Accounting Policies of GRUH Finance Ltd. Company

Mar 31, 2019

1. SIGNIFICANT ACCOUNTING POLICIES

1.1 Basis of Preparation and Presentation

The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period as explained in the accounting policies below, the relevant provisions of the Companies Act, 2013 (the Act) (to the extent notified) and the guidelines issued by the National Housing Bank (NHB) to the extent applicable. The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter. The financial statements are presented in Indian Rupees (Rs.) which is the functional and the presentation currency and all values are rounded to the nearest crore, except when otherwise indicated.

Effective April 1, 2018, the Company has adopted all the Ind AS and the adoption was carried out in accordance with Ind AS 101, Firsttime Adoption of Indian Accounting Standards, with April 1, 2017 as the transition date. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP.

Accounting policies have been consistently applied except where a newly-issued Ind AS is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the Company.

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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share based payment transactions that are within the scope of Ind AS 102, leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value value in use in Ind AS 36.

Fair value measurements under Ind AS are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows :

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at measurement date

- Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the valuation of assets or liabilities

1.2 Use of Estimates and Judgments

The preparation of the financial statements in conformity with Ind AS requires the Management to make estimates, judgments and assumptions. Estimates and underlying assumptions are reviewed at each balance sheet date. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected. The application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in the financial statements have been disclosed in Note 2.1. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.

1.3 Presentation of Financial Statements

The Balance Sheet and the Statement of Profit and Loss are prepared on accrual basis and presented in the format prescribed in the Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as per the requirements of Ind AS 7 “Statement of Cash Flows”.

Amounts in the financial statements are presented in Indian Rupees in crore rounded off to two decimal places as permitted by Schedule III to the Act. Per share data are presented in Indian Rupee to two decimal places.

1.4 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured and there exists reasonable certainty of its recovery.

1.4.1 Interest and Dividend Income

Interest income on financial instruments at amortised cost is recognised on a time proportion basis taking into account the amount outstanding and the effective interest rate (EIR) applicable. Repayments of loans are by way of Equated Monthly Instalments (EMIs) comprising principal and interest. Interest on loans is computed either on annual rest, monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month. Interest on financial instruments measured as at fair value is included within the fair value movement during the period.

The EIR is the rate that exactly discounts estimated future cash flows of the financial instrument through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial instrument. The future cash flows are estimated taking into account all the contractual terms of the instrument.

The calculation of the EIR includes all fees paid or received between parties to the contract that are incremental and directly attributable to the specific lending arrangement, transaction costs, and all other premiums or discounts. For financial assets at Fair Value through Profit or Loss (FVTPL), transaction costs are recognised in profit or loss at initial recognition.

The interest income is calculated by applying the EIR to the gross carrying amount of non-credit impaired financial assets (i.e. at the amortised cost of the financial asset before adjusting for any expected credit loss allowance). For credit-impaired financial assets the interest income is calculated by applying the EIR to the amortised cost of the credit-impaired financial assets [i.e. the gross carrying amount less the allowance for expected credit losses (ECLs)].

Dividend income is recognised when the Company’s right to receive dividend is established by the reporting date.

1.4.2 Fees Income

Fees income include fees other than those that are an integral part of EIR.

1.4.3 Other operational revenue

Other operational revenue represents income earned from the activities incidental to the business and is recognised when the right to receive the income is established as per the terms of the contract.

1.4.4 Exceptional items

An item of income or expense which its size, type or incidence requires disclosure in order to improve an understanding of the performance of the Company is treated as an exceptional item and the same is disclosed in the notes to accounts.

1.5 Property, Plant and Equipment (PPE)

Land and buildings held for use are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses.

PPE is recognised when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. PPE is stated at original cost less accumulated depreciation and cumulative impairment, if any, Cost includes professional fees related to the acquisition of PPE.

For transition to Ind AS, the Company has elected to adopt as deemed cost, the carrying value of PPE measured as per IGAAP less accumulated depreciation and cumulative impairment on the transition date of April 1, 2017.

PPE not ready for the intended uses on the date of the Balance Sheet are disclosed as “capital work-in-progress”.

Depreciation is recognised using straight line method so as to write off the cost of the assets (other than freehold land) less their residual values over their useful lives specified in Schedule II to the Act, or in case of assets where the useful life was determined by technical evaluation, over the useful life so determined. Depreciation method is reviewed at each financial year end to reflect expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful life and residual values are also reviewed at each financial year end with the effect of any change in the estimates of useful life/residual value is accounted on prospective basis.

Where cost of a part of the asset (“asset component”) is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part is determined separately and such asset component is depreciated over its separate useful life.

Depreciation for additions to/deductions from, owned assets is calculated pro rata to the period of use. Depreciation charge for impaired assets is adjusted in future periods in such a manner that the revised carrying amount of the asset is allocated over its remaining useful life.

Freehold land is not depreciated. The useful life of the property, plant and equipment held by the Company is as follows :

* For the above class of assets, based on internal assessment, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. 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.

1.6 Intangible Assets

Intangible assets comprising application software are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. Intangible assets are stated at original cost less accumulated amortisation and cumulative impairment. Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalised as a part of the cost of the intangible assets.

Intangible assets not ready for the intended use on the date of Balance Sheet are disclosed as “Intangible assets under development”.

Intangible assets are amortised on straight line basis over the estimated useful life of 4 years. The method of amortisation and useful life are reviewed at the end of each accounting year with the effect of any changes in the estimate being accounted for on a prospective basis.

Amortisation on impaired assets is provided by adjusting the amortisation charge in the remaining periods so as to allocate the asset’s revised carrying amount over its remaining useful life.

An intangible asset is derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

1.7 Impairment of Assets

As at the end of each accounting year, the Company reviews the carrying amounts of its PPE, and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the PPE, and intangible assets are tested for impairment so as to determine the impairment loss, if any.

Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If recoverable amount of an asset is estimated to be less than its carrying amount, such deficit is recognised immediately in the Statement of Profit and Loss as impairment loss and the carrying amount of the asset is reduced to its recoverable amount.

When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss is recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Profit and Loss.

1.8 Employee Benefits

1.8.1 Share-based payment arrangements

The stock options granted to employees pursuant to the Company’s Stock Options Schemes, are measured at the fair value of the options at the grant date. The fair value of the options is treated as discount and accounted as employee compensation cost over the vesting period on a straight line basis. The amount recognised as expense in each year is arrived at based on the number of grants expected to vest. If a grant lapses after the vesting period, the cumulative discount recognised as expense in respect of such grant is transferred to the general reserve within other equity.

1.8.2 Defined Contribution Plans

1.8.2.1 Superannuation Fund

Company’s superannuation fund is administered through a trust which is recognised by the Income Tax Authorities and the contribution thereto is charged as an expense based on the amount of contribution required to be made.

1.8.3 Defined Benefit Plans

1.8.3.1 Provident Fundand State Pension Scheme

All employees of the Company are entitled to receive benefits under the Provident Fund. The Company makes a contribution to provident fund and the schemes thereunder, as recognised by the Income-tax authorities and administered by various trustees. The contributions are recognised as an expense in the year in which they are incurred. The Rules of the Company’s Provident Fund administered by a Trust require that if the Board of Trustees is unable to pay interest at the rate declared for Employees’ Provident Fund by the Government under para 60 of the Employees’ Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. The guidance on implementing Ind AS-19, Employee Benefits issued by the ICAI, states that benefits involving employer established provident funds, which require interest shortfalls to be provided, are to be considered as defined benefit plans.

Company’s Contribution to State Plans namely Employee’s Pension Scheme is charged as an expense based on the amount of contribution required to be made.

1.8.3.2 Gratuity Benefits

For defined benefit plans in the form of gratuity fund and post retirement pension scheme for employees, the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the schemes.

1.8.3.3 Short-Term Employee Benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.

1.8.3.4 Long-Term Employee Benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability at the present value of the defined benefit obligation as at the balance sheet date, based on actuarial valuation.

1.9 Leases

The determination of whether an agreement is, or contains, a lease is based on the substance of the agreement at the date of inception.

1.9.1 Operating Leases

Lease rentals on assets under operating lease are charged to the Statement of Profit and Loss on a straight line basis over the term of the relevant lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost increases.

1.10 Financial Instruments

1.10.1 Financial instruments - initial recognition

1.10.1.1 Date of recognition

Financial assets and liabilities, with the exception of loans, debt securities, deposits and 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. Loans are recognised when disbursed to the customers. The Company recognises debt securities, deposits and borrowings when funds reach the Company.

1.10.1.2 Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their contractual terms and the business model for managing the instruments, except in the case of financial assets and financial liabilities recorded at FVTPL, transaction costs are added to, or subtracted from, this amount. Trade receivables are measured at the transaction price. When the fair value of financial instruments at initial recognition differs from the transaction price, the Company accounts for the Day 1 profit or loss, as described below.

1.10.1.3 Day 1 Profit or Loss

When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation technique using only inputs observable in market transactions, the Company recognises the difference between the transaction price and fair value in net gain on fair value changes. In those cases where fair value is based on models for which some of the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only recognised in profit or loss when the inputs become observable, or when the instrument is derecognised.

1.10.2 Measurement categories of Financial Assets and Liabilities

The Company classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual terms, measured at either :

- Amortised cost

- FVOCI (Fair Value Through Other Comprehensive Income),

- FVTPL (Fair Value Through Profit & Loss Account)

The Company classifies and measures Mutual Fund Investments at FVTPL. The Company may designate financial instruments at FVTPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies.

Financial liabilities, other than loan commitments are measured at FVTPL when the fair value designation is applied.

1.10.3 Financial Assets and Liabilities

Financial assets and financial liabilities are recognised in the Company’s balance sheet when the Company becomes a party to the contractual provisions of the instrument.

Recognised financial assets and financial liabilities are initially measured at fair value. Transaction costs and revenues that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs and revenues directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.

