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Accounting Policies of PNB Gilts Ltd. Company

Mar 31, 2018

NOTE -1

SIGNIFICANT ACCOUNTING POLICIES

1.1. Basis of Preparation of Financial Statements

The Company follows accrual system of accounting and the financial statements are prepared on historical cost basis. The basis of preparation of Financial Statements is in accordance with generally accepted accounting principles. These statements are also in compliance with the mandatory Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014 and the Reserve Bank of India guidelines as applicable to the Primary Dealers and NBFC.

As the Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Statement of Profit and Loss (as per the revised guidelines), the Company assumes, one year is the operating cycle period.

The preparation of financial statements in conformity with Indian GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

The difference, if any, between the actual and the estimate is recognized in the accounting period in which the same is acknowledged or materialized.

1.2. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities, Fixed Deposits and Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked at the prevailing floating rates.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/ income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted scrip wise with loss on sale of securities.

vi) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognised as income.

vii) For continuing or long term duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

viii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

viii) As per Board approval, the Company transfers Stale Cheques outstanding for more than three years to Miscellaneous Income, and if any claim arises thereafter the same is paid by debit of Miscellaneous Expenses in the year in which it is actually paid.

ix) Dividend income is recognized when the shareholders'' right to receive payment is established by the reporting date.

1.3. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Statement of Profit and Loss. Interest and other expenses are accounted on accrual basis.

Share issue expenditure is charged to Statement of Profit and Loss in the year of occurrence.

1.4. Valuation of Inventories

i) All securities (except securities under HTM category classified as Non-Current Investment) in which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non-hedged portfolio.

ii) The Company has the following categories of securities namely, Treasury Bills, CDs, CPs, Deep Discount Bonds, Dated Government Securities (including Central and State and Repo Stock), Corporate/PSD Bonds & Debentures, Hedging contracts/Swaps, Trading Swaps, Equity, Mutual Fund Units, Interest Rate Futures, Futures & Options.The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSD/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower. Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) on last working day of the Financial Year, except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges on last working day of the Financial Year. The securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net unrealized diminution, if any, for each category of securities is provided for and charged to Statement of Profit and Loss. Net unrealized appreciation, if any, is ignored. The unrealized diminution in one category of securities is not set off against unrealised appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/appreciation of hedged assets will be netted with diminution/ appreciation of hedging swaps and net diminution if any, is charged to Statement of Profit and Loss and net appreciation if any, is ignored.

vi) In case of Future contracts (i.e IRF, Equity futures & Nifty futures) valuation is done as per the closing prices provided by SHCIL.

vii) The secondary market short sale transactions in Government securities as permitted by RBI Circular No. RBI/2006-2007/243 IDMD.No.711.01.01 (B)/2006-07 are grouped under other liabilities.

viii) All the inventories are recognized in accounts on delivery basis i.e. when the delivery of the same takes place and the same are credited in SQL 1 / Demat account of the company.

1.5. Held To Maturity (HTM) Securities

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

• Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation if any, on such transfer shall be fully provided for.

• Investments classified under HTM category will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period

• The profit on sale of securities, if any from HTM category shall first be taken to the Statement of Profit and Loss and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Statement of Profit and Loss. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines.

1.6. Accounting for Repo Transactions

Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit and Loss do not include Repo/Reverse Repo transactions in accordance with RBI guidelines No. RBI/2009-2010/356/IDMD/4135/11.08.43/2009-10 dated March 23, 2010.

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities as the case may be, even during the repo period while the repo buyer shall not accrue the same.

1.7. Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest rate swaps outstanding at balance sheet date are Marked- to- Market and the resultant loss, if any, is recorded in Statement of Profit and Loss. Any other charges relating to Trading Interest Rate Swaps are charged to Statement of Profit and Loss.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated Asset/Liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a hedge swap from one item of Asset/Liability to another item of Asset/Liability, the Marked-to-market profit/loss of the hedge swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset/Liability.

1.8. Accounting for Future and Options Transactions

i) Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii) Transactions in Future Contracts are done as Purchases and Sales at the notional trade value of the contract.

iii) The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked-to- Market Margin (or by whatever name). The balance in the Marked- to- Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked- to- Market Margin Account is charged off to revenue, whereas net credit balance is shown under Current Liabilities.

iv) Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9. Dividend and Tax on Dividend

Final Dividends on Shares and Dividend Distribution Tax thereon as per Section 115-O of the Income Tax Act, 1961 are recorded as liability as on the date of approval of dividend. Interim Dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.

1.10. Retirement Benefits - Provident Fund, Gratuity & Leave Liability (As per Accounting Standard 15)

i) Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue. The premium is calculated on actuarial basis by LIC as per Projected Unit Credit Method (PUCM) as per AS-15.

ii) Leave Liability is accounted for on actuarial valuation carried at year-end and actuarial gains/losses are charged to revenue.

iii) Contribution to recognised provident fund is charged to revenue.

1.11. Property,Plant & Equipment And Depreciation

Tangible Fixed Assets are stated at their cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the tangible fixed assets and making it ready for its intended use less depreciation and impairment. Intangible assets are amortized over a useful life of the asset. Intangible assets are stated at cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the intangible fixed assets less depreciation and impairment.

Depreciation on Fixed Assets is charged as per the useful life prescribed in Schedule II of the Companies Act 2013 on Written Down Value (WDV) basis. Residual value of Land & Building and Vehicles is taken as 5 percent of the original cost, whereas for assets other than those specified above the residual value is taken as Re.1/-.

1.12. Impairment of Assets

The management periodically (annually) assesses whether there is any indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of the asset exceeds its recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

1.13. Income Taxes And Deferred Taxes

Tax expense comprises of current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the provisions of the Income tax Act, 1961 enacted in India.

