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Accounting Policies of Intec Capital Ltd. Company

Mar 31, 2015

Corporate information

Intec Capital Limited ('the Company') incorporated in India on 15 February 1994, is registered with the Reserve Bank of India ('RBI') as a Non-Banking Financial Company ('NBFC') vide Certificate No. B-14.00731 dated 4 May 1998 in the name of Intec Securities Limited. Subsequently, due to change in name of the Company, the Company received a revised Certificate of Registration ('CoR') in the name of Intec Capital Limited on 4 November 2009 under Section 45-1A of the Reserve Bank of India Act, 1934. It is a systemically important non-deposit taking Non-Banking Financial Company (NBFC-ND-SI). The Company is primarily engaged in the business of providing machinery loans to Small and Medium Enterprises ('SME') customers. During the financial year 2014- 15, Company has been registered as an Asset Finance Company ('AFC'), as defined by the RBI.

(a) Basis of preparation of financial statements:

The financial statements have been prepared to comply in all material respects with the Accounting Standards ('AS') notified under section 133 of the Companies Act, 2013 (the 'Act') read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and other accounting principles generally accepted in India (IGAAP) and as per the guidelines issued by Reserve Bank of India ('RBI') as applicable to a Non-Banking Financial (Non-deposit accepting or holding) Companies ('NBFC Regulation'). The financial statements have been prepared on an accrual basis and under the historical cost convention. The notified Accounting Standards (AS) are followed by the Company insofar as they are not inconsistent with the NBFC Regulation.

The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

(b) Current / non-current classification of assets / liabilities

As required by Revised Schedule III, the Company has classified assets and liabilities into current and non-current based on the operating cycle. An operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Since in case of non-banking financial Company normal operating cycle is not readily determinable, the operating cycle has been considered as 12 months.

(c) Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from the estimates used in preparing the accompanying financial statements. Any changes in estimates are recognised prospectively.

I) Change in estimates

i) Provision on Loans

During the year ended March 31, 2015, the Company has changed its estimates related to provisioning for all loans in order to align the same in accordance with RBI Prudential norms on Non-Performing Assets (NPA). Consequent to the change in such estimates, provision and write off is lower by H1,525.99 Lakhs for the year ended March 31, 2015. The above mentioned change has been carried out in view of management re-assessment of recoverability of its NPA, considering the quality and quantum of primary and collateral security available with the Company.

ii) Depreciation on Fixed Assets

Pursuant to the Companies Act, 2013 (the "Act") becoming effective from April 01, 2014, the Company has recomputed the depreciation based on the useful life of the assets as prescribed in Schedule II of the Act. This has resulted in additional charge of depreciation of H48.58 Lakhs for the year ended March 31, 2015. Further, as per the transitional provision, the Company has adjusted H11.23 Lakhs (net of deferred tax) in the opening balance of Reserves and Surplus of Profit and Loss Account.

iii) Useful lives of Fixed Assets

Till the previous year, the Company was depreciating its assets in accordance with the rates as per Schedule XIV of the Companies Act. During the year ended March 31, 2015, the Company revised the estimated useful life of fixed assets. Accordingly, depreciation on fixed assets for the year has been provided on the basis of revised estimated useful lives.

The management's revised estimate of the useful lives of the various fixed assets is as follows:

(d) Revenue Recognition

(i) Interest income on loans is accounted for by applying the Internal Rate of Return (IRR), implicit in the agreement, on the diminishing balance of the financed amount, over the period of the agreement so as to provide a constant periodic rate of return on the net amount outstanding on the contracts.

(ii) Future accrual of interest is suspended for accounts that are contractually delinquent for more than 180 days, after setting-off of collateral amounts. Suspended income on such accounts is recognised as and when collected. Reversal of income not collected for these assets are being netted-off against income as required by the Prudential Norms.

(iii) Loan installments received are apportioned between interest income and principal portion. The principal amount is reduced from the loan outstanding, so as to achieve the constant rate of interest on the remaining balance.

(iv) Processing fees and other servicing fees and servicing fees on assignment of loans in respect of loans agreement is recognized as income on accrual basis.

