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Accounting Policies of Reliance Capital Ltd. Company

Mar 31, 2016

1 Background

Reliance Capital Limited (''the Company'') is registered as a Non-Banking Financial Company (''NBFC'') as defined under Section 45-IA of the Reserve Bank of India Act, 1934. The Company is principally engaged in lending and investing activities.

2 Significant Accounting Policies

a Basis of Preparation of Standalone Financial Statements

The accompanying standalone financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the generally accepted accounting principles (GAAP) in India and comply with the Accounting Standards specified under section 133 of the Companies Act, 2013 (The Act), read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Act. These financial statements are presented in Indian rupees rounded to the nearest crore except otherwise stated.

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

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 issued vide Reserve Bank of India (''RBI'') Notification No. DNBR.009/CGM (CDS)-2015 dated March 27, 2015, as applicable to the Company.

b Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/materialized.

c Revenue Recognition

i) Interest income:

Interest income is recognized as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of nonperforming assets ("NPAs") where it is recognized, upon realization.

ii) Dividend income:

Dividend income is recognized when the right to receive payment is established.

iii) Income from investments:

Profit / (Loss) earned from sale of securities is recognized on trade date basis. The cost of securities is computed based on weighted average basis.

iv) Lease rental income:

Lease rental income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.

v) Discount on investments:

The difference between the acquisition cost and face value of debt instruments is recognized as interest income over the tenor of the instrument on straight-line basis.

vi) Redemption premium on investments :

Redemption premium on investments is recognized as finance income over the tenor of the investments.

vii) Share of profits or losses in partnership firm:

Share of profits / losses in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company''s account in the books of the partnership firm.

viii) Loan processing fee income:

Loan processing fee income is accounted for upfront upon processing of loan as and when it becomes due.

ix) Management fee income:

Management fee income towards support services is accounted as and when services are rendered and it becomes due on contractual terms with the parties.

x) Income from assignment / securitization:

In case of assignment / securitization of loans, the assets are derecognized when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned/ securitized loans in accordance with the Guidelines issued by Reserve Bank of India vide RBI/2012-13/170 DnbS. PD. No. 301/3.10.01/2012-13 dated August 21, 2012. The profit if any, as reduced by the estimated provision for loss/ expenses and incidental expenses related to the transaction, is recognized as gain or loss arising on assignment / securitization over the tenure of the deal. Loss arising from these transactions if any are recognized immediately in the statement of profit and loss.

xi) Servicing fee income:

Servicing fees received is accounted for based on the underlying deal structure of the transaction as per the agreement.

d Fixed assets

i) Tangible assets Leased assets

All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

Own assets

Tangible Assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes acquisition cost which is directly attributable to bring the asset to its working condition for its intended use.

ii) Intangible assets

Intangible assets are recognized where it is probable that the future economic benefit attributable to the assets will flow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortization.

Expenditure incurred on acquisition / development of intangible assets which are not put / ready to use at the reporting date is disclosed under intangible assets under development.

e Depreciation / Amortization

Depreciation on fixed assets is provided as follows:

i) Tangible assets

The Company has provided for depreciation over the useful life of the assets as prescribed under part C of Schedule II of the Companies Act, 2013 as per straight line method except Plant & Machinery and data processing machineries given on lease where useful life is considered 8 years and 5 years, respectively based on management''s assessments of useful life in respect of these assets. Lease hold improvements are amortized over the primary period of the lease on straight-line basis.

ii) Intangible Assets are amortized on straight-line basis over the useful life of the asset up to a maximum of 5 years commencing from the month in which such asset is first installed.

The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

f Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

g Investments

Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost and fair value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment scrip wise.

An investment property is accounted for in accordance with cost model. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property.

h Repossessed assets

Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount. The classification and provision is based on the underlying Days Past Due (DPD) for these loans.

i Loan origination/acquisition cost

All direct cost incurred for the loan origination is amortized over the tenure of the loan.

j Security of loans given

Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other secured loans are secured against hypothecation of respective assets.

k Provisions for Non Performing Assets (NPA) and doubtful debts

Loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management''s assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by the Reserve Bank of India.

l Provisions for standard assets

Provisions for standard assets are made as per para 10 of the Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.

m Market linked debentures (MLD)

The Company has issued certain non-convertible debentures, the rate of interest which is linked to performance of specified indices over the period of the debentures. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain/loss on these hedge positions are netted against with interest expense on MLD and resultant ''net loss'' is recognized in Statement of Profit and Loss immediately, however ''net gain'' if any, is ignored.

n Discount on commercial paper

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognized as discounting expense.

o Foreign currency transactions

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognized in the Statement of Profit and Loss.

Monetary assets and liabilities denominated in foreign currencies at the yearend are restated at year end rates. p Employee benefits

i) Provident fund: Company''s contributions to the recognized provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.

ii) Gratuity: The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

iii) Leave encashment: Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.

iv) Phantom Shares: As a long term incentive plan to employees, the Company has initiated Phantom stock option plan which are cash settlement rights where the employees are entitled to get cash compensation based on agreed formulae linked to market value of group company shares upon exercise of phantom stock options over notional or hypothetical shares, whereby instead of becoming entitled to buy the actual shares on vesting, they become entitled to cash payment equivalent to appreciation in the value over defined base price of shares. The present value of the obligation under such plan is determined based on actuarial valuation.

q Employee Stock Option Scheme ("ESOS")

The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOS plan of the Company. The employee compensation expenses are accounted on the basis of "intrinsic value method" as prescribed by the Guidance Note on Employee share based payments issued by the Institute of Chartered Accountants of India as required by the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. The excess, if any, of quoted market price over the exercise price on the date of grant would be recognized as compensation cost over the vesting period. The Company recognizes compensation cost on the basis of estimated number of stock options expected to vest.

r Borrowing costs

Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalized as part of the cost of the assets. Other borrowing costs are recognized as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.

s Operating leases

Lease payments for assets taken on an operating lease are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

t Earnings per share

The basic earnings per share is computed by dividing the net profit / (loss) after tax attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit / (loss) after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.

u Taxation

- Current Tax

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognized where there is convincing evidence that the same can be realized in future.