If the transaction price differs from fair value at initial recognition, the Company will account for such difference as follows :

- if fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that uses only data from observable markets, then the difference is recognised in profit or loss on initial recognition (i.e. day 1 profit or loss);

- In all other cases, the fair value will be adjusted to bring it in line with the transaction price (i.e. day 1 profit or loss will be deferred by including it in the initial carrying amount of the asset or liability).

After initial recognition, the deferred gain or loss will be released to profit or loss on a rational basis, only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.

1.10.3.1 Financial Assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at FVTPL. Transaction costs directly attributable to the acquisition of financial assets classified as at FVTPL are recognised immediately in profit or loss.

All recognised financial assets that are within the scope of Ind AS 109 are required to be subsequently measured at amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

Specifically :

- debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI), are subsequently measured at amortised cost;

- All other debt instruments (e.g. debt instruments managed on a fair value basis, or held for sale) and equity investments are subsequently measured at FVTPL.

However, the Company may make the following irrevocable election / designation at initial recognition of a financial asset on an asset-by-asset basis :

- The Company may irrevocably designate a debt instrument that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch (referred to as the fair value option).

1.103.1.1 Debt instruments at amortised cost or at FVTOCI

The Company assesses the classification and measurement of a financial asset based on the contractual cash flow characteristics of the asset and the Company’s business model for managing the asset.

For an asset to be classified and measured at amortised cost or at FVTOCI, its contractual terms should give rise to cash flows that are meeting SPPI test.

For the purpose of SPPI test, principal is the fair value of the financial asset at initial recognition. That principal amount may change over the life of the financial asset (e.g. if there are repayments of principal). Interest consists of consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The SPPI assessment is made in the currency in which the financial asset is denominated.

Contractual cash flows that are SPPI are consistent with a basic lending arrangement. Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to contractual cash flows that are SPPI. An originated or an acquired financial asset can be a basic lending arrangement irrespective of whether it is a loan in its legal form.

1.10 3.1 2 Business Model Test for Financial Assets

An assessment of business models for managing financial assets is fundamental to the classification of a financial asset. The Company determines the business models at a level that reflects how financial assets are managed together to achieve a particular business objective. The Company’s business model does not depend on management’s intentions for an individual instrument, therefore the business model assessment is performed at a higher level of aggregation rather than on an instrument-by-instrument basis.

The Company has more than one business model for managing its financial instruments which reflect how the Company manages its financial assets in order to generate cash flows. The Company’s business models determine whether cash flows will result from collecting contractual cash flows, selling financial assets or both.

The Company considers all relevant information available when making the business model assessment. However this assessment is not performed on the basis of scenarios that the Company does not reasonably expect to occur, such as so-called ‘worst case’ or ‘stress case’ scenarios. The Company takes into account all relevant evidence available such as :

- how the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity’s key management personnel;

- the risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way in which those risks are managed; and

- How employees of the business are compensated (e.g. whether the compensation is based on the fair value of mutual funds of the assets managed or on the contractual cash flows collected of loans).

At initial recognition of a financial asset, the Company determines whether newly recognised financial assets are part of an existing business model or whether they reflect the commencement of a new business model. The Company reassesses its business models each reporting period to determine whether the business models have changed since the preceding period. For the current and prior reporting period the Company has not identified a change in its business models.

When a debt instrument measured at FVTOCI is derecognised, the cumulative gain/loss previously recognised in OCI is reclassified from equity to profit or loss.

Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to impairment.

1.103.13 Financial assets at FVTPL

Financial assets at FVTPL are :

- assets with contractual cash flows that are not SPPI; or/and

- assets that are held in a business model other than held to collect contractual cash flows or held to collect and sell; or

- Assets designated at FVTPL using the fair value option.

These assets are measured at fair value, with any gains/losses arising on remeasurement recognised in profit or loss.

1.103.1.4 Reclassifications

If the business model under which the Company holds financial assets changes, the financial assets affected are reclassified. The classification and measurement requirements related to the new category apply prospectively from the first day of the first reporting period following the change in business model that result in reclassifying the Company’s financial assets. During the current financial year and previous accounting period there was no change in the business model under which the Company holds financial assets and therefore no reclassifications were made. Changes in contractual cash flows are considered under the accounting policy on Modification and derecognition of financial assets described below.

1.103.1 5 Impairment

The Company recognises loss allowances for ECLs on the following financial instruments that are not measured at FVTPL :

- loans and advances to customers;

- debt investment securities;

- Loan commitments issue; and

ECLs are required to be measured through a loss allowance at an amount equal to :

- 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within 12 months after the reporting date, (referred to as Stage 1); or

- Full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to the 12-month ECL.

ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as the present value of the difference between the cash flows due to the Company under the contract and the cash flows that the Company expects to receive arising from the weighting of multiple future economic scenarios, discounted at the asset’s EIR.

- for undrawn loan commitments, the ECL is the difference between the present value of the difference between the contractual cash flows that are due to the Company if the holder of the commitment draws down the loan and the cash flows that the Company expects to receive if the loan is drawn down;

The Company measures ECL on an individual basis, or on a collective basis for portfolios of loans that share similar economic risk characteristics. The measurement of the loss allowance is based on the present value of the asset’s expected cash flows using the asset’s original EIR, regardless of whether it is measured on an individual basis or a collective basis.

1.103.15.1 Credit-impaired financial assets

A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Credit-impaired financial assets are referred to as Stage 3 assets. Evidence of credit-impairment includes observable data about the following events :

- significant financial difficulty of the borrower or issuer;

- a breach of contract such as a default or past due event;

- the lender of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

- the disappearance of an active market for a security because of financial difficulties; or

- The purchase of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets to become credit-impaired. The Company assesses whether debt instruments that are financial assets measured at amortised cost or FVTOCI are credit-impaired at each reporting date. To assess if sovereign debt instruments are credit impaired, the Company considers factors such as bond yields, credit ratings and the ability of the borrower to raise funding.

A loan is considered credit-impaired when a concession is granted to the borrower due to a deterioration in the borrower’s financial condition, unless there is evidence that as a result of granting the concession the risk of not receiving the contractual cash flows has reduced significantly and there are no other indicators of impairment. For financial assets where concessions are contemplated but not granted the asset is deemed credit impaired when there is observable evidence of credit-impairment including meeting the definition of default. The definition of default (see below) includes unlikeliness to pay indicators and a back-stop if amounts are overdue for 90 days or more.

1.103.1.6 Definition of default

Critical to the determination of ECL is the definition of default. The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the measurement of ECLs and the identification of a significant increase in credit risk.

The Company considers the following as constituting an event of default :

- the borrower is past due more than 30 days on any material credit obligation to the Company, in case of retail loans which are EMI-based; or

- the borrower is past the due date on any material credit obligation to the Company, in case of other loans i.e. loan to the party other than individual (developer loans/others); or

- The borrower is unlikely to pay its credit obligations to the Company in full.

The definition of default is appropriately tailored to reflect different characteristics of different types of assets.

When assessing if the borrower is unlikely to pay its credit obligation, the Company takes into account both qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example in other loans a qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis. The Company uses a variety of sources of information to assess default which are either developed internally or obtained from external sources.

1.103.1.7 Significant increase in credit risk

The Company monitors all financial assets, issued loan commitments that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Company will measure the loss allowance based on lifetime rather than 12-month ECL. The Company’s accounting policy is not to use the practical expedient that financial assets with ‘low’ credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Company monitors all financial assets, issued loan commitments that are subject to impairment for significant increase in credit risk.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Company compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Company’s historical experience and expert credit assessment including forward-looking information.

Multiple economic scenarios form the basis of determining the probability of default (PD) at initial recognition and at subsequent reporting dates. Different economic scenarios will lead to a different probability of default. It is the weighting of these different scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit risk has significantly increased.

For other loans, forward-looking information includes the future prospects of the industries in which the Company’s counterparties operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar organisations, as well as consideration of various internal and external sources of actual and forecast economic information. For retail lending forward looking information includes the same economic forecasts as other loans with additional forecasts of local economic indicators, particularly for regions with a concentration to certain industries, as well as internally generated information of customer payment behaviour. The Company allocates its counterparties to a relevant internal credit risk grade depending on their credit quality. The quantitative information is a primary indicator of significant increase in credit risk and is based on the change in lifetime PD by comparing :

- the remaining lifetime PD at the reporting date;

- the remaining lifetime PD for this point in time that was estimated based on facts and circumstances at the time of initial recognition of the exposure.

The PDs used are forward looking and the Company uses the same methodologies and data used to measure the loss allowance for ECL.

The qualitative factors that indicate significant increase in credit risk are reflected in PD models on a timely basis. However the Company still considers separately some qualitative factors to assess if credit risk has increased significantly. For other loans there is particular focus on assets that are included on a ‘watch list’ given an exposure is on a watch list once there is a concern that the creditworthiness of the specific counterparty has deteriorated. For retail lending the Company considers the expectation of forbearance and payment holidays, credit scores and events such as unemployment, bankruptcy, divorce or death.

Given that a significant increase in credit risk since initial recognition is a relative measure, a given change, in absolute terms, in the PD will be more significant for a financial instrument with a lower initial PD than compared to a financial instrument with a higher PD.

As a back-stop when an asset becomes 30 days past due, the Company considers that a significant increase in credit risk has occurred and the asset is in stage 2 of the impairment model, i.e. the loss allowance is measured as the lifetime ECL.

1.10 3.1 8 Modification and de-recognition of financial assets

A modification of a financial asset occurs when the contractual terms governing the cash flows of a financial asset are renegotiated or otherwise modified between initial recognition and maturity of the financial asset. A modification affects the amount and/or ti ming of the contractual cash flows either immediately or at a future date. In addition, the introduction or adjustment of existing covenants of an existing loan would constitute a modification even if these new or adjusted covenants do not yet affect the cash flows immediately but may affect the cash flows depending on whether the covenant is or is not met (e.g. a change to the increase in the interest rate that arises when covenants are breached).