(v) Dividend income on investments is accounted for as and when the right to receive the same is established.

(vi) Profit/ loss on sale of loan assets through direct assignment/ securitization are recognized over the residual life of loan/ pass through certificates in terms of RBI guidelines. Loss arising on account of direct assignment/ securitization is recognized upfront.

(vii) Interest income on fixed deposits recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

(viii) Income on account of overdue interest, bouncing charges received, foreclosure charges and penal charges is recognized on receipt basis.

(e) Fixed assets, intangibles and related depreciation/ amortisation/ impairment

a. Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.

b. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.

c. Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

d. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in an amalgamation in the nature of purchase is their fair value as at the date of amalgamation. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.

e. Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash- generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

f. The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS-5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

g. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

h. The Company follows the straight-line method for computing the depreciation charge. Other fixed assets are depreciated on a straight line basis over their estimated economic useful lives as estimated by the management, except leasehold improvements, which are being amortised over the lease period. Such rates are higher than the corresponding depreciation rates prescribed in Schedule II of the Companies Act, 2013. Depreciation is charged on a pro-rata basis for assets purchased/ sold during the year.

(f) Investment

Investments that are readily realisable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long- term investments which is expected to be realised within 12 months after the reporting date is also presented under 'current assets' as "current portion of long-term investments" in consonance with the current/non-current classification.

Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.

Current investments are carried at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments i.e., equity shares, preference shares, convertible debentures, etc.

Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

(g) Commercial Paper

Commercial paper is recognized at redemption value. The difference between redemption value and issue value is charged to profit and loss account on a Straight line method (SLM).

(h) Borrowing Cost

Borrowing costs consists of interest and other ancillary cost that an entity incurs in connection with borrowing of funds. Ancillary costs incurred in connection with the arrangement of borrowings are amortized over the tenor of borrowings.

(i) Loan origination cost

Loan origination costs such as credit verification, agreement stamping, processing fee, ROC charges and valuation charges are charged to statement of profit and loss account.

(j) Sale of asset portfolios by way of assignment/ securitization

The Company undertakes sale of its loan portfolios by way of securitization/ assignment out of its loan portfolio. The assigned/ securitized portfolio is de-recognised from the books of the Company in situations where the Company relinquishes its contractual rights over the underlying loan receivables and all risks and rewards are transferred to assignee/ buyer.

(k) Employee Benefits:

The Company has various schemes of retirement benefits, namely provident fund, gratuity and leave encashment.

(a) Short term employee benefits: All employee benefits payable/ available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the Statement of Profit and Loss in the period in which the employee renders the related service.

(b) Other long term employee benefits: Entitlements to annual leave are recognized when they accrue to employees. Leave entitlements can be availed while in service or en-cashed at the time or retirement / termination of employment subject to restriction on the maximum number of accumulation. The company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation carried out by an independent actuary at the year end.

(c) Defined contribution plan: Contributions towards Provident Fund are considered as defined contribution plan and the contributions are charged to the Statement of Profit and Loss for the year when the expense is actually incurred.

(d) Defined benefit plans: The Company's gratuity scheme is a defined benefit plan. The Company pays gratuity to employees who retire or resign after a minimum period of five years of continuous service. The Company's contribution to gratuity fund in respect of its employees is managed by a trust, which invests the funds with Life Insurance Corporation of India ('LIC'). The present value of obligations under such defined benefit plans are based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of estimated future cash flows. The discount rate used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity period approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.

(l) Provision for standard, sub-standard and doubtful assets

Provision for standard and sub-standard and doubtful assets is recognised in accordance with prudential norms and guidelines issued by Reserve Bank of India from time to time. Further, specific provisions are also created based on the management's best estimate of the recoverability of non-performing assets.

In accordance with Para 10 of Prudential Norms, the Company has separately shown provision for loans under short term/ long term provisions (as applicable) without netting off from loans.

(m) Current and deferred tax

Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.

Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.

Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

(n) Provision, contingent liabilities and contingent assets

The Company recognises a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

(o) Earnings per share

Basic earnings per equity share is computed by dividing net profit/ loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding for the year. Diluted earnings per share is computed using the weighted average number of equity shares and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares except where results are anti-dilutive. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at the fair value.

