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Accounting Policies of Muthoot Capital Services Ltd. Company

Mar 31, 2015

1.1 Basis for preparation of financial statements

i. The financial statements for the year ended 31st March, 2015, have been prepared under historical cost convention and on the accrual basis of accounting in accordance with Indian Generally Accepted Accounting Principles ("GAAP") and in compliance with the provisions of the Companies Act, 2013, mandatory and relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the directions issued by Reserve Bank of India for Non-Banking Financial Companies from time to time, wherever applicable.

ii. All assets and liabilities have been classified as current and non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013. Based on the nature of financial services provided and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 36 months for the purpose of classification of its assets and liabilities into current and non-current as per the requirements of Schedule III of the Companies Act, 2013.

iii. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

1.2 Use of Estimates

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the Balance Sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the management's evaluation of the relevant facts and circumstances as on the date of financial statements. 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.

1.3 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured:

* Income from Financial Services

Finance charges in respect of hypothecation loan transactions are accounted by applying the Internal Rate of Return method. Overdue charges on belated hypothecation loan instalments are accounted as and when received by the Company.

Interest on loans and advances, including Loan Buyout, is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for delayed payments are accounted as and when received.

Income in respect of Non-performing assets is recognized as and when received as per the guidelines given in the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007.

Interest income on SLR Investment/ Deposits is recognized on accrual basis.

* Windmill Income

Income from power generation is recognized on supply of power to the grid as per the terms of the agreement with Muthoot Bankers.

* Dividend Income

Dividend on investments is recognized as income, when right to receive payment is established by the date of Balance Sheet. The profit/loss on Capital Market Operations is recognized at the time of actual sale/redemption of investments.

1.4 Receivables from Financing Activities

The Company has followed the Directions issued by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / Writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments and also the Non-Banking Financial Companies acceptance of Public Deposits (Reserve Bank) Directions 2007.

Hypothecation Loans

i. Hypothecation loans are stated at the amounts advanced including finance charges accrued and due, as reduced by amounts received up to Balance Sheet date.

ii. Repossessed automobile assets are valued at lower of book value and estimated realizable value.

iii. Interest on hypothecation loans was recognized on accrual basis up to the current reporting date.

1.5 Tangible Fixed Assets

Fixed Assets are stated at historical 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 discount and rebate are deducted in arriving at the purchase price.

Subsequent expenditure related to an item of fixed asset is added to its book value, only if it increases the future benefit of 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 & Loss for the period during which such expenses are incurred.

Gains or losses arising from de-recognition 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 & Loss when the asset is de-recognized.

1.6 Depreciation on Tangible Fixed Assets

Depreciation on assets held for own use of the Company is provided on written down value method as per the useful years of life of the assets and in the manner prescribed under Schedule II of the Companies Act, 2013.

The company has adopted the following as the useful years of life to provide depreciation on its fixed assets.

Sl No Description of the Assets Useful Years of Life

1 Motor Vehicles

(i) Car 8 (ii) Cycles, Scooters 10

2 Furniture and Fittings 10

3 Office Equipments 5

4 Computer and Accessories

(i) Computers 3

(ii) Networks & Servers 6

5 Windmill generator 22

Carrying Amounts of assets for which useful life is reduced as per the Schedule II of the Companies Act, 2013 which came into effect from 1st April, 2014, are depreciated as shown below:

a. The Carrying amount as on 1st April, 2014, is depreciated over remaining useful life of the asset as per Schedule II of the Companies Act, 2013

b. If the useful life of asset as on 1st April, 2014, is nil as per Schedule II of the Companies Act, 2013,the carrying amount as on 1st April, 2014, is recognized in the opening balance of the Reserves and Surplus.

Impairment of tangible and intangible assets

a) The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. An asset's recoverable amount is the higher of an asset's net selling price and its value in use.

b) After impairment, depreciation is provided on the revised carrying amount of the asset as per the Useful Life as prescribed in Schedule II of the Companies Act 2013.

c) An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset's recoverable amount. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

1.7 Leases

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

1.8 Investments

a) Investment in Government Securities

Long-Term Investments are stated at cost and provision for diminution in value, other than temporary, is considered wherever necessary.