The Company renegotiates loans to customers in financial difficulty to maximise collection and minimise the risk of default. Loan forbearance is granted in cases where although the borrower made all reasonable efforts to pay under the original contractual terms, there is a high risk of default or default has already happened and the borrower is expected to be able to meet the revised terms. The revised terms in most of the cases include an extension of the maturity of the loan, changes to the timing of the cash flows of the loan (principal and interest repayment), reduction in the amount of cash flows due (principal and interest forgiveness) and amendments to covenants.

When a financial asset is modified the Company assesses whether this modification results in de-recognition. In accordance with the Company’s policy a modification results in de-recognition when it gives rise to substantially different terms. To determine if the modified terms are substantially different from the original contractual terms the Company considers the following :

Qualitative factors, such as contractual cash flows after modification are no longer SPPI, change in currency or change of counterparty, the extent of change in interest rates, maturity, covenants. If these do not clearly indicate a substantial modification, then;

A quantitative assessment is performed to compare the present value of the remaining contractual cash flows under the original terms with the contractual cash flows under the revised terms, both amounts discounted at the original EIR. If the difference in present value is greater than an acceptable %, the Company deems the arrangement is substantially different leading to de-recognition.

In the case where the financial asset is derecognised the loss allowances for ECL is remeasured at the date of de-recognition to determine the net carrying amount of the asset at that date. The difference between this revised carrying amount and the fair value of the new financial asset with the new terms will lead to a gain or loss on de recognition. The new financial asset will have a loss allowance measured based on 12-month ECL except in the rare occasions where the new loan is considered to be originated-credit impaired. This applies only in the case where the fair value of the new loan is recognised at a significant discount to its revised par amount because there remains a high risk of default which has not been reduced by the modification. The Company monitors credit risk of modified financial assets by evaluating qualitative and quantitative information, such as if the borrower is in past due status under the new terms.

When the contractual terms of a financial asset are modified and the modification does not result in de-recognition, the Company determines if the financial asset’s credit risk has increased significantly since initial recognition by comparing :

- the remaining lifetime PD estimated based on data at initial recognition and the original contractual terms;

- The remaining lifetime PD at the reporting date based on the modified terms.

For financial assets modified, where modification did not result in de-recognition, the estimate of PD reflects the Company’s ability to collect the modified cash flows taking into account the Company’s previous experience of similar forbearance action, as well as various behavioural indicators, including the borrower’s payment performance against the modified contractual terms. If the credit risk remains significantly higher than what was expected at initial recognition the loss allowance will continue to be measured at an amount equal to lifetime ECL. The loss allowance on forborne loans will generally only be measured based on 12-month ECL when there is evidence of the borrower’s improved repayment behaviour following modification leading to a reversal of the previous significant increase in credit risk.

Where a modification does not lead to de-recognition the Company calculates the modification gain/loss comparing the gross carrying amount before and after the modification (excluding the ECL allowance). Then the Company measures ECL for the modified asset, where the expected cash flows arising from the modified financial asset are included in calculating the expected cash shortfalls from the original asset.

The Company derecognises a financial asset only when the contractual rights to the asset’s cash flows expire (including expiry arising from a modification with substantially different terms), or when the financial asset and substantially all the risks and rewards of ownership of the asset are transferred to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain/loss that had been recognised in OCI and accumulated in equity is recognised in profit or loss.

On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain/loss allocated to it that had been recognised in OCI is recognised in profit or loss. A cumulative gain/loss that had been recognised in OCI is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

1.103.1.9 Write-off

Loans and debt securities are written off when the Company has no reasonable expectations of recovering the financial asset (either in its entirety or a portion of it). This is the case when the Company determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. A write-off constitutes a de-recognition event. The Company may apply enforcement activities to financial assets written off. Recoveries resulting from the Company’s enforcement activities will result in impairment gains.

Presentation of allowance for ECL in the statement of financial position

Loss allowances for ECL are presented in the statement of financial position as follows :

- for financial assets measured at amortised cost : as a deduction from the gross carrying amount of the assets;

- for loan commitments as a provision;

Where a financial instrument includes both a drawn and an undrawn component, and the Company cannot identify the ECL on the loan commitment component separately from those on the drawn component : the Company presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision.

1.10.4 Financial Liabilities and Equity

Debt and equity instruments that are issued are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Company or a contract that will or may be settled in the Company’s own equity instruments and is a non-derivative contract for which the Company is or may be obliged to deliver a variable number of its own equity instruments, or a derivative contract over own equity that will or may be settled other than by the exchange of a fixed amount of cash (or another financial asset) for a fixed number of the Company’s own equity instruments.

1.10.4.1 Equity Instruments

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 are recognised at the proceeds received, net of direct issue costs.

When there is a repurchase of the Company’s own equity instruments, it is recognised and deducted directly from equity. No gain/loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

1.10.4.2 Transfer and servicing of assets

When the Company transfers loans through securitisation and direct assignment transactions, the transferred loans are de-recognised and gains/losses are accounted for, only if the Company surrenders the risks and rewards specified in the underlying securitised loan contract. In accordance with the Ind AS 109, on de-recognition of a financial asset under securitisation transactions, the difference between the carrying amount and the consideration received shall be recognised in the Statement of profit and loss.

1.10.4.3 Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘at amortised cost.

1.10.4.3.1 De-recognition of financial liabilities

The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

1.11 Cash and cash equivalents

Cash comprises of cash on hand and demand deposits with banks. Cash equivalents are short-term deposits with banks (with an original maturity of three months or less from the date of placement) and cheques on hand. Short term and liquid investments being subject to more than insignificant risk of change in value, are not included as part of cash and cash equivalents.

1.12 Securities Premium Account

The issue expenses of securities which qualify as equity instruments are written off against securities premium account.

Equity-settled share-based payments to employees are measured by reference to the fair value of the options at the grant date using Black Scholes Model.

The fair value determined at the grant date of the equity-settled share-based payments, is charged to Profit and Loss on the straight-line basis over the vesting period of the option, based on the Company’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. The employee stock option outstanding account is shown net of unamortised deferred employee compensation expenses.

1.13 Borrowing Costs

Borrowing costs include interest expense calculated using the EIR.

1.14 Segments

The Company’s main business is financing by way of loans for the purchase or construction of residential houses in India. All other activities of the Company revolve around the main business. This in the context of Ind AS 108 - “Operating Segments” specified under section 133 of the Companies Act, 2013, is considered to constitute one reportable segment.

1.15 Earnings Per Share

Basic earnings per share have been computed by dividing net income by the weighted average number of shares outstanding during the year. Diluted earnings per share has been computed using the weighted average number of shares and dilutive potential shares, except where the result would be anti-dilutive.

1.16 Taxes on Income

Income tax expense comprises current and deferred taxes. Income tax expense is recognized in the Statement of Profit and Loss except when they relate to items that are recognized outside profit or loss (whether in other comprehensive income or directly in equity), in which case tax is also recognized outside profit or loss.

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date, and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured based on the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

1.17 Goods and Services Input Tax Credit

Goods and Services tax input credit is accounted for in the books in the period in which the supply of goods or service received is accounted and when there is no uncertainty in availing/utilising the credits.

1.18 Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised only when :

(i) An entity has a present obligation (legal or constructive) as a result of a past event; and

(ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

(iii) A reliable estimate can be made of the amount of the obligation

Provision is measured using the cash flows estimated to settle the present obligation and when the effect of time value of money is material, the carrying amount of the provision is the present value of those cash flows. Reimbursement expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that the reimbursement will be received.

Where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under such contract, the present obligation under the contract is recognised and measured as a provision.

Contingent liability is disclosed by way of note in case of :

(i) A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation; and

(ii) A present obligation arising from past events, when no reliable estimate is possible.

Contingent Assets :

Contingent assets are not recognised in the financial statements.

Contingent assets are disclosed where an inflow of economic benefits is probable. Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date.

1.19 Commitments

Commitments are future liabilities for contractual expenditure, classified and disclosed as follows :

a) Estimated amount of contracts remaining to be executed on capital account and not provided for;

b) Funding related loan commitment.

1.20 Non-Current Assets held for sale

Non-current assets are classified as held for sale if their carrying amount is intended to be recovered principally through a sale (rather than through continuing use) when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and the sale is highly probable and is expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less costs to sell.

1.21 Statement of Cash Flows

Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities. Cash flow from operating activities is reported using indirect method adjusting the net profit for the effects of :

i. changes during the period in inventories and operating receivables and payables transactions of a non-cash nature;

ii. non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses, and undistributed profits of associates and joint ventures; and

iii. All other items for which the cash effects are investing or financing cash flows.

Cash and cash equivalents (including bank balances) shown in the Statement of Cash Flows exclude items which are not available for general use as on the date of Balance Sheet.

1.22 Standards issued but not effective Ind AS 116 Leases

The Company has not applied Ind AS 116 that has been issued but is effective from April 1, 2019.

(a) On 18 July 2017, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) issued an Exposure Draft (ED) of Ind AS 116 Leases. Ind AS 116 is largely converged with IFRS 16.

Ind AS 116 is expected to replace Ind AS 17 from its proposed effective date, being annual periods beginning on or after 1 April 2019.

(b) The application of Ind AS 116 is not likely to have material impact on the Company’s financial statements.

---

Mar 31, 2018

1.1 Accounting Convention

The Financial Statements of GRUH Finance Limited (GRUH) have been prepared in accordance with historical cost convention, the accounting principles generally accepted in India including the applicable Accounting Standards specified u/s 133 of the Companies Act, 2013 and relevant provisions of the Companies Act, 2013 and guidelines issued by the National Housing Bank (NHB) to the extent applicable.