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax assets are recognized only to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Unrecognised deferred tax assets of earlier years are re-assessed and recognized to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually not 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.

1.14. Segment Reporting

The Company''s primary business segments are reflected based on the principal business carried out, i.e. trading in securities.

The risk and returns of the business of the company is not associated with geographical segmentation, hence there is no secondary segment reporting based on geographical segment.

1.15. Cash flow statement

Cash flows are reported using the indirect method as prescribed in AS-3, whereby profit before tax is adjusted for the effect of transactions of a non cash nature, any deferral or accruals of past and future operating cash receipts or payments and items of income associated with investing or financing cash flows.

1.16. Cash and Cash Equivalents

Cash and Cash Equivalents comprise cash at bank and in hand and short term investments with an original maturity of three months or less.


Mar 31, 2017

1.1. Basis of Preparation of Financial Statements

The Company follows accrual system of accounting and the financial statements are prepared on historical cost basis. The basis of preparation of Financial Statements is in accordance with generally accepted accounting principles. These statements are also in compliance with the mandatory Accounting Standards as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014 and the Reserve Bank of India guidelines as applicable to the Primary Dealers and NBFC.

1.2. Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit and Loss do not include Repo/Reverse Repo transactions in accordance with RBI guidelines No. RBI/2009-2010/356/IDMD/4135/11.08.43/2009-10 dated March 23, 2010.

1.3. Revenue Recognition

i). The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognized as accrued income and included in the carrying cost of the securities.

ii). Interest accrued on Government Dated Securities, Fixed Deposits and Corporate Bonds and Debentures is recognized at its coupon rate and that of Floating Rate Bonds is recognized on the yield of instruments to which these are linked at the prevailing floating rates.

iii). Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realized. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/ income.

iv). Profit/loss on sale of securities is accounted on weighted average cost method and is recognized on settlement date. Profit on sale of securities is netted scrip wise with loss on sale of securities.

v). Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognized as income.

vi). For continuing or long term duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii). For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan, the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

viii). As per Board approval, the Company transfers Stale Cheques outstanding for more than three years to Miscellaneous Income, and if any claim arises thereafter the same is paid by debit of Miscellaneous Expenses in the year in which it is actually paid.

1.4. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Statement of Profit and Loss. Interest and other expenses are accounted on accrual basis.

1.5. Valuation of Inventories / Investment

a. Current Investment / Inventories

i) All securities (except securities under HTM category classified as Non-Current Investment) in

which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non-hedged portfolio.

ii) The Company has the following categories of securities namely, Treasury Bills, CDs, CPs, Deep Discount Bonds, Dated Government Securities (including Central and State and Repo Stock), Corporate/PSU Bonds & Debentures, Hedging contracts/Swaps, Trading Swaps, Equity, Mutual Fund Units, Interest Rate Futures, Futures & Options. The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI circular). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) on last working day of the Financial Year, except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges on last working day of the Financial Year. The securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net unrealized diminution, if any, for each category of securities is provided for and charged to Statement of Profit and Loss. Net unrealized appreciation, if any, is ignored. The unrealized diminution in one category of securities is not set off against unrealized appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/appreciation of hedged assets will be netted with diminution/appreciation of hedging swaps and net diminution if any, is charged to Statement of Profit and Loss and net appreciation if any, is ignored.

vi) In case of Future contracts (i.e IRF, Equity futures & Nifty futures) valuation is done as per the closing prices provided by SHCIL.

vii) The secondary market short sale transactions in Government securities as permitted by RBI Circular No. RBI/2006-2007/243 IDMD .No./11.01.01(B)/2006-07 are grouped under other liabilities.

b. Non-Current Investments

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

- Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation if any, on such transfer shall be fully provided for.

- Investments classified under HTM category need not be Marked-to-Market and will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period

- The profit on sale of securities, if any from HTM category shall first be taken to the Statement of Profit and Loss and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Statement of Profit and Loss. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines

1.6. Accounting for Repo Transactions

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities as the case may be, even during the repo period while the repo buyer shall not accrue the same.

1.7. Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest rate swaps outstanding at balance sheet date are Marked- to- Market and the resultant loss, if any, is recorded in Statement of Profit and Loss. Any other charges relating to Trading Interest Rate Swaps are charged to Statement of Profit and Loss.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated Asset/Liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a hedge swap from one item of Asset/Liability to another item of Asset/Liability, the Marked-to-market profit/loss of the hedge swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset/Liability.

1.8. Accounting for Future and Options Transactions

i. Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii. Transactions in Future Contracts are done as Purchases and Sales at the notional trade value of the contract.

iii. The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked- to- Market Margin (or by whatever name). The balance in the Marked- to- Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked- to- Market Margin Account is charged off to revenue, whereas net credit balance is shown under Current Liabilities.

iv. Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9. Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

1.10. Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by Institute of Chartered Accountants of India on “Accounting for Taxes on Income”.

1.11. Depreciation

Depreciation on Fixed Assets is charged as per the useful life prescribed in Schedule II of the Companies Act

2013 on Written Down Value (WDV) basis. Residual value of Land & Building and Vehicles is taken as 5 percent of the original cost, whereas for assets other than those specified above the residual value is taken as Re.1/-.

1.12. Share Issue Expenses

Share issue expenditure is charged to Statement of Profit and Loss in the year of occurrence.

1.13. Dividend and Tax on Dividend

Final Dividends on Shares and Dividend Distribution Tax thereon as per Section 115-O of the Income Tax Act, 1961 are recorded as liability as on the date of approval of dividend. Interim Dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors.