(p) Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

(q) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term fixed deposits/ investments with an original maturity of three month or less.


Mar 31, 2014

(a) Basis of preparation of financial statements:

The financial statements have been prepared and presented under the historical cost convention on a going concern basis, on the accrual basis of accounting, in accordance with the Indian Generally Accepted Accounting Principles (''GAAP''), Accounting Standards prescribed under the Companies (Accounting Standards) Rules, 2006, relevant pronouncements of the Institute of Chartered Accountants of India (''ICAI'') and the presentation requirements of the Companies Act, 1956 as adopted consistently by the Company and guidelines issued by the RBI, as applicable to the Company.

The Company complies with the prudential norms relating to income recognition, accounting principles, asset classification and the minimum provisioning for standard, Substandard and doubtful debts, specified in the directions issued by the RBI in terms of Non- Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (''Prudential Norms''), as applicable to it.

(b) Current / non-current classification of assets / liabilities

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

i) it is expected to be realised in, or is intended for sale or consumption in, the Company''s normal operating cycle;

ii) it is held primarily for the purpose of being traded;

iii) it is expected to be realised within 12 months after the reporting date; or

iv) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non- current financial assets. All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

i) it is expected to be settled in the Company''s normal operating cycle;

ii) it is held primarily for the purpose of being traded;

iii) it is due to be settled within 12 months after the reporting date; or

iv) the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Current liabilities include current portion of non- current financial liabilities. All other liabilities are classified as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents.

(c) Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from the estimates used in preparing the accompanying financial statements. Any changes in estimates are recognised prospectively.

(d) Revenue Recognition

(i) Interest income on loans is accounted for by applying the Internal Rate of Return (IRR), implicit in the agreement, on the diminishing balance of the financed amount, over the period of the agreement so as to provide a constant periodic rate of return on the net amount outstanding on the contracts.

(ii) Future accrual of interest is suspended for accounts that are contractually delinquent for more than 180 days, after setting-off of collateral amounts. Suspended income on such accounts is recognised as and when collected. Reversal of income not collected for these assets are being netted-off against income as required by the Prudential Norms.

(iii) Loan installments received are apportioned between interest income and principal portion. The principal amount is reduced from the loan outstanding, so as to achieve the constant rate of interest on the remaining balance of the liability.

(iv) Processing fees and other servicing fees and servicing fees on assignment of loans in respect of loans agreement is recognized as income on accrual basis.

(v) Dividend income on investments is accounted for as and when the right to receive the same is established.

(vi) Profit/ loss on sale of loan assets through direct assignment/ securitization are recognized over the residual life of loan/ pass through certificates in terms of RBI guidelines. Loss arising on account of direct assignment/ securitisation is recognized upfront.

(vii) Interest income on fixed deposits recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

(viii) Income on account of overdue interest, bouncing charges received, foreclosure charges and penal charges is recognized on receipt basis.

(e) Fixed assets, intangibles and related depreciation/ amortisation/ impairment

a. Fixed assets are stated at cost less accumulated depreciation. Cost of acquisition is inclusive of freight, taxes and other incidental expenses incurred to put the asset to the intended use.

b. Acquired intangible assets are recorded at the consideration paid for their acquisition. In respect of internally generated assets, the expenditure incurred by the Company in form of salaries of full time employees and professional services billings from outsourced vendors which are directly attributed or allocated on a reasonable and consistent basis, for creating, producing and making the asset ready for its intended use, being enduring in nature, is capitalised.

c. The Company follows the straight-line method for computing the depreciation charge. Assets costing Rs. 5,000 or less are depreciated fully in the year of purchase. Other fixed assets are depreciated on a straight line basis over their estimated economic useful lives as estimated by the management, except leasehold improvements, which are being amortised over the lease period. Such rates are higher than the corresponding depreciation rates prescribed in Schedule XIV of the Companies Act, 1956. Depreciation is charged on a pro-rata basis for assets purchased/ sold during the year.

