Accounting Policies of Edelweiss Financial Services Ltd. Company
Mar 31, 2023
To the Members of Edelweiss Financial Services Limited
Report on the Audit of the Standalone Financial Statements Opinion
We have audited the ac-companymg standalone financial statements of Edelweiss Financial Services Limited ("the Company ), which comprise the Balance Sheet os at March 31 2023, the Statement of Profit and Loss, including the statement of Othc-r Comprehensive Income, the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations given to us. the aforesaid standalone financial statements give the information required by the Companies Act 2013. as amended (ââhe Act'') in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, ot the state ot affairs of the Company as at March 31,2023, its profit including other comprehensive income its cash flows and the changes in equity for the year ended on that date
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs), as specified undersection 143( 10) of the Act. Our responsibilities under those Standards are further described in th e ''Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report We are independent of the Company in accordance with the âCode of Ethics'' issued by the institute of Chartered Accountants of India together with the ethical requirements that are relevant tG our audit of the financial statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropnate to provide a basis for our audit opinion on the standalone financial statements
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the financial year ended March 31, 2023 These matters were addressed in the context of our audit ot the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters For each matter below, our description ot now our audit addressed the matter is provided in that context
We have determined the matters descnbed below to be the key audit matters to be communicated in our report We have fulfilled the responsibilities described in the Auditor s responsibilities for the audit of the standalone financial statements section of our report including in relation to these matters. Accordingly our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement ot the standalone financial statements The results of our audit procedures, including the procedures performed to address the matters below, provide the Dasis for our audit opinion on the accompanying standalone financial statements
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Key audit matters How our audit addressed the key audit matter |
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Impairment of investments in subsidiary companies (as described in note 1.4.1.3 and note 6 of the standalone financial statements) |
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The Company has investments in vanous subsidiaries aggregating ? 48456.95 million which are not listed (equity) or quoted, these investments are valued at cost and are required to be assessed for impairment in accordance with Ind AS 36, when any indicators of impairment are observed. In carrying out such impairment assessment, a significant judgement of the management is Involved In estimating the investee company''s "value in use*, in accordance with Ind AS 36. Estimation of the value in use requires the management to apply appropriate assumptions with respect to the growth rates for future cash flow projections of the investee company and discount rates for determining present value of such cash flows In view of the high degree of management''s Judgement involved In estimation of the recoverable amount of investments in unlisted subsidiaries and the inherent uncertainty relating to the assumptions supporting such estimates, we considered this area as a key audit matter. |
Our audit procedures included considering the appropriateness of the processes laid down by the management for assessment of impairment in the value of investments in subsidianes combined with procedures performed as follows ⢠Considered management''s assessment of impairment from the management experts wherever considered necessary and assessed whether any impairment indicators existed for investment in individual subsidiaries ⢠Traced the net-worth of the individual subsidianes to their audited financial statements to assess whether any impairment indicators were present. ⢠Assessed information used to determine the key assumptions including growth rates and discount rates. ¦ Assessed the disclosures relating to investments in subsidianes included in the standalone financial statements In accordance with the requirements of Ind AS |
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IT systems and controls |
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Financial accounting and reporting processes, especially In the financial services sector are fundamentally reliant on IT systems and IT controls to process significant transaction, hence we identified IT systems and controls as a key audit matter for the Company Automated accounting procedures and II environment controls, which indude IT governance, general IT controls over program development and changes, access to programs and data and IT operations, are required to be designed and to operate effectively to ensure reliable financial reporting |
Our audit procedures focused Dn the IT infrastructure and applications relevant to financial reporting of the Company: ¦ Tested the design and operating effectiveness of the Company''s IT access controls over the information systems that are important to financial reporting and various interfaces configuration and other identified application controls. ⢠Tested IT general controls (logical access, changes management and aspects of IT operational controls). This included testing requests tor access to systems were reviewed and authorized ⢠Tested the Company''s periodic review of access rights. Also tested requests of changes to systems for approval and authorization. ⢠In addition to the above, tested the design and operating effectiveness of certain automated controls that were considered as key internal controls. ⢠Tested the design and operating effectiveness of compensating controls in case deficiencies were identified and. where necessary extended the scope of our substantive audit procedures |
Information other than the Financial Statements and Auditor''s Report thereon
The Company''s Board of Directors is responsible for the other information The other information comprises the information included in the Board report, but does not include the standalone financial statements and our auditor''s report thereon which we obtained prior to the date of this auditors report, arid the Annual report, which is expected to me made available to us after that date.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon
In connection with our audit of the standalone Financial statements, our responsibility is to read the other information and, in doing so. consider whether such other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed we conclude that there is a material misstatement of this other information, we are required to report that fact We have nothing to report in this regard.
When we read the Board report if we conclude that there is a material misstatement therein, we ate required to communicate the matter to those charged with governance.
Responsibilities of Management for the Standalone Financial Statements
The Company''s Board of Directors is responsible for the matters stated in section 154(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended This responsibility also includes maintenance of adequate accounting records In accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other Irregularities; selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent; and the design Implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from matenal misstatement, whether due to fraud or error
In preparing the standalone financial statements, management is responsible far assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but tD do so
Those Board af Directors are also responsible for overseeing the Companyâs financial reporting process.
Auditor''s Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are tree from matenal misstatement, whether due to fraud or error and to issue an auditor''s report that includes our opinion Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a matenal misstatement when it exists Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As pan of an audit in accordance with SAs. we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
⢠Identify and assess The risks of matenal misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropnate to provide a basis for our opinion The risk of not delecting a matenal misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control
⢠Obtain an understanding of intEmal control relevant to the audit in order to design audit procedures that are appropriate m the circumstances. Under section 143{3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
⢠Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management
⢠Conclude on the appropriateness of management''s use of the going concern basis of accounting and. based an the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s abifity to continue as a going concern If we conclude that a matenal uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures m the financial statements or if such disclosures are â¢inadequate, to modify our opinion. Oui conclusions are based on the audit evidence obtained up to the date of our auditor s report However future events or conditions may cause the Company to cease to continue as a going concern
⢠Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events ir. a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in Internal control that we identify during our audiL
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards
From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the standalone financial statements for the financial year ended March 31, 2023 and are therefore the key audit matters. We describe these matters in our auditor s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public Interest benefits of such communication
Report on Other Legal and Regulatory Requirements
1 As required by the Companies (Auditor''s Report) Order, 202Q ("the Order''), issued by the Central Government of India in terms of sub-section 111) of section 143 of the Act, we give in the ''Annexure V'' a statement on the matters specified in paragraphs 3 and 4 of the Order.
2. As required by Section 143(3) of the Act we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books
(c) The Balance Sheet, the Statement of Profit and Loss including the Statement of Other Comprehensive Income, the Cash Flow Statement arvd Statement of Changes in Equity dealt with by this Report are in agreement with the bGoks of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act. read with Companies (Indian Accounting Standards) Rules, 2015, as amended;
(e) On the basis of the confirmation received from the directors as on March 31. 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31. 2023 from bc-mg appointed as a director in terms of Section 164 (2) of the Act
(0 With respect to the adequacy of the interna! financial controls with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in ''Annexure 2â to this report
ig) In our opinion the managenal remuneration for the year ended March 31. 2023 has been paid / provided by the Company to ns directors in accordance with the provisions of section 197 read with Schedule V to the Act,
(h) With respect to the other matters to be included in the Auditor s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:
i The Company has disclosed the impact of pending litigations on rts financial position in its standalone financial statements - (Refer Note 32(1 ){a) and (b) to the standalone financial statements);
il. The Company lias made provision as required under the applicable law or accounting standards, for material foreseeable losses, if any. on long-term contracts including derivative contracts - (Refer Note 68 to the standalone financial statements),
hi There has been no delay In transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company
iv a) The management has represented that, to the best of its knowledge and belief, other than as disclosed irt the note 51 (A) to the standalone financial statements, nG funds have been advanced or loaned or invested (e/ther from borrowed funds or share premium or any other sources or kind of funds) bv the Company to or in any other person(s) or entityfies), including foreign entities ("Intermediaries-1) with the understanding, whether recoided in writing or otherwise, that the Intermediary shall, whether; directiy or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate 3eneficianes") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,
b) The management has represented that, to the best of its knowledge and belief other than as disclosed in the note 51 (B) to the standalone financial statements no funds have been received by the Company from any person(s) or entity(ies) including foreign entities (âFunding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (âUltimate Beneficiaries'') or provide any guarantee, security or the like on behalf of the Ultimate Beneficianes; and
c) Based on such audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (a) and (b'' contain any material misstatement.
v. The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with section 125 of the Act to the extent it applies to payment of dividend
The intenm dividend declared and paid by the Company during the year 3nd until the date of this audit report is m accordonce with section 123 of the Act
As stated in note 55 to the standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend
vi. As proviso ro Rule 3(1) of the Companies (Accounts) Rules. 2014 is applicable for the Company only w.e.f. April 1. 2023, reporting under this clause is not applicable.
For S.R. Batliboi & Co. LLP
Chartered Accountants
ICAI Firm Registration Number. 301003E/E300005
por Shrawan Jalan
Partner
Membership Number 102102
UDIN: 23102102BGXJET6638
Place of Signature: Mumba.i
Date: May 26. 2023
Mar 31, 2022
1. Background
Edelweiss Financial Services Limited (''the Company'') is registered with Securities and Exchange Board of India (SEBI) as Category I - Merchant Banker. The Company was incorporated on November 21, 1995 and is the ultimate holding company of Edelweiss group of companies. The Company has its registered office at Edelweiss House, Off C.S.T. Road, Kalina, Mumbai, India.
The Company is principally engaged in providing investment banking services and holding company activities comprising of development, managerial and financial support to the business of Edelweiss group entities.
Significant Accounting Policies1.1 Basis of preparation of financial statements
The standalone financial statements of the Company has been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).
These standalone financial statements have been prepared on a historical cost basis, except for derivative financial instruments and other financial assets held for trading, which have been measured at fair value. The standalone financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest million, except when otherwise indicated.
1.2 Presentation of financial statements
The Company presents its balance sheet in order of liquidity in compliance with the Division III of the Schedule III to the Companies Act, 2013. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (noncurrent) is presented in Note no.43.
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
⢠The normal course of business
⢠The event of default
⢠The event of insolvency or bankruptcy of the company and or its counterparties
1.3 Financial Instruments1.3.1 Date of recognition
Financial assets and financial liabilities, with the exception of borrowings are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. This includes regular way trades purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. The Company recognises borrowings when funds reach the Company.
1.3.2 Initial measurement of financial instruments
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
The Company classifies all its financial assets based on the business model for managing the assets and the asset''s contractual terms, measured at either:
Financial assets carried at amortized cost (AC)
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The changes in carrying value of financial assets is recognised in profit and loss account.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The changes in fair value of financial assets is recognised in Other Comprehensive Income.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL. The Company measures all financial assets classified as FVTPL at fair value at each reporting date. The changes in fair value of financial assets is recognised in Profit and loss account.
1.4.1.1. Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.
For financial instruments the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
1.4.1.2 Financial assets held for trading
The Company classifies financial assets as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there is evidence of a recent pattern of short-term profit is taking. Held-for-trading assets and liabilities are recorded and measured in the balance sheet at fair value.
The Company measures all equity investments at fair value through profit or loss except, for Investment in subsidiaries and associates are recognised at cost, subject to impairment if any at the end of each reporting period. Cost of investment represents amount paid for acquisition of the investment.
All financial liabilities are measured at amortised cost except for financial guarantees, and derivative financial liabilities.
1.4.2.1 Debt securities and other borrowed funds
After initial measurement, debt issued, and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the EIR.