1.14. Retirement Benefits - Provident Fund, Gratuity & Leave Liability (As per Accounting Standard 15)

i. Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue. The premium is calculated on actuarial basis by LIC as per Projected Unit Credit Method (PUCM) as per aS-15.

ii. Leave Liability is accounted for on actuarial valuation carried at year-end.

iii. Contribution to recognized provident fund is charged to revenue.

1.15. Operating Cycle

As the Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Statement of Profit and Loss (as per the revised guidelines), the Company assumes, one year is the operating cycle period.

1.16. Fixed Assets

Tangible Fixed Assets are stated at their cost of acquisition or construction along with the other directly related costs incurred in acquiring the tangible fixed assets and making it ready for its intended use less depreciation and impairment. Intangible assets are amortized over a useful life of the asset. Intangible assets are stated at cost of acquisition or construction along with the other directly related costs incurred in acquiring the intangible fixed assets less depreciation and impairment.

1.17. Impairment of Assets

The management periodically (annually) assesses whether there is any indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of the asset exceeds its recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

1.18. Use of Estimates

The preparation of financial statements in conformity with Indian GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue expenses, assets and liabilities and disclosure of contingent liabilities at the end of the reporting period. Although these estimates are based on the management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

The difference, if any, between the actual and the estimate is recognized in the accounting period in which the same is acknowledged or materialized.

1.19. Income Taxes

Tax expense comprises of current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the provisions of the Income tax Act, 1961 enacted in India.

Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax assets are recognized only to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Unrecognized deferred tax assets of earlier years are re-assessed and recognized to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually not 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.

1.20. Segment Reporting

The Company’s primary business segments are reflected based on the principal business carried out, i.e. trading in securities.

The risk and returns of the business of the company is not associated with geographical segmentation, hence there is no secondary segment reporting based on geographical segment.

1.21. Cash flow statement

Cash flows are reported using the indirect method as prescribed in AS-3, whereby profit before tax is adjusted for the effect of transactions of a non cash nature, any deferral or accruals of past and future operating cash receipts or payments and items of income associated with investing or financing cash flows.

1.22. Cash and Cash Equivalents

Cash and Cash Equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

- Rights, preferences and restrictions attached to each class of shares including restrictions on the distribution of dividends and the repayment of capital:

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. Dividend distribution is for all equity shareholders who are eligible for dividend as on the record date. In the event of liquidation of the Company, the holders of equity shares 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.

- Shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts: Nil (Prev. Year: Nil)

- For the period of five years immediately preceding the date as at which the Balance Sheet is prepared:

(a) Aggregate number and class of shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash: Nil (Prev. Year: Nil)

(b) Aggregate number and class of shares allotted as fully paid-up by way of bonus shares: No. of Equity Shares - 44992534. Current Year : Nil (Prev. Year : NIL)

(c) Aggregate number and class of shares bought back : Nil (Prev. Year: Nil)

- Terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date : Nil (Prev. Year : Nil)

- Calls unpaid (showing aggregate value of calls unpaid by Directors and Officers): Nil (Prev. Year : Nil)

- Forfeited shares: Nil (Prev. Year : Nil)

- A sum of Rs. 3343.48 lacs (Prev.Year : Rs, 689.93 lacs) (20 per cent of Profit After Tax) has been transferred to Statutory Reserve Fund as per RBI Guidelines

- Net Profit (after tax) through sale of securities from HTM category amounting Rs, 2229.71 lacs (Prev. Year : Rs, 356.56 lacs) has been transferred to Capital Reserve Account as per RBI guidelines. The same will be utilized as per the regulatory guidelines.

- The Board of Directors, in its meeting held on January 9, 2003, had decided to build up Market Fluctuation Reserve over a period of time with the cap equal to paid up capital of the company. At the time of adoption of annual accounts each year, the Board may decide the quantum of amount to be transferred to this Reserve, if necessary. For the financial year 2016-17, Board of Directors had decided not to appropriate any amount to this reserve and the balance outstanding as on March 31, 2017 in this reserve is Rs, 6300 lacs (Prev.Year : Rs, 6300 lacs).

- Ministry of Corporate Affairs amended the Companies (Accounting Standards) Rules, 2006 on March 30, 2016 and vide its General Circular no. 4/2016 dated 27.04.2016 has clarified that the Companies (Accounting Standards) Amended Rules, 2016 would be applicable for preparation of accounts for accounting period commencing on or after the date of notification i.e. w.e.f Financial Year 2016-17.

According to this amendment, the proposed dividend is not recognizable in the accounts as liability until it is approved.

Accordingly, the proposed dividend for FY 2016-17 of Rs, 2.50 (Prev.Year : Rs, 1.10 per equity share of Rs, 10 each) per equity share of Rs, 10 each has not been recognized as liability as well as an appropriation of profit in the Annual Financial Statements for the FY 2016-17. If the dividend as proposed is approved, the outflow of dividend will be of Rs, 4500.25 lacs (Prev.Year : Rs, 1980.11 lacs) and the Dividend Distribution Tax thereon shall be Rs, 916.15 lacs (Prev.Year : Rs, 403.10 lacs). These will be recognized as liability on approval of the same.

On account of this change, the accounting policy followed for recognizing proposed dividend for this current financial year and the previous financial year are different and hence the financial statement for these two years are not comparable to that extent.

- Net owned Funds (after deducting Deferred Tax and Intangible Assets) of the Company stands at Rs, 89835.70 lacs (Prev.Year : Rs, 73122.23 lacs) as against the minimum stipulated capital of Rs, 25000.00 lacs. Return on Average Net Worth for the year 2016-17 stands at 20.51 per cent (Prev.Year : 5.10 per cent).