Accounting policies applied have been consistent with previous year except where different treatment is required as per new pronouncements made by the regulatory authorities. The management evaluates all recently issued or revised accounting pronouncements on an ongoing basis.

The preparation of financial statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

All assets and liabilities have been classified as current or non-current as per GRUH’s operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of its activities, GRUH has determined its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

1.2 System of Accounting

GRUH adopts the accrual concept in the preparation of the accounts. The Balance Sheet and Statement of Profit and Loss of GRUH are prepared in accordance with the provisions contained in the Companies Act, 2013, read with Schedule III thereto.

1.3 Inflation

Assets and Liabilities are recorded at historical cost to GRUH. These costs are not adjusted to reflect the changing value in the purchasing power of money.

1.4 Cash and Cash Equivalent (for purposes of Cash Flow Statement)

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term deposits with banks (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

1.5 Interest on Loans

Repayments of loans are by way of Equated Monthly Instalments (EMIs) comprising principal and interest. Interest on loans is computed either on an annual rest, on a monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

Interest income accrued as earned with the passage of time. Interest on loan assets classified as “Non-Performing” is recognised only on actual receipt.

1.6 Income from Investment

Interest Income from investment is accounted on an accrual basis. The gain/loss on account of discount/premium on investments made in debentures/bonds and government securities is recognised over the life of the security on a pro-rata basis.

1.7 Borrowing and Borrowing Costs

GRUH borrows funds that carry a fixed rate or floating rate of interest. Borrowing costs include interest, amortised brokerage and incentive on deposits and other borrowing costs incurred in connection with the borrowing of funds.

1.8 Operating Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases.

Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term.

1.9 Investments

Investments are capitalised at cost inclusive of related expenses and are classified into two categories, viz. Current or Long-Term. LongTerm Investments are carried individually at cost less provision for diminution, other than temporary in the value of such investments. Current Investments are carried individually, at the lower of cost and fair value. Provision for diminution in the value of investments is made in accordance with the guidelines issued by the National Housing Bank and the Accounting Standard on ‘Accounting for Investment’ (AS 13).

1.10 Brokerage and Incentive on Deposit

Brokerage and incentive on deposits is amortised over the period of the deposit.

1.11 Properties Acquired under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Stock of acquired properties is valued at realisable value or outstanding dues, whichever is less.

1.12 Taxes on Income

The accounting treatment for the Income Tax in respect of GRUH’s income is based on the Accounting Standard on ‘Accounting for Taxes on Income’ (AS 22). The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961 (the “Income Tax Act”).

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise the assets.

Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and GRUH has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability. Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss.

1.13 Property, Plant and Equipment

Property, Plant and Equipment are carried at cost inclusive of legal and/or installation expenses.

Depreciation

Depreciation is provided on all assets on a pro-rata basis on the “Straight Line Method” over the useful lives and in the manner prescribed under schedule II to the Companies Act, 2013 except for Computers where based on a technical evaluation, useful life is estimated at four years in order to reflect the actual usage of the assets.

1.14 Intangible Assets

Intangible Assets comprising of Application Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortisation. Any expenses on such software for support and maintenance payable annually are charged to revenue.

Amortisation

Application software is amortised over a period of four years.

1.15 Impairment of Assets

GRUH assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Statement of Profit and Loss to the extent carrying amount of asset exceeds their estimated recoverable amount.

1.16 Provision for Standard Assets, Non-Performing Assets (NPAs) and Contingencies

GRUH’s policy is to carry adequate amounts towards Provision for Standard Assets, Non-Performing Assets (NPAs) and other contingencies. All loans and other credit exposures where the instalments are overdue for ninety days and more are classified as NPAs in accordance with the prudential norms prescribed by the National Housing Bank (NHB). The provisioning policy of GRUH covers the minimum provisioning required as per the NHB guidelines.

Provisions are established on a collective basis against loan assets classified as “Standard” to absorb credit losses on the aggregate exposures in each of the GRUH’s loan portfolios based on the NHB Directions. A higher non-performing asset provision may be made based upon an analysis of past performance, level of allowance already in place and Management’s judgement. This estimate includes consideration of economic and business conditions. The amount of the allowance for credit losses is the amount that is required to establish a balance in the Provision for Non-Performing Assets Account that GRUH’s management considers adequate, after consideration of the prescribed minimum requirement under the NHB Directions, to absorb credit related losses in its portfolio of loan items after individual allowances or write offs.

1.17 Employee Benefits

Employee Stock Option Scheme (‘ESOS’)

The Employee Stock Option Scheme (‘the Scheme”) provides for the grant of options to acquire equity shares of GRUH to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a specified period.

GRUH follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on the working day immediately preceding the date of grant. Compensation cost, if any, is amortised over the vesting period.

GRUH has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognised by the Income Tax Authorities. These funds are administered through trustees and GRUH’s contributions thereto are charged to revenue every year. GRUH’s Contribution to State Plans namely Employee’s Pension Scheme is charged to revenue every year.

GRUH has defined benefit plans namely leave encashment / compensated absences and gratuity for all the employees, the liability for which is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the schemes. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

1.18 Provisions, Contingent Liabilities and Assets

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding employee benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes. Contingent assets are neither recognised nor disclosed in the financial statements.

1.19 Earnings Per Share

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

1.20 Goods and Service tax / Service Tax input credit

Goods and Service tax / Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilising the credits.

1.21 Share and Debenture Issue Expenses

Expenses in connection with issue of Shares and Debentures are being adjusted against Security Premium as permitted by section 52 of the Companies Act, 2013.

---

Mar 31, 2017

1 SIGNIFICANT ACCOUNTING POLICIES

1.1 Accounting Convention

The Financial Statements have been prepared in accordance with historical cost convention, the accounting principles generally accepted in India including the applicable Accounting Standards specified u/s 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, 2013 and guidelines issued by the National Housing Bank.

The preparation of financial statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

All assets and liabilities have been classified as current or non-current as per GRUH''s operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of its activities, GRUH has determined its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

1.2 System of Accounting

GRUH adopts the accrual concept in the preparation of the accounts. The Balance Sheet and Statement of Profit and Loss of GRUH are prepared in accordance with the provisions contained in the Companies Act, 2013, read with Schedule III thereto.

1.3 Inflation

Assets and Liabilities are recorded at historical cost to GRUH. These costs are not adjusted to reflect the changing value in the purchasing power of money.

1.4 Interest on Loans

Repayments of loans are by way of Equated Monthly Installments (EMIs) comprising principal and interest. Interest on loans is computed either on an annual rest, on a monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

Interest on loan assets classified as "Non-Performing" is recognized only on actual receipt.

1.5 Income from Investment

Interest Income from investment is accounted on an accrual basis. The gain/loss on account of discount/premium on investments made in debentures/bonds and government securities is recognized over the life of the security on a pro-rata basis.

1.6 Investments

Investments are capitalized at cost inclusive of related expenses and are classified into two categories, viz. Current or Long-Term. Long-term Investments are carried individually at cost less provision for diminution, other than temporary in the value of such investments. Current Investments are carried individually, at the lower of cost and fair value. Provision for diminution in the value of investments is made in accordance with the guidelines issued by the National Housing Bank and the Accounting Standard on ''Accounting for Investment'' (AS 13).

1.7 Brokerage and Incentive on Deposit

Brokerage and incentive on deposits is amortized over the period of the deposit.

1.8 Properties Acquired under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Stock of acquired properties is valued at realizable value or outstanding dues, whichever is less.

1.9 Tax on Income

The accounting treatment for the Income Tax in respect of GRUH''s income is based on the Accounting Standard on ''Accounting for Taxes on Income'' (AS 22). The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Deferred tax is recognized for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

1.10 Property, Plant and Equipment

Property, Plant and Equipment are carried at cost inclusive of legal and/or installation expenses.

Depreciation

Depreciation is provided on all assets on a pro-rata basis on the "Straight Line Method" over the useful lives and in the manner prescribed under schedule II to the Companies Act, 2013 except for Computers where based on a technical evaluation, useful life is estimated at four years in order to reflect the actual usage of the assets.

1.11 Intangible Assets

Intangible Assets comprising of Application Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortization. Any expenses on such software for support and maintenance payable annually are charged to revenue.

Amortization

Application software is amortized over a period of four years.

1.12 Provision for Standard Assets, Non-Performing Assets (NPAs) and Contingencies

GRUH''s policy is to carry adequate amounts towards Provision for Standard Assets, Non-Performing Assets (NPAs) and other contingencies. All loans and other credit exposures where the installments are overdue for ninety days and more are classified as NPAs in accordance with the prudential norms prescribed by the National Housing Bank (NHB). The provisioning policy of GRUH covers the minimum provisioning required as per the NHB guidelines. Excess provisions over and above provisioning requirement for Standard Assets and NPAs are carried under Provision for Contingencies Account.

1.13 Employee Benefits

GRUH has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognized by the Income Tax Authorities. These funds are administered through trustees and GRUH''s contributions thereto are charged to revenue every year. GRUH''s Contribution to State Plans namely Employee''s Pension Scheme is charged to revenue every year.

GRUH has Defined Benefit Plans namely leave encashment / compensated absences and Gratuity for all the employees, the liability for which is determined on the basis of an actuarial valuation at the yearend based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognized by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in Statement of Profit and Loss as income or expense.

1.14 Contingent Liabilities

Contingent liabilities, if any, are disclosed in the notes on accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialize into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

1.15 Capital Issue Expenses

Expenses in connection with issue of Shares and Debentures are being adjusted against Security Premium as permitted by section 52 of the Companies Act, 2013.

(b) Aggregate number of shares allotted as fully paid-up by way of Bonus Shares (During 5 years immediately preceding March 31, 2017) :

During the year 2014-15, pursuant to approval of share holders at the 28th Annual General Meeting (AGM) of GRUH held on May 28, 2014, GRUH allotted 18,01,31,150 Bonus Equity Shares of Rs, 2 each as fully paid-up shares in the proportion of 1:1.