1.4.2.2 Financial assets and Financial liabilities at fair value through profit or loss
Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by management upon initial recognition or are mandatorily required to be measured at fair value under Ind AS 109. Management only designates an instrument at FVTPL upon initial recognition when one of the following criteria are met. Such designation is determined on an instrument-by-instrument basis:
⢠The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis; or
⢠The liabilities are part of a group of financial liabilities, which are managed, and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or
⢠The liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited.
Financial assets and financial liabilities at FVTPL are recorded in the balance sheet at fair value. Changes in fair value are recorded in profit and loss with the exception of movements in fair value of liabilities designated at FVTPL due to changes in the Company''s own credit risk. Such changes in fair value are recorded in the Own credit reserve through OCI and do not get recycled to the profit or loss. Interest earned or incurred on instruments designated at FVTPL is accrued in interest income or finance cost, respectively, using the EIR, taking into account any discount/ premium and qualifying transaction costs being an integral part of instrument. Interest earned on assets mandatorily required to be measured at FVTPL is recorded using effective interest rate.
Financial guarantees are contract that requires the Company to make specified payments to reimburse to holder for loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument.
Financial guarantee issued or commitments to provide a loan at below market interest rate are initially measured at fair value and the initial fair value is amortised over the life of the guarantee or the commitment. Subsequently they are measured at higher of this amortised amount and the amount of loss allowance.
1.4.3 Financial liabilities and equity instruments
Financial instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.
1.4.4 Derivative contracts (Derivative assets / Derivative liability)
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and interest rate swaps.
Derivatives are initially recognised at fair value and are subsequently re-measured at fair value through profit or loss. The resulting gain or loss is recognised in profit or loss immediately.
1.5 Reclassification of financial assets and financial liabilities
The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
The Company is a sponsor to two trusts namely: (i) Edelweiss Employees'' Welfare Trust; and (ii) Edelweiss Employees'' Incentives and Welfare Trust. These trusts have been formed exclusively to provide benefits to employees of the Company and its subsidiaries and associates. These trusts have been treated as an extension of the Company for the purpose of these financial statements. Accordingly, the equity shares of the Company held by these trusts have been treated as treasury shares. The excess of the cost of such shares over the face value of shares has been reduced from the securities premium account of the Company.
1.7 Derecognition of financial assets and financial liabilities
1.7.1 Derecognition of financial assets due to substantial modification of terms and conditions
The Company derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Company records a modification gain or loss, to the extent that an impairment loss has not already been recorded.
1.7.2 Derecognition of financial assets (other than due to substantial modification)
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognises the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition.
The Company has transferred the financial asset if, and only if, either:
⢠The Company has transferred its contractual rights to receive cash flows from the financial asset; or
⢠It retains the rights to the cash flows but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement.
A transfer only qualifies for derecognition if either:
⢠The Company has transferred substantially all the risks and rewards of the asset; or
⢠The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
1.7.3 Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled, or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid, including modified contractual cash flow recognised as new financial liability, would be recognised in profit or loss.
1.8 Impairment of financial assets
The Company records allowance for expected credit losses for all amortised cost financial assets and financial guarantee contracts, in this section all referred to as ''financial instruments. Equity instruments are not subject to impairment under Ind AS 109.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables and lease receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on portfolio of its receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables.
1.8 Impairment of financial assets (Continued)
For all other financial instruments, the Company recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses (12m ECL). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset being credit-impaired at the reporting date or an actual default occurring.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate. The Company recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.
Financial assets are written off either partially or in their entirety only when the Company has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to impairment on financial instruments in statement of profit and loss.
1.10 Determination of fair value
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below:
⢠Level 1 financial instruments -Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Company has access to at the measurement date. The Company considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date.
1.10 Determination of fair value
⢠Level 2 financial instruments-Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instrument''s life.
⢠Level 3 financial instruments -Those that include one or more unobservable input that is significant to the measurement as whole. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Company periodically reviews its valuation techniques including the adopted methodologies and model calibrations.
1.11 Revenue from contract with customer
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognized when (or as) the Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset. When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price (excluding estimates of variable consideration) that is allocated to that performance obligation. The Company applies the five-step approach for recognition of revenue:
i. Identification of contract(s) with customers;
ii. Identification of the separate performance obligations in the contract;
iii. Determination of transaction price;
iv. Allocation of transaction price to the separate performance obligations; and
v. Recognition of revenue when (or as) each performance obligation is satisfied Revenue Recognition for different heads of Income are as under:
(i) Investment banking advisory fees, Syndication fees (net of tax)
Advisory/Syndication fees are recognised on an accrual basis in accordance with agreement entered into with respective investment managers / advisors.
Interest income is recognized using the effective interest rate.
Dividend income is recognized in the statement of profit or loss on the date that the Company''s right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of dividend can be reliably measured. This is generally when the Shareholders approve the dividend.
(iv) Profit or loss on sale of investments
Profit or loss on sale of investments is recognised on trade date basis. Difference between the sale price and average cost of acquisition is recognized as profit or loss on sale of investments.
Basic earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by weighted average number of equity shares considered for deriving basic earnings per share and weighted average number of equity shares that could have been issued upon conversion of all potential equity shares.
1.13 Foreign currency transactions
These financial statements are presented in Indian Rupees which is also the functional currency of the Company. Transactions in currencies other than Indian Rupees (i.e. foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.
1.14 Retirement and other employee benefit Provident fund and national pension scheme
The Company contributes to a recognised provident fund and national pension scheme which is a defined contribution scheme. The contributions are accounted for on an accrual basis and recognised in the statement of profit and loss.
The Company''s gratuity scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that the employees have earned in return for their service in the current and prior periods, that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted. The present value of the obligation under such benefit plan is determined based on independent actuarial valuation using the Projected Unit Credit Method. Benefits in respect of gratuity are funded with an Insurance company approved by Insurance Regulatory and Development Authority (IRDA).
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
1.14 Retirement and other employee benefit (Continued)Compensated Absences
The eligible employees of the Company are permitted to carry forward certain number of their annual leave entitlement to subsequent years, subject to a ceiling. The Company recognises the charge in the statement of profit and loss and corresponding liability on such non-vesting accumulated leave entitlement based on a valuation by an independent actuary. The cost of providing annual leave benefits is determined using the projected unit credit method.
The liability is provided based on the number of days of unutilised leave at each balance sheet date based on a valuation by an independent actuary.
1.15 Share-based payment arrangements
Equity-settled share-based payments to employees of the Group and others providing similar services that are granted by the Company are measured by reference to the fair value of the equity instruments at the grant date. These includes Stock Appreciation Rights (SARs) which are equity settled share-based payments.
a. with respect to Company''s employees:
The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Employee Stock Option Plan Reserve and Stock Appreciation Rights Reserve. In cases where the share options granted vest in installments over the vesting period, the Company treats each installment as a separate grant, because each installment has a different vesting period, and hence the fair value of each installment differs.
b. with respect to employees of the Group:
The fair value determined at the grant date of the equity-settled share-based payments is accounted as a capital contribution (deemed investment) to the respective subsidiaries over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised such that the cumulative capital contribution (deemed investment) is increased so that it reflects the revised estimate, with a corresponding adjustment to the Employee Stock Option Plan Reserve. In cases where the share options granted vest in installments over the vesting period, the Company treats each installment as a separate grant, because each installment has a different vesting period, and hence the fair value of each installment differs. Whenever, these estimates are expected to get settle between the subsidiaries and the Company, they are accounted as receivable/payable.
1.16 Property, plant and equipment
Property plant and equipment is stated at cost excluding the costs of day-to-day servicing, less accumulated depreciation, and accumulated impairment in value. Changes in the expected useful life are accounted for by changing the depreciation period or methodology, as appropriate, and treated as changes in accounting estimates.
Subsequent costs incurred on an item of property, plant and equipment is recognised in the carrying amount thereof when those costs meet the recognition criteria as mentioned above. Repairs and maintenance are recognised in profit or loss as incurred.
1.16 Property, plant and equipment (Continued)
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives. Depreciation is provided on a written down value basis from the date the asset is ready for its intended use or put to use whichever is earlier. In respect of assets sold, depreciation is provided up to the date of disposal.
As per the requirement of Schedule II of the Companies Act, 2013, the Company has evaluated the useful lives of the respective fixed assets which are as per the provisions of Part C of the Schedule II for calculating the depreciation. The estimated useful lives of the fixed assets are as follows
Estimated useful lives of the assets are as follows:
|
Nature of assets |
Estimated useful life |
|
Building (other than Factory Building) |
60 years |
|
Furniture and fixtures |
10 years |
|
Vehicles |
8 years |
|
Office equipment |
5 years |
|
Computers - servers and networks |
6 years |
|
Computers - end user devices, such as desktops, laptops, etc. |
3 years |
Leasehold improvements are amortised on a straight-line basis over the estimated useful lives of the assets or the period of lease, whichever is shorter.
Amount of those components which have been separately recognised as assets is derecognised at the time of replacement thereof. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Intangible assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost less accumulated amortization and impairment, if any. Intangibles such as software are amortised over a period of 3 years based on its estimated useful life.
1.18 Impairment of non-financial assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired based on internal/external factors. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of cash generating unit which the asset belongs to is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of the depreciable historical cost.
1.19 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.
1.20 Provisions and other contingent liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed. Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
Deferred tax assets are also recognised with respect to carry forward of unused tax losses and unused tax credits (including Minimum Alternative Tax credit) to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
It is probable that taxable profit will be available against which a deductible temporary difference, unused tax loss or unused tax credit can be utilised when there are sufficient taxable temporary differences which are expected to reverse in the period of reversal of deductible temporary difference or in periods in which a tax loss can be carried forward or back. When this is not the case, deferred tax asset is recognised to the extent it is probable that:
⢠the entity will have sufficient taxable profit in the same period as reversal of deductible temporary difference or periods in which a tax loss can be carried forward or back; or
⢠tax planning opportunities are available that will create taxable profit in appropriate periods.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
1.21 Income tax expenses (Continued)
1.21.2 Deferred tax (Continued)
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
1.21.3 Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.22 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company''s accounting policies, which are described above, the management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
1.23 Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations, that the management has made in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognised in the standalone financial statements.
1.23.1 Business model assessment
Classification and measurement of financial assets depends on the results of the solely payments for principal and interest (SPPI) and the business model test. The Company determines the business model at a level that reflects how Group of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance is measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost that are derecognised prior to their maturity to understand the quantum, the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Company''s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.
1.24 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, as described below. The Company based its assumptions and estimates on parameters available when these financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
1.24.1 Fair value of financial instruments
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation, and volatility.
1.24.2 Impairment of financial assets
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
The Company''s ECL calculations are outputs of models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies.
It is Company''s policy to regularly review its models in the context of actual loss experience and adjust when necessary.
1.25 Standards issued but not yet effective
There are no new standard or amendment issued but not effective.
Mar 31, 2019
1.1 Basis of preparation of financial statements
The abridged standalone financial statements of the C ompany has been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).
For all periods up to and including the year ended March 31, 2018, the Company prepared its standalone financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). These abridged standalone financial statements for the year ended March 31, 2019 are the first financial statements of the Company prepared under Ind AS. Refer to note 19 for information on how the Company transitioned to Ind AS.
These abridged standalone financial statements have been prepared on a historical cost basis, except for derivative financial instruments and other financial assets held for trading, which have been measured at fair value. The abridged standalone financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest million, except when otherwise indicated.
Complete Balance sheet, Statement of Changesin Equity, Statement of Profitand Loss, Statement of Cash flows and other statements and notes thereto, prepared as per the requirements of Division III of Schedule III to the Act are available at the Companyâs website i.e. https://www.edelweissfin.com/web/edelweiss/annual-reportsRs.param=annualReport. Copy of financial statement is also available for inspection at the registered office of the company during working hours for a period of 21 days before the date of AGM.
1.2 Presentation offinancial statements
The Company presents its abridged balance sheet in order of liquidity in compliance with the Division III of the Schedule III to the Companies Act, 2013.