Current Investments are valued at lower of cost and market value / net asset value.

b) Investments - Others

Investments, which are readily realizable and intended to be held for not more than three years from the date on which such investments are made, are classified as current investments. All other investments are classified as Long- Term investments.

On initial recognition, all investments are measured at cost. The cost comprises of purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

On disposal of investments, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit & Loss.

1.9 Income Tax

Tax expense comprises of 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.

Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and the reversal of timing differences of the earlier years.

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 a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

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.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax asset against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxation authority.

1.10 Retirement and Other Employee Benefits

a) Defined Contribution Plan

(i) Provident Fund

Retirement benefit in the form of provident fund is a defined contribution scheme. The contributions to the provident fund are charged to the Statement of Profit & Loss for the year when the contributions are due in accordance with the fund rules. The Company has no obligation, other than the contribution payable to the provident fund.

(ii) Employees State Insurance

The Company also contributes to Employees State Insurance Corporation on behalf of its employees.

b) Defined Benefit Plan - Gratuity.

Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/premium paid/ payable is determined on actuarial valuation done by LIC. Actuarial gain and loss for defined benefit plan is recognized in full in the period in which they occur in the Statement of Profit & Loss.

1.11 Segment Reporting

The Company's business activity primarily falls within a single business segment which constitutes Financing Activities (Advancing of hypothecation loans, buying loan portfolio of other NBFCs/ Micro Finance company and loan against demand promissory notes etc.). Hence, there is no additional disclosures required under Accounting Standard 17 'Segment Reporting'.

The Company operates primarily in India; hence there is no other significant geographical segment that requires the disclosure.

1.12 Related Party Disclosure

Disclosures are made as per the requirements of the Accounting Standard 18 'Related Party' read with the clarifications issued by Institute of Chartered Accountants of India.

1.13 Earnings per Share

The Company reports basic earning per share in accordance with Accounting Standared -20 "Earnings per Share", issued by the ICAI. Basic earnings per share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year.

1.14 Cash and Cash Equivalents

Cash and Cash equivalents in the cash flow statements comprise cash at hand and at bank, remittances in transits and short-term investments with an original maturity of three months or less.

1.15 Material Events

Material Event occurring after the Balance Sheet date is taken into cognizance.

1.16 Provisions other than that for Non-Performing Assets

A provision is recognized when the Company has a present legal and constructive obligation as a result of past event, it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

1.17 Contingent Liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

1.18 Classification and provisioning as per RBI Guidelines

As per the guidelines given in the Prudential Norms for Non-Banking Financial Companies prescribed by the Reserve Bank of India, the Company makes adequate provisions against Non-Performing Assets in the following manner;

a. Standard Assets:

Provision against Standard Assets is made at the rate of 0.25% as required by Paragraph 9A of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007 read with Notification No. DNBS.222/CGM (US)-2011 issued by Reserve Bank of India on January 17, 2011.

b. Sub-standard, Doubtful and Loss Assets:

Provision as required by Paragraph 9 of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007.

c. An additional adhoc provision as considered appropriate by the management towards provision against non-performing assets.


Mar 31, 2014

CORPORATE INFORMATION

Muthoot Capital Services Limited (the company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed in the Bombay Stock Exchange in India. The Company is registered as a Non-Banking Financial Company (NBFC) with Reserve Bank of India. During the year the Company is mainly engaged in asset financing activities, especially two wheelers and three wheelers. The Company has a strong presence in the Non-banking financial sector in rural and semi-urban areas in South India. Muthoot Capital Services Limited was incorporated on February 18, 1994 as a public limited company.