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized when there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized to the extent there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realized.

v Provisions, contingent liabilities and contingent assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognized but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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

Contingent assets are not recognized nor disclosed in the financial statements.

3 Previous year figures has been regrouped / reclassified wherever necessary

(e) The Company has one class of equity shares having a par value of '' 10 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholder.

For the year ended March 31,2016, the amount of per share dividend recognized as distributable to equity shareholders is '' 10 (March 31, 2015 '' 9). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting,

(g) As on March 31, 2016, 6,21,809 equity shares (Previous year 5,98,1 66 equity shares) are held by custodian against which depository receipts have been issued.

(h) In Extraordinary General Meeting held on January 23, 2015, the members of the Company have duly approved, vide e-voting, Preferential Allotment of 70,00,000 equity shares of Rs, 10 each at a premium of Rs, 520 per share aggregating to Rs, 371 crore to Sumitomo Mitsui Trust Bank Limited of Japan which were allotted on March 12, 2015.

* Includes Rs, 846 crore (Previous year Rs, 846 crore) created pursuant to the Scheme of Amalgamation approved by High Court which shall for all regulatory and accounting purposes be considered to be part of the owned funds / net worth of the Company.

** During the year ended March 31, 2015, the Securities and Exchange Board of India (SEBI) has issued the "SEBI (Share Based Employee Benefits) Regulations, 2014 (''the Regulation'') which requires the accounting treatment for employee share based payments to be based on the Guidance Note on Accounting for Employee Share Based Payments issued by the Institute of Chartered Accountants of India (the Guidance Note). Accordingly, based on the requirements of the Guidance Note, the Company has not considered the ESOS Trust for inclusion in the standalone financial statements for the year ended March 31, 2015 and March 31, 2016. Consequently, these financial statements do not include the assets and liabilities of the ESOS Trust and to that extent. The Company has disclosed the loan to ESOS Trust under long term loans and advances.

*** Includes Rs, 3 837 crore (Previous year Rs, 3 837 crore) created pursuant to Scheme of Amalgamation approved by High Court.

**** Created pursuant to Section 45-IC of Reserve Bank of India Act, 1934.

a. Cash Credit facilities amounting to Rs, 3 crore (Previous year Rs, 1 crore) referred above are secured by pari passu first charge on all present and future book debts, receivables and loan assets pertaining only to the Company''s commercial finance division.

b. Short term loan amounting to Rs, 675 crore (Previous year Rs, 540 crore) referred above are secured by pari passu first charge on all present and future book debt, receivables and loan assets pertaining only to the Company''s commercial finance division.

c. In respect of Commercial Papers maximum amount outstanding during the year was Rs, 5 499 crore (Previous year Rs, 5 055 crore).

3. Investment in 38,85,24,405 (Previous year 38,85,24,405) equity shares of Reliance Life Insurance Company Limited, 9,000 (Previous year 9,000) equity shares of Reliance CWT India Limited and Nil (Previous year 30,000) equity shares of Viscount Management Services Limited are carried at fair value i.e. at amount transferred under the Scheme of Amalgamation.

4. During the year, Reliance Life Insurance Company Limited ceased to be an associate and has become a subsidiary of the Company

5. Land of Rs, 29 crore and Building of Rs, 109 crore representing Investment in Property are acquired against the settlement of loans. Freehold Land includes Rs, 13 crore and Buildings Rs, 49 crore acquired against settlement of loan has been reclassified and transferred from fixed assets to investment in properties during the year.

6. The Company has been allotted warrants without paying any consideration at the time of allotment.

7. The Company has entered into a joint venture with KGS Developers Limited in respect of real estate project development. The Company has invested '' 85 crore in the financial year 2008-09 and is entitled to share the Profit / Loss equally. However assets, liabilities, revenue and expenses related to the project are not included in the financial statements of the Company as it does not meet the definition criteria of a Joint Venture under AS 27 ''''Financial Reporting of Interests in Joint Ventures".

8. Investments includes Rs, 67 crore (Previous year Rs, 61 crore) of equity shares given as collateral/pledge towards margin with brokers.

9. Investments in Nil equity shares of TV18 Broadcast Limited amounting to Rs, Nil crore (Previous year 22,90,393 equity shares of Rs, 5 crore) and 33,1 97 equity shares of Jindal Saw Limited amounting to Rs, 29,96,693 (Previous year 33,1 97 equity shares of Rs, 29,96,693) are given to comply with the margin requirements, thus theses securities are not in the name of Company.

10. During the year, Nippon Life Insurance Company (NLIC), has acquired 9% equity shareholding in Reliance Capital Asset Management Limited (subsidiary of the Company) and 23% equity shareholding in Reliance Life Insurance Company Limited.

In respect of balances with Scheduled Banks in Fixed deposit accounts, Rs, 42 crore (Previous year Rs, 206 crore) is kept as credit enhancement towards securitization / assignment transaction, Rs, 5 33 932 (Previous year Rs, 3 23 502) is kept as deposit with sales tax authority, Rs, 5 00 000 (Previous year Rs, 5 00 000) is kept as deposit with the Pension Fund Regulatory and Development Authority (PFRDA) and Rs, 32 crore (Previous year Rs, Nil) is kept as deposit with stock exchanges for margins.