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances:
- The normal course of business
- The event of default
- The event of insolvency or bankruptcy of the company and or its counterparties
1.3 Recognition of Interest and Dividend income
Under Ind AS 109 interest income is recorded usingthe effective interest rate (EIR) method for all financial instruments measured at amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account any discount or premium on acquisition, fees and costs that are an integral part of the EIR. The Company recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected life of the loan. Hence, it recognises the effect of potentially different interest rates charged at various stages, and other characteristics of the product life cycle (including prepayments, penalty interest and charges).
Dividend income is recognised in profit or loss when the Companyâs right to receive payment of the dividend is established, it is probable that the economic benefits associated with the dividend will flow to the entity, and the amount of the dividend can be measured reliably.
1.4 Financial Instruments
1.4.1 Date of recognition
Financial assets and financial liabilities, with the exception of borrowings are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. This includes regular way trades purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. The Company recognises borrowings when funds reach the Company.
1.4.2 Initial measurement offinancial instruments
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue offinancial assets and financial liabilities (otherthan financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
1.5 Classification of financial instruments
1.5.1 Financial assets:
The Company classifies all of its financial assets based on the business model for managing the assets and the assetâs contractual terms, measured at either:
Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The changes in carrying value of financial assets is recognised in profit and loss account.
Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The changes in fair value of financial assets is recognised in Other Comprehensive Income.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL. The Company measures all financial assets classified as FVTPL at fair value at each reporting date. The changes in fair value of financial assets is recognised in Profit and loss account.
1.5.1.1 Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period.
For financial instruments the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.
1.5.1.2 Financial assets held for trading
The Company classifies financial assets as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there evidence of a recent pattern of short-term profit is taking. Held-for-trading assets and liabilities are recorded and measured in the balance sheet at fair value.
1.5.1.3 Investment in equity instruments
The Company subsequently measures all equity investments at fair value through profit or loss. However, for equity investments in subsidiaries and associates, these are measured at cost as permitted under Ind AS 27, subject to impairment, if any.
1.5.2 Financial liabilities
All financial liabilities are measured at amortised cost except for financial guarantees, and derivative financial liabilities.
1.5.2.1 Debt securities and other borrowed funds
After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the EIR.
1.5.2.2 Financial assets and Financial liabilities at fair value through profit or loss
Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by management upon initial recognition or are mandatorily required to be measured at fair value under Ind AS 109. Management only designates an instrument at FVTPL upon initial recognition when one of the following criteria are met. Such designation is determined on an instrument-by-instrument basis:
- The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis; or
- The liabilities are part of a group of financial liabilities, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or
- The liabilities containing one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited.
Financial assets and financial liabilities at FVTPL are recorded in the balance sheet at fair value. Changes in fair value are recorded in profit and loss with the exception of movements in fair value of liabilities designated at FVTPL due to changes in the Companyâs own credit risk. Such changes in fair value are recorded in the Own credit reserve through OCI and do not get recycled to the profit or loss. Interest earned or incurred on instruments designated at FVTPL is accrued in interest income or finance cost, respectively, using the EIR, taking into account any discount/ premium and qualifying transaction costs being an integral part of instrument. Interest earned on assets mandatorily required to be measured at FVTPL is recorded using effective interest rate.
1.5.2.3 Financial guarantee:
Financial guarantees are contract that requires the Company to make specified payments to reimburse to holder for loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument.
Financial guarantee issued or commitments to provide a loan at below market interest rate are initially measured at fair value and the initial fair value is amortised over the life of the guarantee or the commitment. Subsequently they are measured at higher of this amortised amount and the amount of loss allowance.
1.5.3 Financial liabilities and equity instruments
Financial instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company entity are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Companyâs own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Companyâs own equity instruments.
1.5.4 Derivative contracts (Derivative assets / Derivative liability)
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and interest rate swaps.
Derivatives are initially recognised at fair value and are subsequently re-measured at fair value through profit or loss. The resulting gain or loss is recognised in profit or loss immediately
1.6 Reclassification of financial assets and financial liabilities
The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
1.7 Employee welfare trust
The Company is a sponsor to two trusts namely: (i) Edelweiss Employeesâ Welfare Trust; and (ii) Edelweiss Employeesâ Incentives and Welfare Trust. These trusts have been formed exclusively to provide benefits to employees of the Company and its subsidiaries and associates. These trusts have been treated as an extension of the Company for the purpose of these financial statements. Accordingly, the equity shares of the Company held by these trusts have been treated as treasury shares. The excess of the cost of such shares over the face value of shares has been reduced from the securities premium account of the Company. Further, the interest-free loan given by the Company to these trusts has been derecognized.
1.8 Derecognition of financial assets and financial liabilities
1.8.1 Derecognition of financial assets due to substantial modification of terms and conditions
The Company derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Company records a modification gain or loss, to the extent that an impairment loss has not already been recorded.
1.8.2 Derecognition of financial assets (other than due to substantial modification)
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognises the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition.
The Company has transferred the financial asset if, and only if, either:
- The Company has transferred its contractual rights to receive cash flows from the financial asset; or
- It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement.
A transfer only qualifies for derecognition if either:
- The Company has transferred substantially all the risks and rewards of the asset; or
- The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset
The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
1.8.3 Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid, including modified contractual cash flow recognised as new financial liability, would be recognised in profit or loss.
1.9 Impairment of financial assets
The Company records allowance for expected credit losses for all amortised cost financial assets and financial guarantee contracts, in this section all referred to as âfinancial instrumentsâ. Equity instruments are not subject to impairment under Ind AS 109.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables and lease receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. The Company uses a provision matrix to determine impairment loss allowance on portfolio of its receivables. The provision matrix is based on its historically observed default rates over the expected life of the receivables.
For all other financial instruments, the Company recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses (12m ECL). The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition instead of on evidence of a financial asset being credit-impaired at the reporting date or an actual default occurring.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate. The Company recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.
1.10 Write off
Financial assets are written off either partially or in their entirety only when the Company has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to impairment on financial instruments in statement of profit and loss.
1.11 Determination of fair value
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as summarised below:
- Level 1 financial instruments -Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Company has access to at the measurement date. The Company considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date.
- Level 2 financial instruments-Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instrumentâs life.
- Level 3 financial instruments -Those that include one or more unobservable input that is significant to the measurement as whole. For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Company periodically reviews its valuation techniques including the adopted methodologies and model calibrations.
1.12 Revenue from contract with customer
Revenue is measured at transaction price i.e. the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to the customer, excluding amounts collected on behalf of third parties. The Company consider the terms of the contract and its customary business practices to determine the transaction price. Where the consideration promised is variable, the Company excludes the estimates of variable consideration that are constrained.
The Company recognises revenue from the following sources:
Fee income including fees for Investment Banking Advisory Fees, Syndication fees and fees for other allied services. The right to receive Investment Banking & Syndication fees is basis on milestones defined in accordance with the terms of the contracts entered into between the Company and the counterparty which also defines its performance obligation. All types of fee income is accounted for, on an accrual basis.
1.13 Earnings per share
Basic earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by weighted average number of equity shares considered for deriving basic earnings per share and weighted average number of equity shares that could have been issued upon conversion of all potential equity shares.
1.14 Foreign currency transactions
These financial statements are presented in Indian Rupees which is also the functional currency of the Company. Transactions in currencies other than Indian Rupees (i.e. foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.
1.15 Retirement and other employee benefit Provident fund and national pension scheme
The Company contributes to a recognised provident fund and national pension scheme which is a defined contribution scheme. The contributions are accounted for on an accrual basis and recognised in the statement of profit and loss.
Gratuity
The Companyâs gratuity scheme is a defined benefit plan. The Companyâs net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that the employees have earned in return for their service in the current and prior periods, that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted. The present value of the obligation under such benefit plan is determined based on independent actuarial valuation using the Projected Unit Credit Method. Benefits in respect of gratuity are funded with an Insurance company approved by Insurance Regulatory and Development Authority (IRDA).
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent periods.
Compensated Absences
The eligible employees of the C ompany are permitted to carryforward certain number of their annual leave entitlement to subsequent years, subject to a ceiling. The Company recognises the charge in the statement of profit and loss and corresponding liability on such non-vesting accumulated leave entitlement based on a valuation by an independent actuary. The cost of providing annual leave benefits is determined using the projected unit credit method.
The liability is provided based on the number of days of unutilised leave at each balance sheet date based on a valuation by an independent actuary.
1.16 Share-based payment arrangements
Equity-settled share-based payments to employees of the Group and others providing similar services that are granted by the Company are measured by reference to the fair value of the equity instruments at the grant date.
a. with respect to Companyâs employees:
The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the Employee Stock Option Plan Reserve. In cases where the share options granted vest in installments over the vesting period, the Company treats each installment as a separate grant, because each installment has a different vesting period, and hence the fair value of each installment differs.
b. with respect to employees of the Group:
The fair value determined at the grant date of the equity-settled share-based payments is accounted as a capital contribution (deemed investment) to the respective subsidiaries over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised such that the cumulative capital contribution (deemed investment) is increased so that it reflects the revised estimate, with a corresponding adjustment to the Employee Stock Option Plan Reserve. In cases where the share options granted vest in installments over the vesting period, the Company treats each installment as a separate grant, because each installment has a different vesting period, and hence the fair value of each installment differs. Whenever, these estimates are expected to get settle between the subsidiaries and the Company, they are accounted as receivable/payable.
1.17 Property, plant and equipment
Property plant and equipment is stated at cost excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Changes in the expected useful life are accounted for by changing the amortisation period or methodology, as appropriate, and treated as changes in accounting estimates.
Subsequent costs incurred on an item of property, plant and equipment is recognised in the carrying amount thereof when those costs meet the recognition criteria as mentioned above. Repairs and maintenance are recognised in profit or loss as incurred.
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives. Depreciation is provided on a written down value basis from the date the asset is ready for its intended use or put to use whichever is earlier. In respect of assets sold, depreciation is provided upto the date of disposal.
As per the requirement of Schedule II of the Companies Act, 2013, the Company has evaluated the useful lives of the respective fixed assets which are as per the provisions of Part C of the Schedule II for calculating the depreciation. The estimated useful lives of the fixed assets are as follows:
Estimated useful lives of the assets are as follows:
Leasehold improvements are amortised on a straight-line basis over the estimated useful lives of the assets or the period of lease, whichever is shorter.
Amount of those components which have been separately recognised as assets is derecognised at the time of replacement thereof. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
For transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as of April 01, 2017 (transition date) measured as per the previous GAAP and use that carrying value as the deemed cost as of the transition date.
1.18 Intangible assets
Intangible assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost less accumulated amortization and impairment, if any. Intangibles such as software are amortised over a period of 3 years based on its estimated useful life. For transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as of April 01, 2017 (transition date) measured as per the previous GAAP and use that carrying value as the deemed cost as of the transition date.
1.19 Impairment of non-financial assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired based on internal/external factors. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of cash generating unit which the asset belongs to is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of the depreciable historical cost.
1.20 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.
1.21 Provisions and other contingent liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed. Given the subjectivity and uncertainty of determining the probability and amount of losses, the Company takes into account a number of factors including legal advice, the stage of the matter and historical evidence from similar incidents.
1.22 Income tax expenses
Income tax expense represents the sum of the tax currently payable and deferred tax.
1.22.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
1.22.2 Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
Deferred tax assets are also recognised with respect to carry forward of unused tax losses and unused tax credits (including Minimum Alternative Tax credit) to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
It is probable that taxable profit will be available against which a deductible temporary difference, unused tax loss or unused tax credit can be utilised when there are sufficient taxable temporary differences which are expected to reverse in the period of reversal of deductible temporary difference or in periods in which a tax loss can be carried forward or back. When this is not the case, deferred tax asset is recognised to the extent it is probable that:
- the entity will have sufficient taxable profit in the same period as reversal of deductible temporary difference or periods in which a tax loss can be carried forward or back; or
- tax planning opportunities are available that will create taxable profit in appropriate periods.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Minimum Alternative Tax (MAT) credit
MAT credit asset is recognised where there is convincing evidence that the asset can be realised in future. MAT credit assets are reviewed as at the balance sheet date and written down or written up to reflects the amount that is reasonably certain to be realised.