1.1 Basis for preparation of financial statements

i. The financial statements for the year ended 31st March, 2014, have been prepared under historical cost convention and on the accrual basis of accounting in accordance with Indian Generally Accepted Accounting Principles ("GAAP") and in compliance with the provisions of the Companies Act, 2013 (to the extent modified) and the Companies Act, 1956 (to the extent applicable), mandatory and relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the directions issued by Reserve Bank of India for Non Banking Financial Companies from time to time, wherever applicable.

ii. All assets and liabilities have been classified as current and non current as per the Company''s normal operating cycle and other criteria set out in the revised Schedule VI of the Companies Act, 1956. Based on the nature of services and their realization in cash and cash equivalents, the Company has adopted its operating cycle as 12 months for the purpose of current and non current classification of its assets and liabilities.

iii. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

1.2 Use of Estimates

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the balance sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the management''s evaluation of the relevant facts and circumstances as on the date of financial statements. 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.

1.3 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured:

- Income from Financial Services

- Finance charges in respect of hypothecation loan transactions are accounted by applying the Internal Rate of Return method. Overdue charges on belated hypothecation loan installments are accounted as and when received by the Company.

- Interest on loans and advances is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for delayed payments are accounted as and when received.

- Income in respect of Non performing assets is recognized as and when received as per the guidelines given in the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007.

- Income from Services is recognized on accrual basis as per the terms of the contract.

- Interest Income on SLR Investment is recognized on accrual basis

Windmill Income

Income from power generation is recognized on supply of power to the grid as per the terms of the power purchase agreement with Tamil Nadu State Electricity Board.

Dividend Income

Dividend on investments is recognized as income, when right to receive payment is established by the date of balance sheet. The profit / loss on Capital Market Operations is recognized at the time of actual sale / redemption of investments.

1.4 Receivables from Financing Activities

The Company has followed the Directions issued by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, provisioning / writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments and also the Non-Banking Finance Companies acceptance of Public Deposits (Reserve Bank) Directions 2007.

Hypothecation Loans

i. Hypothecation loans are stated at the amounts advanced including finance charges accrued and due, as reduced by amounts received up to balance sheet date.

ii. Repossessed automobile assets are valued at lower of book value and estimated realizable value.

iii. Interest on hypothecation loans was recognized on accrual basis up to the current reporting date.

1.5 Tangible Fixed Assets

Fixed Assets are stated at historical 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 discount and rebate are deducted in arriving at the purchase price.

Subsequent expenditure related to an item of fixed asset is added to its book value, only if it increases the future benefit of 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 & Loss for the period during which such expenses are incurred.

Gains or losses arising from de-recognition 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 de recognized.

1.6 Depreciation on tangible fixed assets

Depreciation on assets held for own use of the Company is provided on written down value method at the rates and in the manner prescribed under schedule XIV of the Companies Act, 1956. All fixed assets individually costing Rs. 5,000 or less are fully depreciated in the year of installation.

1.7 Impairment of tangible and intangible assets

a) The carrying amounts of assets are reviewed at each balance sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. An asset''s recoverable amount is the higher of an asset''s net selling price and its value in use.

b) After impairment, depreciation is provided on the revised carrying amount of the asset as per the depreciation rate prescribed in Schedule XIV of the Companies Act, 1956.

c) An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset''s recoverable amount. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

1.8 Leases

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

1.9 Investments

(a) Investment in Government Securities- Long term Investments are stated at cost and provision for diminution in value, other than temporary, is considered wherever necessary.

Current Investments are valued at lower of cost and market value / net asset value.

(b) Investments - Others

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long term investments.

On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.

Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

On disposal of investments, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.

1.10 Income Tax

Tax expense comprises of 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.

Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and the reversal of timing differences of the earlier years.

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 a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

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.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax asset against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxation authority.

1.11 Retirement and Other Employees Benefits

a) Defined Contribution Plan

(i) Provident Fund

Retirement benefit in the form of provident fund is a defined contribution scheme. The contributions to the provident fund are charged to the Statement of Profit and Loss for the year when the contributions are due in accordance with the fund rules. The Company has no obligation, other than the contribution payable to the provident fund.

(ii) Employee State Insurance

The company also contributes to Employees State Insurance Corporation on behalf of its employees.

b) Defined Benefit Plan - Gratuity.

Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution / premium paid / payable is determined on actuarial valuation done by LIC. Actuarial gain and loss for defined benefit plan is recognized in full in the period in which they occur in the Statement of Profit and Loss.

