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Accounting Policies of Sakthi Finance Ltd. Company

Mar 31, 2016

1 Company Overview

Sakthi Finance Limited ("SFL" or "the Company") is a public limited Company having its Registered Office in Coimbatore, Tamilnadu. The equity shares of the Company are listed on BSE Limited. The Company is a deposit-taking Non-Banking Financial Company (NBFC) registered with Reserve Bank of India (RBI). The Company has been classified as an Asset Financing Company by RBI. The Company is engaged in the business of Hire Purchase Financing of Commercial Vehicles, Infrastructure Equipments, Machineries etc.

2 Significant Accounting Policies

a. Basis of preparation of financial statements

The financial statements of the company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the accounting standards specified under Section 133 of the Companies Act 2013 read with rule 7 of the Companies (Accounts) Rules 2014 and the relevant provisions of the Companies Act 2013 as applicable and the guidelines issued by Reserve Bank of India applicable to Non-Banking Financial Companies. The Financial Statements have been prepared on accrual basis under the historical cost convention, except certain fixed assets which have been revalued. The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.

b. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and the results of operations during the reporting year end. Although the estimates are based on management''s best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future period.

c. Tangible Fixed Assets

Fixed assets, other than those which have been revalued, are stated at historical cost less accumulated depreciation. The revalued fixed assets are restated at their estimated replacement value at the time of revaluation.

d. Depreciation

Depreciation on Tangible Fixed Assets has been determined on the Straight Line Method (SLM) as per the Useful Life prescribed in Schedule II to the Companies Act 2013.

Additional depreciation on revalued Fixed Assets has been transferred from Revaluation Reserve Account to General Reserve Account.

e. Intangible Assets

Intangible Assets viz. Computer Software are stated at the consideration paid for its acquisition. Intangible assets are amortized based on the management''s estimate of useful economic life of the asset, reckoned as 6 years.

f. Revenue Recognition

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non-Banking Financial Companies have been followed.

Accordingly, revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

i) a) Hire purchase finance charges are recognized as income under the internal rate of return method.

b) Interest on advances by way of loans are accounted for, to the extent accrued during the year.

ii) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

iii) Income from Investments by way of dividend is recognized when the right to receive the payment is established by the balance sheet date.

iv) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

v) Debenture Issue Expenses:

The expenditure relating to Public issue of Debentures is amortized over the tenor of the debentures.

g. Investments

Long-term investments are carried at cost. Provision for diminution in value is made to recognize a decline, if any, other than temporary, in the value of investments. Current investments are carried at the lower of cost and fair value.

h. Employee Benefits (Also refer Note 31 of Notes forming an integral part of the Financial Statements for the year ended 31st March 2016)

i) Defined Contribution Plans

1. Provident Fund (PF)

Contributions are made periodically to the PF Commissioner, under the Employees Provident Fund Scheme, in accordance with the provisions of Employees Provident Funds and Miscellaneous Provisions Act 1952. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognized as an expense in the year incurred.

2. Superannuation

The Company contributes a sum equivalent to 15% of eligible employees salary to a Superannuation Fund administered by trustees and managed by Life Insurance Corporation of India (LIC). The company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contribution as an expense in the year incurred.

ii) Defined Benefit Plans Gratuity

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity based on actuarial valuation determined by LIC as at the Balance Sheet date.

iii) Other Benefits

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits which are in the nature of staff welfare are recognized as expense in the year in which they are incurred. Leave salary is determined for the period of 12 months ended 31st December of each year and paid fully within the end of the accounting year.

i. Leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

j. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders less preference dividend by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss after tax for the year attributable to equity shareholders less preference dividend and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential of equity shares.

k. Cash and Cash Equivalents

Cash and Cash Equivalents in the Cash Flow statement comprise Cash at Bank and in hand, Cheques on hand and Balance in Current Account and Short term investments with an original maturity of three months or less.

l. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax liability is recognized, on timing differences, being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to offset such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to recoup the value of such assets.

m. Stock on Hire

Stock on Hire represents unexpired Installments under Hire Purchase Finance Agreements including that in relation to repossessed Assets.

n. Provisions, Contingent Liabilities and Contingent Assets

Provision is recognized only when there is a present obligation as a result of past event and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are shown by way of notes attached to and forming part of the Balance Sheet. Contingent Assets are neither recognized nor disclosed in the financial statements.

o. Provision as per RBI Norms

(i) Provision for Non Performing Assets

Provision for non-performing assets, doubtful debts, loans and advances have been made as per the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007.

(ii) Contingent Provision against Standard Assets

RBI by its Notification No.DNBR.011/CGM(CDS)-2015 dated March 27, 2015 has issued directions to all Non-Banking Financial Companies to make a provision of 0.30% on the Standard Assets as on March 31, 2016. Accordingly necessary provision has been made.