1.22.3 Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.22.4 Business Combination :
The acquisition method of accounting is used to account for business combinations by the Group. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values with certain limited exceptions. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groupâs cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
1.23 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Companyâs accounting policies, which are described above, the management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
1.24 Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations, that the management has made in the process of applying the Companyâs accounting policies and that have the most significant effect on the amounts recognised in the standalone financial statements.
1.24.1 Business model assessment
Classification and measurement of financial assets depends on the results of the solely payments for principal and interest (SPPI) and the business model test. The Company determines the business model at a level that reflects how Group of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance is measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost that are derecognised prior to their maturity to understand the quantum, the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Companyâs continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.
1.25 Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, as described below. The Company based its assumptions and estimates on parameters available when these financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
1.25.1 Fair value of financial instruments
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility.
1.25.2 Impairment of financial assets
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
The Companyâs ECL calculations are outputs of models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies.
It is Companyâs policy to regularly review its models in the context of actual loss experience and adjust when necessary.
1.26 Standards issued but not yet effective
1.26.1 Ind AS 116Leases:
Ind AS 116 Leases replaces Ind AS 17 Leases, including appendices thereto. Ind AS 116 is effective for annual periods beginning on or after April 01, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of âlow-valueâ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. The application of this standard is not likely to have a material impact on the Financial Statements.
1.26.2 Long term Interests in Associates and Joint Ventures (Amendments to Ind AS 28)
The amendment clarifies that Ind AS 109, including its impairment requirements, applies to long term interests. Furthermore, in applying Ind AS 109 to long term interests, an entity does not take into account adjustments to their carrying amount required by Ind AS 28 (i.e., adjustments to the carrying amount of longterm interests arising from the allocation of losses of the investee or assessment of impairment in accordance with Ind AS 28). These amendments are to be applied retrospectively in accordance with Ind AS 8 for annual reporting periods beginning on or after April 01, 2019. Specific transition provisions apply depending on whether the first time application of the amendments coincides with that of Ind AS 109.
The application of these amendments is not likely to have a material impact on these Financial Statements.
1.26.3 Prepayment Features with Negative Compensation (Amendments to Ind AS 109)
The amendments to Ind AS 109 clarify that for the purpose of assessing whether a prepayment feature meets the SPPI condition, the party exercising the option may pay or receive reasonable compensation for the prepayment irrespective of the reason for prepayment. In other words, prepayment features with negative compensation do not automatically fail SPPI. These amendments are to be applied for annual periods beginning on or after April 01, 2019.
The application of these amendments is not likely to have a material impact on the Financial Statements.
1.27 Annual Improvements to Ind AS (2018)
1.27.1 Ind AS 12 Income taxes
The amendments clarify that an entity should recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised the transactions that generated the distributable profits. This is the case irrespective of whether different tax rates apply to distributed and undistributed profits. These amendments are to be applied for annual periods beginning on or after April 01, 2019.
1.27.2 Ind AS 103 Business Combinations
The amendments clarify that when an entity obtains control of a business that is a joint operation, the entity applies the requirements for a business combination achieved in stages, including remeasuring its previously held interest (PHI) in the joint operation at fair value. The PHI to be remeasured includes any unrecognised assets, liabilities and goodwill relating to the joint operation. These amendments are to be applied for business combinations in which the date of acquisition is on or after April 01, 2019.
1.27.3 Plan Amendment, Curtailment or Settlement (Amendments to Ind AS 19)
The amendments clarify that the past service cost (or of the gain or loss on settlement) is calculated by measuring the defined benefit liability (asset) using updated assumptions and comparing benefits offered and plan assets before and after the plan amendment (or curtailment or settlement) but ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a surplus position). The change in the effect of the asset ceiling that may result from the plan amendment (or curtailment or settlement) is determined in a second step and is recognised in the normal manner in other comprehensive income.
An entity is also now required to use the updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. In the case of the net interest, for the period post plan amendment, the net interest is calculated by multiplying the net defined benefit liability (asset) as remeasured under Ind AS 19 with the discount rate used in the remeasurement (also taking into account the effect of contributions and benefit payments on the net defined benefit liability (asset)).
These amendments are to be applied to plan amendments, curtailments or settlements occurring on or after April 01, 2019.
The application of these amendments is not likely to have a material impact on the Financial Statements.
1.27.4 Uncertainty over Income Tax Treatments (Appendix C of Ind AS 12)
This Appendix sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The Appendix requires an entity to:
o determine whether uncertain tax positions are assessed separately or as a Company; and
o assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings:
o If yes, the entity should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income tax filings.
o If no, the entity should reflect the effect of uncertainty in determining its accounting tax position.
The Appendix is effective for annual periods beginning on or after April 01, 2019. Entities can apply the Appendix with either full retrospective application or modified retrospective application without restatement of comparatives retrospectively or prospectively.
Mar 31, 2018
1.1 Background
Edelweiss Financial Services Limited (âthe Companyâ) is registered with the Securities & Exchange Board of India (SEBI) as a Category I - Merchant Banker and Portfolio Management Advisor. The Company was incorporated on 21 November 1995 and is the ultimate holding company of Edelweiss group of companies.
The Company is principally engaged in providing investment banking services and holding company activities comprising of development, managerial and financial support to the businesses of Edelweiss group entities.
1.2 Basis of preparation of abridged financial statements
The accompanying abridged financial statements are prepared and presented in accordance with Indian Generally Accepted Accounting Principles (âGAAPâ) under the historical cost convention, on the accrual basis of accounting , unless otherwise stated, and comply with the Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Companies Act, 2013 (to the extent notified), the provisions of the Companies Act, 1956 (to the extent applicable)(hereinafter referred to as âthe Actâ) and the Schedule III to the Act. The financial statements are presented in Indian Rupees in millions.
1.3 Use of estimates
The preparation of the abridged financial statementsin conformity with the generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities on the date of the financial statements and reported amount of revenue and expenses during the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon managementâs evaluation of the relevant facts and circumstances as on the date of the financial statements. Actual results could differ from the estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
1.4 Current / non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the following criteria:
a. It is expected to be realized in, or is intended for sale or consumption in, the companyâs normal operating cycle;
b. It is held primarily for the purpose of being traded;
c. It is expected to be realized within 12 months after the reporting date; or
d. It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
a. It is expected to be settled in the companyâs normal operating cycle.
b. It is held primarily for the purpose of being traded;
c. It is due to be settled within 12 months after the reporting date; or
d. The company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of the liability that could, at the option of the counterparty, results in its settlement by the issue of equity instruments do not affect its classification.
Current liabilities include current portion of non-current financial liabilities.
All other liabilities are classified as non-current
1.5 Revenue recognition
a. Investment banking fee and other advisory fee income is recognised on an accrual basis in accordance with the terms and contracts entered into between the Company and the counterparty. Guarantee commission and other fees for services rendered to group companies is recognised on an accrual basis.
b. Interest income is recognised on accrual basis.
c. Diviend income is recognised when the right to receive payment is established.
d. Profit earned on sale of investments is recognised on trade date basis. Profit/loss on sale of investments is determined based on the weighted average cost of the investments sold.
e. The rating support fee for the borrowing programme of the subsidiaries is accrued on straight line basis over the rating period and as per the contractual terms agreed with the subsidiaries.
f. Royalty income, which is generally earned based upon a percentage of sales or a fixed amount, is recognized on an accrual basis.
1.6 Fixed assets and depreciation / amortization Property, Plant and Equipment
Property, Plant and Equipment acquired by the Company are reported at acquisition cost, with deductions for accumulated depreciation and impairment losses, if any. The cost of fixed assets comprises of purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
Depreciation is provided on a written down value basis from the date the asset is ready for its intended use or the date it is put to use, whichever is earlier. In respect of assets sold, depreciation is provided upto the date of disposal.
As per the requirement of Schedule II of the Companies Act, 2013, the Company has evaluated the useful lives of the respective fixed assets which are as per the provisions of Part C of the Schedule II of the Act for calculating the depreciation.
Leasehold improvements & premised are amortized on a straight-line basis over the estimated useful lives of the assets or the period of lease, whichever is shorter.
Intangible fixed assets
Intangible fixed assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost less accumulated amortization and impairment, if any.
Intangibles such as software is amortized over a period of 3 years or its estimated useful life whichever is shorter.
1.7 Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired based on internal/external factors. If any such indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount is the greater of the net selling price and the value in use of those assets. Value in use is arrived at by discounting the estimated future cash flows to their present value based on an appropriate discount factor. If such recoverable amount of the asset or the recoverable amount of cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of the depreciable historical cost.
1.8 Investments
Investments are classified into non-current investments and current investments. Investments that are readily realisable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long term investments which is expected to be realized within 12 months after the reporting date is also presented under âcurrent assetsâ as âcurrent portion of long term investmentsâ in consonance with the current and non-current classification as per Schedule III.
Non-current investments are carried at cost less diminution in value which is other than temporary, determined separately for each investment.
Current investments are carried at lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each investment. In case of investments in mutual funds, the net asset value of units declared by the mutual funds is considered as the fair value.
1.9 Foreign currency transactions and currency derivatives
Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any, arising out of transactions settled during the year are recognised in the statement of profit and loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date. The resultant exchange differences, if any, are recognised in the statement of profit and loss and related assets and liabilities are accordingly restated in the balance sheet.
The Company enters into currency derivative transactions to economically hedge its foreign exchange exposure. These derivative transactions are measured at fair value as at the balance sheet date. Fair value is determined using quoted market prices in an actively traded market, for the instrument.
In respect of currency forward contracts entered with banks, the premium or discount arising at the inception of the contract is amortised over the life of the contract in the statement of profit and loss. The difference in the opening and closing exchange rates (mark to market) is recognised in the statement of profit and loss. Any profit or loss arising on cancellation or renewal of such contracts is recognised in the statement of profit and loss.
1.10 Employee benefits
The accounting policy followed by the Company in respect of its employee benefit schemes in accordance with Accounting Standard 15 (Revised 2005), is set out below:
Provident fund and National Pension Scheme
The Company contributes to a recognised provident fund and national pension scheme which is a defined contribution scheme. The contributions are accounted for on an accrual basis and recognised in the statement of profit and loss.
Gratuity
The Companyâs gratuity scheme is a defined benefit plan. The Companyâs net obligation in respect of the gratuity benefit is calculated by estimating the amount of future benefit that the employees have earned in return for their service in the current and prior periods. Such benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted. The present value of the obligation under such benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The obligation is measured at present values of estimated future cash flows. The discount rates used for determining the present value are based on the market yields on Government Securities as at the balance sheet date.
Benefits in respect of gratuity are funded with an Insurance Company approved by Insurance Regulatory and Development Authority (IRDA).
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.
Compensated absences
The eligible employees of certain companies of the Group are permitted to carry forward certain number of their annual leave entitlement to subsequent years, subject to a ceiling. The Group recognises the charge to the statement of profit and loss and corresponding liability on account of such non-vesting accumulated leave entitlement based on a valuation by an independent actuary. The cost of providing annual leave benefits are determined using the projected unit credit method.
Deferred Bonus
The Company has adopted a Deferred Bonus Plan under its Deferred Variable Compensation Plan. A pool of identified senior employees of the Company is entitled for benefits under this plan. Such deferred compensation will be paid in a phased manner over a future period of time. The measurement for the same has been based on actuarial assumptions and principles. These assumptions and principles are consistent with the requirements of Accounting Standard 15 (Revised 2005).