2.2 Terms/Rights attached to Equity Shares :

GRUH has one class of share referred to as equity shares having a par value of Rs, 2 each. Each shareholder is entitled to one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

2.5 Shares reserved for issue under options :

(a) During the year, GRUH has issued 8,82,744 (Previous Year 2,97,160) shares on exercise of options granted to its employees and directors under ESOS Schemes.

(c) Intrinsic Value Method has been used to account for the employee share based payment plans. The intrinsic value of each stock option granted under the ESOS - 2015 and ESOS - 2011 (Tranche I and II) plan is Rs, Nil, since the market price of the underlying share at the grant date was same as the exercise price and consequently the accounting value of the option (compensation cost) is Rs, Nil.

3.1 As per section 29C(i) of the National Housing Bank Act, 1987, GRUH is required to transfer at least 20% of its net profit every year to reserve before any dividend is declared. For this purpose any Special Reserve created by GRUH under section 36(1)(viii) of the Income Tax Act, 1961 is considered to be an eligible transfer. GRUH has transferred an amount of Rs, 84.00 crores (Previous Year Rs, 69.85 crores) to Special Reserve in terms of section 36(1)(viii) of the Income Tax Act, 1961. GRUH doesn''t anticipate any withdrawal from Special Reserve in foreseeable future.

3.2 Vide circular NHB(ND)/DRS/Policy Circular 65/2014-15 dated August 22, 2014, the National Housing Bank ("NHB") had directed Housing Finance Companies (HFCs) to provide for a deferred tax liability in respect of amount transferred to "Special Reserve" created under section 36(1)(viii) of the Income Tax Act, 1961. As per the circular, NHB has advised HFCs to create deferred tax liability in respect of accumulated balance of Special Reserve as on April 1, 2014 from the reserves over a period of 3 years starting with financial year 201415, in a phased manner in the ratio of 25:25:50. Accordingly, GRUH has created third and final phase of 50% of deferred tax liability of Rs, 39.09 crores (Rs, 39.09 crores created during earlier two years) on accumulated Special Reserve as on April 1, 2014 out of General Reserve.

Also, GRUH has charged its Statement of Profit and Loss by Rs, 29.07 crores (Previous year Rs, 24.17 crores) for the year ended March 31, 2017 with the deferred tax liability on additional amount appropriated towards Special Reserve out of profits.

3.3 The Central Government in consultation with National Advisory Committee of Accounting Standards vide notification dated March 30, 2016 and circular no. 04/2016 dated April 27, 2016 had amended Companies (Accounting Standards) Rules, 2006 (''principal rules''). According to Companies (Accounting Standards) Amendment Rules, 2016, the Company has not appropriated proposed dividend of Rs, 102.08 crores and Tax thereon of Rs, 20.78 crores from Statement of Profit and Loss for the year ended March 31, 2017. (Refer Para 8.5 of AS - 4 Contingencies and Events occurring after Balance Sheet date). Accordingly, the proposed dividend and tax thereon are not recognized as liability at the year end. Due to such change, Current Liability is lower by Rs, 122.86 crores and Reserves and Surplus is higher to that extent. However, the same will be recognized as liability on approval of shareholders at ensuing Annual General Meeting.

3.4 In respect of equity shares issued pursuant to Employee Stock Option Scheme, GRUH has paid dividend (including tax on dividend) of (Rs, 40,583) for the year 2015-16 (Previous year Rs, 0.02 crore) as approved by the shareholders at the Annual General Meeting.

4.1 Refinance from National Housing Bank (NHB) and Term Loans from Banks :

(a) Nature of Security

Refinance from National Housing Bank (NHB) and Term Loans from Banks are secured against negative lien on all the assets of GRUH excluding :

(i) The specific immovable property mortgaged in favour of Debenture Trustees against the Secured Redeemable Non-Convertible Debentures; and

(ii) The Statutory Liquid Assets having floating charge in favour of the Public Deposit Trustees against the Public Deposits.

4.2 Redeemable Non-Convertible Debentures :

(a) Nature of Security

Redeemable Non-Convertible Debentures are secured by the mortgage of specific immovable property created in favour of Debenture Trustees and by a negative lien on all the assets of GRUH excluding the Statutory Liquid Assets having floating charge in favour of the Public Deposit Trustees against the Public Deposits.

4.3 Unsecured Non-Convertible Subordinated Debentures :

Redeemable Non-Convertible Subordinated Debentures, for value aggregating to Rs, 35 crores are subordinated debt to present and future senior indebtedness of GRUH and qualify as Tier II Capital under National Housing Bank''s (NHB) guidelines for assessing capital adequacy. These NCDs are redeemable at par on March 22, 2023 (Rs, 10 crores) and on March 25, 2023 (Rs, 25 crores).

4.4 Public Deposits :

Public deposits as defined in paragraph 2(1)(y) of the Housing Finance Companies (NHB) Directions, 2010, are secured by floating charge on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

8 TRADE PAYABLES

Trade Payables of Rs, 2.19 crores (Previous Year Rs, 1.18 crore) include Rs, Nil (Previous Year Rs, Nil) payable to "Suppliers" registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid / payable by GRUH during the year to the "Suppliers" covered under the Micro, Small and Medium Enterprises Development Act, 2006.

14.2 Loans granted by GRUH are secured or partly secured by :

a) Equitable mortgage of property and / or

b) Pledge of shares, Units, Other Securities, assignments of Life Insurance policies and / or

c) Hypothecation of assets and / or

d) Bank guarantees, Company guarantees or Personal guarantees and / or

e) Undertaking to create a security.

14.3 Loans includes Rs, 28.56 crores (Previous Year Rs, 13.55 crores) in respect of properties held for disposal under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

14.4 Loans includes Rs, 0.27 crore (Previous Year Rs, 0.44 crore) given to the related parties of GRUH under the Staff Loan Scheme.

18.1 Other Interest includes Interest on Long-Term SLR Investments Rs, 15.30 crores (Previous Year Rs, 13.71 crores), Interest on Bank Deposits amounting to Rs, 4.77 crores (Previous Year Rs, 5.90 crores) and Interest on Income Tax Refund Rs, Nil (Previous Year Rs, 0.71 crore).

18.2 Fees and Other Income is net of Loan Referral Charges of Rs, 14.22 crores (Previous Year Rs, 12.11 crores).

18.3 Surplus from deployment in Cash Management Schemes of Mutual Funds is in respect of Investments held as Current Investments.

24 In accordance with the Accounting Standard on Rs,Leases'' (AS 19), the following disclosure in respect of operating leases are made :

GRUH has taken retail office premises under operating lease or leave and license agreements for a period ranging from 11 months to 180 months. These are generally cancellable and have no specific obligation for renewal. The total lease payments for current year amounts to Rs, 6.01 crores (Previous year Rs, 5.36 crores) which is recognized in the Statement of Profit and Loss under ''Rent Expenses'' under Note 21.

25 Disclosure as required by National Housing Bank :

The following disclosures have been given in terms of the National Housing Bank''s notification no. NHB.HFC.CG-DIR.1/MD&CEO/2016 dated February 9, 2017 and in terms of the circular no. NHB/ND/DRS/Pol-No.35/2010-11 dated October 11, 2010 :

25.4 During the year, GRUH has not entered into any (a) derivative transaction, (b) securitization and assignment transaction, (c) Capital market transaction, (d) financing of Parent Company product, (e) finance of any unsecured advances against intangible securities such as rights, licenses, authority etc as collateral security and (f) transaction in foreign currency apart from dividend payment to Nonresident shareholder as per note. 34.

25.5 GRUH has not exceeded limit prescribed by National Housing Bank for Single Borrower Limit (SGL) and Group Borrower Limit (GBL).

25.6 Assets Liability Management

Assets and Liabilities are classified in the maturity buckets as per the guidelines issued by the National Housing Bank. Maturity pattern of certain

items of Assets and Liabilities As At March 31, 2017 :

25.8 GRUH has not obtained registration from any other financial sector regulator.

25.9 National Housing Bank (NHB) has not raised any stricture or direction in their inspection carried out during the year. NHB has not imposed any penalty on GRUH during the year.

25.10 As per the Accounting Standard on ''Related Party Disclosures'' (AS 18), the related parties of GRUH with whom GRUH had carried out transactions are as follows. There were no material transaction with related parties and all these transactions were carried out in ordinary course of business and were at arm''s length price.

(a) Holding Company

Housing Development Finance Corporation Limited (HDFC)

(b) Fellow Subsidiary Companies

(i) HDFC Standard Life Insurance Co. Limited

(ii) HDFC ERGO General Insurance Co. Limited

(c) Key Management Personnel

(i) Mr. Sudhin Choksey, Managing Director

(ii) Mr. Kamlesh Shah, Executive Director

(iii) Mr. Marcus Lobo, Company Secretary

(iv) Mr. Hitesh Agrawal, Chief Financial Officer

(d) Entity in which Key Management Personnel exercise significant influence (i) GRUH Foundation

The Rules of GRUH''s Provident Fund administered by a Trust require that if the Board of the Trustees are unable to pay interest at the rate declared for Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by GRUH. Having regard to the assets of the fund and the return on the investments, GRUH does not expect any deficiency in the foreseeable future.

26.2 State Plans

GRUH has recognized expenses of Rs, 0.51 crore (Previous Year Rs, 0.49 crore) in Statement of Profit and Loss for Contribution to State Plan namely Employees'' Pension Scheme.

26.3 Defined Benefit Plans

(a) Leave Encashment / Compensated Absences :

Salaries and Bonus includes Rs, 1.07 crore (Previous Year Rs, 0.72 crore) towards provision made as per actuarial valuation in respect of accumulated leave salary encashable on retirement.