Mar 31, 2015

A Basis of Preparation of Standalone Financial Statements

The accompanying standalone financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the generally accepted accounting principles (GAAP) in India and comply with the Accounting Standards specified under section 133 of the Companies Act, 2013 (The Act), read with Rule 7 of the Companies (Accounting Standards) Rules 2014 and relevant provisions of Companies Act, 2013. These financial statements are presented in Indian rupees rounded to the nearest crore except otherwise stated.

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

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 vide Reserve Bank of India (''RBI'') Notification No. DNBR.009/CGM (CDS)-2015 dated March 27, 2015, as applicable to the Company.

b Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.

c Revenue Recognition

i) Interest income:

Interest income is recognised as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of non performing assets ("NPAs ") where it is recognised, upon realisation.

ii) Dividend income:

Dividend income is recognised when the right to receive payment is established.

iii) Income from investments:

Profit / (Loss) earned from sale of securities is recognised on trade date basis. The cost of securities is computed based on weighted average basis.

iv) Lease rental income:

Lease rental income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term. v) Discount on investments:

The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.

vi) Redemption premium on investments :

Redemption premium on investments is recognised as income over the tenor of the investment.

vii) Share of profits or losses in partnership firm:

Share of profits / losses in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company''s account in the books of the partnership firm.

viii) Loan processing fee income:

Loan processing fee income is accounted for upfront as and when it becomes due.

ix) Management fee income:

Management fee income towards support services is accounted as and when it becomes due on contractual terms with the parties.

x) Income from assignment / securitization:

In case of assignment / securitisation of loans, the assets are derecognised when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned/ securitised loans in accordance with the Guidelines issued by Reserve Bank of India vide RBI/2012-13/170 DNBS. PD. No. 301/3.10.01/2012-13 dated August 21, 2012. The profit if any, as reduced by the estimated provision for loss/ expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment / securitisation over the tenure of the deal. Loss arising from these transactions if any will be recognised immediately in the statement of profit and loss.

xi) Servicing fee income:

Servicing fees received is accounted for based on the underlying deal structure of the transaction as per the agreement.

d Fixed assets

i) Tangible assets

Leased assets

All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

Own assets

Tangible Assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes acquisition cost which is directly attributable to bring the asset to its working condition for its intended use.

ii) Intangible assets

Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will flow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.

Expenditure incurred on acquisition / development of intangible assets which are not put / ready to use at the reporting date is disclosed under intangible assets under development.

Depreciation / Amortisation

Depreciation on fixed assets is provided as follows:

i) Tangible assets

The Company has provided for depreciation over the useful life of the assets as prescribed under part C of Schedule II of the Companies Act, 2013 as per straight line method except Plant & Machinery and data processing machineries given on lease where useful life is considered 8 years and 5 years, respectively based on management''s assessments of useful life in respect of these assets. Lease hold improvements are amortised over the primary period of the lease on straight-line basis.

ii) Intangible Assets are amortised on straight line basis over the useful life of the asset up to a maximum of five years commencing from the month in which such asset is first installed.

The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

g Investments

Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost or fair value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment script wise.

h Repossessed assets

Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount. The classification and provision is based on the underlying Days Past Due (DPD) for these loans.

i Loan origination/acquisition cost

All direct cost incurred for the loan origination is amortised over the tenure of the loan.

j Security of loans given

Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other Secured loans are secured against hypothecation of respective assets.

k Provisions for Non Performing Assets (NPA) and doubtful debts

Loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management''s assessment of the degree of impairment and the level of provisioning which meets the NBFC prudential norms prescribed by Reserve Bank of India.

l Provisions for standard assets

Provisions for standard assets are made as per para 10 of the Systematically Important Non-Banking Financial (Non Accepting or Holding) Companies Prudential Norms (Reserve Bank) directions, 2015.

m Market linked debentures (MLD)

The Company has issued certain non-convertible debentures, the rate of interest which is linked to performance of specified indices over the period of the debentures. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain/loss on these hedge positions are netted against with interest expense on MLD and resultant ''net loss'' is recognised in Statement of Profit and Loss immediately, however ''net gain'' if any, is ignored.

n Discount on commercial paper

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.

o Foreign currency transactions

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Statement of Profit and Loss.

Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.

p Employee benefits

i) Provident fund: Company''s contributions to the recognised provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.

ii) Gratuity: The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss. iii) Leave encashment: Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.

q Employee Stock Option Scheme ("ESOS ")

The Employees Stock Option Scheme ("the Scheme ") provides for grant of equity shares of the Company to directors (including whole-time) (excluding independent directors) and employees of the Company, the Holding Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortised over the vesting period of the option on a straight line basis.

The fair market price is the latest closing price, immediately prior to the date of the Board / Committee meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

r Borrowing costs

Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.

s Operating leases

Lease payments for assets taken on an operating lease are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

t Earnings per share

The basic earning per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit / loss after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.

u Taxation

- Current Tax

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.

- Deferred tax

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.

v Provisions, contingent liabilities and contingent assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognised nor disclosed in the financial statements.


Mar 31, 2014

The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956 read with the general circular 15/2013 dated September 13, 2013 of the Ministry of Corporate affairs in respect of section 133 of the Companies Act, 2013. These financial statements are presented in Indian rupees rounded to the nearest crore except otherwise stated.

All assets and liabilities have been classifed as current or non-current as per the Company''s normal operating cycle and other criteria set out in revised Schedule VI to the Companies Act, 1956. Based on the nature of the services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classifcation of assets and liabilities.

