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Notes to Accounts of Motilal Oswal Financial Services Ltd.

Mar 31, 2014

Note 1 : Nature of Business:

The Company is a Non-banking Financial Company registered with the Reserve Bank of India ("RBI") under section 45-IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the certificate of Registration from the RBI on 5th April, 2006, enabling the Company to carry on business as a Non-banking Finance Company.

In accordance with the provisions of section 45- IC of the RBI Act, 1934, the Company has created a Reserve Fund & during the year, the Company has transferred an amount of R 78.62 in mn (Previous Year R 77.50 in mn) to Reserve Fund, being 20% of the profit After Tax.

Note 2 : Segment Reporting

The Company is engaged in single segment of Fund based activities and there are no separate reportable segments as defi ned in AS – 17.

Note 3: Operating Lease

During the year, Rs 0.19 mn (P.Y Rs 0.46 mn) has been recognised as Lease Payments in the Statement of profit and Loss under the head "Rents".

During the year, Rs 35.85 mn (P.Y Rs 27.98 mn) has been recognised as Rent income in the Statement of profit and Loss under the head "Other operating revenue".

NOTE 4 :

Exceptional items comprises of amount of Rs 12.95 mn provided by the company in respect of its Loan given to client in respect of the client''s exposure to commodities transactions on National Spot Exchange Limited (NSEL).

The Exceptional items for the previous year ended 31st March, 2013 represents ''Provision and write off for doubtful non performing assets of Rs 51.30 mn & Rs 112.50 mn respectively.

NOTE 5 :

During the year, the Company has mortgaged its Immovable property "Motilal Oswal Tower" to HDFC Bank Limited for the banking facilities availed by its subsidiary Motilal Oswal Securities Limited.

NOTE 6 :

During the year, the Company has started applying principles of Accounting Standard -30 "Financial Instruments : Recognition and Measurement" to the arbitrage / proprietary trading transactions entered into as against earlier accounting policy of recognizing these transactions on the principles of prudence as enunciated in Accounting Statndard-1 "Disclosure of Accounting Policies." Accordingly in respect of these transactions, the company has designated the Financial assets of Equity / Currency and Commodities, and its Corresponding Derivatives positions entered at "fair value through profit or loss". Such designations are considered by the Company to eliminate / signifi cantly reduce measurement / recognition inconsistency. These instruments and all other derivative contracts including embedded derivatives are measured at fair value and changes therein are recognized in the statement of profit or loss. As a result of this change, profit before tax for the current year has increased by R 8.54 mn.

NOTE 7 :

No debenture redemption reserve is being created for issue of 2,500 Principal Protected Secured Redeemable Non-Convertible Debentures of Rs 100,000/- each. The Ministry of Company Affairs has vide General Circular No. 9/2000 No. 6/3/20001-CL.V dated April, 18th, 2002 clarifi ed that NBFCs need not create a debenture redemption reserve as specifi ed under section 117C of the Companies Act, 1956 in respect of privately placed debentures.

NOTE 8 :

1) During the year, Crisil Limited reaffirmed the Credit Rating of "CRISIL A1 " (pronounced ''CRISIL A One Plus'') to the Short Term Debt Programme of Rs 1500 mn of the Company. The rating indicates very strong degree of safety regarding timely servicing of financial obligations.

2) During the year, ICRA Limited assigned the credit rating of "PP-MLD[ICRA] AA-" Rating with a stable outlook to the long term debt programme of Rs 250 mn of the company. The rating indicates very strong degree of safety regarding timely servicing of financial obligations.

NOTE 9 :

There is no amount outstanding for more than thirty days to any Small Scale Industrial Undertaking as at the Balance Sheet date. There are no Micro, Small and Medium Enterprises to whom the Company owes dues, which are outstanding for more than forty five days as at the Balance Sheet date. The Micro, Small and Medium Enterprises have been identifi ed on the basis of the information provided by the vendors to the Company.

NOTE 10 :

During the current year, Company has made a provision Rs 0.94 mn (Previous Year Rs 2.06 mn) being 0.25% of Standard Assets as per the Notifi cation No DNBS.222/CGM(US)-2011 dated 17th January, 2011 issued by RBI.

NOTE 11 :

In the opinion of the Board of Directors, all current assets, loans & advances would be realizable at least of an amount equal to the amount at which they are stated in the balance sheet.

There is no impairment loss recognised on fixed assets.