- Capital Adequacy Ratios as on June 30, 2016, September 30, 2016, December 31, 2016 and March 31, 2017 were 72.02 per cent (Prev.Year : 66.41 per cent), 82.14 per cent (Prev.Year : 69.50 per cent), 74.90 per cent (Prev.Year : 71.39 per cent) and 54.48 per cent (Prev.Year : 68.07 per cent) respectively as against RBI stipulation of 15 per cent.

- Securities amounting to Face Value Rs, 187819.70 lacs were sold directly from the HTM category (Prev. Year: Rs, 111781.50 lacs) and the company earned a gross profit of Rs, 3394.38 lacs (Prev. Year : Rs, 545.26 lacs). Balance profit after tax amounting to Rs, 2229.71 lacs has been transferred to Capital Reserve Account in accordance with RBI guidelines (Prev. Year : Rs, 356.56 lacs).

- Amortization of Rs, 79.33 lacs on the HTM category as on March 31, 2017 has been separately provided in Note No. 2.23 relating to other expenses (Prev. Year figures of amortization in HTM category as on March 31, 2016 is Rs, 42.47 lacs)

An amount of Rs, 1000 lacs was lent in Call Money to Madhavpura Mercantile Co-operative Bank Ltd. (MMCBL) in March 2001, which became overdue as on March 31, 2001. The Company was informed by MMCBL that the Government of India (Ministry of Agriculture, Department of Agriculture and Co-operation, New Delhi), in consultation with RBI, has formed Reconstruction Scheme and the amount would be paid accordingly. However, the repayment was not done by them as per the scheme and vide Government’s notifications instructed that all payments by bank including installment of repayment due in August 2007, August 2008 and August 2009 (totaling to Rs, 761.88 lacs against which Rs, 761.88 lacs provision was outstanding) and payments of interest and the deposit amount were deferred till August 2011. RBI cancelled the license of MMCBL to carry

- For basis of valuation, please refer accounting policy (note 1.5a). Details of securities are given in Annex-2.

- Stock-in-Trade includes hedged securities (Book Value - Rs, 12401.09 lacs and the market value of the same is Rs, 12737.90 lacs (Prev. Year : Book Value Rs, 14842.50 lacs and Market Value Rs, 15117.65 lacs) and there is a net provision of Rs, NIL lacs (Prev. Year : Rs, 107.83 lacs) for diminution after adjusting the depreciation in Swaps of Rs, 143.18 lacs (Prev. Year : Rs, 382.99 lacs).

- The company is providing custodian services to its constituents and total holdings of 85 (Prev. Year : 97) constituents in Govt. Securities as at 31.03.2017 in SGL II with RBI is Rs, 3575148.21 lacs (Prev. Year : Rs, 2830037.91 lacs)

* The aggregate carrying value and market value as at March 31, 2017 is Rs, 388535.20 lacs (Prev. Year : Rs, 496058.15 lacs).

(i) Govt. Securities pledged for availing LAF/Term Repo - Face Value Rs, 40589.90 lacs - Book Value Rs, 40782.00 lacs (Prev. Year : Face Value Rs, 129547.00 lacs and Book value Rs, 126254.03 lacs)

(ii) Govt. Securities pledged for availing CBLO borrowing - Face Value Rs, 25470.00 lacs - Book value Rs, 24965.94 lacs (Prev. Year : Face Value Rs, 71900.00 lacs and Book value Rs, 70551.04 lacs)

(iii) Govt. Securities pledged for availing RBI Refinance - Face Value Rs, NIL lacs - Book Value Rs, NIL lacs (Prev. Year : Face Value Rs, 37156.00 lacs and Book value Rs, 36364.83 lacs)

The securities mentioned in (i) ,(ii) and (iii) above were not available for trading as on March 31, 2017, although included in the inventories as on March 31, 2017.

As per Para 9 of the Accounting Standard 18 on Related Party Disclosures, the Company, being a state controlled enterprise, is not required to make disclosures of related party relationships with other state controlled enterprises and transactions with such enterprises. Other information as per the Standard is as under:

- The overall supervision and control of the company vests with the Board of Directors. The Managing Director and Executive Director and CFO of the company, appointed by the Board of Directors, who are working full time with the company.

- Out of the total Eight Directors on the Board of the company as at March 31, 2017, four are independent Directors. Only the Non-Executive Directors are being paid sitting fees for the Board / Committee Meetings. Sitting fee to be paid to Non-Executive Directors is Rs, 25000/- for attending each meeting of the Board and Rs, 10000/- for attending each meeting of Audit Committee/CSR Committee/Nomination and Remuneration Committee/Only Independent Directors’ Meeting. Sitting fee for attending each meeting of (a) Share Transfer and Issue of Duplicate Shares Committee; and (b) Stakeholders’ Relationship Committee is Rs, 5000/-. During the year, the Company has paid a sum of Rs, 18.57 lacs (Prev. Year : Rs, 12.21 lacs) towards sitting fee, including service tax.

- Other information in this regard is available in Corporate Governance Report and Board’s report.

Market Risk In the event of 100 basis points adverse movement in interest

rate there will be a negative impact of Rs, 214.50 lacs (Prev. Year : Rs, 391.07 lacs) on Hedging Swaps in Swap Book.

The losses, which would be incurred if, counter parties fail to fulfill their obligations works out to Rs, NIL lacs (Prev. Year : Rs, Nil lacs)

The Company’s exposure with regard to outstanding swap transactions is limited to banks and CCIL.