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classifcation and provisioning for bad and doubtful debts and other matters, specifed in the directions issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to the Company.

b Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.

c Revenue Recognition

i) Interest income:

Interest income is recognised as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of non performing assets (''NPAs'') where it is recognised, upon realisation.

ii) Dividend income: Dividend income is recognised when the right to receive payment is established.

iii) Income from investments:

profit earned from sale of securities is recognised on trade date basis. The cost of securities is computed on weighted average basis.

iv) Lease rental income:

Lease rental income is recognized in the Statement of profit and Loss on a straight-line basis over the lease term.

v) Discount on investments:

The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.

vi) Redemption premium on investments: Redemption premium on investments is recognised as income over the tenor of the investment.

vii) Share of profits or losses in partnership frm:

Share of profits / losses in partnership frm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company''s account in the books of the partnership frm.

viii) Loan processing fee income:

Loan processing fee income is accounted upfront as and when it becomes due.

ix) Management fee income:

Management fee income towards support services is accounted as and when it becomes due on contractual terms with the parties.

x) Income from assignment / securitisation:

In case of assignment / securitisation of loans, the assets are derecognised when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned/ securitised loans in accordance with Reserve Bank of India Guideline no RBI/2012-13/170 DNBS. PD. No. 301/3.10.01/2012-13 dated August 21, 2012. The profit, if any, as reduced by the estimated provision for loss/ expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment / securitisation over the tenure of the deal. Loss arising from these transactions, if any, will be recognised immediately in the statement of profit and loss.

d Fixed assets

i) Tangible assets Leased assets

All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

Own assets

Fixed Assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes all expenses incidental to the acquisition of the fixed assets.

ii) Intangible assets

Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will fow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.

Expenditure incurred on acquisition / development of intangible assets which are not put / ready to use at the reporting date is disclosed under intangible assets under development.

e Depreciation / Amortisation

Depreciation on fixed assets is provided as follows:

i) Tangible Assets

1) Leased assets: Depreciated on Straight Line Method over the useful life of assets. The estimated useful lives for the different types of assets are:

a) Plant & equipments

1) Energy Saving Equipments - 15 years

2) Specialized Machinery used in manufacturing -10 years

3) General Plant & Machinery - 8 years

b) Data processing machineries – 5 years

c) Vehicle for personal use – 8 years

d) Vehicle for commercial use – Taxi – 8 years other than Taxi - 6 years

2) Own Assets: All assets other than lease hold improvements, on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and lease hold improvements are amortised over the primary period of the lease on straight-line basis.

ii) Intangible Assets are amortised on straight line basis over the useful life of the asset up to a maximum of five years commencing from the month in which such asset is first installed. The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

f Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refected at the recoverable amount subject to a maximum of depreciable historical cost.

g Investments

Investments are classifed as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost or fair value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.

h Repossessed assets

Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount. The classifcation and provision is based on the underlying Days Past Due (DPD) for these loans.

i Loan origination / acquisition cost

All direct cost incurred for the loan origination is amortised over the tenure of the loan.

j Security of loans given

Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other Secured loans are secured against hypothecation of respective assets.

k Provisions for Non Performing Assets (NPA) and doubtful debts

NPA including loans and advances, receivables are identifed as bad / doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management''s assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by Reserve Bank of India.

l Provisions for standard assets

Provisions for standard assets are made as per the Reserve Bank of India notifcation DNBS.PD.CC.No.207/ 03.02.002 /2010-11 dated January 17, 2011.

m Market Linked Debentures (MLDs)

The Company has issued certain non-convertible debentures, the rate of interest which is linked to performance of specifed indices over the period of the debentures.

The Company hedges its interest rate risk on MLD by taking positions in future & options based on specifed indices. Any gain/loss on these hedge positions are netted against with interest expense on MLD and resultant ''net loss'' is recognised in Statement of profit and Loss immediately, however ''net gain'' if any, is ignored.

n Discount on commercial paper

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.

o Foreign currency transactions

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any, arising out of transactions settled during the year are recognised in the Statement of profit and Loss. Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.

p Employee benefits

i) Provident fund:

Company''s contributions to the recognised provident fund, which is a Defined contribution scheme, are charged to the Statement of profit and Loss.

ii) Gratuity:

The Company''s gratuity benefit scheme is a Defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such Defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the fnal obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under Defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognised immediately in the Statement of profit and Loss.

iii) Leave encashment:

Leave encashment which is a Defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.

The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement.

q Employees Stock Option Scheme (''ESOS'')

The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to directors (including whole-time) and employees of the Company, the Holding Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specifed period. The Company follows the intrinsic value method to account for its stock- based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortised over the vesting period of the option on a straight line basis.

The fair market price is the latest closing price, immediately prior to the date of the Board /Committee meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

r Borrowing costs

Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.

s Operating lease

Lease payments for assets taken on an operating lease are recognised as an expense in the Statement of profit and Loss on a straight line basis over the lease term.

t Earnings per share

The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share refect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit / loss after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.

u Taxation

- Current tax

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.

- Deferred tax

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to refect the amount that is reasonably / virtually certain (as the case may be) to be realised.

v Provisions, contingent liabilities and contingent assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to refect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs. 3 Previous year fgures has been regrouped /reclassifed wherever necessary.

(f) The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholder. For the year ended March 31, 2014, the amount of per share dividend recognised as distributable to equity shareholders is Rs. 8.50 (March 31, 2013 Rs. 8). The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

(h) As on March 31, 2014, 6 37 035 equity shares (Previous year 5 07 101 equity shares) are held by custodian against which depository receipts have been issued.

(i) In terms of SEBI (ESOS and ESPS) Guidelines, 1999 and recent opinion of the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (the ICAI) the accounting treatment for the equity shares of the company held by the RCAP ESOS Trust as at March 31, 2014 has been given in Standalone Financial Statements of the Company. The said Trust is holding 16,00,000 equity shares of Rs. 10 each of the Company. Face value of the said shares are presented as deduction from the paid up share capital and balance Rs. 60 crore being an amount exceeding the said face value are presented as deduction from the Securities Premium with corresponding adjustment to the loan receivable from the Trust.