1.12 Segment Reporting

The company''s business activity primarily falls within a single business segment which constitutes Financing Activities (Advancing of hypothecation loans and loan against demand promissory notes etc.). Hence, there are no additional disclosures required under Accounting Standard 17 ''Segment Reporting''.

The Company operates primarily in India; hence there is no other significant geographical segment that requires the disclosure.

1.13 Related Party Disclosure

Disclosures are made as per the requirements of the Accounting Standard 18 read with the clarifications issued by Institute of Chartered Accountants of India.

1.14 Earnings per Share

The Company reports basic earning per share in accordance with AS-20 "Earnings per Share", issued by the ICAI. Basic earnings per share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year.

1.15 Cash and Cash Equivalents

Cash and cash equivalents in the cash flow statements comprise cash at hand and at bank, remittances in transits and short term investments with an original maturity of three months or less.

1.16 Provisions other than that for Non Performing Assets

A provision is recognized when the company has a present legal and constructive obligation as a result of past event, it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

1.17 Contingent Liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements.

1.18 Classification and provisioning as per RBI Guidelines

As per the guidelines given in the Prudential Norms for Non Banking Financial Companies prescribed by the Reserve Bank of India, the Company makes adequate provisions against Non Performing Assets in the following manner;

a. Standard Assets:

Provision against Standard Assets is made at the rate of 0.25% as required by Paragraph 9A of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007 read with Notification No. DNBS.222/CGM (US)-2011 issued by Reserve Bank India on January 17, 2011.

b. Sub-standard, Doubtful and Loss Assets:

Provision as required by paragraph 9 of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007.


Mar 31, 2013

1.1 Basis for preparation of financial statements

i. The financial statements for the year ended March 31, 2013, have been prepared under historical cost convention and on the accrual basis of accounting in accordance with Indian Generally Accepted Accounting Principles (“GAAP") and in compliance with the provisions of Companies Act, 1956, mandatory and relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the directions issued by Reserve Bank of India for Non Banking Financial Companies from time to time, wherever applicable.

ii. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

1.2 Use of Estimates

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the balance sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the management''s evaluation of the relevant facts and circumstances as on the date of financial statements. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differfrom these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future years.

1.3 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flowtothe Company and the revenue can be reliably measured:

Income from Financial Services

- Finance charges in respect of hypothecation loan transactions are accounted by applying the Internal Rate of Return method. Overdue charges on belated hypothecation loan installments are accounted as and when received by the Company.

- Interest on loans and advances is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for delayed payments are accounted as and when received.

- Income in respect of Non-performing assets is recognized as and when received as per the guidelines given in the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007.

- Income from Services is recognized on accrual basis as perthe terms ofthe contract.

Windmill Income

Income from power generation is recognized on supply of power to the grid as per the terms of the power purchase agreement with Tamil Nadu State Electricity Board.

Dividend Income

Dividend on investments is recognized as income when right to receive payment is established by the date of balance sheet. The profit/loss on Capital Market Operations is recognized at the time of actual sale/redemption of investments.

1.4 Receivables from Financing Activities

The Company has followed the Directions issued by the Reserve Bank of India for Non Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, provisioning / writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit/investments and also the Non Banking Finance Companies acceptance of Public Deposits (Reserve Bank) Directions 2007.

Hypothecation Loans

i. Hypothecation loans are stated at the amounts advanced including finance charges accrued and due, as reduced by amounts received up to balance sheet date.

ii. Repossessed automobile assets are valued at lower of book value and estimated realizable value.

iii. Interest on hypothecation loans was recognized on accrual basis uptothe current reporting date.

1.5 Tangible Fixed Assets

Fixed Assets are stated at historical 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 discount and rebate are deducted in arriving atthe purchase price.

Subsequent expenditure related to an item of fixed asset is added to its book value, only if it increases the future benefit of 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 & Loss forthe period during which such expenses are incurred.

Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount ofthe asset and are recognized in the Statement of Profit & Loss when the asset is de-recognized.