(b) Contribution to Gratuity Fund :

The details of GRUH''s post-retirement benefit plans for its employees are given below which is certified by the actuary and relied upon by the auditors :

---

Mar 31, 2015

1.1 Accounting Convention

The Financial Statements have been prepared in accordance with historical cost convention, the accounting principles generally accepted in India including the applicable Accounting Standards specified u/s 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, 2013 and guidelines issued by the National Housing Bank.

The preparation of financial statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

All assets and liabilities have been classified as current or non-current as per the Company''s operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of its activities, the Company has determined its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

1.2 System of Accounting

The Company adopts the accrual concept in the preparation of the accounts. The Balance Sheet and Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in the Companies Act, 2013, read with Schedule III thereto.

1.3 Inflation

Assets and Liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.

1.4 Interest on Loans

Repayments of loans is by way of Equated Monthly Installments (EMIs) comprising principal and interest. Interest on loans is computed either on an annual rest, on a monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

Interest on loan assets classified as "Non-Performing" is recognised only on actual receipt.

1.5 Income from Investment

Income from investment is accounted on an accrual basis. The gain/loss on account of investments in debentures/bonds and government securities held as long-term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

1.6 Investments

Investments are stated at cost inclusive of related expenses and are classified into Current or Long-Term categories. Provision for diminution in value of investments is made, if management perceives that there is significant permanent diminution in value of investments or in accordance with the norms prescribed by the National Housing Bank and Accounting Standard on ''Accounting for Investments'' (AS-13).

1.7 Brokerage and Incentive on Deposits

Brokerage and incentive on deposits is amortised over the period of the deposit.

1.8 Stock of Acquired and/or Developed Properties

Stock of acquired and/or developed properties is valued at realisable value or outstanding dues, whichever is less. In case of properties acquired and developed, the value includes appropriate share of development expenses.

1.9 Tax on Income

The accounting treatment for the Income Tax in respect of the Company''s income is based on the Accounting Standard on ''Accounting for Taxes on Income'' (AS-22). The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Deferred tax is recognised for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

1.10 Tangible Fixed Assets

Tangible Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses.

1.11 Intangible Assets

Intangible Assets comprising of Computer Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortisation. Any expenses on such software for support and maintenance payable annually are charged to revenue.

1.12 Depreciation and Amortisation Tangible Fixed Assets :

Depreciation is provided on all assets on a pro-rata basis on the "Straight Line Method" over the useful lives and in the manner prescribed under schedule II to the Companies Act, 2013 except for Computers where based on a technical evaluation, useful lives is estimated at four years in order to reflect the actual usage of the assets.

Intangible Assets :

Application software is amortised over a period of four years.

1.13 Provision for Standard Assets, Non-Performing Assets (NPAs) and Contingencies

The Company''s policy is to carry adequate amounts towards Provision for Standard Assets, Non-Performing Assets (NPAs) and other contingencies. All loans and other credit exposures where the installments are overdue for ninety days and more are classified as NPAs in accordance with the prudential norms prescribed by the National Housing Bank (NHB). The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines. Excess provisions over and above provisioning requirement for Standard Assets and NPAs are carried under Provision for Contingencies Account.

1.14 Employee Benefits

The Company has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognised by the Income Tax Authorities. These funds are administered through trustees and the Company''s contributions thereto are charged to revenue every year. The Company''s Contribution to State Plans namely Employee''s Pension Scheme is charged to revenue every year.

The Company has Defined Benefit Plans namely leave encashment / compensated absences and Gratuity for all the employees, the liability for which is determined on the basis of an actuarial valuation at the year end based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in Statement of Profit and Loss as income or expense.

1.15 Contingent Liabilities

Contingent liabilities, if any, are disclosed in the notes on accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialise into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

1.16 Capital Issue Expenses

Expenses in connection with issue of Shares and Debentures are being adjusted against Security Premium as permitted by section 52 of the Companies Act, 2013.

---

Mar 31, 2014

1.1 Accounting Convention

The Financial Statements have been prepared in accordance with historical cost convention, applicable Accounting Standards and relevant provisions of the Companies Act, 1956 and guidelines issued by the National Housing Bank.

The preparation of Financial Statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

1.2 System of Accounting

The Company adopts the accrual concept in the preparation of the accounts. The Balance Sheet and Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in the Companies Act, 1956, read with Schedule VI thereto.

1.3 Inflation

Assets and Liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.

1.4 Interest on Housing Loans

Repayments of housing loans is by way of Equated Monthly Installments (EMIs) comprising principal and interest. Interest on loans is computed either on an annual rest or on a monthly rest basis. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

1.5 Income from Investment

Income from investment is accounted on an accrual basis. The gain/loss on account of investments in debentures/bonds and government securities held as long-term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

1.6 Investments

Investments are stated at cost inclusive of related expenses and are classified into Current or Long-Term categories. Provision for diminution in value of investments is made if management perceives that there is significant permanent diminution in value of investments or in accordance with the norms prescribed by the National Housing Bank and Accounting Standard on ''Accounting for Investments'' (AS-13).

1.7 Brokerage on Deposit

Brokerage, other than incentives, paid on deposits is amortised over the period of the deposit. Incentives, which is payable to agents who achieve certain collection targets, is charged to Statement of Profit and Loss.

1.8 Stock of Acquired and/or Developed Properties

Stock of acquired and/or developed properties is valued at realisable value or outstanding dues, whichever is less. In case of properties acquired and developed, the value includes appropriate share of development expenses.

1.9 Tax on Income

The accounting treatment for the Income Tax in respect of the Company''s income is based on the Accounting Standard on ''Accounting for Taxes on Income'' (AS-22). The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Deferred tax is recognised for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

1.10 Fixed Assets

Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses.

1.11 Intangible Assets

Intangible Assets comprising of Computer Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortisation. Any expenses on such software for support and maintenance payable annually are charged to revenue.

1.12 Depreciation

Fixed Assets :

i) Depreciation is provided on all assets except office premises and residential premises on "Written Down Value Method" under section 205 (2) (a) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

ii) Depreciation on office premises and residential premises is provided on "Straight Line Method" under section 205 (2) (b) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

Intangible Assets :

Computer software is amortised over a period of four years on Straight Line Basis.

1.13 Provision for Contingencies

The Company''s policy is to carry adequate amounts in the Provision for Contingencies account to cover the principal amount outstanding in respect of all non-performing assets, standard assets as also all other contingencies. All loans and other credit exposures where the installments are overdue for ninety days and more are classified as non-performing assets in accordance with the prudential norms prescribed by the National Housing Bank. The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.

1.14 Employee Benefits

The Company has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognized by the Income Tax Authorities. These funds are administered through trustees and the Company''s contributions thereto are charged to revenue every year. The Company''s Contribution to State Plans namely Employee''s Pension Scheme is charged to revenue every year.

The Company has Defined Benefit Plans namely leave encashment / compensated absences and Gratuity for all the employees, the liability for which is determined on the basis of an actuarial valuation at the year end based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in Statement of Profit and Loss as income or expense.

1.15 Contingent Liabilities

Contingent liabilities, if any, are disclosed in the notes on accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialise into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

1.16 Capital Issue Expenses

Expenses in connection with issue of Shares and Debentures are being adjusted against Security Premium as permitted by section 78 of the Companies Act, 1956.

2.1 Terms/Rights attached to Equity Shares

The Company has one class of share referred to as equity shares having a par value of Rs. 2 each. Each shareholder is entitled to one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

2.2 Shares reserved for issue under options

(a) During the year, the Company has issued 16,54,475 (Previous Year 19,63,485) shares on exercise of Options granted to its employees and Directors under ESOS Schemes.

(c) Intrinsic Value Method has been used to account for the employee share based payment plans. The intrinsic value of each stock option granted under the ESOS - 2011 Tranche II and ESOS - 2011 Tranche I plan is Rs. Nil, since the market price of the underlying share at the grant date was same as the exercise price and consequently the accounting value of the option (compensation cost) is Rs. Nil.

3.1 As per Section 29C(i) of the National Housing Bank Act, 1987, the Company is required to transfer at least 20% of its net profit every year to a reserve before any dividend is declared. For this purpose any Special Reserve created by the Company under Section 36(1) (viii) of the Income Tax Act, 1961 is considered to be an eligible transfer. The Company has transferred an amount of Rs. 45 crores (Previous Year Rs. 37 crores) to Special Reserve in terms of Section 36 (1)(viii) of the Income Tax Act, 1961. The Company doesn''t anticipate any withdrawal from Special Reserve in foreseeable future.

3.2 The Company has transferred an amount of Rs. 15 crores (Previous Year Rs. 12.50 crores) to Additional Reserve u/s 29C of the National Housing Bank Act, 1987. During the year, an amount of Rs. 7.26 crores (Previous Year Rs. Nil) net of Deferred Tax of Rs. 3.74 crores (Previous year Rs. Nil) has been transferred from Additional Reserve Account as per Section 29C of the National Housing Bank Act, 1987 pursuant to circular NHB(ND)/DRS/Pol-No.03/2004-05 dated August 26, 2004 to Provision for Contingencies Account.

3.3 In respect of equity shares issued pursuant to Employee Stock Option Scheme, the Company has paid dividend of Rs. 0.23 crore for the year 2012-13 (Previous year Rs. 0.22 crore) and tax on dividend of Rs. 0.04 crore (Previous year Rs. 0.04 crore) as approved by the shareholders at the Annual General Meeting held on July 8, 2013.