Note 12 : Contingent Liability and Commitment (To the Extent Not Provided For)

12.1 Contingent Liabilities:

The company has given corporate guarantees of Rs 110 mn (Previous Year: Rs 51.25 mn Net of Margins) to various banks for its subsidiary Motilal Oswal Commodity Brokers Pvt. Ltd.

Demand in respect of Income Tax matters for which appeal is pending is Rs 19.94 mn (Previous Year Rs 10.30 mn). This is disputed by the Company and hence not provided for in the books of accounts.The Company has paid demand of Rs 5.03 mn till date.

12.2 Capital Commitment (to the extent not provided for)

1. The company has given capital commitment of 10% (subject to maximum limit of Rs 450 mn) in respect of total capital commitment of Business Excellence Trust, the Trust sponsored by the Company under the Indian Trust Act, 1982. Till date, the Company has contributed an amount of Rs 438.75 mn (Previous year: Rs 438.75 mn) towards its capital contribution as per the draw down intimations received from the Fund. During the year, company has received back Nil (Previous Year: 28.95 mn) towards the capital return from the fund.

2. The company has given a capital commitment of Rs 565 mn (Previous Year: Rs 550 mn) in respect of Business Excellence Trust II, the Trust sponsored by the Company under the Indian Trust Act, 1982. The Company has contributed an amount of Rs 114.05 mn (Previous Year: Rs 110 mn) as per the draw down intimations received from the Fund.

3. The Company has given a capital commitment of an amount of Rs 170 mn (Previous Year: 170 mn) to India Realty Excellence Fund launched by Realty Excellence Trust. In respect to this, the Company has contributed an amount of Rs 170 mn (Previous Year : Rs 170 mn) as per the draw down intimations received from the Fund. During the year company has received back Rs 65.45 mn (Previous Year: Rs 33.05 mn) towards the capital return from the fund.

4. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) is Rs 75.90 mn (Previous Year: Rs 24.89 mn).

NOTE 13 : Related Party Disclosure :

I. Names of Related Parties :- (as certified by Management)

A) Holding Company: – Passionate Investment Management Private Limited

B) Enterprises where control exists Subsidiary companies: – Motilal Oswal Securities Limited – Motilal Oswal Investment Advisors Private Limited

– MOPE Investment Advisors Private Limited (Formerly known as Motilal Oswal Private Equity Advisors Private Limited)

– Motilal Oswal Commodities Broker Private Limited

– Motilal Oswal Capital Markets Private Limited

– Motilal Oswal Wealth Management Limited (Formerly known as Motilal Oswal Wealth Management Private Limited)

– Motilal Oswal Insurance Brokers Private Limited

– Motilal Oswal Asset Management Company Limited

– Motilal Oswal Trustee Company Limited

– Motilal Oswal Capital Market (Hongkong) Private Limited

– Motilal Oswal Capital Markets (Singapore) Pte. Limited

– Motilal Oswal Securities International Private Limited

– Motilal Oswal Real Estate Investment Advisors Private Limited

– Motilal Oswal Real Estate Investment Advisors II Private Limited

– Aspire Home Finance Corporation Limited

– India Business Excellence Management Company

C) Enterprises in which Key Managerial Personnel exercises Significant Influence: – Motilal Oswal Foundation – Motilal Oswal-HUF – Raamdeo Agarwal (HUF)

D) Key Management Personnel: Mr. Motilal Oswal – Chairman & Managing Director Mr. Raamdeo Agarawal – Joint Managing Director

E) Relatives of Key Management Personnel:

a) Sunita Agrawal – Spouse of Joint Managing Director

b) Vimla Oswal – Spouse of Chairman & Managing Director

NOTE 14 :

Disclosure as per guidelines for NBFC-ND-SI as regards capital adequacy, liquidity and disclosure norms

NOTE 15 : Corporate Social Responsibility

Recognizing the responsibilities towards society, as a part of on-going activities, the company has contributed towards various Corporate Social Responsibility initiatives like supporting underprivileged in education, medical treatments, etc and various other charitable and noble aids.

NOTE 16 :

Previous year figures have been regrouped/reclassified wherever necessary to make them comparable.


Mar 31, 2013

Note 1 : Nature Of Business:

The Company is a Non-banking Financial Company registered with the Reserve Bank of India ("RBI") under section 45-IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificate of Registration from the RBI on 5th April, 2006, enabling the Company to carry on business as a Non-banking Finance Company.

In accordance with the provisions of section 45- IC of the RBI Act, 1934, the Company has created a Reserve Fund & during the year, the Company has transferred an amount of R 77.50 in millions (Previous Year R 112.59 in millions ) to Reserve Fund, it being 20% of the Profit After Tax.