Collateral No Collateral is insisted upon from counterpart

Credit Risk Concentration Rs, 18.23 lacs (Prev. Year : Rs, 60.04 lacs)


Mar 31, 2015

1.1. Method of Accounting

The Company follows accrual system of accounting and the financial statements are prepared on historical cost basis, in accordance with generally accepted accounting principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

1.2. Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit and Loss do not include Repo transactions in accordance with revised RBI guidelines.

1.3. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities, Fixed Deposits and Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognised as income.

vi) For continuing or long term duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

1.4. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Statement of Profit and Loss. Interest and other expenses are accounted on accrual basis.

1.5. Valuation of Inventories / Investment

a. Inventories

i) All securities (except securities under HTM category classified as Non-Current Investment) in which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non- hedged portfolio.

ii) The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI circular). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) as on March 31, 2015, except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges as on March 31, 2015. For this purpose, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to Statement of Profit and Loss. Net appreciation, if any, is ignored. The diminution in one category of securities is not set off against appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/appreciation of hedged assets will be netted with diminution/ appreciation of hedging swaps and net diminution if any, is charged to Statement of Profit and Loss and net appreciation if any, is ignored.

b. Non-Current Investments

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

* Securities classified under HTM category need not be Marked-to-Market and will be carried out at the value at which they were transferred to HTM portfolio.

* Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation if any, on such transfer shall be fully provided for.

* Investments classified under HTM will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period.

* The profit on sale of securities, if any from HTM category shall first be taken to the Statement of Profit and Loss and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Statement of Profit and Loss. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines.

1.6 Accounting for Repo Transactions

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities as the case may be, even during the repo period while the repo buyer shall not accrue the same.

1.7 Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest rate swaps outstanding at balance sheet date are Marked-to-Market and the resultant loss, if any, is recorded in Statement of Profit and Loss. Any other charges relating to Trading Interest Rate Swaps are charged to Statement of Profit and Loss.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated Asset/Liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a hedge swap from one item of asset/liability to another item of Asset/Liability, the Marked-to-Market profit/loss of the hedge swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset/Liability.

1.8. Accounting for Future and Options Transactions

i. Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii. Transactions in Future Contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in futures as at the Balance Sheet date is netted by its notional value.

iii. The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked-to-Market Margin. The balance in the Marked-to-Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked-to-Market Margin Account is charged off to revenue, whereas net credit balance is shown under Current Liabilities.

iv. Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9. Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

1.10. Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

1.11 Depreciation

Depreciation on Fixed Assets is charged as per the useful life prescribed in Schedule II of the Companies Act 2013 on Written Down Value (WDV) basis. Residual value of Land & Building and Vehicles is taken as 5 percent of the original cost, whereas for assets other than those specified above the residual value is taken as Re.1/-.

1.12 Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

1.13 Share Issue Expenses

Share issue expenditure is charged to Statement of Profit and Loss in the year of occurrence.

1.14 Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-0 of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

1.15 Retirement Benefits - Provident Fund, Gratuity & Leave Liability (As per Accounting Standard 15)

i. Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue.

ii. Leave Liability is accounted for on actuarial valuation carried at year-end.

iii. Contribution to recognised provident fund is charged to revenue.

1.16 Operating Cycle

As the Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Statement of Profit and Loss (as per the revised guidelines), the Company assumes, one year is the operating cycle period.

1.17 Fixed Assets

Tangible Fixed Assets are stated at their cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the tangible fixed assets and making it ready for its intended use less depreciation and impairment. Intangible assets are amortized over a useful life of the asset. The useful life of intangible asset has been taken as 3 years. Intangible assets are stated at cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the intangible fixed assets less depreciation and impairment.

1.18 Impairment of Assets

The management periodically assesses whether there is any indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of the asset exceeds its recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.


Mar 31, 2014

1.1 Method of Accounting

The Company follows accrual system of accounting and the financial statements are prepared on historical cost basis, in accordance with Generally Accepted Accounting Principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

1.2 Sales/Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit & Loss Account do not include Repo transactions in accordance with revised RBI guidelines.

1.3 Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities and Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognised as income.

vi) For continuing or long term duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

1.4 Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Profit and Loss Account.

1.5 Valuation of Inventories/Investment a Inventories

i) All securities in which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non-hedged portfolio.

ii) The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds, Debentures and equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI guidelines). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA), except for equity shares. Market value of Equity shares is determined by the closing rates provided by the stock exchanges. For this purpose, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to Profit and Loss Account. Net appreciation, if any, is ignored. The diminution in one category of securities is not set off against appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of mutual fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/appreciation of hedged assets will be netted with diminution/ appreciation of hedging swaps and net diminution if any, is charged to Profit and Loss Account and net appreciation, if any, is ignored.

b. Non-Current Investments

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

* Securities classified under HTM category need not be Marked-to-Market and will be carried out at the value at which they were transferred to HTM portfolio.

* Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation if any, on such transfer shall be fully provided for.

* Investments classified under HTM will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period

* The profit on sale of securities, if any from HTM category shall first be taken to the Profit and Loss Account and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Profit and Loss Account. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines.

1.6 Accounting for Repo Transactions

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/discount on securities as the case may be, even during the repo period while the repo buyer shall not accrue the same.

1.7 Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest Rate Swaps outstanding at Balance Sheet date are Marked-to-Market and the resultant loss, if any, is recorded in Profit and Loss Account. Any other charges relating to Trading Interest Rate Swaps are charged to Profit and Loss Account.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated Asset/Liability. Gains or losses on the termination/redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a hedge swap from one item of asset/liability to another item of Asset/Liability, the Mark-to-Market profit/loss of the hedge swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset/Liability.

