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Notes to Accounts of Cholamandalam Investment & Finance Company Ltd.

Mar 31, 2015

Cholamandalam Investment and Finance Company Limited ("the Company") is one of the premier diversified non-banking finance companies in India, engaged in providing vehicle finance, home loans and corporate mortgage loans. The Company through its subsidiaries, is also engaged in the business of broking and distribution of financial products.

NOTE : 1 SEGMENT REPORTING

The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India. As such there are no separate reportable segments as per AS-17 "Segmental Reporting".

NOTE : 2 RELATED PARTY DISCLOSURES (As per AS-18 "Related Party Disclosures")

List of Related Parties:

- Holding Company:Tube Investments of India Limited

- Associate of Holding Company: Murugappa Holdings Limited

- Joint venture of Holding Company: Cholamandalam MS Risk Services Limited

- Subsidiaries: Cholamandalam Securities Limited, Cholamandalam Distribution Services Limited

- Fellow Subsidiary: Cholamandalam MS General Insurance Company Limited

- Key Managerial Personnel: Mr. S. Vellayan, Managing Director.

Note:

Related party relationships are as identified by the Management and relied upon by the Auditors.

NOTE : 3 CONTINGENT LIABILITIES AND COMMITMENTS

(a) Contested Claims not provided for: Rs. in lakhs

Particulars As at As at 31.03.2015 31.03.2014

Income tax and Interest on Tax issues where the Company is in appeal 5,280.52 3,442.76

Decided in the Company's favour by Appellate Authorities and for which the Department is in further 564.60 98.36 appeal with respect to Income Tax

Sales Tax issues pending before Appellate Authorities in respect of which the Company is in appeal. 4,220.09 1,187.66

(The Company has paid Rs. 649.15 lakhs (March 31, 2014 - Rs. 75.66 lakhs) under protest, which is included under loans and advances - Note 13)

Disputed claims against the Company lodged by various parties under litigation (to the extent 3,376.36 1,676.69 quantifiable)

i) The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.

ii) It is not practicable for the Company to estimate the timings of the cashflows, if any, in respect of the above pending resolution of the respective proceedings.

iii) The Company does not expects any reimbursement in respect of the above contingent liabilities.

iv) Future Cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various forums/authorities.

(b) Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances paid) - Rs. 981.51 lakhs (March 31,2014 - Rs. 985.57 lakhs)

NOTE : 4 EMPLOYEE STOCK OPTION PLAN

The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 1,904,162 Equity Shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 subject to the approval of the shareholders under Section 81(1A) of the Companies Act, 1956. The Shareholders of the Company at the Annual General Meeting held on July 30, 2007 approved the aforesaid issue of 1,904,162 Equity Shares of the Company under one or more Employee Stock Option Scheme(s). The Compensation and Nomination Committee has approved the following grants to a list of senior level executives of the Company and some of its Subsidiaries in accordance with the Stock Option Scheme -2007:

The shareholders of the Company, at the 34th Annual General Meeting held on July 30, 2012, authorised extension of exercise period from 3 years from the date of vesting to 6 years from the date of vesting.Accordingly, the Company has measured the fair value of the options using the Black Scholes model immediately before and after the date of modification to arrive at the incremental fair value arising due to the extension of the exercise period. The incremental fair value so calculated is recognised from the modification date over the vesting period in addition to the amount based on the grant date fair value of the stock options.

The incremental (benefit)/cost due to modification of the exercise period from 3 years to 6 years from the date of vesting for the year ended March 31,2015 is (Rs. 0.97) lakh (March 31,2014Rs.13.00 lakhs).

The fair value of the options has been calculated using the Black Scholes model on the date of modification.

NOTE : 5 SHARING OF COSTS

The Company shares certain costs / service charges with other companies in the Group. These costs have been allocated between the Companies on a basis mutually agreed between them, which has been relied upon by the Auditors.

NOTE: 6 PREVIOUS YEARS' FIGURES

Previous year's figures have been reclassified to conform with the current year's classification / presentation, wherever applicable.


Mar 31, 2014

1. Approval of Scheme of Amalgamation

Cholamandalam Factoring Ltd (CFACT) was a Non-Banking Finance Company (NBFC) and a wholly owned subsidiary of the Company. The Board of Directors at their meeting held on 30 October, 2012 approved a Scheme of Amalgamation of CFACT with the Company subject to the approval of Hon''ble High Court of Judicature at Madras and other necessary approvals and sanctions. The Hon''ble High Court of Judicature at Madras sanctioned the scheme with an Appointed date of 1 April, 2012 and is effective from 24 May, 2013, being date of fling the order with the Registrar of Companies. In accordance with the said Scheme, the Company has accounted for this amalgamation in the nature of merger under the pooling-of-interest method, during the current year with retrospective effect from the appointed date.