Note 2 : Segment Reporting

The Company is engaged in single segment of Fund based activities and there are no separate reportable segments as defined in AS - 17.

NOTE 3 :

The Exceptional items for the year ended 31st March, 2013 represents ''Provision for doubtful non performing assets" & "Write off of doubtful non performing asset" of R 51.30 millions (Previous Year : 23.14 millions) & R 112.50 millions respectively.

NOTE 4 :

During the year company has issued 2,500 Principal Protected Secured Redeemable Non-Convertible Debentures by way of private placement, details of the same are as under: and are secured in favor of debenture trustees against loans receivables of the company. The Investor have the Put Option to Redeem the Debenture in Part/Full on any Business day after 18 Month from the date of allotment."

NOTE 5 :

With effect from October 5th, 2012 the Passionate Investment Management Private Limited, promoter of the company, became the holding company of the company due to inter-se transfer of the shares between the promoter''s group.

NOTE 6 :

During the year company has received income distribution of R 81.48 millions from India Business Excellence Fund and the same has been included in the Statement of Profit & Loss of the Company for the year ended 31st March, 2013.

NOTE 7 :

No debenture redemption reserve is being created for issue of 2,500 Principal Protected Secured Redeemable Non-Convertible Debentures of R 100,000/- each. The Ministry of Company Affairs has vide General Circular No. 9/2000 No. 6/3/20001-CL.V dated April, 18th, 2002 clarified that NBFCs need not create a debenture redemption reserve as specified under section 117C of the Companies Act, 1956 in respect of privately placed debentures.

NOTE 8 :

1) During the year, Crisil Limited reaffirmed the Credit Rating of "CRISIL A1 " (pronounced ''CRISIL A One Plus'') to the Short Term Debt Programme of 1,500 millions of the Company. The rating indicates very strong degree of safety regarding timely servicing of financial obligations.

2) During the year, ICRA Limited assigned the credit rating of "PP-MLD[ICRA] AA-" Rating with a stable outlook to the long term debt programme of 250 millions of the company. The rating indicates very strong degree of safety regarding timely servicing of financial obligations.

NOTE 9 :

The Company has not received any intimation from "suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid / payable as required under the said Act have not been given.

NOTE 10 :

During the current year, Company has made a provision R 2.06 millions (previous year R8.28 in millions) being 0.25% of its standard assets as per the Notification No DNBS.222/CGM(US)-2011 dated 17th January, 2011 issued by RBI.

NOTE 11 :

In the opinion of the board of directors, all current assets, loans & advances would be realizable at least of an amount equal to the amount at which they are stated in the balance sheet. Hence no impairment loss recognised on fixed assets.

NOTE 12 : Related Party Disclosure :

I. Names of Related Parties : (as certified by Management)

A) Holding Company:

- Passionate Investment Management Private Limited (From 5th October,2012)

B) Enterprises where control exists:

Subsidiary companies:

- Motilal Oswal Securities Limited

- Motilal Oswal Investment Advisors Private Limited

- Motilal Oswal Private Equity Advisors Private Limited

- Motilal Oswal Commodities Broker Private Limited

- Motilal Oswal Capital Markets Private Limited

- Motilal Oswal Wealth Management Private Limited

- Motilal Oswal Insurance Brokers Private Limited

- Motilal Oswal Asset Management Company Limited

- Motilal Oswal Trustee Company Limited

- Motilal Oswal Capital Market (Hongkong) Private Limited

- Motilal Oswal Capital Markets (Singapore) Pte. Limited

- Motilal Oswal Securities International Private Limited

C) Enterprises in which Key Managerial Personnel exercise Significant Influence:

- Nagori Agro & Cattle Feeds Private Limited

- Rishabh Securities Private Limited

- Windwell Securities Private Limited

- Textile Exports Private Limited

- Raamdeo Agarawal (HUF )

- VISU Associates - Partnership firm

- OSAG Enterprises LLP

- Motilal Oswal Foundation

D) Key Management Personnel:

Mr. Motilal Oswal - Chairman & Managing Director

Mr. Raamdeo Agarawal - Joint Managing Director

E) Relatives of Key Management Personnel:

Mrs. Sunita Agrawal - Spouse of Joint Managing Director Mrs. Vimla Oswal - Spouse of Chairman & Managing Director

Note 13 : Contingent Liability and Commitment (To the Extent Not Provided For)

13.1 Contingent Liabilities:

The company has given corporate guarantees (Net of Margins) of R 51.25 millions (Previous Year: R Nil) to various banks for its subsidiary Motilal Oswal Commodity Brokers Pvt. Ltd.