Till the previous year, the Company was depreciating its assets in accordance with the rates as per Schedule XIV of the Companies Act. During the year ended 31stMarch, 2014, the Company revised the estimated useful life of fixed assets. Accordingly, depreciation on fixed assets for the year has been provided on the basis of revised estimated useful lives.

The management''s revised estimate of the useful lives of the various fixed assets are as follows:

Asset description Useful life (in years)

Computers and peripherals 6

Furniture and Fixtures 16

Vehicles 11

Air conditioners 10

Office equipment 10

Electrical installations 8

As a result of the change in estimated useful lives, depreciation for the year is higher by Rs.18.67 lacs and consequently, profit before tax for the year and reserves and surplus and net fixed assets as at the year-end are lower by that amount.

d. Management periodically assesses using external and internal sources whether there is an indication that an asset may be impaired. Impairment occurs where the carrying value exceeds its recoverable amount. The impairment loss to be expensed is determined as the excess of the carrying value over the higher of the asset''s net sales price or the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying value does not exceed the carrying value that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

(f) Investment

Investments that are readily realisable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long-term investments which is expected to be realised within 12 months after the reporting date is also presented under ''current assets'' as "current portion of long-term investments " in consonance with the current/non- current classification scheme of revised Schedule VI.

Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.

Current investments are carried at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments i.e., equity shares, preference shares, convertible debentures, etc.

Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.

(g) Sale of asset portfolios by way of assignment/ securitization

The Company undertakes sale of its loan portfolios by way of securitization/ assignment out of its loan portfolio. The assigned/ securitized portfolio is de- recognised from the books of the Company in situations where the Company relinquishes its contractual rights over the underlying loan receivables and all risks and rewards are transferred to assignee/ buyer.

The Company is maintaining minimum holding period criteria and minimum retention requirements as prescribed by RBI vide its circular number RBI/2012- 13/170/DNBS.PD.No.301/3.10.01/2012-13, issued on 21st August, 2012.

(h) Employee Benefits

The Company has various schemes of retirement benefits, namely provident fund, gratuity and leave encashment.

(a) Short term employee benefits:

All employee benefits payable/ available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the Statement of Profit and Loss in the period in which the employee renders the related service.

(b) Other long term employee benefits:

Entitlements to annual leave are recognized when they accrue to employees. Leave entitlements can be availed while in service or en-cashed at the time or retirement / termination of employment subject to restriction on the maximum number of accumulation. The company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation carried out by an independent actuary at the year end.

(c) Defined contribution plan:

Contributions towards Provident Fund are considered as defined contribution plan and the contributions are charged to the Statement of Profit and Loss for the year when the expense is actually incurred.

(d) Defined benefit plans:

The Company''s gratuity scheme is a defined benefit plan. The Company pays gratuity to employees who retire or resign after a minimum period of five years of continuous service. The Company''s contribution to gratuity fund in respect of its employees is managed by a trust, which invests the funds with Life Insurance Corporation of India (''LIC''). The present value of obligations under such defined benefit plans are based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of estimated future cash flows. The discount rate used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity period approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss. Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.

(i) Provision for standard, sub-standard and doubtful assets

Provision for standard and sub-standard and doubtful assets is recognised in accordance with prudential norms and guidelines issued by Reserve Bank of India from time to time. Further, specific provisions are also created based on the management''s best estimate of the recoverability of non-performing assets.

In accordance with Para 10 of Prudential Norms, the Company has separately shown provision for loans under short term/ long term provisions (as applicable) without netting off from loans.

During the current year, the Company re-evaluated the percentages at which provision for standard and non-performing assets was being recognised hitherto. As a result, the Board of Directors considered it appropriate to make provisions at higher percentages of loan assets depending on the outstanding age, as compared to the percentages being used hitherto. Such change has resulted in an incremental provision of Rs. 1,519.13 lacs, and consequently, profit before tax for the year and reserves and surplus are lower by that amount.

(j) Current and deferred tax

Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the Income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). The current charge for income tax is based on estimated tax liability as computed after taking credit for allowances and exemptions in accordance with the Income-tax laws applicable for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the notified tax rates. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written up to represent the amount that is reasonably/ virtually certain to be realised.