Consequently:

i. All the assets, debts, liabilities and obligations of CFACT have been vested in the Company and have been recorded at their respective book values as of 1 April, 2013.

ii. The net asset value of CFACT of Rs.411.61 lakhs as on 1 April, 2013 has been adjusted against the net investment of the Company in CFACT.

iii. The excess of net asset value of CFACT over the value of investments held by the company in CFACT (after adjusting CFACT Capital reserve of Rs.3.94 lakhs and Statutory reserve of Rs.12.63 lakhs) as at 1 April, 2012 amounting to Rs.4.91 lakhs has been credited to “General Reserve". The difference in the “Surplus in the Statement of Proft and Loss" of CFACT between 1 April, 2012 and 1 April, 2013 aggregating to Rs.49.23 lakhs has been debited to opening balance in “Surplus in the Statement of Proft and Loss" of the Company.


Mar 31, 2013

Cholamandalam Investment and Finance Company Limited ("the Company") is one of the premier diversified non- banking finance companies in India, engaged in providing vehicle finance, home loans, corporate mortgage loans and gold loans. The Company through its subsidiaries, is also engaged in the business of broking and distribution of financial products.

1. APPROVAL OF SCHEME OF AMALGAMATION

The Board of Directors at their meeting held on 30 October, 2012 approved a Scheme of Amalgamation of the Company''s wholly owned subsidiary M/s.Cholamandalam Factoring Limited (CFACT) with the Company with effect from 01 April, 2012 (the Appointed Date) subject to the approval of Hon''ble High Court of Judicature at Madras and other necessary approvals and sanctions. The Order of Hon''ble High Court is awaited on the petition filed by CFACT in this regard. As per the proposed Scheme of Amalgamation, the details of assets / liabilities appearing in the books of CFACT as at the appointed date, proposed to be merged into the Company are summarised below:

NOTE : 2 MICRO, SMALL & MEDIUM ENTERPRISES

Based on and to the extent of information received by the Company from the suppliers during the year regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and relied upon by the auditors, the relevant particulars as at the year end are furnished below:

NOTE : 3 SEGMENT REPORTING

The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India. As such there are no separate reportable segments as per AS-17 "Segmental Reporting".

NOTE : 4 CONTINGENT LIABILITIES AND COMMITMENTS

(a) Counter Guarantees provided to Banks -Rs. 115.65 lakhs (31.03.2012- Rs. 113.49 lakhs).

(b) Contested Claims not provided for:

The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.

(c) Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances paid) - Rs. 528.64 lakhs (31 March, 2012 - Rs. 572.74 lakhs)

NOTE : 5 LEASES

Assets taken on Non-cancellable operating lease consists of Plant and Machinery, Furniture and Fixtures and Office Equipments.

NOTE : 6 EMPLOYEE STOCK OPTION PLAN

The Board at its meeting held on 22 June, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 1,904,162 Equity Shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 subject to the approval of the shareholders under Section 81(1A) of the Companies Act, 1956. The Shareholders of the Company at the Annual General Meeting held on 30 July, 2007 approved the aforesaid issue of 1,904,162 Equity Shares of the Company under one or more Employee Stock Option Scheme(s). The Compensation and Nomination Committee has approved the following grants to a list of senior level executives of the Company and some of its Subsidiaries in accordance with the Stock Option Scheme -2007:

NOTE : 7 SHARING OF COSTS

The Company shares certain costs / service charges with other companies in the Group. These costs have been allocated between the Companies on a basis mutually agreed to between the Companies, which has been relied upon by the Auditors.

NOTE : 8 PREVIOUS YEAR''S FIGURES

Previous year''s figures have been reclassified to conform with the current year''s classification / presentation, wherever applicable.


Mar 31, 2012

1. CHANGE IN ACCOUNTING POLICY

During the year, the Company has, by way of bilateral assignment, sold loan receivables aggregating to Rs70,883.45 lakhs. The interest spread arising there from is accounted over the residual tenor of the receivables sold as against upfront recognition of such interest spread in earlier years. Income from operations & Profit before tax would have been higher by Rs2,699.20 lakhs and Profit after Tax would have been higher by Rs1,619.52 lakhs had the company recognised the said interest spread upfront as in previous years. This change is also in line with the draft revised guidelines on Securitisation transaction issued by Reserve Bank of India in September 2011.

a) Terms/rights attached to Equity shares

The company has only one class of equity shares having a par value of Rs10 per share. All these shares have the same rights and preferences with respect to payment of dividend, repayment of capital and voting. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

2.1 Represents the amount transferred for a sum equal to the nominal value of shares redeemed during the prior years

2.2 Represents the Reserve Fund created under Section 45-IC of the Reserve Bank of India Act, 1934.

4.4 Represents dividend payment relating to previous year in respect of 5,128 shares which were allotted to the employees under the Employee Stock Option Scheme 2007 after 31 March, 2011 but before 25 July 2011 (book closure date).