Demand in respect of Income Tax matters for which appeal is pending is R 9.54 millions (Previous Year R 4.10 millions). This is disputed by the Company and hence not provided for in the books of accounts.

13.2 Capital Commitment

1. The company has given capital commitment of 10% (subject to maximum limit of R 450 millions) in respect of total capital commitment of Business Excellence Trust, the Trust sponsored by the Company under the Indian Trust Act, 1 982. The Company has contributed an amount of R 438.75 millions (Previous year: R 438.75 millions) towards its capital contribution as per the draw down intimations received from the Fund. During the year company has received back R 28.95 millions (Previous Year: 57.35 millions) towards the capital return from the fund.

2. The company has given a capital commitment of R 550 millions (Previous Year: 400 millions) in respect of Business Excellence Trust II, the Trust sponsored by the Company under the Indian Trust Act, 1982. The Company has contributed an amount of R 110 millions (Previous Year: 40 millions) as per the draw down intimations received from the Fund.

3. The Company has given a capital commitment of an amount of R 170 millions (Previous Year: 170 millions) to India Realty Excellence Fund launched by Realty Excellence Trust. In respect to this, the Company has contributed an amount of R 170 millions (Previous Year: 136 millions) as per the draw down intimations received from the Fund . During the year company has received back R 33.05 millions (Previous Year: Nil) towards the capital return from the fund.

4. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) is R 24.89 millions (Previous Year: R 86.96 millions).

NOTE 14:

During the current finacial year the company has classified the office premises of R 164.42 millions which has been leased out to other subsidiaries as Investment in Property under Non Current Investment. The Tranfer has been done on WDV on the date on which the premises were leased out.

NOTE 15 : Corporate Social Responsibility

Recognizing the responsibilities towards society, as a part of on -going activities, the company has contributed towards various Corporate Social Responsibility initiatives like supporting underprivileged in education ,medical treatments, etc and various other charitable and noble aids.

NOTE 16 :

Previous year figures have been regrouped/reclassified wherever necessary to make them comparable.


Mar 31, 2010

1 Nature of Business:

The Company is Non-banking Financial Company registered with the Reserve Bank of India ("RBI") under section 45-IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificate of Registration from the RBI on 5th April, 2006, enabling the Company to carry on business as a Non-banking Finance Company. In accordance with the provisions of section 45- IC of the RBI Act, 1934, the Company has created a Reserve Fund & during the year, the Company has transferred an amount of Rs. 84,791 (in thousands) (Previous Year Rs. 90,623 in thousands) to Reserve Fund, it being 20% of the Profit After Tax.

2 Contingent Liabilities:

The Company has given corporate guarantees of Rs. 92,000 (in thousands) (Previous Year: Rs. 47,000 in thousands) to various banks for its subsidiary Motilal Oswal Commodity Brokers Pvt. Ltd. & Rs. 300,000 (in thousands) (Previous Year: Rs. NIL) to Pun|ab National Bank for its subsidiary Motilal Oswal Securities Limited.

Demand in respect of Income Tax matters for which appeal is pending is Rs. 2,499 (in thousands) (Previous Year: Rs. Nil). This is disputed by the Company and hence not provided for in the books of accounts.

3. Employees Stock Options Scheme (ESOS) :

During the year the Company has granted 1,747,500 Employee Stock Options to various employees of the Company and its subsidiary Companies.

The Company has adopted intrinsic value method of accounting Employee Compensation Cost in respect of ESOS. The intrinsic value of shares is excess of market price of the shares under ESOS over the exercise price. Employee Compensation Cost is accounted for by amortizing the intrinsic value on the straight line basis over the vesting period. The total amount to be amortized as at March 3 1, 2010 over the balance vesting period is Rs 493 (in thousands) (Previous year - Rs. 772 in thousands)

3.1 Commercial paper & Non-convertible debentures:

The maximum balance outstanding during the year in respect of commercial paper & Non convertible debentures was Rs. 1,000,000 (in thousands) (PY Rs. 2,000,000 in thousands) & Rs. 1,100,000 (in thousands) (PY Rs. Nil) respectively.

3.2 During the year Motilal Insurance Brokers Pvt. Ltd. became the Subsidiary of Motilal Oswal Financial Services Limited by virtue of acquiring of 99% stake & Motilal Oswal Asset Management Company Limited & Motilal Oswal Trustee Company Limited became the subsidiary of Motilal Oswal Securities Limited (Subsidiary of Motilal Oswal Financial Services Limited) by virtue of acquiring of 100% stake.