(k) Provision, contingent liabilities and contingent assets

The Company recognises a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

(l) Earnings per share

Basic earnings per equity share is computed by dividing net profit/ loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding for the year. Diluted earnings per share is computed using the weighted average number of equity shares and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares except where results are anti-dilutive. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at the fair value.

(m) Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

(n) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and inhandandshort-termfixeddeposits/investmentswithan original maturity of three month or less.

Terms/ rights, preferences and restrictions attached to each class of shares


Mar 31, 2012

(a) Basis for Preparation of Accounts:

The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards (AS') under Companies Accounting Standard Rules, 2006, as amended, the relevant provisions of the Companies Act, 1956 ('the Act') and the guidelines issued by the Reserve Bank of India ('RBI') as applicable to a Non Banking Finance Company ('NBFC'). The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The company adopts accrual system of accounting unless otherwise stated.

(b) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future years.

(c) Fixed Assets:

Fixed assets are stated at cost less accumulated depreciation. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Intangible Assets expected to provide future enduring economic benefits are carried at cost less accumulated amortization and impairment losses, if any. Cost comprises of purchase price and directly attributable expenditure on making the asset ready for its intended use.

(d) Depreciation & Impairment of Assets:

Depreciation on fixed assets is provided on straight-line method, which reflects the management's estimate of the useful lives of the respective fixed assets, at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

The carrying amounts of assets are reviewed at each balance sheet date to ascertain impairment based on internal or external factors. Impairment is recognized if the carrying value exceeds the higher of net selling price of the assets and its value in use.

Goodwill arose on account of merger of Unitel Credit Private Limited is to be written off in Five years. However, nothing is written off in the current financial year. Goodwill arose on account of takeover of M/s Amulet Technologies Private Limited is written off during the current financial year.

(e) Investment:

Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made only if; such a decline is other than temporary in the opinion of the management.

(f) Employee Benefits:

(i) Defined Contribution Scheme

Employees benefits in the form of Provident Fund are considered as defined contribution plan and the contributions are charged to the profit & Loss Account for the year when the expense is actually incurred.

Provision for provident fund is made as per 'The Employees Provident Fund and Miscellaneous Provisions Act, 1952' as applicable to the company.

(ii) Defined Benefit Scheme

Retirement benefits in the form of Gratuity and leave encashment are considered as defined obligations scheme.

Provision for gratuity has been made as per the calculation received from Life Insurance Corporation under the Gratuity Scheme taken by the company.

Leave encashment benefits are paid / provided in it's entirety in the accounts for the year.

(iii) Other employee benefits are accounted for on accrual basis.

(g) Revenue Recognition:

(i) Loan Income

In respect of loan agreements, the income is accrued by applying the implicit rate in the transaction on declining balance on the amount financed for the period of the agreement.

(ii) Loan installments received are apportioned between interest income and principal portion. The principal amount is reduced from the loan outstanding, so as to achieve the constant rate of interest on the remaining balance of the Liability.

(iii) Dividend income on investments is accounted for as and when the right to receive the same is established.

(iv) No income is recognized in respect of Non-Performing assets, if any, as per the prudential norms for income recognition introduced for Non Banking Financial Corporation by Reserve Bank of India vide its notification o.DFC.No.119/DG/ (SPT)- 98 date 31-01-1998 and revised notification no. DNBS.192/DG (VL)-2007 dated 22/02/2007.

(v) Gains arising on direct assignment of assets are recognized over the tenure of agreements and loss, if any is recognized upfront.

(vi) Interest income on fixed deposits recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

(h) Expense Accounting:

All expenditures including the interest costs are accounted for on accrual basis.

(i) Loan Assets:

Loan Assets include loans advanced by the Company, secured by collateral offered by the customers, if applicable. These are shown net of assets directly assigned.

(j) Provisioning of Assets:

The Company makes provision for Standard and Non-Performing Assets as per the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms Reserve Bank) Directions, 2007, as amended from time to time. The Company also makes additional provision towards loan assets, to the extent considered necessary, based on the management's best estimate.

Loan assets which as per the management are not likely to be recovered, are considered as bad debts and written off.