1.11 Current and Deferred Tax
Tax expense comprises of current tax (i.e. amount of tax for the year determined in accordance with the Income Tax Act, 1961), deferred tax charge or benefit (reflecting the tax effect of timing differences between accounting income and taxable income for the year) and minimum alternate tax.
Current tax
Provision for current tax is recognised based on estimated tax liability computed after adjusting for allowances, disallowances and exemptions in accordance with the Income Tax Act, 1961.
Deferred tax
The deferred tax charge or benefit and the corresponding deferred tax liabilities and assets are recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty with convincing evidence of realisation of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain, as the case may be, to be realised.
Minimum Alternate Tax (MAT)
MAT credit asset is recognised where there is convincing evidence that the asset can be realised in future. MAT credit assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably certain to be realised.
1.12 Operating leases
Lease payments for assets taken on operating lease are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
1.13 Earnings per share
The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20 - âEarnings Per Shareâ.Basic earnings per share is computed by dividing the net profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by weighted average number of equity shares considered for deriving basic earning per share and weighted average number of equity shares that could have been issued upon convertion of all potential equity shares.
1.14 Employee stock option plans (âESOPsâ)
The Company follows the intrinsic value method to account for compensation cost of its stock based employee compensation plans as per the accounting treatment prescribed by Employee Stock Option Scheme and Employee Share-based Payments issued by Securities and Exchange Board of India (SEBI) and guidance note on Employee Share-based Payments issued by Institute of Chartered Accountants of India (ICAI). The compensation cost is amortised on a straight-line basis.
1.15 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, demand deposits with banks and other fixed deposits with bank with original maturities of three months or less.
1.16 Borrowing Costs
Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Interest cost in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.
1.17 Provisions and contingencies
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.
Mar 31, 2017
1.1 Basis of preparation of financial statements
The accompanying financial statements are prepared and presented in accordance with Indian Generally Accepted Accounting Principles (âGAAPâ) under the historical cost convention, on the accrual basis of accounting , unless otherwise stated, and comply with the Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Companies Act, 2013 (to the extent notified), the provisions of the Companies Act, 1956 (to the extent applicable), (hereinafter referred to as âthe Actâ) and the Schedule III to the Act. The financial statements are presented in Indian Rupees in millions.
1.2 Use of estimates
The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets, liabilities and disclosure of contingent liabilities on the date of the financial statements and reported amount of revenue and expenses during the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon managementâs evaluation of the relevant facts and circumstances as on the date of the financial statements. Actual results could differ from the estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
1.3 Current / non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it is expected to be realized in, or is intended for sale or consumption in, the companyâs normal operating cycle or it is held primarily for the purpose of being traded or it is expected to be realized within 12 months after the reporting date or it is cash or cash equivalent unless it is restricted from being exchanged or expected to be used to settle a liability for at least 12 months after the reporting date. Current assets include the current portion of non-current assets. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it is expected to be settled in the companyâs normal operating cycle or it is held primarily for the purpose of being traded or it is due to be settled within 12 months after the reporting date or the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current liabilities. All other liabilities are classified as non-current.
1.4 Revenue recognition
a. Investment banking fee and other advisory fee income is recognised on an accrual basis in accordance with the terms and contracts entered into between the Company and the counterparty. Guarantee commission and other fees for services rendered to group companies are recognised on an accrual basis.
b. Interest income is recognised on accrual basis.
c. Dividend income is recognised when the right to receive payment is established.
d. Profit earned on sale of investments is recognised on trade date basis. Profit/loss on sale of investments is determined based on the weighted average cost of the investments sold.
e. The rating support fee for the borrowing programme of the subsidiaries is accrued on straight line basis over the rating period and as per the contractual terms agreed with the subsidiaries.
f. Royalty income, which is generally earned based upon a percentage of sales or a fixed amount, is recognized on an accrual basis.
1.5 Fixed assets and depreciation / amortization
Property, Plant and Equipment
Property, Plant and Equipment acquired by the Company are reported at acquisition cost, with deductions for accumulated depreciation and impairment losses, if any. The cost of fixed assets comprises of purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
Depreciation is provided on a written down value basis from the date the asset is ready for its intended use or the date it is put to use, whichever is earlier. In respect of assets sold, depreciation is provided upto the date of disposal.
As per the requirement of Schedule II of the Companies Act, 2013, the Company has evaluated the useful lives of the respective fixed assets which are as per the provisions of Part C of the Schedule II of the Act for calculating the depreciation.
Leasehold improvements & premises are amortized on a straight-line basis over the estimated useful lives of the assets or the period of lease, whichever is shorter.
Intangible fixed assets
Intangible fixed assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost less accumulated amortization and impairment, if any.
Intangibles such as software are amortized over a period of 3 years or its estimated useful life whichever is shorter.
1.6 Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired based on internal/external factors. If any such indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount is the greater of the net selling price and the value in use of those assets. Value in use is arrived at by discounting the estimated future cash flows to their present value based on an appropriate discount factor. If such recoverable amount of the asset or the recoverable amount of cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If, at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of the depreciable historical cost.
1.7 Investments
Investments are classified into non-current investments and current investments. Investments that are readily realisable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long term investments which is expected to be realized within 12 months after the reporting date is also presented under âcurrent assetsâ as âcurrent portion of long term investmentsâ in consonance with the current and non-current classification as per Schedule III.
Non-current investments are carried at cost less diminution in value which is other than temporary, determined separately for each investment.
Current investments are carried at lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each investment. In case of investments in mutual funds, the net asset value of units declared by the mutual funds is considered as the fair value.
1.8 Foreign currency transactions and currency derivatives
Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any, arising out of transactions settled during the year are recognised in the statement of profit and loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date. The resultant exchange differences, if any, are recognised in the statement of profit and loss and related assets and liabilities are accordingly restated in the balance sheet.
The Company enters into currency derivative transactions to economically hedge its foreign exchange exposure. These derivative transactions are measured at fair value as at the balance sheet date. Fair value is determined using quoted market prices in an actively traded market, for the instrument.
In respect of currency forward contracts entered with banks, the premium or discount arising at the inception of the contract is amortized over the life of the contract in the statement of profit and loss. The difference in the opening and closing exchange rates (mark to market) is recognised in the statement of profit and loss. Any profit or loss arising on cancellation or renewal of such contracts is recognised in the statement of profit and loss.
1.9 Employee benefits
The accounting policy followed by the Company in respect of its employee benefit schemes in accordance with Accounting Standard 15 (Revised 2005), is set out below:
Provident fund and National Pension Scheme
The Company contributes to a recognised provident fund and national pension scheme which is a defined contribution scheme. The contributions are accounted for on an accrual basis and recognised in the statement of profit and loss.
Gratuity
The Companyâs gratuity scheme is a defined benefit plan. The Companyâs net obligation in respect of the gratuity benefit is calculated by estimating the amount of future benefit that the employees have earned in return for their service in the current and prior periods. Such benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted. The present value of the obligation under such benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method. The obligation is measured at present values of estimated future cash flows. The discount rates used for determining the present value are based on the market yields on Government Securities as at the balance sheet date.
Benefits in respect of gratuity are funded with an Insurance Company approved by Insurance Regulatory and Development Authority (IRDA).
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.
Compensated absences
The eligible employees of the Company are permitted to carry forward certain number of their annual leave entitlement to subsequent years, subject to a ceiling. The Company recognises the charge to the statement of profit and loss and corresponding liability on account of such non-vesting accumulated leave entitlement based on a valuation by an independent actuary.
Deferred Bonus
The Company has adopted a Deferred Bonus Plan under its Deferred Variable Compensation Plan. A pool of identified senior employees of the Company is entitled for benefits under this plan. Such deferred compensation will be paid in a phased manner over a future period of time. The measurement for the same has been based on actuarial assumptions and principles. These assumptions and principles are consistent with the requirements of Accounting Standard 15 (Revised 2005).
1.10 Taxation
Tax expense comprises of current tax (i.e. amount of tax for the year determined in accordance with the Income Tax Act, 1961), deferred tax charge or benefit (reflecting the tax effect of timing differences between accounting income and taxable income for the year) and minimum alternate tax.
Current tax
Provision for current tax is recognised based on estimated tax liability computed after adjusting for allowances, disallowances and exemptions in accordance with the Income Tax Act, 1961.
Deferred tax
The deferred tax charge or benefit and the corresponding deferred tax liabilities and assets are recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future, however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain, as the case may be, to be realised.
Minimum Alternate Tax (MAT)
MAT credit asset is recognised where there is convincing evidence that the asset can be realised in future. MAT credit assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably certain to be realised.
1.11 Operating leases
Lease payments for assets taken on operating lease are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
1.12 Earnings per share
The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20 - âEarnings Per Shareâ. Basic earnings per share is computed by dividing the net profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax attributable to the equity shareholders for the year by weighted average number of equity shares considered for deriving basic earning per share and weighted average number of equity shares that could have been issued upon conversion of all potential equity shares.
1.13 Employee stock option plans (âESOPsâ)
The Company follows the intrinsic value method to account for compensation cost of its stock based employee compensation plans as per the accounting treatment prescribed by Employee Stock Option Scheme and Employee Share-based Payments issued by Securities and Exchange Board of India (SEBI) and guidance note on Employee Share-based Payments issued by Institute of Chartered Accountants of India (ICAI). The compensation cost is amortized on a straight-line basis.
1.14 Provisions and contingencies
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.
Mar 31, 2013
1.1 Basis of preparaton of abridged fnancial statements
The accompanying abridged fnancial statements have been prepared
pursuant to Rule 7A of the Companies (Central Government''s) General
Rules and Forms, 1956 and are based on the annual accounts for the year
ended 31 March 2013. The abridged fnancial statements are presented in
Indian Rupees in millions.
1.2 Use of estmates
The preparaton of the abridged fnancial statements in conformity with
the generally accepted accountng principles requires the management to
make estmates and assumptons that afect the reported amount of assets,
liabilites, revenues and expenses and disclosure of contngent
liabilites on the date of the abridged fnancial statements. Actual
results could difer from the estmates. Any revision to accountng
estmates is recognised prospectvely in current and future periods.
1.3 Revenue recogniton
a. Investment banking fee income is recognised on an accrual basis in
accordance with the terms and contracts entered into between the
Company and the counterparty.
b. Interest income is recognised on accrual basis.
c. Dividend income is recognised when the right to receive payment is
established.
d. Proft earned on sale of investments is recognised on trade date
basis. Proft/loss on sale of investments is determined based on the
weighted average cost of the investments sold.
e. The ratng support fee for the borrowing programme of the
subsidiaries is accrued on straight line basis over the ratng period
and as per the contractual terms agreed with the subsidiaries.
f. Portolio management fees are accounted on accrual basis as follows:
i. In case of percentage based fees, in accordance with the Portolio
Management Agreement entered with the respectve clients and with the
SEBI Regulatons as amended from tme to tme, on a quarterly basis.
ii. In case of return based fee, as a percentage of the annual proft,
on an annual basis.
1.4 Benchmark linked debentures
The Company had issued certain non-convertble debentures, the return of
which is linked to performance of specifed indices/commodites over the
period of the debenture. Such debentures have a component of an
embedded derivatve which is fair valued at year end. The resultant ''net
unrealised loss or gain'' on the fair valuaton of these embedded
derivatves is recognised in the statement of proft and loss. The debt
component of such debentures is measured at amortsed cost using yield
to maturity basis.
1.5 Fixed assets and depreciaton
Tangible fxed assets
Fixed assets are stated at cost less accumulated depreciaton. The cost
of fxed assets comprises of purchase price and any atributable cost of
bringing the asset to its working conditon for its intended use.
Depreciaton is provided on a writen down value basis from the date the
asset is ready for its intended use or put to use, whichever is
earlier. In respect of assets sold, depreciaton is provided upto the
date of disposal.