Mar 31, 2013

A Basis of Preparation of Financial Statements

The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated in accordance with the generally accepted accounting principles (GAAP) in India and comply with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. These financial statements are presented in Indian rupees rounded to the nearest crore.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Revised Schedule VI to the Companies Act, 1956. Based on the nature of the services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to the Company.

b Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.

c Revenue Recognition

i) Interest income:

Interest income is recognised as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of non performing assets ("NPAs") where it is recognised, upon realisation.

ii) Dividend income:

Dividend income is recognised when the right to receive payment is established.

iii) Income from investments:

Profit earned from sale of securities is recognised on trade date basis. The cost of securities is computed on weighted average basis.

iv) Lease rental income:

Lease rental income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term.

v) Discount on investments:

The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.

vi) Redemption premium on investments:

Redemption premium on investments is recognised as income over the tenor of the investment.

vii) Share of profits or losses in partnership firm:

Share of profits / losses in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company''s account in the books of the partnership firm.

viii) Loan processing fee income:

Loan processing fee income is accounted for upfront as and when it becomes due.

ix) Management fee income:

Management fee income towards support services is accounted as and when it becomes due on contractual terms with the parties.

x) Income from assignment / securitisation:

In case of assignment / securitization of loans, the assets are derecognized when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned/ securtised loans. The profit if any, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment / securitization over the tenure of the deal. Loss arising from these transactions if any will be recognised immediately in the statement of profit and loss account.

d Fixed assets

i) Tangible assets

- Lease assets

All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss, if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

- Own assets

Fixed assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes all expenses incidental to the acquisition of the fixed assets.

ii) Intangible assets

- Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will flow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.

- Expenditure incurred on acquisition / development of intangible assets which are not put / ready to use at the reporting date us disclosed under intangible assets under development.

e Depreciation / Amortisation

Depreciation on Tangible assets is provided as follows:

i) Leased assets: Depreciated on Straight Line Method over the useful life of assets. The estimated useful life for the different types of assets are :

a) Plant & equipments - 8 years

b) Data processing machineries - 5 years

c) Vehicle for personal use - 8 years

d) Vehicle for commercial use - 8 years other than Taxi - 6 years

ii) Own Assets: All assets other than lease hold improvements, on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and lease hold improvements are amortised over the primary period of the lease on straight-line basis.

iii) Intangible Assets are amortised on straight line basis over the useful life of the asset up to a maximum of five years commencing from the month in which such asset is first installed.

The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

f Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

g Investments

Investments are classified as long term or current based on intention of the management at the time of purchase. Current investments are valued, scrip wise at cost or fair value, whichever is lower. Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.

h Repossessed assets

Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount. The classification and provision is based on the underlying Days Past Due (DPD) for these loans.

i Loan origination / acquisition cost

All direct cost incurred for the loan origination is amortised over the tenure of the loan.

j Security of loans given

Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other Secured loans are secured against hypothecation of respective assets.

k Provisions for Non Performing Assets (NPA) and doubtful debts

NPA including loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management''s assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by Reserve Bank of India.

l Provisions for standard assets

Provisions for standard assets are made as per the Reserve Bank of India notification DNBS.PD.CC.No.207/ 03.02.002 /2010-11 dated January 17, 2011.

m Market linked debentures (MLD)

The Company has issued certain non-convertible debentures, the rate of interest which is linked to performance of specified indices over the period of the debentures.

The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified indices. Any gain/loss on these hedge positions are netted against with interest expense on MLD and resultant ''net loss'' is recognised in Statement of Profit and Loss immediately, however ''net gain'' if any, is ignored.

n Discount on commercial paper

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.

o Foreign currency transactions

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Statement of Profit and Loss. Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.

p Employee benefits

i) Provident fund:

Company''s contributions to the recognised provident fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.

ii) Gratuity:

The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.

iii) Leave encashment:

Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.

The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

q Employee Stock Option Scheme ("ESOS")

The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortised over the vesting period of the option on a straight line basis. The fair market price is the latest closing price, immediately prior to the date of the Board /Commitee meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

r Borrowing costs

Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.

s Operating lease

Lease payments for assets taken on an operating lease are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

t Earning per share

The basic earning per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit / loss after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.

u Taxation

- Current tax

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.

- Deferred tax

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.

v Provisions, contingent liabilities and contingent assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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

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


Mar 31, 2012

A Basis of Preparation of Financial Statements

The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated and comply with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable.

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classifcation and provisioning for bad and doubtful debts and other matters, specifed in the directions issued by the Reserve Bank of India in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.

b Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.

c Revenue Recognition

i) Interest income:

Interest income is recognised as it accrues on a time proportion basis taking into account the amount outstanding and the rate applicable except in the case of non performing assets ("NPAs") where it is recognised, upon realisation.

ii) Dividend income:

Dividend income is recognised when the right to receive payment is established.

iii) Income from investments: profit earned from sale of securities is recognised on trade date basis. The cost of securities is computed based on weighted average basis.

iv) Lease rental income:

Lease rental income is recognised in the Statement of profit and Loss on a straight-line basis over the lease term.

v) Discount on investments:

The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument on straight-line basis.

vi) Redemption premium on investments in preference shares:

Redemption premium on investments in preference shares is recognised as income over the tenor of the investments.

vii) Share of profits or losses in partnership frm:

Share of profits / losses in partnership frm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company's account in the books of the partnership frm.

viii) Loan processing fee income:

Loan processing fee income is recognised as and when it becomes due.

ix) Management fee income:

Management fee income towards support services is accounted as and when it becomes due on contractual terms with the parties.

x) Income from assignment / securitisation:

a) In case of assignment of loans, the assets are de-recognised when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On de-recognition, the difference between book value of the loans assigned and consideration received, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment.

