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Notes to Accounts of LKP Finance Ltd.

Mar 31, 2017

1. Terms / Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholder in the ensuring Annual General Meeting. During the year ended 31st March,2017, the amount of per share dividend recommended and provided for distributions to equity shareholders is Rs.2/- per share.

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

2. Shares held by holding / ultimate holding company and /or their subsidiaries / associates : NIL

3. There is no movement in the share capital during the current and previous year.

4. Litigation Matter:

5. Claim against the Company not acknowledged as debt Rs. 33.99 Lacs , against which the company has deposited full amount in the Hon’ble High Court of Mumbai. The matter is pending since 2007

6. Against a penalty order for Rs 180 lakhs received from the Enforcement Directorate in respect of a matter which arose in 1996 pertaining to the erstwhile money changing division of the Company , the Company has preferred an appeal in the Hon’ble Madras High . The Company has provided a bank guarantee to cover the demand. The matter is pending The Management is of the opinion that a cash outflow is unlikely and therefore no provision is considered necessary .

7. A winding up petition filed by the Company against a borrower has been admitted by the Hon’ble High court of Mumbai. The recovery if any will be accounted for when the money is received from official Liquidator.

8. The Company has filed an arbitration case (Rs. 9.27 Lacs ) against a borrower for which it has received a favourable award from the arbitrator. The opposing party has filed an appeal in the Hon’ble High court of Mumbai for which the matter is pending.

9. The Company has filed recovery suits in the Mumbai High Court against three parties for an amount of Rs 33.38 crores to whom loans/advances were given. The matter is pending. Any recoveries will be accounted for in the year of recovery.

10. With a view to demerge its SEBI Registered Intermediaries business, the company filed a scheme of arrangement with the Honourable Bombay High Court for which approval was received during the year. As per the Scheme, the investment of the Company in LKP Securities Limited (erstwhile subsidiary) of equity shares and preference shares were cancelled. This has resulted in reduction of Investments in the books of the Company by Rs.39.79 Crores and corresponding reduction in the Reserves of the Company. As per the Scheme, LKP Securities Limited has on 8th July,2o16 allotted 7,31,83,896 equity shares of Rs.2/- each fully paid up to the shareholders of LKP Finance Limited in the ratio of 6 shares of LKP Securities for every share held in LKP Finance Limited.

11. The company has contributed towards its gratuity liability for employees to Life Insurance Corporation of India - Group Gratuity Scheme based on the annual contribution as intimated by Life Insurance Corporation of India.

12. Corporate Social Responsibility (CSR)

As per Section 135 of the Companies Act , 2013, a CSR Committee has been formed by the company. The areas for CSR activities are as per Schedule VII of the Companies Act,2013. An amount of Rs. 27.60 Lakhs has been spent for the CSR activities during the year.

13. Income Tax assessments have been completed up to Asst. Year 2014- 2015. There are no demands outstanding.

14. Balances shown under the head of Current Assets, Loans and Advances are considered as good and recoverable by the management.

15. Prudential Norms of the Reserve bank of India (RBI):

The Prudential Norms of the RBI require the company to derecognize certain income and make provisions for nonperforming assets.

In compliance with Guidelines prescribed by Reserve Bank of India for NBFCs, the company has

16. provided 0.25% of Standard Assets amounting to Rs. NIL ( Previous year Rs NIL ). The Contingent Provision against Standard Assets as on 31.03.2017 is Rs 38.62 lacs ( Previous year Rs 38.62 lacs)

17. appropriated 20% of the Net Profits Rs 201.47 lacs ( Previous year Rs 177.45 lacs) to Special Reserve Fund.

18. Tax Deducted at Source on income: Rs. 112.19 lacs (Previous Year Rs. 129.82)

19. The company has no amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at 31st March, 2017.

20. There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at 31st March, 2017

21. Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI. The company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. 5,01,800 ESOPs are outstanding as on 31st March,2017. None of the options have been exercised so far.