Leasehold improvements are amortsed on a straight-line basis over the
estmated useful lives of the assets or the period of lease, whichever
is shorter.
Intangible fxed assets
Intangibles such as sofware are amortsed over a period of 3 years or
over the estmated useful life, whichever is shorter. All fxed assets
individually costng less than Rs. 5,000 are fully depreciated in the
year of purchase.
1.6 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indicaton that an asset may be impaired based on internal/external
factors. If any such indicaton exists, the Company estmates the
recoverable amount of the asset. If such recoverable amount of the
asset is less than its carrying amount, the carrying amount is reduced
to its recoverable amount. The reducton is treated as an impairment
loss and is recognised in the statement of proft and loss. If, at the
balance sheet date there is an indicaton that a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is refected at the recoverable amount subject to a
maximum of the depreciable historical cost.
1.7 Investments
Investments are classifed into long term investments and current
investments. Investments which are intended to be held for one year or
more are classifed as long term investments and investments which are
intended to be held for less than one year are classifed as current
investments.
Long term investments are carried at cost less diminuton in value which
is other than temporary, determined separately for each investment.
Current investments are carried at lower of cost or fair value. The
comparison of cost and fair value is done separately in respect of each
investment. In case of investments in mutual funds, the net asset value
of units declared by the mutual funds is considered as the fair value.
1.8 Foreign currency transactons and currency derivatves
Foreign currency transactons are recorded at the rates of exchange
prevailing on the date of the transacton. Exchange diferences, if any,
arising out of transactons setled during the year are recognised in the
statement of proft and loss for the year.
Monetary assets and liabilites denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date. The exchange diferences, if any, are recognised in the
statement of proft and loss and related assets and liabilites are
accordingly restated in the balance sheet.
The Company enters into currency derivatve transactons to economically
hedge its foreign exchange exposure. These derivatve transactons are
measured at fair value as at the balance sheet date. Fair value is
determined using quoted market prices in an actvely traded market, for
the instrument.
1.9 Employee benefts
The accountng policy followed by the company in respect of its employee
beneft schemes in accordance with Accountng Standard 15 (Revised 2005),
is set out below:
Provident fund
The Company contributes to a recognised provident fund which is a
defned contributon scheme. The contributons are accounted for on an
accrual basis and recognised in the statement of proft and loss.
Gratuity
The Company''s gratuity scheme is a defned beneft plan. The Company''s
net obligaton in respect of the gratuity beneft is calculated by
estmatng the amount of future beneft that the employees have earned in
return for their service in the current and prior periods, that beneft
is discounted to determine its present value, and the fair value of
plan assets, if any, is deducted. The present value of the obligaton
under such beneft plan is determined based on actuarial valuaton using
the Projected Unit Credit Method. The obligaton is measured at present
values of estmated future cash fows. The discount rates used for
determining the present value are based on the market yields on
government securites as at the balance sheet date.
Benefts in respect of gratuity are funded with an Insurance Company
approved by Insurance Regulatory and Development Authority (IRDA).
Actuarial gains and losses arising from experience adjustments and
change in actuarial assumptons are recognised in the statement of proft
and loss in the period in which they arise.
Compensated absences
The eligible employees of the Company are permited to carry forward
certain number of their annual leave enttlement to subsequent years,
subject to a ceiling. The Company recognises the charge to the
statement of proft and loss and corresponding liability on account of
such non- vestng accumulated leave enttlement based on a valuaton by an
independent actuary.
1.10 Taxaton
Tax expense comprises income tax (i.e. amount of tax for the year
determined in accordance with the Income Tax Act, 1961), deferred tax
charge or beneft (refectng the tax efect of tming diferences between
accountng income and taxable income for the year) and minimum alternate
tax.
Income tax
Provision for income tax is recognised based on estmated tax liability
computed afer adjustng for allowances, disallowances and exemptons in
accordance with the Income Tax Act, 1961.
Deferred tax
The deferred tax charge or beneft and the corresponding deferred tax
liabilites and assets are recognised using the tax rates that have been
enacted or substantally enacted as at the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the asset can be realised in future, however, where
there is unabsorbed depreciaton or carried forward loss under taxaton
laws, deferred tax assets are recognised only if there is a virtual
certainty of realisaton of the assets. Deferred tax assets are reviewed
as at each balance sheet date and writen down or writen up to refect
the amount that is reasonably/virtually certain, as the case may be, to
be realised.
Minimum alternate tax (MAT)
MAT credit asset is recognised where there is convincing evidence that
the asset can be realised in future. MAT credit assets are reviewed at
each balance sheet date and writen down or writen up to refect the
amount that is reasonably certain to be realised.
1.11 Operatng leases
Lease payments for assets taken on operatng lease are recognised as an
expense in the statement of proft and loss on a straight-line basis
over the lease term.
1.12 Earnings per share
The Company reports basic and diluted earnings per share in accordance
with Accountng Standard 20 - Earnings Per Share prescribed by the
Companies (Accountng Standards) Rules, 2006. Basic earnings per share
is computed by dividing the net proft afer tax atributable to equity
shareholders by the weighted average number of equity shares
outstanding during the year.
Diluted earnings per share refect the potental diluton that could occur
if securites or other contracts to issue equity shares were exercised
or converted during the year. Diluted earnings per share is computed by
dividing the net proft afer tax by the weighted average number of
equity shares and dilutve potental equity shares outstanding at year
end.
1.13 Employee stock opton plans (''ESOPs'')
The Company follows the intrinsic value method to account for
compensaton cost of its stock based employee compensaton plans. The
compensaton cost is amortsed on a straight-line basis.
1.14 Provisions and contngencies
The Company creates a provision when there is present obligaton as a
result of a past event that probably requires an outlow of resources
and a reliable estmate can be made of the amount of the obligaton. A
disclosure for a contngent liability is made when there is a possible
obligaton or a present obligaton that may, but probably will not,
require an outlow of resources. When there is a possible obligaton or a
present obligaton in respect of which the likelihood of outlow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
refect the current best estmate. If it is no longer probable that the
outlow of resources would be required to setle the obligaton, the
provision is reversed.
Contngent assets are not recognised in the abridged fnancial
statements. However, contngent assets are assessed contnually and if it
is virtually certain that an economic beneft will arise, the asset and
related income are recognised in the period in which the change occurs.
1.15 Change in accountng policies
From 1 April 2011, the Company by virtue of its holding company
actvites has adopted the practce of charging its actual borrowing cost
on the loans extended to its group companies.
Mar 31, 2012
1.1 Basis of preparation of financial statements
The accompanying financial statements are prepared and presented under
the historical cost convention, on the accrual basis of accounting and
comply with the Accounting Standards prescribed by Companies
(Accounting Standards) Rules, 2006, the relevant provisions of the
Companies Act, 1956 ('the Act') and the Revised Schedule VI to the Act,
which has become effective from the current year. Figures of the
previous year have been redrawn to conform to the Revised Schedule VI
classification. The financial statements are presented in Indian rupees
in millions.
1.2 Use of estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, revenues and expenses and disclosure of contingent
liabilities on the date of the financial statements. Actual results
could differ from the estimates. Any revision to accounting estimates
is recognised prospectively in current and future periods.
1.3 Revenue recognition
a. Investment banking fee income is recognised on an accrual basis in
accordance with the terms and contracts entered into between the
Company and the counterparty.
b. Interest income is recognised on accrual basis.
c. Oividend income is recognised when the right to receive payment is
established.
d. Profit earned on sale of investments is recognised on trade date
basis. Profit/loss on sale of investments is determined based on the
weighted average cost of the investments sold.
e. The rating support fee for the borrowing programme of the
subsidiaries is accrued on straight line basis over the rating period
and as per the contractual terms agreed with the subsidiaries.
f. Fee income from subsidiaries for Brand Equity, Brand Protection,
Brand Promotion services provided by the Company is recognised on
accrual basis in accordance with the contractual terms and conditions
as agreed with the subsidiaries. The Company has ceased to charge such
fees from its subsidiaries with effect from 01 April 2011.
g. Portfolio management fees are accounted on accrual basis as
follows:
i. In case of percentage based fees, in accordance with the Portfolio
Management Agreement entered with the respective clients and with the
SEBI Regulations as amended from time to time, on a quarterly basis.
ii. In case of return based fee, as a percentage of the annual profit,
on an annual basis.
1.4 Benchmark linked debentures
The Company has issued certain non-convertible debentures, the return
of which is linked to performance of specified indices/commodities over
the period of the debenture. Such debentures have a component of an
embedded derivative which is fair valued at year end. The resultant
'net unrealised loss or gain' on the fair valuation of these embedded
derivatives is recognised in the statement of profit and loss. The debt
component of such debentures is measured at amortised cost using yield
to maturity basis.
1.5 Fixed assets and depreciation Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation. The cost
of fixed assets comprises of purchase price and any attributable cost
of bringing the asset to its working condition for its intended use.
Depreciation is provided on a written down value basis from the date
the asset is ready for its intended use or put to use, whichever is
earlier. In respect of assets sold, depreciation is provided upto the
date of disposal.
1.5 Fixed assets and depreciation {Continued)
Leasehold improvements are amortised on a straight-line basis over the
estimated useful lives of the assets or the period of lease, whichever
is shorter.
Intangible fixed assets
Intangibles such as software is amortised over a period of 3 years or
its estimated useful life whichever is shorter.
All fixed assets individually costing less than Rs 5,000 are fully
depreciated in the year of purchase.
1.6 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired based on internal/ external
factors. If any such indication exists, the Company estimates the
recoverable amount of the asset. If such recoverable amount of the
asset is less than its carrying amount, the carrying amount is reduced
to its recoverable amount. The reduction is treated as an impairment
loss and is recognised in the statement of profit and loss. If, at the
balance sheet date there is an indication that a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount subject to a
maximum of the depreciable historical cost.
1.7 Investments
Investments are classified into long term investments and current
investments. Investments which are intended to be held for one year or
more are classified as long term investments and investments which are
intended to be held for less than one year are classified as current
investments.
Long term investments are carried at cost less diminution in value
which is other than temporary, determined separately for each
investment.
Current investments are carried at lower of cost or fair value. The
comparison of cost and fair value is done separately in respect of each
investment. In case of investments in mutual funds, the net asset value
of units declared by the mutual funds is considered as the fair value.
1.8 Foreign currency transactions and currency derivatives
Foreign currency transactions are recorded at the rates of exchange
prevailing on the date of the transaction. Exchange differences, if any
arising out of transactions settled during the year are recognised in
the statement of profit and loss of the year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date. The exchange differences, if any, are recognised in the
statement of profit and loss and related assets and liabilities are
accordingly restated in the balance sheet.
The Company enters into currency derivative transactions to
economically hedge its foreign exchange exposure. These derivative
transactions are measured at fair value as at the balance sheet date.
Fair value is determined using quoted market prices in an actively
traded market, for the instrument.
1.9 Employee benefits.
The accounting policy followed by the company in respect of its
employee benefit schemes in accordance vyith Accounting Standard 15
(Revised 2005), is set out below: .
Provident fund
The Company contributes to a recognised provident fund which is a
defined contribution scheme. The contributions are accounted for on an
accrual basis and recognised in the statement of profit and loss.
Gratuity
The Company's gratuity scheme is a defined benefit plan. The Company's
net obligation in respect of the gratuity benefit is calculated by
estimating the amount of future benefit that the employees have earned,
in return for their service in the current and prior periods, that
benefit is discounted to determine its present value, and the fair
value of any plan as Sets, if any, is deducted; The present value of the
obligation under such benefit plan is determined based on actuarial
valuation using the Projected Unit Credit Method. The obligation is
measured at present values of estimated future cash flows, the
discounted rates used for determining the present value are based on
the market yields on government securities as at the balance sheet
date.
Benefits in respect of gratuity are funded with an Insurance Company
approved by Insurance Regulatory and Development Authority (IRDA).