1.8 Accounting for Future and Options Transactions

i. Initial Margin payable at the time of entering into Future contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii Transactions in Future contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in Futures as at the Balance Sheet date is netted by its notional value.

iii The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked-to-Market Margin. The balance in the Marked-to-Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked-to-Market Margin Account is charged off to Revenue, whereas net credit balance is shown under Current Liabilities.

iv Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9 Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

1.10 Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard - 22 issued by the Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

1.11 Depreciation

Depreciation on fixed assets is charged on written down value method in accordance with the rates specified in Schedule XIV to the Companies Act, 1956. Intangible Assets comprise of software acquired by the company to facilitate its operations and these are depreciated @40 per cent on WDV basis.

1.12 Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

1.13 Share Issue Expenses

Share issue expenditure is charged to Profit and Loss account in the year of occurrence.

1.14 Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-O of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

1.15 Retirement Benefits - Provident Fund, Gratuity and Leave Liability (As per Accounting Standard - 15)

i. Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to Revenue.

ii. Leave Liability is accounted for on actuarial valuation carried at year-end.

iii. Contribution to recognised provident fund is charged to Revenue.

1.16 Operating Cycle

As the Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Profit and Loss Account (as per the revised guidelines), the Company has assured one year as its operating cycle year.


Mar 31, 2013

1.1. Method of Accounting

The Company follows accrual system of accounting and the financial statements are prepared on historical cost basis, in accordance with Generally Accepted Accounting Principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

1.2. Sales / Purchases of Treasury Bills (including Cash management bills) and Government Dated Securities, as disclosed in Statement of Profit & Loss Account, do not include Repo transactions in accordance with revised RBI guidelines.

1.3. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities and Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognised as income.

vi) For continuing or long term duration activities (e.g. Mutual fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan, the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

1.4. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Profit and Loss Account.

1.5. Valuation of Inventories / Investment

a. Inventories

i) All securities in which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and nonhedged portfolio.

ii) The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI guidelines). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA), except for Equity Shares. Market value of Equity shares is determined by the closing rates provided by the stock exchanges. For this purpose, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to Profit and Loss Account. Net appreciation, if any, is ignored. The diminution in one category of securities is not set off against appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the balance sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/appreciation of hedged assets is netted with diminution/ appreciation of hedging swaps and net diminution, if any, is charged to Profit and Loss Account and net appreciation, if any, is ignored.

b. Non-Current Investments

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

i) Securities classified under HTM category need not be Marked-to-Market and will be carried out at the value at which they were transferred to HTM portfolio.

ii) Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation, if any, on such transfer shall be fully provided for.

iii) Investments classified under HTM will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period

iv) The profit on sale of securities, if any, from HTM category shall first be taken to the Profit and Loss Account and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Profit and Loss Account. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines

1.6 Accounting for Repo Transactions

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities, as the case may be, even during the repo period, while the repo buyer shall not accrue the same.

1.7 Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest rate swaps outstanding at Balance Sheet date are Marked-to-Market and the resultant loss, if any, is recorded in Profit and Loss Account. Any other charges relating to Trading Interest Rate Swaps are charged to Profit and Loss Account.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated asset/liability. Gain or loss on the termination / redesignation of Hedge Swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a Hedge Swap from one item of asset/liability to another item of Asset/Liability, the Marked-to- Market profit/loss of the Hedge Swap on the day of redesignation is amortized over the shorter of the remaining life of the Swap or the remaining life of the Asset/Liability.

1.8 Accounting for Future and Options Transactions

i) Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii) Transactions in Future Contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in Futures as at the Balance Sheet date is netted by its notional value.

iii) The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked-to-Market Margin. The balance in the Marked-to-Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked-to-Market Margin Account is charged off to Revenue, whereas net credit balance is shown under Current Liabilities.

iv) Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9 Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

1.10 Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

1.11 Depreciation

Depreciation on fixed assets is charged on written down value method in accordance with the rates specified in Schedule XIV to the Companies Act, 1956. Intangible Assets comprise of software acquired by the Company to facilitate its operations and these are depreciated @40 per cent on WDV basis.

1.12 Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

1.13 Share Issue Expenses

Share issue expenditure is charged to Profit and Loss account in the year of occurrence.

1.14 Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-O of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

1.15 Retirement Benefits - Provident Fund, Gratuity and Leave Liability (As per Accounting Standard 15)

i) Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue.

ii) Leave Liability is accounted for on actuarial valuation carried at year-end.

iii) Contribution to recognised provident fund is charged to revenue.

1.16 Operating Cycle

As our Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Profit and Loss Account (as per the revised guidelines), the Company has assumed one year as operating cycle period.


Mar 31, 2012

1.1 Method of Accounting

The company follows accrual system of accounting and the financial statements are prepared on historical cost basis, in accordance with Generally Accepted Accounting Principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

1.2 Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit & Loss Account, do not include Repo transactions in accordance with revised RBI guidelines.

1.3 Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities, Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase & received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned on allotment/devolvement in respect of underwriting commitments is proportionately reduced from the cost of securities alloted/devolved and the remaining amount is directly recognized as income.

vi) For continuing or long term duration activities (e.g. Mutual fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan the income (dividend) is accounted based on the dividend declared by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

1.4 Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities, is charged to Profit & Loss Account.

1.5 Valuation of Inventories / Investments

a. Inventories

i) All securities in which the company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non-hedged portfolio.

ii) The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI guidelines). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) except for equity shares. Market value of Equity shares is determined by the closing rates provided by the stock exchanges.

Further, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to Profit & Loss Account. Net appreciation, if any, is ignored. The diminution in one category of securities is not set off against appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

b. Non-Current Investments

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions, at present, are under:

i) Securities classified under HTM category need not be Marked to Market and will be carried at the value at which they were transferred to HTM portfolio.

ii) Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation, if any, on such transfer shall be fully provided for.

iii) The profit on sale of securities, if any from HTM category shall first be taken to the Profit & Loss Account and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Profit & Loss Account. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines.