22. During the year the company has entered into Futures & Options contracts on the National Stock Exchange in the Equity & Currency Segments and on the Multi Commodity Exchange in the commodity segment. The open position as on 31.03.2017 is Rs 1,311.39 lacs (Previous Year Rs 7,048.06 lacs).

23. Balance sheet of a non deposit taking non-banking financial company (As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms {Reserve Bank} Directions, 2007)

24. At the closure of 08th November, 2016 The Company was having cash balance of Rs.5,518/- which does not include any specified bank notes. (Circular no. G.S.R. as Per 308 (E) dated 30th March,2017.

25. Previous Years Figures are regrouped / reclassified wherever necessary.


Mar 31, 2015

1. Contingent Liabilities:

(a) Guarantee given to a Bank on behalf of a Subsidiary - Rs 8 crores. (Previous Year Rs 8 crores)

(b) Claim against the Company not acknowledged as debt Rs. 33.99 Lacs , against which the company has deposited full amount in the Honorable High Court of Mumbai. The matter is pending.

2. The company has contributed towards its gratuity liability for employees to Life Insurance Corporation of India - Group Gratuity Scheme based on the annual contribution as intimated by Life Insurance Corporation of India.

3. Balances shown under the head of Current Assets, Loans and Advances are considered as good and recoverable by the management.

4. Prudential Norms of the Reserve bank of India (RBI):

The Prudential Norms of the RBI require the company to derecognize certain income and make provisions for non- performing assets.

In compliance with Guidelines prescribed by Reserve Bank of India for NBFCs, the company has

(a) provided 0.25% of Standard Assets amounting to Rs. NIL (Previous year Rs NIL). The Contingent Provision against Standard Assets as on 31.03.2015 is Rs 38.62 lacs (Previous year Rs 38.62 lacs)

(b) appropriated 20% of the Net Profits Rs 354.74 lacs ( Previous year Rs 149.53 lacs) to Special Reserve Fund.

5. Tax Deducted at Source on income: Rs. 106.34 lacs (Previous Year Rs. 178.24 lacs)

6. The company has provided Rs 146.16 lacs (Net) ( Previous year Rs 163.16 lacs) against NPAs

7. Short Term Loans and Advance include Rs NIL due from a Director ( Previous year Rs 6 lacs)

8. The company has no amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at 31st March, 2015.

9. There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at 31st March, 2015

10. Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI. The company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. 15,23,000 ESOPs are outstanding as on 31st March,2015. None of the options have been exercised so far.

11. During the year the company has entered into Futures & Options contracts on the National Stock Exchange in the Equity Segment and on the Multi Commodity Exchange in the commodity segment. The open position as on 31.03.2015 is Rs 4,246.31 lacs (Previous Year Rs 128.42 lacs).

12. The Management has reviewed the loans against shares portfolio as at the year end. On such review and inspite of best efforts made to recover the amounts due, Rs 3325.42 lacs was found to be bad and irrecoverable, and the same have been written off in the accounts.

13. Balance sheet of a non deposit taking non-banking financial company

(As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms {Reserve bANK} dIRECTIONS, 2007)


Mar 31, 2014

1. Contingent Liabilities:

(a) Guarantee given to a Bank on behalf of a Subsidiary - Rs 8 crores. (Previous Year Rs 8 crores)

(b) Claim against the Company not acknowledged as debt Rs. 33.99 Lacs , against which the company has deposited full amount in the Honorable High Court of Mumbai. The matter is pending.

2. The company has contributed towards its gratuity liability for employees to Life Insurance Corporation of India - Group Gratuity Scheme based on the annual contribution as intimated by Life Insurance Corporation of India.

3. Prudential Norms of the Reserve bank of India (RBI):

The Prudential Norms of the RBI require the company to derecognize certain income and make provisions for non- performing assets.

In compliance with Guidelines prescribed by Reserve Bank of India for NBFCs, the company has

(a) provided 0.25% of Standard Assets amounting to Rs. NIL ( Previous year Rs 21.25 lacs). The Contingent Provision against Standard Assets as on 31.03.2014 is Rs 38.62 lacs (Previous year Rs 53.01 lacs)

(b) appropriated 20% of the Net Profits Rs 149.53 lacs (Previous year Rs 134.97 lacs) to Special Reserve Fund.