b) In case of securitisation of loans, the transferred loans are de-recognised and gains/losses are accounted for only if the company surrenders the rights to benefits specifed in the underlying securitised loan contract. In accordance with the Reserve Bank of India guidelines for securitisation of standard assets ,the Company recognises any loss arising from securitisation immediately at the time of sale and premium arising from securitisation is amortised over the life of securities issued or to be issued by the special purpose vehicle to which the assets are sold. Income on retained interest in securitised assets is booked on accrual basis.

d Fixed assets

Fixed assets are stated at cost of acquisition less accumulated depreciation and impairment loss if any. Cost includes all expenses incidental to the acquisition of the fixed assets.

e Leased assets

All assets given on operating lease are shown as fixed assets net of depreciation and impairment loss if any. Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

f Intangible assets

Intangible assets are recognised where it is probable that the future economic beneft attributable to the assets will fow to the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortisation.

g Depreciation / Amortisation

i) Leased assets: Depreciated on straight-line method over the useful life of assets. The estimated useful lives of the assets for the different types of assets are :

a) Plant & equipments – 8 years

b) Computers – 5 years

c) Vehicle for personal use – 8 years

d) Vehicle for commercial use - 8 years other than Taxi – 6 years

ii) Own assets: All assets other than lease hold improvements, on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and lease hold improvements are amortised over the primary period of the lease on straight-line basis.

iii) Intangible assets are amortised on straight-line basis over the useful life of the asset up to a maximum of five years commencing from the month in which such asset is frst installed.

The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

h Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is refected at the recoverable amount subject to a maximum of depreciable historical cost.

i Investments

Investments are classifed as long term or current based on intention of the management at the time of purchase.

Current investments are valued, scrip wise at cost or fair value, whichever is lower.

Long-term investments are carried at cost less diminution in value which is other than temporary, determined separately for each individual investment.

j Stock-in-trade

Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.

k Repossessed assets

Assets repossessed against the settlement of loans are carried in the balance sheet at outstanding loan amount or market value whichever is lower. The difference between the outstanding loan amount and the market value is charged to Statement of profit and Loss in the year of repossession of assets.

l Loan origination/acquisition cost

All direct cost incurred for the loan origination is amortised over the average tenure of the loan.

m Security of Loans Given

Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Other Secured loans are secured against the hypothecation of respective assets.

n Market linked debentures (MLD)

The Company has issued certain non-convertible debentures, the rate of interest on which is linked to performance of specifed indices over the period of the debentures.

The Company hedges its interest rate risk on MLD by taking positions in future & options based on specifed indices. Any gain / loss on these hedge positions are netted against with interest expense on MLD & resultant 'net loss' is recognised in Statement of profit and Loss immediately, however 'net gain' if any is ignored.

o Discount on commercial papers

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.

p Employee benefits

i) Provident fund:

Company's contributions to the recognised provident fund, which is a defned contribution scheme, are charged to the Statement of profit and Loss.

ii) Gratuity:

The Company's gratuity beneft scheme is a defned beneft plan. The Company's net obligation in respect of the gratuity beneft scheme is calculated by estimating the amount of future beneft that employees have earned in return for their service in the current and prior periods; that beneft is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defned beneft plan is determined based on actuarial valuation using the Projected Accrued Beneft Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee beneft entitlement and measures each unit separately to build up the fnal obligation.

The obligation is measured at the present value of the estimated future cash fows. The discount rates used for determining the present value of the obligation under defned beneft plan, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognised immediately in the Statement of profit and Loss.

iii) Leave encashment:

Leave encashment which is a defned beneft, is accrued for based on an actuarial valuation at the balance sheet date carried out by an independent actuary.

The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

q Employee Stock Option Scheme ("ESOS")

The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specifed period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortised over the vesting period of the option on a straight-line basis.

The fair market price is the latest closing price, immediately prior to the date of the Board / Committee meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

r Foreign currency transactions

Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Statement of profit and Loss.

Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.

s Borrowing costs

Borrowing costs, which are directly attributable to the acquisition / construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over the tenure of the borrowing.

t Operating leases

Lease payments for assets taken on an operating lease are recognised as an expense in the Statement of profit and Loss on a straight-line basis over the lease term.

u Earnings per share

The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting year. Diluted earnings per share refect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share, is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / increase loss per share are included.

v Provisions for Non Performing Assets (NPA) and Doubtful Debts

NPA including loans and advances, receivables are identifed as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management's assessment of the degree of impairment and the level of provisioning meets the NBFC prudential norms prescribed by Reserve Bank of India.

w Provisions for Standard Assets

Provisions on Standard Assets are made as per the Reserve Bank of India notifcation DNBS.PD.CC.No. 207/ 03.02.002 /2010- 11 dated January 17, 2011.

x Taxation

i) Current tax

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that the same can be realised in future.

ii) Deferred tax:

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to refect the amount that is reasonably / virtually certain (as the case may be) to be realised.

y Provisions, contingent liabilities and contingent assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outfow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outfow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outfow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to refect the current best estimate. If it is no longer probable that the outfow of resources would be required to settle the obligation, the provision is reversed.

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


Mar 31, 2011

A. Basis of preparation of Financial Statements

The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting unless otherwise stated and comply with the Accounting Standards prescribed by the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest crore upto two decimal places.

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classifcation and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India (RBI) in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.