3.1 Security

(i) Redeemable Non convertible debentures - Medium term is secured by way of specific charge on assets under hypothecation relating to automobile financing, corporate mortgage loans and loans against immovable property and pari pasu charge on immovable property situated at Ahmedabad.

(ii) Term loans from banks is secured by way of specific charge on assets under hypothecation relating to automobile financing and loans against immovable property.

(iii) Cash credit from banks and working capital demand loans are secured by floating charge on assets under hypothecation and other current assets.

4.1 There are no amounts of Unclaimed Dividend due and outstanding to be credited to Investor Education and Protection Fund (IEPF)

4.2 As at March 31, 2012, there are no amounts due and outstanding to be credited to Investor Education and Protection Fund (IEPF) in respect of Fixed Deposits except for Rs1.86 lakhs (2011 - Rs1.86 lakhs), the repayment of which to the depositors has been stayed by the Madras High Court. Further, in respect of overdue amounts totaling to Rs0.11 lakhs (2011 - Rs0.11 lakhs), payments have not been made as per instructions received from Central Bureau of Investigation.

4.3 Pursuant to the Company obtaining a fresh Certificate of Registration dated December 11, 2006 from the Reserve Bank of India (RBI) for carrying on the business of Non-Banking Financial Institution without accepting public deposits, consequent to its decision to exit from deposit accepting activities effective November 01, 2006, the Company has a total deposit of Rs85.21 lakhs as at March 31, 2012 (2011 - Rs97.29 lakhs) in an Escrow Account, as directed by the RBI. Also refer Note 16.

5.1 Balances with Banks on Current Account include amounts collected in respect of assets de-recognised on account of Assignment of Receivables pending remittance to the assignees. Refer Note 8

5.2 Balance on Deposit Accounts - Free of lien includes deposits amounting to Rs 4,997.83 lakhs (2011 - Rs 4,182.58 lakhs) which have an original maturity of more than 12 months.

NOTE : 6 Segment reporting

The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India. As such there are no separate reportable segments as per AS-17 "Segment Reporting".

NOTE : 7 CONTINGENT LIABILITIES AND COMMITMENTS

(a) Counter Guarantees provided to Banks Rs113.49 lakhs (2011-Rs78.02 lakhs) and Shortfall Undertaking provided to the lender of Cholamandalam Factoring Limited (Subsidiary) RsNIL (2011- Rs6,000 lakhs)

(b) Contested Claims Not Provided for:

Rs in lakhs

Particulars As at As at 31.03.2012 31.03.2011

Income tax and Interest Tax issues where the company is in appeal 2,290.20 2,128.67

Decided in the Company's favour by Appellate Authorities and for which the 108.56 105.19

Department is in further appeal with respect to Income Tax

Sales Tax issues pending before Appellate Authorities in respect of which the 384.15 425.95

Company is in appeal

Disputed claims against the Company lodged by various parties under litigation 1,062.66 912.47 (to the extent quantifiable)

The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.

(c) Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances paid)

- Rs 1,747 lakhs (2011 - Rs98.58 lakhs)

NOTE : 8 LEASES

Assets taken on Non-cancellable operating lease consists of Plant and Machinery, Furniture and Fixtures and Office Equipments. The details of Maturity profile of Non-cancellable Future Operating Lease Payments are given below.

NOTE:9

a) EMPLOYEE STOCK OPTION PLAN

The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 19,04,162 Equity Shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 subject to the approval of the shareholders under Section 81(1A) of the Companies Act, 1956. The Shareholders of the Company at the Annual General Meeting held on July 30, 2007 approved the aforesaid issue of 19,04,162 Equity Shares of the Company under one or more Employee Stock Option Scheme(s). The Compensation & Nomination Committee has approved the following grants to a list of senior level executives of the Company and some of its Subsidiaries in accordance with the Stock Option Scheme -2007:

The fair value of options used to compute Proforma net profit and earnings per Equity Share have been estimated on the date of the grant using Black-Scholes model by an independent Consultant.

b) Share application money pending allotment as on March 31, 2011 represents application money received on exercise of 3,652 options on March 31, 2011 which were subsequently allotted on April 11, 2011.

NOTE : 10 SHARING OF COSTS

The Company shares certain costs / service charges with other companies in the Group. These costs have been allocated between the Companies on a basis mutually agreed to between the Companies, which has been relied upon by the Auditors.

Notes:

1. Though the Company has become a Non-deposit taking Non-Banking Finance Company, since the Company still has fixed deposits from the public accepted prior to November 1, 2006 which have not yet been liquidated (Refer Note 8), the details of the same have been disclosed above.

2. Fixed Deposits include Matured / Unclaimed Deposits (together with Interest on Matured / Unclaimed Deposits) amounting to Rs53.74 lakhs as at March 31, 2012.

NOTE : 11 PREVIOUS YEAR FIGURES

The Revised Schedule VI has become effective from 1 April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

 
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