(c) provided Rs 163.16 lacs ( Previous year Rs 103.23) against Sub Standard Assets under the guidelines.

4. Tax Deducted at Source on income: Rs. 178.24 lacs (Previous Year Rs. 183.30 lacs)

5. Short Term Loans and Advance include Rs 6 lacs due from a Director (Maximum balance Rs Rs 6 lacs) (Previous year Rs Nil)

6. The company has no amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at 31st March, 2014.

7. There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at 31st March, 2014

8. Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI. The company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. The company has charged Rs 0.31 lacs to the statement of Profit and loss of the year. 8,12,625 ESOPs are outstanding as on 31st March,2014. None of the options have been exercised so far.

9. During the year the company has entered into Futures & Options contracts on the National Stock Exchange in the Equity Segment and on the Multi Commodity Exchange in the commodity segment. The open position as on 31.03.2014 is Rs 128.42 lacs (Previous Year Rs 459.25 lacs).

10. Balance sheet of a non deposit taking non-banking financial company (As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms {Reserve Bank} Directions, 2007)

11. Previous Years Figures are regrouped / reclassified wherever necessary.


Mar 31, 2013

1. Contingent Liabilities:

(a) Guarantee given to a Bank on behalf of a Subsidiary - Rs 8.00 crores. (Previous Year Rs 8.00 crores)

(b) Claim against the Company not acknowledged as debt Rs. 33.99 Lacs , against which the company has deposited the money in the Honorable High Court of Mumbai.

2. The company has contributed towards its gratuity liability for employees to Life Insurance Corporation of India - Group Gratuity Scheme based on the annual contribution as intimated by Life Insurance Corporation of India.

3. Taxation :

A. The company has made adequate provision for Income Tax based on the current year''s taxable income. As the tax under Minimum Alternative Tax is higher than the tax computed under the normal provisions of the Income Tax Act, 1961 provision for current tax has been made as per Minimum Alternative Tax provisions of the Income Tax Act, 1961. The company has made adjustment of equivalent amount of tax provision for the year by availing MAT Credit of earlier years.

B. Tax expenses for the year comprises of :

i. Current Tax U/s 115JB of Income Tax Act, 1961 Rs 235.13 lacs

Less : MAT credit adjustment of earlier years Rs 235.13 lacs

ii. Deferred Tax Asset Written off Rs 358.81 lacs

iii. Excess provision of tax of earlier year Written back Rs 2.62 lacs Total Rs 356.19

C. Income Tax assessments have been completed upto Asst. Year 2011- 2012. There are no pending demands in respect of completed assessments.

4. Prudential Norms of the Reserve bank of India (RBI):

The Prudential Norms of the RBI require the company to derecognize certain income and make provisions for non- performing assets. The market value of the quoted shares as at 31.03.2013 was lower by Rs 389.26 lacs as compared to the carrying cost.The company is of the view that this fall in the market value of quoted investments is temporary and in line with the ICAI guidelines no provision need be made. However as an abundant caution the company has decided to make additional provision of Rs 24.19 lacs in addition to existing provision of Rs 14.73 lacs to make overall provision of Rs 38.93 lacs to cover 10% of the shortfall in the market value of investments.

5. In compliance with Guidelines prescribed by Reserve Bank of India for NBFCs, the company has

(a) provided 0.25% of Standard Assets amounting to Rs. 21.25 lacs ( Previous year Rs 31.76 lacs)

(b) appropriated 20% ofthe Net Profits Rs 134.97 lacs ( Previous year Rs 97.29 lacs) to Special Reserve Fund.