C. Use of Estimates and Judgments

The preparation of financial statements is in conformity with generally accepted accounting principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

D. Revenue Recognition

i) Interest Income

Interest income is recognised in the profit and Loss Account as it accrues except in the case of Non Performing Assets ("NPAs") where it is recognised, upon realisation.

ii) Dividend Income

Dividend income is recognised when the right to receive payment is established.

iii) Income from Investments

profit earned from sale of securities is recognised on a trade date basis. The cost of securities is computed based on weighted average basis.

iv) Lease Rental Income

Income from operating lease is recognised as rental as per the lease agreement over the period of lease.

v) Discount on investments

The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument.

vi) Redemption Premium on Investments in Preference Shares

Redemption premium on investments in Preference shares is recognised as income over the tenor of the investment.

vii) Share of profits or Losses in Partnership Firm

Share of profit/loss on share in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company's account in the books of the partnership frm.

viii) Loan Processing Fee Income

Loan processing fee income is accounted for upfront as and when it becomes due. ix) Management fee income

Management fee income is recognized based on the contractual terms with the parties.

x) Income from Assignment / Securitisation

a) In case of assignment of loans, the assets are derecognised when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On derecognition, the difference between book value of the loans assigned and consideration received, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment.

b) In case of securitisation of loans, the transferred loans are de-recognised and gains/losses are accounted for only if the Company surrenders the rights to benefits specified in the underlying securitised loan contract. In accordance with the RBI guidelines for securitisation of standard assets, which is effective from February 1, 2006, the Company has recognised any loss arising from securitisation immediately at the time of sale and premium arising from securitisation is amortized over the life of securities issued or to be issued by the special purpose vehicle to which the assets are sold. Income on retained interest in securitised assets is booked on accrual basis.

E. Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets.

F. Leased Assets

All assets given on operating lease are shown in fixed assets net of depreciation.

Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

G. Intangible Assets

Intangible assets comprising of software purchased / developed and licensing costs.

H. Depreciation / Amortisation

Depreciation on fixed assets, lease assets and intangible assets are provided as follows:

i) Own assets : All assets other than lease hold improvements, on Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956 and lease hold improvements are amortised over the primary period of the lease on Straight Line Basis.

ii) Leased assets: Depreciated on Straight Line Method over the useful life of assets. The estimated useful lives of the assets for the different types of assets are:

a) Vehicle for personal use – 8 years

b) Vehicle for commercial use (Taxi) – 6 years

c) Vehicle for commercial use (Lorries) – 8 years

d) Plant & Machinery – 8 years

iii) Intangible Assets : Intangible Assets are depreciated on straight line basis over the useful life of the software up to a maximum of five years commencing from the month in which such software is first installed.

The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

I. Impairment of Assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

J. Investments

Investments are classified as long term or current based on intention of the management at the time of purchase.

Current investments are valued, scrip wise, at cost or fair value, whichever is lower.

Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.

K. Stock-in-trade

Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.

L. Assets Held for Sale

Assets held for sale are valued at cost or market value, whichever is lower.

M. Repossession of Assets

Assets repossessed against the settlement of loan are carried in the balance sheet at outstanding loan amount or market value, whichever is lower. The difference between the outstanding loan amount and the market value is charged to profit and Loss Account in the year of repossession of assets.

N. Loan Origination/Acquisition Cost

The direct commission cost incurred for the loan origination is written off over the average tenure of the loan.

O. Security of Loans Given

Housing loans/loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Secured loans in the nature of commercial vehicle, auto finance are secured against hypothecation of respective vehicle.

P. Discount on Commercial Paper

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.

Q. Employee Retirement benefits

i) Provident Fund

Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the profit and Loss Account.

ii) Gratuity

The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the Balance Sheet date.

Actuarial gains and losses are recognised immediately in the profit and Loss Account.

iii) Leave Encashment

Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the Balance Sheet date carried out by an independent actuary.

iv) Compensated Absences

The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

R. Employee Stock Option Scheme ("ESOS")

The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Company to Directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortized over the vesting period of the option on a Straight Line Basis.

The fair market price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date, is considered.

S. Foreign Currency Transactions

Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and Loss Account.

Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.

T. Borrowing Costs

Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expended over the tenure of the borrowing.

U. Operating Leases

Lease payments for assets taken on an operating lease are recognised as an expense in the profit and Loss Account on a Straight Line Basis over the lease term.

V. Earnings Per Share

The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included.

W. Provisions for Non Performing Assets (NPA) and Doubtful Debts

Assets including loans and advances, receivables are identifed as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management's assessment of the degree of impairment and the level of provisioning meets the prudential norms prescribed by RBI.

X. Provisions for Standard Assets

Provisions on Standard Assets are made in line with the prudential norms prescribed by RBI.

Y. Taxation

Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (refecting the tax effects of timing differences between accounting income and taxable income for the period).

Deferred Tax

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.

Z. Provisions, Contingent Liabilities and Contingent Assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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

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


Mar 31, 2010

A. Basis of preparation of Financial Statements

The accompanying financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting and comply with the Accounting Standards prescribed by the Companies (Accounting Standard) Rules, 2006 and the relevant provisions of the Companies Act, 1956 to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest crore upto two decimal places.

The Company complies in all material respects, with the prudential norms relating to income recognition, asset classification and provisioning for bad and doubtful debts and other matters, specified in the directions issued by the Reserve Bank of India (RBI) in terms of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 2007, as applicable to it.

B. Use of Estimates and Judgments

The preparation of financial statements is in conformity with generally accepted accounting principles (GAAP) and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual result could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

D. Revenue Recognition

i) Interest Income

Interest income is recognised in the Profit and Loss Account as it accrues except in the case of Non Performing Assets (“NPAs”) where it is recognised, upon realisation.

ii) Dividend Income

Dividend income is recognised when the right to receive payment is established.

iii) Income from Investments

Profit earned from sale of securities is recognised on a trade date basis. The cost of securities is computed based on a weighted average basis.

iv) Discount on investments

The difference between the acquisition cost and face value of debt instruments is recognised as interest income over the tenor of the instrument.

v) Redemption Premium on Investments in Preference Shares

Redemption premium on investments in Preference shares is recognised as income over the tenor of the investment.

vi) Share of Profits or Losses in Partnership Firm

Share of profit/loss on share in partnership firm is accounted for once the amount of the share of profit/loss is ascertained and credited/debited to the Company’s account in the books of the partnership firm.