3.4 In terms of requirement of NHB''s Circular No. NHB(ND)/DRS/Pol.Circular.61/2013-14 dated April 7, 2014 following information on Reserve Fund under section 29C of the NHB Act, 1987 is provided :

4.1 Refinance from National Housing Bank (NHB) and Term Loans from Banks :

(a) Nature of Security

Refinance from National Housing Bank (NHB) and Term Loans from Banks are secured against negative lien on all the assets of the Company excluding :

(i) The specific immovable property mortgaged in favor of Debenture Trustees against the Secured Redeemable Non-Convertible Debentures;

(ii) The Statutory Liquid Assets having floating charge in favour of the Public Deposit Trustees against the Public Deposits; and

(iii) Dwelling units financed under line of credit of KfW through HDFC.

4.2 Redeemable Non-Convertible Debentures :

Nature of Security

Redeemable Non-Convertible Debentures are secured by the mortgage of specific immovable property created in favor of Debenture Trustees and by a negative lien on all the assets of the Company excluding (i) the Statutory Liquid Assets having floating charge in favor of the Public Deposit Trustees against the Public Deposits and (ii) Dwelling units financed under the line of credit of KfW through HDFC .

4.3 Term Loan under Line of Credit from Kreditanstalt fur Wiederaufbau (KfW) through HDFC : Nature of Security Loan from HDFC is secured by negative lien on dwelling units financed under line of credit of KfW.

4.4 Unsecured Non-Convertible Subordinated Debentures :

9.75% Redeemable Non-Convertible Subordinated Debentures, for value aggregating to Rs. 35 crores are subordinated debt to present and future senior indebtedness of the Company and qualify as Tier II Capital under National Housing Bank''s (NHB) guidelines for assessing capital adequacy. These NCDs are redeemable at par on March 22, 2023 (Rs. 10 crores) and on March 25, 2023 (Rs. 25 crores).

4.5 Public Deposits :

Public deposits as defined in Paragraph 2(1)(y) of the Housing Finance Companies (NHB) Directions, 2010, are secured by floating charge on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

5.1 Public Deposits

Public deposits as defined in Paragraph 2(1)(y) of the Housing Finance Companies (NHB) Directions, 2010, are secured by floating charge on the Statutory Liquid Assets maintained in terms of sub-sections (1) & (2) of Section 29B of the National Housing Bank Act, 1987.

6 TRADE PAYABLES

Trade Payables Rs. 0.80 crore (Previous Year Rs. 0.75 crore) include Rs. Nil (Previous Year Rs. Nil) payable to "Suppliers" registered under the Micro, Small and Medium Enterprises Development Act, 2006. No interest has been paid / payable by the Company during the year to the "Suppliers" covered under the Micro, Small and Medium Enterprise Development Act, 2006.

---

Mar 31, 2013

1.1 ACCOUNTING CONVENTION

The Financial Statements have been prepared in accordance with historical cost convention, applicable Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 and guidelines issued by the National Housing Bank.

The preparation of Financial Statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

1.2 SYSTEM OF ACCOUNTING

The Company adopts the accrual concept in the preparation of the accounts. The Balance Sheet and Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in section 211 of the Companies Act, 1956, read with Schedule VI thereto.

1.3 INFLATION

Assets and Liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.

1.4 INTEREST ON HOUSING LOANS

Repayments of housing loans is by way of Equated Monthly Instalments (EMIs) comprising principal and interest. Interest on loans is computed either on an annual rest or on a monthly rest basis. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

1.5 INCOME FROM INVESTMENT

Income from investment is accounted on an accrual basis. The gain/loss on account of investments in debentures/bonds and government securities held as long-term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

1.6 INVESTMENTS

Investments are stated at cost inclusive of related expenses and are classified into Current or Long-Term categories. Provision for diminution in value of investments is made if management perceives that there is significant permanent diminution in value of investments or in accordance with the norms prescribed by the National Housing Bank and Accounting Standard on ''Accounting for Investments'' (AS-13) notified by Companies (Accounting Standards) Rules, 2006.

1.7 BROKERAGE ON DEPOSIT

Brokerage, other than incentives, paid on deposits is amortised over the period of the deposit. Incentives, which is payable to agents who achieve certain collection targets, is charged to Statement of Profit and Loss.

1.8 STOCK OF ACQUIRED AND/OR DEVELOPED PROPERTIES

Stock of acquired and/or developed properties is valued at realisable value or outstanding dues, whichever is less. In case of properties acquired and developed, the value includes appropriate share of development expenses.

1.9 TAX ON INCOME

The accounting treatment for the Income Tax in respect of the Company''s income is based on the Accounting Standard on ''Accounting for Taxes on Income'' (AS-22) notified by Companies (Accounting Standards) Rules, 2006. The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Deferred tax is recognised for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

1.10 FIXED ASSETS

Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses.

1.11 INTANGIBLE ASSETS

Intangible Assets comprising of Computer Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortisation. Any expenses on such software for support and maintenance payable annually are charged to revenue.

1.12 DEPRECIATION

FIXED ASSETS :

i) Depreciation is provided on all assets except office premises and residential premises on "Written Down Value Method" under section 205 (2) (a) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

ii) Depreciation on office premises and residential premises is provided on "Straight Line Method" under section 205

(2) (b) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

INTANGIBLE ASSETS :

Computer software is amortised over a period of four years on Straight Line Basis.

1.13 PROVISION FOR CONTINGENCIES

The Company''s policy is to carry adequate amounts in the Provision for Contingencies account to cover the principal amount outstanding in respect of all non-performing assets, standard assets as also all other contingencies. All loans and other credit exposures where the instalments are overdue for ninety days and more are classified as non-performing assets in accordance with the prudential norms prescribed by the National Housing Bank. The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.

1.14 EMPLOYEE BENEFITS

The Company has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognized by the Income Tax Authorities. These funds are administered through trustees and the Company''s contributions thereto are charged to revenue every year. The Company''s Contribution to State Plans namely Employee''s Pension Scheme is charged to revenue every year.

The Company has Defined Benefit Plans namely leave encashment / compensated absences and Gratuity for all the employees, the liability for which is determined on the basis of an actuarial valuation at the year end based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in Statement of Profit and Loss as income or expense.

1.15 CONTINGENT LIABILITIES

Contingent liabilities, if any, are disclosed in the notes on accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialise into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

1.16 CAPITAL ISSUE EXPENSES

Expenses in connection with issue of Shares and Debentures are being adjusted against share premium/security premium as permitted by section 78 of the Companies Act, 1956.

---

Mar 31, 2012

ACCOUNTING CONVENTION

The Financial Statements have been prepared in accordance with historical cost convention, applicable Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 and guidelines issued by the National Housing Bank.

The preparation of Financial Statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

SYSTEM OF ACCOUNTING

The Company adopts the accrual concept in the preparation of the accounts. The Balance Sheet and Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in section 211 of the Companies Act, 1956, read with Schedule VI thereto.

INFLATION

Assets and Liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.

INTEREST ON HOUSING LOANS

Repayments of housing loans is by way of Equated Monthly Instalments (EMIs) comprising principal and interest. Interest on loans is computed either on an annual rest or on a monthly rest basis. EMIs commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is payable every month.

INCOME FROM INVESTMENT

Income from investment is accounted on an accrual basis. The gain/loss on account of investments in debentures/ bonds and government securities held as long-term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

INVESTMENTS

Investments are stated at cost inclusive of related expenses and are classified into Current or Long-Term categories. Provision for diminution in value of investments is made if management perceives that there is significant permanent diminution in value of investments or in accordance with the norms prescribed by the National Housing Bank and Accounting Standard on 'Accounting for Investments' (AS-13) notified by Companies (Accounting Standards) Rules, 2006.

BROKERAGE ON DEPOSIT

Brokerage other than incentives paid on deposits is amortised over the period of the deposit. Incentives, which is payable to agents who achieve certain collection targets, is charged to Statement of Profit and Loss.

STOCK OF ACQUIRED AND/OR DEVELOPED PROPERTIES

Stock of acquired and/or developed properties is valued at realisable value or outstanding dues, whichever is less. In case of properties acquired and developed, the value includes appropriate share of development expenses.

TAXON INCOME

The accounting treatment for the Income Tax in respect of the Company's income is based on the Accounting Standard on 'Accounting for Taxes on Income' (AS-22) notified by Companies (Accounting Standards) Rules, 2006. The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Deferred tax is recognised for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

FIXED ASSETS

Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses.

INTANGIBLE ASSETS

Intangible Assets comprising of Computer Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortisation. Any expenses on such software for support and maintenance payable annually are charged to revenue.

DEPRECIATION

FIXED ASSETS :

i) Depreciation is provided on all assets except office premises and residential premises on "Written Down Value Method" under section 205(2)(a) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

ii) Depreciation on office premises and residential premises is provided on "Straight Line Method" under section 205(2)(b) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

INTANGIBLE ASSETS :

Computer software is amortised over a period of four years on Straight Line Basis.

PROVISION FOR CONTINGENCIES

The Company's policy is to carry adequate amounts in the Provision for Contingencies account to cover the principal amount outstanding in respect of all non-performing assets, standard assets as also all other contingencies. All loans and other credit exposures where the instalments are overdue for ninety days and more are classified as non-performing assets in accordance with the prudential norms prescribed by the National Housing Bank. The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.

EMPLOYEE BENEFITS

The Company has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognized by the Income Tax Authorities. These funds are administered through trustees and the Company's contributions thereto are charged to revenue every year. The Company's Contribution to State Plans namely Employee's Pension Scheme is charged to revenue every year.

The Company has Defined Benefit Plans namely leave encashment / compensated absences, Gratuity and Retention Bonus for all the employees, the liability for which is determined on the basis of an actuarial valuation at the year end based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in Statement of Profit and Loss as income or expense.

CONTINGENT LIABILITIES

Contingent liabilities, if any, are disclosed in the notes to accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialise into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

CAPITAL ISSUE EXPENSES

Expenses in connection with issue of Shares and Debentures are being adjusted against share premium/security premium as permitted by section 78 of the Companies Act, 1956.