1.6 Depreciation on tangible fixed assets

Depreciation on assets held for own use ofthe Company is provided on written down value method at the rates prescribed under schedule XIV ofthe Companies Act, 1956. All fixed assets individually costingRs. 5,000/- orless are fully depreciated in the year of installation.

1.7 Impairment of tangible and intangible assets

a) The carrying amounts of assets are reviewed at each balance sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. An asset''s recoverable amount is the higher of an asset''s net selling price and its value in use.

b) After impairment, depreciation is provided on the revised carrying amount of the asset as per the depreciation rate prescribed in Schedule XIV ofthe Companies Act 1956.

c) An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset''s recoverable amount. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

1.8 Leases

Leases, where the lessor effectively retains substantially all the risks and benefits of ownership ofthe leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on straight line basis overthe lease term.

1.9 Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as longterm investments.

On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.

Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution in value is made to recognize a decline otherthan temporary in the value ofthe investments.

On disposal of investments, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit & Loss.

1.10 Income Tax

Tax expense comprises of 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. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.

Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating duringthe current year and the reversal of timing differences ofthe earlier years.

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 a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

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.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax asset against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxation authority.

1.11 Retirement and other employee Benefits

a) Defined Contribution plan

(i) Provident Fund

Retirement benefit in the form of Provident fund is a defined contribution scheme. The contributions to the Provident fund are charged to the Statement of Profit & Loss for the year when the contributions are due in accordance with the fund rules. The company has no obligation, otherthan the contribution payable to the provident fund.

(ii) Employee State Insurance

The company also contributes to Employees State Insurance Corporation on behalf of its employees.

b) Defined Benefit plan-Gratuity.

Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/premium paid/payable is determined on actuarial valuation done by LIC. Actuarial gain and loss for defined benefit plan is recognized in full in the period in which they occur in the Statement of Profit & Loss.

1.12 Segment Reporting

The company''s business activity primarily falls within a single business segment which constitutes Financing Activities (Advancing of hypothecation loans, loan against demand promissory notes etc.). Hence, there are no additional disclosures required under Accounting Standard 17 ''Segment Reporting1.

The Company operates primarily in India; hence there is no other significant geographical segment that requires the disclosure.

1.13 Related Party Disclosure

Disclosures are made as perthe requirements ofthe Accounting Standard 18 read with the clarifications issued by I nstitute of Chartered Accou ntants of I nd ia.

1.14 Earnings per Share

The Company reports basic earning per share in accordance with AS-20 "Earnings per Share", issued by the ICAI. Basic earning per share has been computed by dividing net profit after tax by the weighted average numberof equity shares outstandingfortheyear.

1.15 Cash and Cash Equivalents

Cash and cash equivalents in the cash flow statements comprise cash at hand and at bank, remittances in transits and shortterm investments with an original maturity of three months or less.

1.16 Provisions otherthan that for non performing assets

A provision is recognized when the company has a present legal and constructive obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount ofthe obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

1.17 Contingent Liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements.

1.18 Classification and provisioning as per RBI Guidelines

As per the guidelines given in the Prudential Norms for Non Banking Financial Companies prescribed by the Reserve Bank of India, the Company makes adequate provisions against Non Performing Assets in the following manner;

a. Standard Assets:

Provision against Standard Assets is made atthe rate of 0.25% as required by Paragraph 9Aofthe Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007 read with Notification No. DNBS.222/CGM(US)-20I I issued by Reserve Bankof India on January 17,201 I.

b. Sub-standard. Doubtful and Loss Assets:

Provision as required by paragraph 9 of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007.


Mar 31, 2010

1.1. Basis for preparation of financial statements.

The financial statements for the year 2009-10, have been prepared under historical cost convention, in compliance with Indian Generally Accepted Accounting Principles ( GAAP ) with mandatory and relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and in compliance with the provisions of Companies Act, 1956 and the directions issued by Reserve Bank of India for Non Banking Financial Companies from time to time wherever applicable.

The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the Balance sheet date, reported amounts of revenues and expenses during the year. The estimates and assumptions used in these financial statements are based upon the managements evaluation of the relevant facts and circumstances as on the date of financial statements.