(c) provided Rs 103.23 lacs ( Previous year Rs Nil) under the guidlines

6. Tax Deducted at Source on income: Rs. 183.30 lacs (Previous Year Rs. 94.77 lacs)

7. The company has no amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at 31st March, 2013.

8. There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at 31st March, 2013

9. Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI. The company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. The company had granted 8,25,000 ESOPs in the year 2010-11. Out of these 4,35,000 ESOPs were surrendered during the year. The company has further granted 4,47,000 ESOPs during the year. Consequent to the surrender of ESOPs Rs 19.60 lacs (net) ESOP Compensation Expenses has been reversed to the statement of profit and loss which was charged to the statement of profit and loss in earlier years. There is no charge to the Statement of profit and loss in respect of ESOPs granted during the year as the grant price was higher than the fair value on the date of grant. None of the options have been exercised so far.

10. During the year the company has entered into Futures & Options contracts on the National Stock Exchange in the Equity Segment and on the Multi Commodity Exchange in the commodity segment. The open position as on 31.03.2013 is Rs 459.25 lacs (Previous Year Rs 1774.15 lacs).

11. Balance sheet of a non deposit taking non-banking financial company (As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms {Reserve Bank} Directions, 2007)

12. Previous Years Figures are regrouped / reclassified wherever necessary.


Mar 31, 2012

1. Contingent Liabilities:

(a) Guarantee given to a Bank on behalf of a Subsidiary - Rs 8.00 crores. (Previous Year Rs 5.00 crores)

(b) Claim against the Company not acknowledged as debt Rs. 33.99 Lacs, against which the company has deposited the money in the Honorable High Court of Mumbai.

2. The company has contributed towards its gratuity liability for employees to Life Insurance Corporation of India - Group Gratuity Scheme based on the annual contribution as intimated by Life Insurance Corporation of India.

3. Taxation:

a. The company has made adequate provision for Income Tax based on the current year's taxable income. As the tax under Minimum Alternative Tax is higher than the tax computed under the normal provisions of the Income Tax Act, 1961 provision for current tax has been made as per Minimum Alternative Tax provisions of the Income Tax Act, 1961.

c. Income Tax assessments have been completed upto Asst. Year 2009-2010. There are no pending demands in respect of completed assessments. .

4. Prudential Norms of the Reserve bank of India (RBI):

The Company has not changed its accounting policy for income recognition (which is on accrual basis). The Prudential Norms of the RBI require the company to derecognize certain income and make provisions for non-performing assets. As the market value of the quoted shares as at 31.03.2012 was lower as compared to the carrying cost, the Company has made full provision towards diminution in value of Non Current Quoted Investments Rs 14,73,053/-

5. In compliance with Guidelines prescribed by Reserve Bank of India for NBFCs, the company has

(a) provided 0.25% of Standard Assets amounting to Rs. 31.76 lacs

(b) appropriated 20% of the Net Profits Rs 97.29 lacs (Previous year Rs 522.34 lacs) to Special Reserve Fund.

6. Tax Deducted at Source on income: Rs. 94.77 lacs (Previous Year Rs. 61.21 lacs)

7. The company has no amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at 31st March, 2012.

8. There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at 31st March, 2012

9. Measurement and disclosure of the employee share-based payment plans is done in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on Accounting for Employee Share-based Payments, issued by ICAI. The Company measures compensation cost relating to employee stock options using the intrinsic value method. Compensation expense is amortized over the vesting period of the option on a straight line basis. During the year Rs 20,71,135/- (Previous year Rs 16,04,863/-) has been amortised on account of the Employees' Stock Option Scheme 2010. None of the options have been exercised so far.

10. During the year the company has entered into Futures & Options contracts on the National Stock Exchange in the Equity Segment and on the Multi Commodity Exchange in the commodity segment. The open position as on 31.03.2012 is Rs 1774.15 lacs (Previous Year Rs 557.57 lacs).