---

Mar 31, 2011

1. ACCOUNTING CONVENTION

The Financial Statements have been prepared in accordance with historical cost convention, applicable Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 and guidelines issued by the National Housing Bank.

The preparation of Financial Statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. SYSTEM OF ACCOUNTING

The Company adopts the accrual concept in the preparation of the accounts. The Balance Sheet and the Profit and Loss Account of the Company are prepared in accordance with the provisions contained in section 211 of the Companies Act, 1956, read with Schedule VI thereto.

3. INFLATION

Assets and Liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.

4. INTEREST ON HOUSING LOANS

Repayments of housing loans is by way of Equated Monthly Instalments (EMIs) / Equated Half-yearly Instalments (EHYIs) comprising principal and interest. Interest on loans is computed either on an annual rest or on a monthly rest basis. EMIs / EHYIs commence once the entire loan is disbursed. Pending commencement of EMIs / EHYIs, Pre-EMI interest is payable every month.

5. SURPLUS ON SALE/ TRANSFER/ ASSIGNMENT OF LOANS

The surplus arising as the difference between the EMIs recoverable on the individual home loans sold/ transferred/ assigned and amounts payable to the purchaser of such home loans over the tenure of the loan is being recognised by way of surplus since risks and rewards of ownership of loan have been assigned on sale / transfer / assignment of loans. However, depending on the terms of such individual home loans, the Company sets aside part of the surplus to Contingencies for Loans Sold. During each subsequent year the Contingencies on Sold Loans is adjusted to recognise the balance surplus depending on the remaining tenure and outstanding loan amount after considering prepayments, if any received during the year.

6. INCOME FROM INVESTMENT

Income from investment is accounted on an accrual basis. The gain/loss on account of investments in debentures/bonds and government securities held as long-term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

7. INVESTMENTS

Investments are stated at cost inclusive of related expenses and are classified into Current or Long Term categories. Provision for diminution in value of investments is made if management perceives that there is significant permanent diminution in value of investments or in accordance with the norms prescribed by the National Housing Bank and Accounting Standard on Accounting for Investments (AS-13) notified by Companies (Accounting Standards) Rules, 2006.

8. BROKERAGE ON DEPOSIT

Brokerage, other than incentives, paid on deposits is amortised over the period of the deposit. Incentives, which is payable to agents who achieve certain collection targets, is charged to the Profit and Loss Account.

9. STOCK OF ACQUIRED AND/OR DEVELOPED PROPERTIES

Stock of acquired and/or developed properties is valued at realisable value or outstanding dues, whichever is less. In case of properties acquired and developed, the value includes appropriate share of development expenses.

10. TAX ON INCOME

The accounting treatment for the Income Tax in respect of the Companys income is based on the Accounting Standard on Accounting for Taxes on Income (AS-22) notified by Companies (Accounting Standards) Rules, 2006. The provision made for Income Tax in Accounts comprises both, the current tax and deferred tax.

Deferred tax is recognised for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

11. FIXED ASSETS

Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses.

12. INTANGIBLE ASSETS

Intangible Assets comprising of Computer Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortization. Any expenses on such software for support and maintenance payable annually are charged to revenue.

13. DEPRECIATION

FIXED ASSETS :

i) Depreciation is provided on all assets except office premises and residential premises on "Written Down Value Method" under section 205 (2) (a) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

ii) Depreciation on office premises and residential premises is provided on "Straight Line Method" under section 205 (2) (b) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

INTANGIBLE ASSETS :

Computer software is amortised over a period of four years on Straight Line Basis.

14. PROVISION FOR CONTINGENCIES

The Companys policy is to carry adequate amounts in the Provision for Contingencies account to cover the principal amount outstanding in respect of all non-performing assets, standard assets as also all other contingencies. All loans and other credit exposures where the installments are overdue for ninety days and more are classified as non-performing assets in accordance with the prudential norms prescribed by the National Housing Bank. The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.

15. EMPLOYEE BENEFITS

The Company has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognized by the Income Tax Authorities. These funds are administered through trustees and the Companys contributions thereto are charged to revenue every year. The Companys Contribution to State Plans namely Employees Pension Scheme is charged to revenue every year.

The Company has Defined Benefit Plans namely leave encashment / compensated absences, Gratuity and Retention Bonus for all the employees, the liability for which is determined on the basis of an actuarial valuation at the year end based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account as income or expense.

16. CONTINGENT LIABILITIES

Contingent liabilities, if any, are disclosed in the notes on accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialise into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

17. CAPITAL ISSUE EXPENSES

Expenses in connection with issue of Shares and Debentures are being adjusted against share premium/security premium as permitted by section 78 of the Companies Act, 1956.

---

Mar 31, 2010

1. ACCOUNTING CONVENTION

The Financial Statements have been prepared in accordance with historical cost convention, applicable Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 and guidelines issued by the National Housing Bank.

The preparation of Financial Statements requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. SYSTEM OF ACCOUNTING

The Company adopts the accrual concept in the preparation of the accounts. The Balance Sheet and the Profit and Loss Account of the Company are prepared in accordance with the provisions contained in section 211 of the Companies Act, 1956, read with Schedule VI thereto.

3. INFLATION

Assets and Liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.

4. INTEREST ON HOUSING LOANS

Repayments of housing loans is by way of Equated Monthly Instalments (EMIs) / Equated Half-yearly Instalments (EHYIs) comprising principal and interest. Interest on loans is computed either on an annual rest or on a monthly rest basis. EMIs / EHYIs commence once the entire loan is disbursed. Pending commencement of EMIs / EHYIs, Pre-EMI interest is payable every month.

5. SURPLUS ON SALE/ TRANSFER/ ASSIGNMENT OF LOANS

The surplus arising as the difference between the EMIs recoverable on the individual home loans sold/ transferred/ assigned and amounts payable to the purchaser of such home loans over the tenure of the loan is being recognised by way of surplus since risks and rewards of ownership of loan have been assigned on sale / transfer / assignment of loans. However, depending on the terms of such individual home loans, the Company sets aside part of the surplus to Contingencies for Loans Sold. During each subsequent year the Contingencies on Sold Loans is adjusted to recognise the balance surplus depending on the remaining tenure and outstanding loan amount after considering prepayments, if any received during the year.

6. INCOME FROM INVESTMENT

Income from investment is accounted on an accrual basis. The gain/loss on account of investments in debentures/ bonds and government securities held as long-term investments and acquired at a discount/premium, is recognised over the life of the security on a pro-rata basis.

7. INVESTMENTS

Investments are stated at cost inclusive of related expenses and are classified into Current or Long Term categories. Provision for diminution in value of investments is made if management perceives that there is significant permanent diminution in value of investments or in accordance with the norms prescribed by the National Housing Bank and Accounting Standards on Accounting for Investments (AS 13) notified by Companies (Accounting Standards) Rules, 2006.

8. BROKERAGE ON DEPOSIT

Brokerage, other than incentives, paid on deposits is amortised over the period of the deposit. Incentives, which is payable to agents who achieve certain collection targets, is charged to the Profit and Loss Account.

9. STOCK OF ACQUIRED AND/OR DEVELOPED PROPERTIES

Stock of acquired and/or developed properties is valued at realisable value or outstanding dues, whichever is less. In case of properties acquired and developed, the value includes appropriate share of development expenses.

10. TAX ON INCOME

The accounting treatment for the Income Tax in respect of the Companys income is based on the Accounting Standards on Accounting for Taxes on Income (AS 22) notified by the Companies (Accounting Standards) Rules, 2006. The provision made for Income Tax in Accounts comprises of both, the current tax and deferred tax.

Deferred tax is recognised for all timing differences, being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.

11. FIXED ASSETS

Fixed Assets are capitalised at cost inclusive of legal and/or installation expenses.

12. INTANGIBLE ASSETS

Intangible Assets comprising of Computer Software are stated at cost of acquisition, including any cost attributable for bringing the same in its working condition less accumulated amortization. Any expenses on such software for support and maintenance payable annually are charged to revenue.

13. DEPRECIATION

FIXED ASSETS :

i) Depreciation is provided on all assets except office premises and residential premises on "Written Down Value Method" under section 205(2)(a) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

ii) Depreciation on office premises and residential premises is provided on "Straight Line Method" under section 205(2)(b) at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956.

INTANGIBLE ASSETS :

Computer software is amortised over a period of four years on Straight Line Basis.

14. PROVISION FOR CONTINGENCIES

The Companys policy is to carry adequate amounts in the Provision for Contingencies account to cover the principal amount outstanding in respect of all non-performing assets, standard assets as also all other contingencies. All loans and other credit exposures where the installments are overdue for ninety days and more are classified as non-performing assets in accordance with the prudential norms prescribed by the National Housing Bank. The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.

15. EMPLOYEE BENEFITS

The Company has Defined Contribution Plans for post employment benefits namely Provident Fund and Superannuation Fund which are recognized by the Income Tax Authorities. These funds are administered through trustees and the Companys contributions thereto are charged to revenue every year. The Companys Contribution to State Plans namely Employees Pension Scheme is charged to revenue every year.

The Company has Defined Benefit Plans namely leave encashment / compensated absences, Gratuity and Retention Bonus for all the employees, the liability for which is determined on the basis of an actuarial valuation at the year end based on the Projected Unit Credit method and incremental liability, if any, is provided for in the books. Gratuity scheme is administered through trust recognised by the Income Tax Authorities.

Actuarial Gains and Losses comprise of experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account as income or expense.

16. CONTINGENT LIABILITIES

Contingent liabilities, if any, are disclosed in the notes on accounts. Provision is made in the accounts in respect of those contingencies which are likely to materialise into liabilities after the year end till the adoption of accounts by Board of Directors and which have material effect on the position stated in the Balance Sheet.

17. CAPITAL ISSUE EXPENSES

Expenses in connection with issue of Shares and Debentures are being adjusted against share premium/security premium as permitted by section 78 of the Companies Act, 1956.