognized as gain or loss arising on assignment.
Income on retained interest in the assigned asset, if any, is accounted
on accrual basis.
Dividend income
Dividend income is recognised when the shareholders' right to receive
payment is established by the balance sheet date. Dividend from the
units of mutual funds is recognized on receipt basis in accordance with
the NBFC Regulation.
Profit/Loss on sale of investments
Profit or loss on sale of investments is determined on the basis of
the weighted average cost method.
Advisory fees
Revenue from investment advisory services are recognised on pro-rata
basis over the period of contract as and when services are rendered or
in accordance with the arrangements entered into with the parties
receiving such investment advisory services.
5. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the investments.
Unquoted investments in units of mutual funds are stated at net asset
value.
6. Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded 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 the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting Company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognised as income or as expenses
in the year in which they arise.
7. Retirement and other employee benefits
(i) The Company's employee benefits cover provident fund, gratuity and
leave encashment.
(ii) Provident fund is a defined contribution scheme and the Company
has no further obligation beyond the contributions made to provident
fund authorities. Contributions are charged to the profit and loss
account in the year in which they accrue.
(iii) 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 financial year. The gratuity liability and the
net periodic gratuity cost is actuarially determined after considering
discount rates, expected long term return on plan assets and increase
in compensation levels. All actuarial gains/losses are immediately
charged to the profit and loss account and are not deferred.
(iv) The Company has provided for leave encashment liability at year
end on account of unavailed earned leave as per the actuarial valuation
as per the Projected Unit Credit Method.
8. Borrowing costs
Borrowing costs consists of interest and other cost that an entity
incurs in connection with borrowing of funds. Borrowing costs are
recognized as an expense in the period in which these are incurred.
9. Segment Reporting Policies
Identification of segments
The Company has organized its operations into three major businesses:
Retail Financial Services, Wholesale credit & Treasury and Investment
Advisory. The analysis of geographical segments is based on the areas
in which major operating divisions of the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items
It includes income and expense items which are not allocated to any
business segment.
10. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease payments are recognized as an expense
in the profit and loss account on a straight line basis over the lease
period.
11. Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
12. Income taxes
Income tax comprises of current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes refl
ects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in the income statement in the period of enactment of the
change. Deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. In situation where the Company has unabsorbed depreciation
and carry forward tax losses, deferred tax assets are recognised only
if there is virtual certainty supported by convincing evidence that
such deferred tax assets can be realised against future taxable profi
ts.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised 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 realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that suffi
cient future taxable income will be available
13. Provisions
A provision is recognized when the enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
their present value and are determined based on management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the
current management estimates.
14. Provision for doubtful assets
After taking into account the time lag between an accounts becoming non
performing, its recognition as such and realization of available
security, following provisions and write off are made against overdue
retail loans as under:
15. Cash collateral
Cash collateral received on loan portfolio buyout is utilised towards
any shortfall in monthly receipt of EMI. The Company is secured from
provisioning requirements to the extent of cash collateral balance
lying with the Company.
16. Loan origination cost
Loan origination costs such as credit verification, front end sales
and processing cost, agreement stamping, direct selling agents
commission and valuation charges are recognised as expense over the
average tenor of the loan agreements. Full month's amortization is done
in the month of booking of loan. The unamortized balance is being
disclosed as part of loans and advances. However, if the case is
foreclosed or transferred through assignment, the unamortised portion
of the loan acquisition costs is recognised as charge to the Profit
and Loss Account at the time of such foreclosure.
17. Commercial Papers
Commercial paper is recognised at redemption value net of unamortized
finance charges. The difference between redemption value and issue
value is amortised on a time basis and is disclosed separately under fi
nance charges.
18. Employee Stock Option Scheme ('ESOS')
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
"Accounting for Employee Share-based Payments" issued by The Institute
of the Chartered Accountants of India ('ICAI'). The Company measures
compensation cost relating to employee stock options using the
intrinsic value method. Compensation expense, if any, is amortised over
the vesting period of the option on a straight line basis.
Mar 31, 2010
1. Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Notified Accounting Standard by Companies Accounting
Standards Rules, 2006 except for the accounting of the effects of the
Scheme, which has been done in accordance with the terms of the Scheme
as approved by the High Court and the relevant provisions of the
Companies Act, 1956 (Ãthe ActÃ). The financial statements have been
prepared under the historical cost convention on an accrual basis,
except for dividend from mutua fund units recognised on receipt basis
and valuation of unquoted units of mutual funds at net asset value,
which is in accordance with Non-Banking Financial (Non-deposit
accepting or holding) Companies Prudential Norms (Reserve Bank)
Direction 2007 (ÃNBFC RegulationÃ). The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
2. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates.
3. Fixed assets and Depreciation
Tangible Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
other directly attributable costs of bringing the asset to its working
condition for its intended use.
Leasehold improvements are depreciated on straight line basis over
primary period of lease agreements.
Intangible Assets
ntangible assets include domain names, trademarks, copyrights and
computer software, which are acquired, capitalized and amortized on a
straight-line basis over the estimated useful lives, of 5 years.
Depreciation
Depreciation is provided using Straight Line Method at the rates
prescribed under Schedule XIV of the Companies Act, 1956.