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.
Compensated absences
The eligible employees of the Company are permitted to carry forward
certain number of their annual leave entitlement to subsequent years,
subject to a ceiling. The Company recognises the charge to the
statement of profit and loss and corresponding liability on account of
such non-vesting accumulated leave entitlement based on a valuation by
an independent actuary.
1.10 Taxation
Tax expense comprises income tax (i.e. amount of tax for the year
determined in accordance with the Income Tax Act, 1961), deferred tax
charge or benefit (reflecting the tax effect of timing differences
between accounting income and taxable income for the year) and minimum
alternate tax.
Income tax
Provision for income tax is recognised based on estimated tax liability
computed after adjusting for allowances, disallowances and exemptions
in accordance with the Income Tax Act, 1961.
Deferred tax
The deferred tax charge or benefit and the corresponding deferred tax
liabilities and assets are recognised using the tax rates that have
been enacted or substantially enacted-as at the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the asset can be realised in future, however,
where there is unabsorbed depreciation or carried forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of the assets. Deferred tax assets are
reviewed as at each balance sheet date and written down or written up
to reflect the amount that is reasonably/virtually certain, as the case
may be, to be realised.
Minimum Alternate Tax (MAT)
MAT credit asset is recognized where there is convincing evidence that
the asset carrbe realized in future. MAT credit assets are reviewed at
each balance sheet date and written down or written up to reflect the
amount that is reasonably certain to be realised.
1.11 Operating leases
Lease payments for assets taken on operating lease are recognised as an
expense in the statement of profit and loss on a straight-line basis
over the lease term.
1.12 Earnings per share
The Company reports basic and diluted earnings per share in accordance
with Accounting Standard 20 - Earnings Per Share prescribed by the
Companies (Accounting Standards) Rules, 2006. Basic earnings per share
is computed by dividing the net profit after tax attributable to equity
shareholders by the weighted average number of equity shares
outstanding during the year.
Diluted earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the year. Diluted earnings per share is
computed by dividing the net profit after tax by the weighted average
number of equity shares and dilutive potential equity shares
outstanding at year end.
1.13 Employee stock option plans
The Company follows the intrinsic value method to account for
compensation cost of its stock based employee compensation plans. The
compensation cost is amortised on a straight-line basis.
1.14 Provisions and contingencies
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that the
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an economic benefit will arise, the asset and
related income are recognised in the period in which the change occurs.
1.15 Change in accounting policies
The Company has ceased to charge Brand Equity, Brand Protection, Brand
Promotion fees to its subsidiaries from 1 April 2011.
From 1 April 2011, the Company by virtue of its holding company
activities has adopted the practice of charging its actual borrowing
cost on the loans extended to its group companies.
Mar 31, 2010
1.1 Basis of preparation of financial statements
The accompanying financial statements are prepared and presented under
the historical cost convention, on the accrual basis of accounting and
comply with the Accounting Standards prescribed by the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956 to the extent applicable. The financial statements
are presented in Indian rupees in millions.
1.2 Use of estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, revenues and expenses and disclosure of contingent
liabilities on the date of the financial statements. Actual results
could differ from the estimates. Any revision to accounting estimates
is recognised prospectively in current and future periods.
1.3 Revenue recognition
a) Investment banking fee income is recognised, on an accrual basis in
accordance with the terms and contracts entered into between the
Company and the counterparty.
b) Interest income is recognised on accrual basis.
c) Dividend income is recognised when the right to receive payment is
established.
d) Profit earned on sale of investments is recognised on trade date
basis. Profit/loss on sale of investments is determined based on the
weighted average cost of the investments sold.
e) The rating support fee for the borrowing programme of the
subsidiaries is accrued on straight line basis over the rating period
and as per the contractual terms agreed with the subsidiaries.
f) Portfolio management fees are accounted on accrual basis as follows:
i) In case of percentage based fees, as a percentage of the unaudited
net asset value at the end of each financial quarter, on a quarterly
basis.
ii) In case of return based fee, as a percentage of the annual profit,
on an annual basis.
1.4 Benchmark linked debentures
The Company has issued certain non-convertible debentures, the return
of which is linked to performance of specified indices over the period
of the debenture. Such debentures have a component of an embedded
derivative which is fair valued at year end. The unrealised loss on the
fair valuation of these embedded derivatives is recognised in the
profit and loss account and unrealised gain, if any is ignored. The
resultant debt component of such debentures is measured at amortised
cost using yield to maturity basis.
1.5 Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. The cost
of fixed assets comprises purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.
Depreciation is provided on a written down value basis from the date
the asset is ready to use or put to use, whichever is earlier. In
respect of assets sold, depreciation is provided upto the date of
disposal.
Depreciation is charged at the rates prescribed in the Schedule XIV to
the Companies Act, 1956 as given below:
Leasehold improvements are amortised on a straight-line basis over the
estimated useful lives of the assets or the period of lease, whichever
is shorter.
All fixed assets individually costing less than Rs. 5,000 are fully
depreciated in the year of purchase.
1.6 Fixed assets and depreciation (Continued)
Software expense includes expenditure on licences for various office
applications which are written off in the year of purchase on a prudent
basis.
1.7 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired based on internal/ external
factors. If any such indication exists, the Company estimates the
recoverable amount of the asset. If such recoverable amount of the
asset or the recoverable amount of the cash generating unit to which
the asset belongs, is less than its carrying amount, the carrying
amount is reduced to its recoverable amount.
The reduction is treated as an impairment loss and is recognised in the
profit and loss account. If at the balance sheet date, there is an
indication that a previously assessed impairment loss no longer exists,
the recoverable amount is reassessed and the asset is reflected at the
recoverable amount subject to a maximum of the depreciable historical
cost.
1.8 Investments
Investments are classified into long term investments and current
investments. Investments which are intended to be held for one year or
more are classified as long term investments and investments which are
intended to be held for less than one year are classified as current
investments.
Long term investments are carried at cost less diminution in value
which is other than temporary, determined separately for each
investment.
Current investments are carried at lower of cost or fair value. The
comparison of cost and fair value is done separately in respect of each
investment. In case of investments in mutual funds, the net asset value
of units declared by the mutual funds is considered as the fair value.
1.9 Foreign currency transactions
Foreign currency transactions are recorded at the rates of exchange
prevailing on the date of the transaction. Exchange differences, if any
arising out of transactions settled during the year are recognised in
the profit and loss account.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date. The exchange differences, if any, are recognised in the
profit and loss account and related assets and liabilities are
accordingly restated in the balance sheet.
1.10 Employee benefits
Provident fund
The Company contributes to a recognised provident fund which is a
defined contribution scheme. The contributions are accounted for on an
accrual basis and recognised in the profit and loss account.
Gratuity
The CompanyÃs gratuity scheme is a defined benefit plan. The CompanyÃs
net obligation in respect of the gratuity benefit is calculated by
estimating the amount of future benefit that the employees have earned
in return for their service in the current and prior periods, that
benefit is discounted to determine its present value.
The present value of the obligation under such benefit plan is
determined based on actuarial valuation using the Projected Unit Credit
Method which recognises each period of service that give rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at present values of estimated future cash
flows. The discounted rates used for determining the present value are
based on the market yields on government securities as at the balance
sheet date.
Actuarial gains and losses are recognised immediately in the profit and
loss account.
1.11 Taxation
Income tax expense comprises current tax (i.e. amount of tax for the
period determined in accordance with the Income Tax Act, 1961),
deferred tax charge or benefit (reflecting the tax effect of timing
differences between accounting income and taxable income for the
period) and fringe benefit tax.
Current tax
Provision for current tax is recognised based on estimated tax
liability computed after adjusting for allowances, disallowances and
exemptions in accordance with the tax laws applicable.
Deferred taxation
The deferred tax charge or benefit and the corresponding deferred tax
liabilities and assets are recognised using the tax rates that have
been enacted or substantially enacted as at the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the asset can be realised in future; however,
where there is unabsorbed depreciation or carried forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of the assets. Deferred tax assets are
reviewed as at each balance sheet date and written down or written up
to reflect the amount that is reasonable/virtually certain (as the case
may be) to be realised.
Fringe benefit tax
For the previous year, provision for Fringe Benefit Tax (ÃFBTÃ) is made
on the basis of applicable FBT on the taxable value of chargeable
expenditure of the Company as prescribed under the Income Tax Act, 1961
and the same has been included in the provision for income tax.
1.12 Operating leases
Lease payments for assets taken on operating lease are recognised as an
expense in the profit and loss account on a straight-line basis over
the lease term.
1.13 Earnings per share
The Company reports basic and diluted earnings per share in accordance
with Accounting Standard 20 - Earnings Per Share prescribed by the
Companies (Accounting Standards) Rules, 2006. Basic earnings per share
is computed by dividing the net profit after tax attributable to equity
shareholders by the weighted average number of equity shares
outstanding during the year.
Diluted earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the year. Diluted earnings per share is
computed by dividing the net profit after tax by weighted average
number of equity shares and dilutive potential equity shares
outstanding during the year.
1.14 Employee stock option plans
The Company follows the intrinsic value method to account for
compensation cost of its stock based employee compensation plans. The
compensation cost is amortised on a straight-line basis.
1.15 Provisions and contingences
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that the
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an economic benefit will arise, the asset and
related income are recognised in the period in which the change occurs.
Mar 31, 2007
1.1 Principles of consolidation
a) The consolidated financial statements relate to Edelweiss Capital
Limited ("the Company) and its subsidiary entities and associates
("the Group). The consolidated financial statements have been prepared
on the following basis:
- In respect of Subsidiary Enterprises (including partnership firm),
the financial statements have been consolidated on a line-by-line basis
by adding together the book values of like items of assets,
liabilities, income and expenses, after as far as possible eliminating
intra-group balances and intra-group transactions resulting in
unrealised profits or losses in accordance with Accounting Standard 21
- Consolidated Financial Statements issued by the Institute of
Chartered Accountants of India.
- In case of Associate Enterprises (including partnership firm), the
financial statements have been consolidated as per Accounting Standard
23 - Accounting for investment in Associates issued by the Institute of
Chartered Accountants of India.
- Assets and liabilities of the foreign subsidiaries are translated
into Indian Rupees at the rate of exchange prevailing as at the balance
sheet date. Revenue and expense are translated into Indian Rupees at
the average exchange rate prevailing during the year and the resulting
net translation adjustment has been disclosed as Foreign Exchange
Translation Reserve in Reserves and Surplus.
- The excess of cost over the Companys investments in the subsidiary
company is recognised in the consolidated financial statements as
Goodwill which has been charged off in the Profit and Loss Account in
the year of acquisition. The excess of Companys share in equity and
reserves of the subsidiary company over the cost of acquisition is
treated as Capital Reserve.
- The share of Minority Interest in the net profit of subsidiaries /
partnership firms for the year is identified and adjusted against the
income of the group to arrive at the net income attributable to the
Company.
- The share of Minority Interest in the net assets of subsidiaries /
partnership firms is identified and presented in the consolidated
financial statements separate from liabilities and the equity of the
Company.
- The consolidated financial statements are prepared using uniform
accounting policies for like transactions and other events in similar
circumstances and are presented in the same manner as the Companys
separate financial statements.
b) Investments other than in subsidiaries and associates have been
accounted as per Accounting Standard 13 on Accounting for Investments.
d) During the year, the Company has increased its stake in Edelcap
Securities and Transaction Services Private Limited (Formerly Tiffin
Investments Private Limited) from 49% to 100% on 12 December 2006
through Crossborder Investments Private Limited, a 100% subsidiary of
the Company.