1.2. Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured

a. Finance charges in respect of Hire Purchase/Hypothecation loan transactions are accounted by applying the Internal Rate of Return method. Over due charges on belated Hire Purchase/Hypothecation loan installments are accounted as and when received by the Company.

b. Interest on loans and advances is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for delayed payments are accounted as and when received.

c. Interest on investments is accounted on accrual basis. Dividend is recognized as income when right to receive payment is established by the date of balance sheet. The Profit/Loss on the sale of investments is dealt with at the time of actual sale/redemption.

d. Income in respect of Non-performing assets is recognized as and when received as per the guidelines given in the Non-Banking Financial Companies (Reserve Bank) Directions, 2007.

e. Income from Services is recognized on accrual basis.

1.3. Treatment of expenses:

a. It is the Companys policy to provide for all expenses on accrual basis, unless otherwise stated.

b. As per the guidelines given in the Prudential Norms for Non-Banking Financial Companies prescribed by the Reserve Bank of India, the Company makes adequate provisions against Non-Performing Assets in the following manner.

(i) Sub-standard Assets:

Provision as required by paragraph 9 of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007.

(ii) Doubtful/Loss Assets:

Provision as required by paragraph 9 of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007. The Company has written off an amount equivalent to the amount required to be provided as per Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007 if the provision required to be made is 100%.

1.4. The Company has followed the Directions prescribed by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, provisioning/writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments and Non Banking Finance Companies acceptance of Public Deposits (Reserve Bank) Directions 2007

1.5.Fixed assets:

Fixed assets are carried at historical cost less accumulated depreciation.

1.6.Depreciation:

Depreciation on assets held for own use of the Company is provided on written down value method at the rates prescribed under schedule XIV of the Companies Act, 1956. Assets costing Rs. 5,000/- or less acquired during the year are fully depreciated.

1.7. Investments:

The investments made by the Company, are valued as per the Accounting Standard-13 issued by The Institute of Chartered Accountants of India. Current investments are valued at lower of cost or market value.

1.8.Stock on hire:

1) Stock under hire purchase of assets is stated at the full agreement value less un- matured finance and other charges in respect of installments not fallen due.

2) Stock of repossessed assets is valued at realizable market price or hire purchase installments receivable whichever is less.

1.9.Income Tax:-

Provision for taxation is made in accordance with the Accounting Standard-22 on Accounting for Taxes on Income issued by ICAI. Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences in the financial statements between carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and deferred tax liabilities are recognized subject to managements judgment.

1.10.Employee Benefits

a) Short Term Employee Benefits

Short Term Employee Benefits for services rendered by employees are recognized during the period when the services are rendered.

b) Post Employment Benefits

(i) Defined Contribution plan- Provident Fund.

Contributions to provident fund made in accordance with the EPF rules are accounted on actual cost to the company.

(ii) Defined Benefit plan - Gratuity

Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/premium paid/payable to be determined on actuarial principle by LIC will be charged to the Profit & Loss Account.

1.11. Impairment of Assets

The carrying amounts of assets are reviewed at each balance sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price of the assets and their value in use.

1.12. Segment Reporting: -

The companys operations are classified into two reportable business segments, viz. Financing Activities (Advancing of Gold Loan, Hire Purchase and Hypothecation Loans, etc.) and Insurance Services (as a corporate agent of HDFC Standard Life Insurance and data sharing partner of Birla SunLife Insurance) and the segment information is reported accordingly. Unallocated items include income and expenses which are not allocated to any business segment.

1.13.Related Party Disclosure: -

Disclosures are made as per the requirements of the Accounting Standard 18 read with the clarifications issued by Institute of Chartered Accountants of India.

1.14.Earnings per Share: -

The Company reports basic earning per share in accordance with AS-20 "Earnings per Share", issued by the ICAI. Basic earning per share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year.

1.15.Provisions

Provisions are recognized when the Company has present legal or constructive obligations, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made for the amount of the obligation.

1.16.Contingent Liabilities

Contingent Liabilities are not provided for, and are disclosed by way of notes.

 
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