1.6 Accounting for Repo Transactions

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities as the case may be, even during the Repo period while the Repo buyer shall not accrue the same.

1.7 Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest Rate Swaps outstanding at Balance Sheet date are Marked to Market and the resultant loss, if any, is recorded in Profit and Loss Account. Any other charges relating to Trading Interest Rate Swaps are charged to Profit and Loss Account.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. In that case the swap should be marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated Asset or Liability.

Gains or losses on the termination of Swaps are recognized when the offsetting gain or loss is recognized on the designated Asset or Liability. This implies that any gain or loss on the terminated swap is deferred and recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the Asset / Liability.

On redesignation of a Hedge Swap from one item of asset/liability to another item of asset/liability, the Marked-to- Market profit/loss of the Hedge Swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset / Liability.

1.8 Accounting for Future and Options Transactions

i) Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii) Transactions in Future Contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in Futures as at the Balance Sheet date is netted by its notional value.

iii) The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked to Market Margin. The balance in the Marked to Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked to Market Margin Account is charged off to revenue, whereas net credit balance is shown under Current Liabilities.

iv) Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received

for those Options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the premium paid for the Option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

1.9 Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

1.10 Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by the Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

1.11 Depreciation

Depreciation on fixed assets is charged on written down value method in accordance with the rates specified in Schedule XIV to the Companies Act, 1956. Intangible Assets comprise of software acquired by the company to facilitate its operations and these are depreciated @ 40 per cent on WDV basis.

1.12 Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

1.13 Share Issue Expenses

Share issue expenditure is charged to Profit and Loss Account in the year of occurrence.

1.14 Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-O of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

1.15 Retirement Benefits - Provident Fund, Gratuity & Leave Encashment (As per Accounting Standard 15)

i) Gratuity contribution made under the Employee Group Gratuity cum Life Insurance Scheme of LIC is charged to revenue.

ii) Leave Encashment is accounted for on actuarial valuation carried at year-end.

iii) Contribution to recognized provident fund is charged to revenue.

1.16 Operating Cycle

As the company is a trader in Government and Fixed Income Securities, the company buys and sells securities depending upon the market conditions. There is no normal fixed period for sale of stock. However, for the purpose of preparing Balance Sheet and Profit & Loss Account (as per the revised guidelines), the company has assumed one year as operating cycle period.


Mar 31, 2011

1. Method of Accounting

The company follows accrual system of accounting and the financial statements are prepared on historical cost basis, in accordance with generally accepted accounting principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

2. Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Profit & Loss Account does not includes repo transactions in accordance with revised RBI guidelines. In year prior to this, sale / purchase of Government dated securities includes repo transactions as well.

3. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities and Corporate Bonds and Debentures is recognised at its coupon rate and that of floating rate bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of fixed income securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase & received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned in respect of devolvement in respect of underwriting commitments is proportionately reduced from the cost of securities devolving and the remaining amount is directly recognised as income.

vi) In case of Merchant Banking activities (Project Appraisal, Loan Syndication etc.) the fee is accrued only on the completion of the assignment/work. For continuing or long term duration activities (e.g. Mutual fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii) In case of Units of Mutual Fund, the company has invested in Daily Dividend Reinvestment Plan and the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. Income on investment made in Mutual Funds with growth plan is accounted daily on the basis of closing NAV declared by mutual funds.

4. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Profit & Loss Account.

5. Valuation of Stock-in-Trade

i) All securities in which the company deals are regarded as Current Assets (Stock-in-Trade) and grouped as hedge and non-hedge portfolio.

ii) The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds & Debentures, Equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI circular). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges. For this purpose, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to Profit and Loss Account. Net appreciation, if any, is ignored. The diminution in one category of securities is not set off against appreciation in another category.

The securities under HTM category are valued as per the guidelines issued by RBI from time to time.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the balance sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund valuation is done on the basis of closing NAV declared by the Mutual Fund.

6. Accounting for Repo Transactions

In confirmation with RBI guidelines, securities sold under repo transactions are not excluded from stock-in-trade and the securities purchased under reverse repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities, as the case may be, even during the repo period while the repo buyer shall not accrue the same. The above said rules are applicable from this financial year onwards (2010-11) as per RBI guidelines.

7. Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest Rate Swaps outstanding at Balance Sheet date are marked to market and the resultant loss, if any, is recorded in Profit and Loss Account. Any other charges relating to Trading Interest Rate Swaps are charged to Profit and Loss Account.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A Hedge Swap designated to an asset/liability is carried at market value. The resulting mark-to-market loss/gain on swap is recorded as an adjustment to the market value of designated asset/liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated asset or liability.

On redesignation of a Hedge Swap from one item of asset/liability to another item of asset/liability, the mark-to-market profit/loss of the Hedge Swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the asset/liability

8. Accounting for Future and Options Transactions

i) Initial Margin payable at the time of entering into future contract/sale of option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii) Transactions in Future contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in futures as at the Balance Sheet date is netted by its notional value.

iii) The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Mark to Market Margin. The balance in the Mark to Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in futures contracts till the Balance Sheet date. Net debit balance in the Mark to Market Margin Account is charged off to revenue whereas net credit balance is shown under current liabilities.

iv) Premium paid or received on purchase and sale of options and the difference paid or received on exercise of options is accounted as Purchases or Sales. In case of open interest in options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of options bought, provision is made for the amount by which the premium paid for the option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

9. Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

10. Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by The Institute of Chartered Accountants of India on “Accounting for Taxes on Income”.