3.3 Related Party Disclosure :

Names of Related Parties :- (as certified by Management)

A) Enterprises where control exists Subsidiary comparies:

a) Motilal Oswal Securities Limited b) Motilal Oswal Investment Advisors Private Limited c) Motilal Oswal Private Equity Advisors Private Limited d) Motilal Oswal Commodities Broker Private Limited e) Motilal Oswal Capital Market Private Limited f) Antop Trade-s Private Limited g) Motilal Oswal Insurance Brokers Private Limited h) Motilal Oswal Asset Management Company Limited i) Motilal Oswal Trustee Company Limited

B) Enterprises in which Key Managerial Personnel exercise Significant Influence :

1. Passionate Investment Management Private Limited 2. Nagori Agro & Cattle Feeds Private Limited 3. Rishabh Securities Private Limited 4. Windwell Securities Private Limited 5. Textile Exports Private Limited

C) Key Management Personnel:

Mr. Motilal Oswal - Chairman & Managing Director Mr. Raamdeo Agrawal - Joint Managing Director

3.4 Arbitrage transactions:

The arbitrage transactions of the Company, encompass of purchase / sale of equity shares/securities and equity derivatives which comprise a portfolio. In view of this, during the year the company has accounted the arbitrage transactions on portfolio basis instead of scrip basis and is marked to market. The transactions of cash segment are valued on weighted average basis as done for Derivatives segment as against first-in-first-out followed earlier year. Accordingly, if the net difference is loss (being an unrealized loss), provision is made in the Profit & Loss Account and if the net difference is a gain (being an unrealized gain), credit is lot taken for the same on the principle of prudence.

Pursuant to above change, profit for the year ended 3 1st March, 2010 is increased by Rs. 8,891/- (in thousands).

3.5 The company pledges Stcck in Trade towards margin requirement for trading/arbitrage in equity/derivatives.

3.6 During the year, CRISIL Limited assigned the Credit Rating of PI + (pronounced P One Plus) to the Short Term Debt Programme of Rs. 4,000,000 (in thousands) of the Company.

3.7 Capital Commitment:

1. Out of the capital commitment of 10% (subject to maximum limit of Rs. 450,000 in thousands) given by the Company in respect of total capital commitment of Business Excellence Trust, the Trust sponsored by the Company under the Indian Trust Act, 1982, the Company has contributed an amount of Rs. 337,500 (in thousands) towards its capital contribution as per the draw down intimations received from the Fund.

2. During the year, the Company settled Realty Excellence Trust (RET). The Company has given a capital commitment of an amount of Rs. 150,000 (in thousands) to India Realty Excellence Fund launched by RET In respect of this, the Company has contributed an amount of Rs. 37,500 (in thousands) as per the draw down intimations received from the Fund.

3. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) is Rs. 25,467 (in thousands) (Previous Year: Rs Nil).

3.8 Disclosures, relating to amounts unpaid as at the year end together with interest paid / payable as required under the Micro, Small and Medium Enterprise Development Act, 2006 have been given to the extent Group has received intimation from "Suppliers" regarding their status under the said Act.

3.9 During the year, the Company jointly with subsidiary Company (Motilal Oswal Securities Limited) has acquired land & building situated at Prabhadevi, Mumbai. The Company is constructing additional building space (jointly with its subsidiary company) on the existing land/building structure for its corporate office. The Company has, during the year, capitalized interest of Rs. 35,426 (in thousands) attributed to capital work-in- progress, which is in accordance with Accounting Standard on Borrowing Costs (AS-16) issued by the Institute of Chartered Accountants of India. The said Accounting Standard specifies that interest on funds that are borrowed generally (for working capital) and used for the purpose of obtaining a qualifying asset are costs that are eligible for capitalisation. The amount of borrowing costs (interest) attributable to the qualifying asset is determined by applying the weighted average rate of borrowings outstanding to the asset expenditures (qualifying assets).

3.10 In the opinion of the board of directors, all current assets, loans & advances would be realizable at least of an amount equal to the amount at which they are stated in the Balance Sheet. Hence no impairment loss recognised on fixed assets.

3.11 Previous years figures have been regrouped, rearranged, reclassified to the extent considered necessary.

3.12 Schedule to the Balance 5heet of NBFC as required in terms of Paragraph I 3 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007) given in "Annexure - I", to the Balance Sheet.

 
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