1.1 Principles of consolidation (Continued)
e) During the financial year 2005-06, the Company has diluted its
interest in Edelweiss Insurance Brokers Limited, a subsidiary company,
from 99.95% to 79.96% on 24 October 2005 and from 79.96% to 71.91% on
31 March 2006. In the absence of separate financial statements drawn on
the said dates of dilution, it is assumed that the profits of the
subsidiary has arisen evenly through out the year for arriving at the
share of profit of the minority interest in the consolidated financial
statements.
f) EC Global Limited, a subsidiary company of Crossborder Investments
Private Limited, was incorporated on 29 December 2004. The first
financial statements drawn by the subsidiary covering the period 29,
December 2004 to 31 March 2006 has been considered for the purpose of
consolidation for the previous year. The subsidiary had no commercial
operations during the period 29 December 2004 to 31 March 2006 and as
such had no impact on the previous years consolidated financial
statements.
1.2 Basis of preparation of financial statements
The accompanying financial statements are prepared under the historical
cost convention, on the accrual basis of accounting and comply with the
accounting standards issued by the Institute of Chartered Accountants
of India (to the extent applicable) and in accordance with the
generally accepted accounting principles and the provisions of the
Companies Act, 1956 as adopted consistently by the Company. The
financial statements are presented in Indian rupees in millions.
1.3 Use of estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, revenues and expenses and disclosure of contingent
assets and liabilities. The estimates and assumptions used in the
accompanying financial statements are based upon managements
evaluation of the relevant facts and circumstances as of the date of
the financial statements. Actual results may differ from the estimates
and assumptions used in preparing the accompanying financial
statements. Any differences of actual to such estimates are
prospectively made in current or future periods.
1.4 Revenue recognition
- Advisory and transactional services fee income is accounted for, on
an accrual basis in accordance with the terms & contracts entered into
between the Company and the counterparty.
- Brokerage income is recognised on trade date basis and is inclusive
of service tax.
- Profit / (loss) on Error trades are included in "Income from
Arbitrage and Trading in Securities and Derivatives" and "Income from
Arbitrage and Trading in Commodity Derivatives" under the respective
heads.
- Brokerage and Commission income earned from Insurance companies is
recognised on accrual basis exclusive of service tax.
- Portfolio management fees are accounted on accrual basis as follows:
a. In case of percentage based fees, as a percentage of the unaudited
Net Asset Value at the end of each financial quarter, on a quarterly
basis.
b. In case of return based fee, as a percentage of the annual profit,
on an annual basis.
- Interest income is recognised on accrual basis.
- Dividend income is recognised when the right to receive payment is
established.
- Revenue from fund management services is recognised in accordance
with the terms and conditions of the investment management agreement
between the Company and the Fund. The amount recognised as revenue is
exclusive of service tax.
- In respect of other heads of income, income from depository
operations etc., the Company follows the practice of accruing income on
a prudent basis.
- Revenue from rendering of trustee services is recognised in
accordance with the terms and conditions of the Compensation Agreement
between the Company and the Fund. The amount recognised as revenue is
exclusive of service tax.
1.5 Equity index / stock - futures
a) "Initial Margin", representing initial margin paid, and "Margin
Deposits", representing additional margin over and above initial
margin, for entering into contracts for Equity index / stock futures,
which are released on final settlement/ squaring-up of underlying
contracts, are disclosed as under Loans and Advances.
b) Equity index / stock futures are marked-to-market on a daily basis.
Debit or credit balance disclosed under Loans and Advances or Current
Liabilities, respectively, in the "Mark-to-Market Margin - Equity Index
/ Stock Futures Account", represents the net amount paid or received on
the basis of movement in the prices of Index / Stock Futures till the
balance sheet date.
c) As on the balance sheet date, profit / loss on open positions in
index / stock futures are accounted for as follows:
- Credit balance in the "Mark-to-Market Margin - Equity Index / Stock
Futures Account", being anticipated profit, is ignored and no credit
for the same is taken in the profit and loss account.
- Debit balance in the "Mark-to-Market Margin - Equity Index / Stock
Futures Account", being anticipated loss is adjusted in the profit and
loss account.
d) On final settlement or squaring-up of contracts for equity index /
stock futures, the profit or loss is calculated as the difference
between settlement / squaring-up price and contract price. Accordingly,
debit or credit balance pertaining to the settled / squared-up contract
in "Mark-to-Market Margin - Equity Index / Stock Futures Account" is
recognised in the profit and loss account. When more than one contract
in respect of the relevant series of equity index futures contract to
which the squared-up contract pertains is outstanding at the time of
the squaring-up of the contract, the contract price of the contract so
squared-up is determined using weighted average method for calculating
profit / loss on squaring-up.
1.6 Equity index / stock - options
a) "Equity Index / Stock Options Margin Account", representing initial
margin paid, and "Margin Deposit", representing additional margin paid
over and above initial margin, for entering into contracts for equity
index / stock options, which are released on final settlement /
squaring-up of underlying contracts, are disclosed under Loans and
Advances.
b) "Equity Index / Stock Option Premium Account" represents premium
paid or received for buying or selling the options, respectively.
c) As at the balance sheet date, in the case of long positions,
provision is made for the amount by which the premium paid for those
options exceeds the premium prevailing on the balance sheet date, and
in the case of short positions, for the amount by which premium
prevailing on the balance sheet date exceeds the premium received for
those options, and reflected in "Provision for Loss on Equity Index /
Stock Option Account".
d) When the option contracts are squared-up before expiry of the
options, the premium prevailing on that date is recognised in profit
and loss account. If more than one option contract in respect of the
same index / stock with the same strike price and expiry date to which
the squared-up contract pertains is outstanding at the time of
squaring-up of the contract weighted average method is followed for
determining profit or loss. On expiry of the contracts and on
exercising the options, the difference between final settlement price
and the strike price is transferred to the profit and loss account. In
both the above cases premium paid or received for buying or selling the
option, as the case may be, is recognised in the profit and loss
account for all squared-up / settled contracts.
1.7 Commodities stock - futures
a) "Initial Margin", representing initial margin paid, and "Margin
Deposits", representing additional margin over and above initial
margin, for entering into contracts for commodities futures, which are
released on final settlement / squaring-up of underlying contracts, are
disclosed under Loans and Advances.
b) Commodities futures are marked-to-market on a daily basis. Debit or
credit balance disclosed under Loans and Advances or Current
Liabilities respectively, in the "Mark-to-Market Margin - Commodities
Stock Futures Account", represents the net amount paid or received on
the basis of movement in the prices of Commodities Futures till the
balance sheet date.
c) As on the balance sheet date, profit / loss on open positions in
Commodities Futures are accounted for as follows:
- Credit balance in the "Mark-to-Market Margin - Commodities Stock
Futures Account", being anticipated profit, is ignored and no credit
for the same is taken in the profit and loss account.
- Debit balance in the "Mark-to-Market Margin - Commodities Stock
Futures Account", being anticipated loss, is adjusted in the profit and
loss account.
1.7 Commodities stock - futures (Continued)
d) On final settlement or squaring-up of contracts for Commodities
Futures, the profit or loss is calculated as the difference between
settlement / squaring-up price and contract price. Accordingly, debit
or credit balance pertaining to the settled / squared-up contract in
"Mark-to-Market Margin - Commodities Stock Futures Account" is
recognised in the profit and loss account. When more than one contract
in respect of the relevant series of commodities futures contract to
which the squared-up contract pertains is outstanding at the time of
the squaring-up of the contract, the contract price of the contract so
squared-up is determined using weighted average method for calculating
profit / loss on squaring-up.
1.8 Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. The cost
of fixed assets comprises of purchase price and any attributable cost
of bringing the asset to its working condition for its intended use.
The Company provides pro-rata depreciation from the month in which
asset is acquired / put to use. In respect of assets sold, pro-rata
depreciation is provided upto the month in which the asset is sold.
1.9 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit which the asset belongs to, is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the profit and loss account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
1.10 Stock-in-trade
a) The securities acquired with the intention of short-term holding and
trading positions are considered as stock-in- trade and disclosed as
current assets.
b) The securities and commodities held as stock-in-trade under current
assets are valued at lower of average cost and market value. In case of
units of Mutual Funds, Net Asset Value is considered as market value.
1.11 Investments
Investments are classified into long term investments and current
investments. Investments which are intended to be held for one year or
more are classified as long term investments and investments which are
intended to be held for less than one year are classified as current
investments.
Long term investments are accounted at cost and any decline in the
carrying value other than temporary in nature is provided for. Current
investments are valued at cost or market / fair value, whichever is
lower. In case of investments in units of a Mutual Fund, the Net Asset
Value of units is considered as the market / fair value, whichever is
lower.
1.12 Foreign currency transactions
Foreign currency transactions are recorded at the rates of exchange
prevailing on the date of the transaction. Exchange differences, if any
arising out of transactions settled during the year are recognised in
the profit and loss account.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rate on
that date. The exchange differences, if any, are recognised in the
profit and loss account and related assets and liabilities are
accordingly restated in the balance sheet except those related to
acquisition of fixed assets which are adjusted in the carrying amount
of the related fixed assets.
1.13 Retirement benefits
Contribution payable to the recognised provident fund, which is a
defined contribution scheme, are charged to the profit and loss account
in the period in which they occur.
Gratuity which is a defined benefit is accrued based on the actuarial
valuation as at the balance sheet date carried out by an independent
actuary.
Unused leave of staff lapses at year end and accordingly is not
encashable.
1.14 Debenture redemption reserve
In terms of Section 117C of the Companies Act, 1956, amounts equivalent
to the principal value of the debentures is transferred to Debenture
Redemption Reserve proportionately over the term of the debentures.
1.15 Taxation
Income-tax expense comprises of current tax (i.e. amount of tax for the
period determined in accordance with the Income- Tax law), deferred tax
charge or credit (reflecting the tax effect of timing differences
between accounting income and taxable income for the period) and fringe
benefit tax.
Deferred taxation
The deferred tax charge or credit and the corresponding deferred tax
liabilities and assets are recognized using the tax rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the asset can be realised in future; however,
where there is unabsorbed depreciation or carried forward loss under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of the assets. Deferred tax assets are
reviewed as at each balance sheet date and written down or written-up
to reflect the amount that is reasonable / virtually certain (as the
case may be) to be realised.
Fringe benefit tax
Provision for Fringe benefit tax (FBT) is made on the basis of
applicable FBT on the taxable value of chargeable expenditure of the
Company as prescribed under the Income Tax Act, 1961.
Securities transaction tax
Securities transaction tax (STT) to the extent allowable u/s 88E of the
Income Tax Act,1961 has been included in provision for Income Tax.
1.16 Preliminary expenses
Preliminary expenses are charged to the profit and loss account in the
year in which they are incurred.
1.17 Operating leases
Lease rentals in respect of operating lease are charged to the profit
and loss account as per the terms of the lease arrangement on a
straight line basis.
1.18 Earnings per share
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders by weighted average number of
equity shares outstanding during the reporting year.
Number of equity shares used in computing diluted earnings per share
comprises of the weighted average number of shares considered for
deriving basic earnings per share and also weighted average number of
equity shares which would have been issued on the conversion of all
dilutive potential shares. In computing diluted earnings per share only
potential equity shares that are dilutive are included.
1.19 Employee Stock Option Plans
Pursuant to the Guidance Note issued by the Institute of Chartered
Accountants of India on Accounting for Employee Share-based Payments,
the independent valuer computes the fair value of its shares using the
earnings capitalization method considering weighted average adjusted
profit after tax for last 3 years of all the subsidiary companies.
Accordingly the difference, if any between the fair value and the issue
price is charged to the profit and loss account as the compensation
cost on account of Employee Stock Option Plan over the period of grant
and vesting date.
1.20 Provisions and contingencies
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that the
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an economic benefit will arise, the asset and
related income are recognised in the period in which the change occurs.
1.21 Reserve Bank of India Prudential Norms
Crossborder Investments Private Limited and ECL Finance Limited, the
subsidiaries of the Company follow the guidelines issued by the Reserve
Bank of India, in respect of income recognition, provisioning for
non-performing assets and valuation of investments.
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