Provision on standard assets is made as per the notification DNBS.PD.CC.No.207/03.02.002 /2010-11 issued by Reserve Bank of India.

(k) Provision, Contingent Liabilities and Contingent Assets:

(i) A provision is recognised when the company has a present obligation as a result of past event and it is probable that outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

(ii) Contingent Liabilities are disclosed separately by way of note to financial statement after careful evaluation by the management of the facts and legal aspects of the matter involved in case of :

(a) a present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation.

(b) a possible obligation, unless the probability of outflow of resources is remote.

(iii) Contingent Assets are neither recognized, nor disclosed in the financial statements.

(I) Taxation:

(i) Provision for current tax is made in accordance with and at the rates specified under the Income-Tax Act, 1961.

(ii) In accordance with Accounting Standard 22 -Accounting for taxes on Income', issued by the Institute of Chartered Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date. Tax Effect of the timing difference of the current period is included in the profit & loss account as a part of the tax expense and as deferred tax liability in the balance sheet.

(iii) Deferred tax assets arising from the timing differences are recognized to the extent there is reasonable certainty that the assets can be realized in future.

(m) Earnings per share:

Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

(n) Assets under Management

Contract assigned are de-recognised from the books of accounts. Contingent liabilities, if any, thereof are disclosed separately.

(o) Cash and cash equivalents

Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and highly liquid investments that are readily convertible into known amount of cash.

(p) Borrowing Cost

Borrowing costs relating to the acquisition / construction of qualifying assets are capitalised until the time all substantial activities necessary to prepare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.

The ancillary costs incurred in connection with the arrangement of borrowings are amortised over the life of underlying borrowings. Premium payable on redemption of bonds is amortised over the tenure of the bonds.

All other costs related to borrowings are recognised as expense in the period in which they are incurred.

(b) Terms/Rights attached to Equity Shares

The Company has only one class of equity shares having par value of Rs. 10 per share. All these Shares have same rights & preferences with respect to payment of dividend, repayment of capital and voting. The dividend proposed by the board of directors is subject to approval of the shareholders in the ensuing Annual General Meeting.

Security:

(i) Working Capital facility from banks are secured by

(a) Primary Security- first pari passu charge on present and future Receivables of the Company,

(b) Collateral Security-Fixed deposits lien marked to banks, Immovable properties & quoted securities- Belonging to promoter and promoters group,

(c) Personal guarantees of directors and others.

(ii) Term Loan from Banks and Financial Institutions are secured by

(a) Primary Security -First pari passu charge on specific Receivables of the Company,

(b) Collateral Security- Fixed Deposit lien marked to banks.

(c) Personal guarantees of directors and others.

Note: There is no default, continuing or otherwise, as at the balance sheet date, in repayment of any of the above loans.


Mar 31, 2010

A) Basis for Preparation of Accounts:

The financial statement has been prepared on the historical cost convention on accrual basis of accounting in accordance with applicable accounting standards in India. A summary of important accounting policies applied consistently is set out below. The financial statements have also been, prepared with relevant presentational requirement of the Companies Act, 1956.

b) Fixed Assets:

Fixed assets are stated at their original cost of acquisition including taxes, duties, freight and other incidental expenses related to acquisition, construction and installation of the assets concerned.

c) Depreciation:

Depreciation on fixed assets is provided on straight-line method at the rates and in the manner prescribed in ScheduleXIV to the Companies Act, 1956.

d) Investment:

Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made only if; such a decline is other than temporary in the opinion of the management. The market value of investment is Rs NIL/- (Previous year 2,19,702/-).

e) Employee Benefits:

(I) Gratuity:

Provision for gratuity has been made as per Provision of Gratuity Act, 1972 calculated on the basis of last salary drawn and completed years of service of eligible employees in the absence of actuarial valuation on the basis of past behavior of employees turnover.

(ii) Leave encashment:

Leave encashment benefits are paid / provided in its entirely in the accounts for the year.

(iii) Provident Fund:

Provision for provident fund is made as The Employees Provident Fund and Miscellaneous Provisions Act, 1952as applicable to the company. Other employee benefits are accounted for on accrual basis.

f) Revenue Recognition:

(i) Loan Income

In respect of loan agreements, the income is accrued by applying the implicit rate in the transaction on declining balance on the amount financed for the period of the agreement.