11. Depreciation

Depreciation on fixed assets is charged on written down value method in accordance with the rates specified in Schedule XIV to the Companies Act, 1956. Intangible Assets comprise of software acquired by the company to facilitate its operations and these are depreciated @40 per cent on WDV basis.

12. Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

13. Share Issue Expenses

Share issue expenditure is charged to Profit and Loss account in the year of occurrence.

14. Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-O of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

15. Retirement Benefits – Provident Fund, Gratuity & Leave Encashment (As per Accounting Standard 15)

i. Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue.

ii. Leave Encashment is accounted for on actuarial valuation carried at year-end.

iii. Contribution to recognised provident fund is charged to revenue.


Mar 31, 2010

1. Method of Accounting

The company follows accrual system of accounting and the financial statements are prepared on historical cost basis, in accordance with generally accepted accounting principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

2. Sales / Purchases of Treasury Bills and Government Dated Securities, as disclosed in Profit & Loss Account includes repo transactions.

3. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities and Corporate Bonds and Debentures is recognised at its coupon rate and that of floating rate bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of fixed income securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase & received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned in respect of devolvement in respect of underwriting commitments is proportionately reduced from the cost of securities devolving and the remaining amount is directly recognised as income.

vi) In cases where performance is basically complete with the execution of a single act over a short duration (e.g. Merchant Banking Activities like Project Appraisal) revenue is accrued on the completion of the single act. For continuing or long duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognised only if there is no significant uncertainty regarding the amount of consideration.

vii) In case of Units of Mutual Fund, the company has invested in Daily Dividend Reinvestment Plan and the income (Dividend) is accounted based on the dividend declaration by the Mutual Fund.

4. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Profit & Loss Account.

5. Valuation of Stock-in-Trade

i) All securities in which the company deals are regarded as Current Assets (Stock-in-Trade) and grouped as hedge and non-hedge portfolio.

ii) The stock of Central Government Securities, Treasury Bills, State Development Loans and PSU/Corporate Bonds & Debentures, Equity Shares are valued at weighted average cost or market value whichever is lower (except securities transferred under HTM category as permitted by RBI vide circular dated August 31, 2009 - refer note no.12 given below for further explanation). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges. For this purpose, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to trading income in the Profit and Loss Account. Net appreciation, if any, is ignored. The diminution in one category of securities is not set off against appreciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) All the Non-SLR securities issued by the Government of India will be valued at a spread of 25 basis points (previously 50 basis points) above the corresponding yield on Government of India securities.

v) In case of units of Mutual Fund valuation is done on the basis of closing NAV declared by the Mutual Fund.

6. Accounting for Repo Transactions

Securities sold under repo transactions are excluded from stock-in-trade and the securities purchased under reverse repo are included in the stock-in-trade.

The securities purchased under reverse repo are valued in accordance with the valuation norms applicable for the respective category of security.

In case of securities sold under repo, the notional loss, if any, arising out of the difference between the transaction price and book value in the first leg of the repo transaction is provided for, notional gains, if any, are ignored.

7. Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest Rate swaps outstanding at Balance Sheet date are marked to market and the resultant loss, if any, is recorded in Profit and Loss Account. Any other charges relating to Trading Interest Rate Swaps are charged to Profit and Loss Account.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A Hedge Swap designated to an asset/liability is carried at market value. The resulting mark-to-market loss/gain on swap is recorded as an adjustment to the market value of designated asset/liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated asset or liability.

On redesignation of a Hedge Swap from one item of asset/liability to another item of asset/liability, the mark-to-market profit/loss of the Hedge Swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the asset/liability.

8. Accounting for Future and Options Transactions

i) Initial Margin payable at the time of entering into future contract/sale of option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii) Transactions in Future Contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in futures as at the Balance Sheet date is netted by its notional value.

iii) The difference in the settlement price or exchange closing price of the previous day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Mark to Market Margin. The balance in the Mark to Market Margin Account represents the net amount paid or received on the basis of movement in the prices of open interest in futures contracts till the Balance Sheet date. Net debit balance in the Mark to Market Margin Account is charged off to revenue whereas net credit balance is shown under current liabilities.

iv) Premium paid or received on purchase and sale of options and the difference paid or received on exercise of options is accounted as Purchases or Sales. In case of open interest in options sold as on the Balance Sheet date, provision is made for the amount by which premium prevailing on the Balance Sheet date exceeds the premium received for those options. The excess of premium received over the premium prevailing on the Balance Sheet date is not recognized. Similarly, in case of options bought, provision is made for the amount by which the premium paid for the option exceeds the premium prevailing on the Balance Sheet date and the excess of premium prevailing on the Balance Sheet date over the premium paid is ignored. In case of multiple open positions, provision is made or excess premiums are ignored after netting off the balance in buy as well as sell positions.

9. Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

10. Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by The Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

11. Depreciation

Depreciation on fixed assets is charged on written down value method in accordance with the rates specified in Schedule XIV to the Companies Act, 1956. Intangible Assets comprises of software acquired by the company to facilitate its operations and these are depreciated @ 40 per cent on WDV basis.

12. Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

13. Share Issue Expenses

Share issue expenditure is charged to Profit and Loss account in the year of occurrence.

14. Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-O of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

15. Retirement Benefits - Provident Fund, Gratuity & Leave Encashment (As per Accounting Standard 15)

i. Gratuity contribution made under the Employee Group Gratuity cum Life Insurance Scheme of LIC is charged to revenue.

ii. Leave Encashment is accounted for on actuarial valuation carried at year-end.

iii. Contribution to Recognised Provident Fund is charged to revenue.

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