11. During the year the Company carried out a physical verification of Furniture & Fixtures and Office Equipments (including computers). The physical list included some very old items of furniture and office equipments(including computers) which were not in good condition and unserviceable and unusable. These assets have been depreciated over 95% of the original cost in the books of accounts. The Company has decided to continue with such assets which have some useful life and are in good condition and write off those assets which are unserviceable and have no salvage value. Accordingly the Company has written of FRs 7,10,321/- to the Statement of P&L Account

12. Till the year ended 31st March,2011, the company was using pre- revised Schedule VI to the Companies Act, 1956 for preparation and presentation of its financial statements. During the year ended 31st March,2012, the revised Schedule VI notified under the Companies Act, 1961 has become applicable to the company. The company has reclassified previous figures to conform to this years classification.


Mar 31, 2010

1. Contingent Liabilities:

a) Guarantee given to a Bank — Rs 5.00 crores.(Previous Year Rs 5.00 crores)

b) Claim against the Company not acknowledged as Debt Rs 33.99 lacs (full amount deposited in the Mumbai High Court) (Previous Year Rs 33.99 lacs)

2. On 25* February 2008 the Company had issued 10,00,000 Share Warrants to the Promoters at a price of Rs 194 per warrant and received 10% of the issue price (i.e Rs 19.40 per Warrant). The option of conversion of warrants into Equity Shares was to be exercised within a period of 18 months from the date of issue of these warrants. As the warrants holders have not exercised their option for conversion within 18 months period the amounts received towards these share warrants were forfeited during the year and transferred to Capital Reserve.

3. The company after obtaining shareholders approval announced buy back of its Equity Shares (pursuant to the provisions of the Companies Act, 1956 (Act) and in compliance of the Securities and Exchange Board of India (Buy back of Securities) Regulations, 1998) on 10* February, 2009. The shareholders approved a buy back for a maximum amount of Rs 945 lacs and a maximum price of Rs 90/- per equity share. The scheme was operative upto July 2009.The company bought back 3,61,263 Shares during April / July 2009 and the total shares purchased during the full period (i.e. February 2009 to July 2009) were 4,50,000 Equity Shares. These equity shares have been extinguished. The company expended Rs 301.63 lacs for purchase of 3,61,263 equity shares (at an average price of Rs 83.35 per share (previous year 88,737 shares at an average price of Rs 54.67 per share). The excess amount paid over the face value of equity shares has been drawn from Share Premium Account.

4. During the year the company nab issued 7,27,489 11% Compulsorily Convertible Debentures^ (CCDs) to a Corporate at a price of Rs 120/- convertible into equal number of equity shares to be converted between 5th March 2010 to 4th March 2011.The said CCDs have been converted into 7,27,489 equity shares on 31.03.2010 .The money received has been utilized for meeting the working capital requirements of the Company.

5. The company has contributed towards its gratuity liability for employees to Life Insurance Corporation of India - Group Gratuity Scheme based on the annual contribution as intimated by Life Insurance Corporation of India.

6 Taxation:

a. The company has made adequate provision for Income Tax based on the current years taxable income. As the tax under Minimum Alternative Tax is higher than the tax computed under the normal provisions of the Income Tax Act, 1961 provision for current tax has been made as per Minimum Alternative Tax provisions of the Income Tax Act, 1961.

b. Assessments have been completed upto Asst. Year 2007-2008. Appeal has been filed with CIT (A) for Assessment Year 2004- 2005, which is pending and the demand is NIL.

7. As per the Accounting Standard 18, disclosures of transactions with the related parties as defined in the Accounting Standards are given below:

8. Prudential Norms of the Reserve bank of India (RBI):

The Company has not changed its accounting policy for income recognition (which is on accrual basis). The Prudential Norms of the RBI require the company to derecognize certain income and make provisions for non-performing assets. As the market value of the quoted shares as at 31.03.2010 was higher as compared to the cost, no provision is required.

9. In compliance with Section 45IC of the Reserve Bank of India Act, the company has appropriated 20% of the Net Profit to Special Reserve Fund, (including for the financial year 2008-2009 Rs 1708.25 lacs)

10. Tax Deducted at Source on income: Rs. 110.77 lacs (Previous YearRs. 190.16 lacs)

11. The company has no amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at 31" March, 2010.

12. There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at 3 Is March, 2010

13. Previous Years Figures are regrouped / reclassified wherever necessary.

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