(ii) Loan installments received are apportioned between interest income and principal portion. The principal amount is reduced from the loan outstanding, so as to achieve the constant rate of interest on the remaining balance of the Liability.

(iii) Dividend income on investments is accounted for as and when the right to receive the same is established.

(iv) No income is recognized in respect of Non-Performing assets, if any, as per the prudential norms for income recognition introduced for Non Banking Financial Corporation by Reserve Bank of India vide its notification no.DFC.No.119/DG/(SPT)-98 date 31-01-1998 and revised notification no. DNBS.192/DG (VD-2007 dated 22/02/2007.

g) Expense Accounting:

(i) The Company follows the policy of paying Interest on Collateral Money to customers on due basis.

(ii) All other expenditures are accounted for on accrual basis.

h) Provisioning:

Provisioning in the case of Non-Performing assets is made in accordance with the guidelines of the prudential norms prescribed by the Reserve Bankof India.

i) Taxation:

(i) Provision for current tax is made in accordance with and at the rates specified under the Income-Tax Act, 1961. (ii) In accordance with Accounting Standard 22 -Accounting for taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date.

(iii)Deferred tax assets arising from the timing differences are recognized to the extent there is reasonable certainty that the assets can be realized in future.


Mar 31, 2009

A) Basis for Preparation of Accounts:

The financial statement has been prepared on the historical cost convention on accrual basis of accounting in accordance with applicable accounting standards in India. A summary of important accounting policies applied consistently is set out below. The financial statements have also been prepared with relevant presentational requirement of the Companies Act, 1956.

b) Fixed Assets:

Fixed assets are stated at their original cost of acquisition including taxes, duties, freight and other incidental expenses related to acquisition, construction and installation of the assets concerned.

c) Depreciation:

Depreciation on fixed assets is provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

d) Investment:

Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made only if, such a decline is other than temporary in the opinion of the management. The market value of investment is Rs 2,19,702/- (Previous year 3,02,528/-).

e) Employee Benefits:

(i) Gratuity:

Provision for gratuity has been made as perProvision of Gratuity Act, 1972 calculated on the basis of last salary drawn and completed years of service of eligible employees in the absence of actuarial valuation on the basis of past behavior of employees turnover.

(ii) Leave encashment:

Leave encashment benefits are paid / provided in its entirely in the accounts forthe year.

(iii) Provident Fund:

Provision for provident fund is not made as The Employees Provident Fund and Miscellaneous Provisions Act, 1952 is not applicable to the company.

Other employee benefits are accounted for on accrual basis.

f) Revenue Recognition:

(i) Loan Income

In respect of loan agreements, the income is accrued by applying the implicit rate in the transaction on declining balance on the amount financed for the period of the agreement.

(ii) Loan installments received are apportioned between interest income and principal portion. The principal amount is reduced from the loan outstanding, so as to achieve the constant rate of interest on the remaining balance of the Liability.

(iii) Dividend income on investments is accounted for as and when the right to receive the same is established.

(iv)No income is recognized in respect of Non-Performing assets, if any, as per the prudential norms for income recognition introduced for Non Banking Financial Corporation by Reserve Bank of India vide its notification no.DFC.No.119/DG/(SPT)-98 date 31-01-1998 and revised notification no. DNBS.192/DG (VL)-2007 dated 22/02/2007.

g) ExpenseAccounting:

(i) The Company follows the policy of paying Interest on Collateral Money to customers on due basis. (ii) All other expenditures are accounted for on accrual basis.

h) Provisioning:

Provisioning in the case of Non-Performing assets is made in accordance with the guidelines of the prudential norms prescribed by the Reserve Bank of India.

i) Taxation:

(i) Provision for current tax is made in accordance with and at the rates specified under the Income-Tax Act, 1961.

(ii) In accordance with Accounting Standard 22 Accounting for taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date.

(iii) Deferred tax assets arising from the timing differences are recognized to the extent there is reasonable certainty that the assets can be realized in future.

 
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