vii) Loan Processing Fee Income

Loan processing fee income is accounted for upfront as and when it becomes due.

viii) Income from Assignment / Securitization

a) In case of assignment of loans, the assets are derecognized when all the rights, title, future receivables and interest thereof along with all the risks and rewards of ownership are transferred to the purchasers of assigned loans. On de-recognition, the difference between book value of the loans assigned and consideration received, as reduced by the estimated provision for loss/expenses and incidental expenses related to the transaction, is recognised as gain or loss arising on assignment.

b) In case of securitization of loans, the transferred loans are de-recognised and gains/losses are accounted for only if the Company surrenders the rights to benefits specified in the underlying securitized loan contract. In accordance with the RBI guidelines for securitization of standard assets, which is effective from February 1, 2006, the Company has recognised any loss arising from securitization immediately at the time of sale and premium arising from securitization is amortized over the life of securities issued or to be issued by the special purpose vehicle to which the assets are sold.

ix) Income from Derivatives

Gains or losses on derivative contracts are recognised on a settlement date basis.

E. Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes all expenses incidental to the acquisition of the fixed assets.

F. Leased Assets

All assets given on finance lease on or before March 31, 2001 are capitalised as fixed assets and all assets given on finance lease on or after April 1, 2001 are shown as receivables at an amount equal to net investment in the lease.

Initial direct costs in respect of leases are expensed in the year in which such costs are incurred.

G. Intangible Assets

Intangible assets comprising of software purchased / developed and licensing costs are depreciated on straight line basis over the useful life of the software up to a maximum of five years commencing from the month in which such software is first installed.

H. Depreciation / Amortisation

Depreciation on fixed assets other than software development and licensing costs is provided as follows:

i) Assets for Own use : On Written Down Value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

ii) Leased Assets : On Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

iii) Leasehold Improvements : Amortised over the primary period of the lease on Straight Line Basis.

The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.

I. Impairment of Assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

J. Investments

Investments are classified as long term or current based on intention of the management at the time of purchase.

Current investments are valued, scrip wise, at cost or fair value, whichever is lower.

Long-term investments are carried at carrying cost less diminution in value which is other than temporary, determined separately for each individual investment.

K. Stock-in-trade

Securities held as stock-in-trade are valued scrip wise at weighted average cost or fair value, whichever is lower.

L. Assets Held for Sale

Assets held for sale are valued at cost or market value, whichever is lower.

M. Repossession of Assets

Assets repossessed against the settlement of loan are carried in the balance sheet at outstanding loan amount or market value, whichever is lower. The difference between the outstanding loan amount and the market value is charged to Profit and Loss Account in the year of repossession of assets.

N. Loan Origination/Acquisition Cost

The direct commission cost incurred for the loan origination is written off over the average tenure of the loan.

O. Security of Loans Given

Housing loans / loans against property granted are secured by equitable registered mortgage of property and / or undertaking to create a security. Secured loans in the nature of commercial vehicle, auto finance are secured against hypothecation of respective vehicle.

P. Discount on Commercial Paper

The difference between the issue price and the redemption value of commercial papers is apportioned on time basis and recognised as discounting expense.

Q. Employee Retirement Benefits

i) Provident Fund

Contributions payable to the recognised provident fund, which is a defined contribution scheme, are charged to the Profit and Loss Account.

ii) Gratuity

The Company’s gratuity benefit scheme is a defined benefit plan. The Company’s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets, if any, is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Accrued Benefit Method (same as Projected Unit Credit Method), which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan, are based on the market yields on Government securities as at the Balance Sheet date.

Actuarial gains and losses are recognised immediately in the Profit and Loss Account.

iii) Leave Encashment

Leave encashment which is a defined benefit, is accrued for based on an actuarial valuation at the Balance Sheet date carried out by an independent actuary.

iv) Compensated Absences

The employees of the Company are entitled to compensated absence. The employees can carry forward a portion of the unutilised accrued leave balance and utilise it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the service that increases the entitlement. The Company measures the expected cost of compensated absence as the amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

R. Employee Stock Option Scheme (“ESOS”)

The Employees Stock Option Scheme (“the Scheme”) provides for grant of equity shares of the Company to Directors (including whole-time) and employees of the Company and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Company that vests in a graded manner. The options may be exercised within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and is amortized over the vesting period of the option on a Straight Line Basis.

The fair market price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date, is considered.

S. Foreign Currency Transactions

Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the Profit and Loss Account.

Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.

T. Borrowing Costs

Borrowing costs, which are directly attributable to the acquisition/construction of fixed assets, till the time such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expended over the tenure of the borrowing.

U. Operating Leases

Lease payments for assets taken on an operating lease are recognised as an expense in the Profit and Loss Account on a Straight Line Basis over the lease term.

V. Earnings Per Share

The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit / loss per share are included.

W. Provisions for Non Performing Assets (NPA) and Doubtful Debts

Assets including loans and advances, receivables are identified as bad/ doubtful based on the duration of the delinquency. The duration is set at appropriate levels for each product. NPA provisions are made based on the management’s assessment of the degree of impairment and the level of provisioning meets the prudential norms prescribed by RBI.

X. Taxation

Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income tax law), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) and fringe benefit tax.

Deferred Taxation

The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.

Fringe Benefit Tax

Provision for Fringe Benefit Tax has been recognised on the basis of applicable Fringe Benefit Tax on the taxable value of chargeable expenses of the Company as prescribed under the Income Tax Act, 1961.

Y. Provisions, Contingent Liabilities and Contingent Assets

The Company creates a provision when there is a present obligation as a result of past events and it is probable that there will be outflow of resources and a reliable estimate of the obligation can be made of the amount of the obligation. Contingent liabilities are not recognised but are disclosed in the notes to the financial statements. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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

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

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