Tangible assets and intangible assets costing Rs 5,000 or less
individually are fully depreciated / amortized in the year of purchase.
Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/ external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
5. Provisions
A provision is recognized when the enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
their present value and are determined based on management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
management estimates.
6. Retirement and other employee benefts
(i) The CompanyÃs employee benefits cover provident fund, gratuity and
leave encashment.
(ii) Provident fund is a defined contribution scheme and the Company
has no further obligation beyond the contributions made to provident
fund authorities. Contributions are charged to the profit and loss
account in the year in which they accrue.
(iii) 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 financial year. The gratuity liability and the
net periodic gratuity cost is actuarially determined after considering
discount rates, expected long term return on plan assets and increase
in compensation levels. All actuarial gains/ osses are immediately
charged to the profit and loss account and are not deferred.
(iv) The Company has provided for leave encashment liability at year
end on account of unavailed earned leave as per the actuaria valuation
as per the Projected Unit Credit Method.
7. Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease payments are recognized as an expense
in the profit and loss account on a straight line basis over the lease
period.
8. Investments
nvestments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the investments.
Unquoted investments in units of mutual funds are stated at net asset
value.
9. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Research and Advisory fees
Revenue from research and advisory services are recognised on pro-rata
basis over the period of contract as and when services are rendered or
in accordance with the arrangements entered into with the parties
receiving such research and advisory services.
Interest income
nterest income is recognised on the time proportionate basis. Income
from retail finance operations is accounted for by applying the nternal
Rate of Return (IRR), implicit in the agreement on the diminishing
balance of the financed amount, so as to provide a constant periodic
rate of return on the net investment outstanding on the agreements.
Pre EMI interest received from customers is recognised as income on
accrual basis.
In case of non performing assets interest income is recognised on
receipt basis as per NBFC Prudential norms.
Income on discounted instruments
Income on discounted instruments is recognised over the tenor of the
instrument on straight line basis. The unamortised income is netted
against unrealized discount on such instrument and is disclosed under
loans and advances.
Interest income on discounted instruments is recognised on a time
proportion accrual basis.
Sourcing fees
Sourcing fees is recognised based on the co -branded credit cards
sourced by the Company.
Income from sharing of spends
Income from sharing of spends is recognised on an accrual basis as a
percentage of expenditure incurred by the holders of CompanyÃs
co-branded credit card.
Upfront fees on loans
Upfront fees on loans are recognised as and when they are due.
Dividend income
Dividend income is recognised when the shareholdersà right to receive
payment is established by the balance sheet date. Dividend from the
units of mutual funds is recognized on receipt basis in accordance with
the NBFC Regulation.
Processing fees, Subvention income (net of service tax)
Processing fees received from customers and Subvention income received
from manufacturers and dealers is recognised as income over the tenor
of the loan agreements . The unamortized balance is being disclosed as
part of current liabilities. However, if the agreement is foreclosed,
balance of processing fees and subvention income is recognised as
income at the time of such foreclosure.
Income from advertisement and promotional activities
Income from advertisement and promotional activities are accounted for
in accordance with the terms of agreement and completion of services.
Profit/ Loss on sale of investments
Profit or loss on sale of investments is determined on the basis of the
weighted average cost method.
10. Charge off and provisions policy
The Company has transferred the retail loans pursuant to the Scheme of
Arrangement and Amalgamation to FCFSL. Till March 31, 2009 the Company
provided for overdue retail loans as under:
11. Loan origination costs
Loan acquisition costs such as credit verification, front end sales and
processing cost, agreement stamping, dealer / agent commission, are
recognised as expense over the average tenor of the loan agreements.
Full monthÃs amortization is done in the month of booking of loan. The
unamortized balance is being disclosed as part of loans and advances.
However, if the case is foreclosed, the unamortised portion of the loan
acquisition costs is recognised as charge to the Profit and Loss
Account at the time of such foreclosure.
12. Borrowing costs
Borrowing costs consists of interest and other cost that an entity
incurs in connection with borrowing of funds. Borrowing costs are
recognized as an expense in the period in which these are incurred.
13. Commercial Papers
Commercial paper is recognised at redemption value net of unamortized
finance charges. The difference between redemption value and issue
value is amortised on a time basis and is disclosed separately under
finance charges.
14. Income taxes
Income tax comprises of current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in the income statement in the period of enactment of the
change. Deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realised. In situation where the Company has unabsorbed depreciation
and carry forward tax losses, deferred tax assets are recognised only
if there is virtual certainty supported by convincing evidence that
such deferred tax assets can be realised against future taxable
profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised 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 realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
15. Earnings per share
Basic earnings per share are calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
16. Employee Stock Option Scheme (ÃESOSÃ)
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
ÃAccounting for Employee Share-based Paymentsà issued by The Institute
of the Chartered Accountants of India (ÃICAIÃ). The Company measures
compensation cost relating to employee stock options using the
intrinsic value method. Compensation expense, if any, is amortised over
the vesting period of the option on a straight line basis.
17. Segment Reporting Policies
Identification of segments
The Company has organized its operations into two major businesses:
Investment Advisory, Wholesale credit and Treasury services. The
analysis of geographical segments is based on the areas in which major
operating divisions of the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items
It includes income and expense items which are not allocated to any
business segment.