Mar 31, 2015

A. Basis of preparation of financial statements

The financial statements of the company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the accounting standards specified under Sec 133 of The Companies Act 2013 read with rule 70 of The Companies (Accounts) Rules 2014 and the relevant provisions of the Companies Act 2013 as applicable and the guidance issued by Reserve Bank of India applicable to Non-Banking Financial Companies. The Financial Statements have been prepared on accrual basis under the historical cost convention, except certain fixed assets which have been revalued. The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.

b. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and the results of operations during the reporting year end. Although the estimates are based on management's best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future period.

c. Tangible Fixed Assets

Fixed assets, other than those which have been revalued, are stated at historical cost less accumulated depreciation. The revalued fixed assets are restated at their estimated replacement value at the time of revaluation.

d. Depreciation

Depreciation on Tangible Fixed Assets has been on the Straight Line method (SLM) as per the Useful Life prescribed in Schedule II to the Companies Act 2013.

e. Intangible Assets

Intangible Assets viz. Computer Software are stated at the consideration paid for its acquisition. Intangible assets are amortized based on the management's estimate of useful economic life of the asset, reckoned as 6 years.

f. Revenue Recognition

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non-Banking Financial Companies have been followed.

Accordingly, revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

i) a) Hire purchase finance charges are recognized as income under the internal rate of return method.

b) Interest on advances by way of loans are accounted for, to the extent accrued during the year.

ii) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

iii) Income from Investments by way of dividend is recognized when the right to receive the payment is established by the balance sheet date.

iv) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

g. Investments

Long-term investments are carried at cost. Provision for diminution in value is made to recognize a decline, if any, other than temporary, in the value of investments. Current investments are carried at the lower of cost and fair value.

h. Employee Benefits (Also refer Note 30 of Notes forming an integral part of the Financial Statements for the year ended 31st March 2015)

i) Defined Contribution Plans

1. Provident Fund (PF)

Contributions are made periodically to the PF Commissioner, under the Employees Provident Fund Scheme, in accordance with the provisions of Employees Provident Funds and Miscellaneous Provisions Act 1952. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognized as an expense in the year incurred.

2. Superannuation

The Company contributes a sum equivalent to 15% of eligible employees salary to a Superannuation Fund administered by trustees and managed by Life Insurance Corporation of India (LIC). The company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contribution as an expense in the year incurred.

ii) Defined Benefit Plans

Gratuity

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity based on actuarial valuation determined by LIC as at the Balance Sheet date.

iii) Other Benefits

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits which are in the nature of staff welfare are recognized as expense in the year in which they are incurred. Leave salary is determined for the period of 12 months ended 31st December of each year and paid fully within the end of the accounting year

i. Leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

j. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders less preference dividend by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss after tax for the year attributable to equity shareholders less preference dividend and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential of equity shares.

k. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax liability is recognized, on timing differences, being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to offset such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to recoup the value of such assets.

l. Stock on Hire

Stock on Hire represents unexpired Installments under Hire Purchase Finance Agreements including that in relation to repossessed Assets.

m. Provision as per RBI Norms

(i) Provision for Non Performing Assets

Provision for non-performing assets, doubtful debts, loans and advances have been made as per the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007.

(ii) Contingent Provision against Standard Assets

RBI by its Notification No.DNBS.222/CGM(US)-2011 dated 17th January 2011 has issued directions to all Non-Banking Financial Companies to make a provision of 0.25% on the Standard Assets. Accordingly necessary provision has been made.


Mar 31, 2014

A. Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention on accrual basis of accounting except for certain fixed assets which have been revalued and comply with the mandatory Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules 2006, the relevant provisions of the Companies Act 1956 and the guidelines issued by the Reserve Bank of India applicable to Non-Banking Financial Companies.

b. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of financial statements and the results of operations during the reporting year end. Although the estimates are based on management''s best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future period.

c. Fixed Assets

Fixed assets, other than those which have been revalued, are stated at historical cost less accumulated depreciation.The revalued fixed assets are restated at their estimated current replacement value.

d. Depreciation

i) Depreciation on Fixed Assets is provided on straight line method by adopting the rates as prescribed under Schedule XIV to the Companies Act 1956.

ii) For assets acquired costing Rs.5,000 each or below, the total cost of the asset has been depreciated.

e. Intangible Assets

Intangible Assets viz. Computer Software are stated at the consideration paid for its acquisition. Intangible assets are amortized based on the management''s estimate of useful life of the asset. Its life is estimated to be 7 years.

f. Revenue Recognition

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non - Banking Financial Companies have been followed.

Accordingly, revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

i) a) Hire purchase finance charges are recognized as income under the internal rate of return method.

b) Interest on advances by way of loans are accounted for, to the extent accrued during the year.

ii) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

iii) Income from Investments by way of dividend is recognized when the right to receive the payment is established by the balance sheet date.

iv) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

g. Investments

Long-term investments are carried at cost. Provision for diminution in value is made to recognize a decline, if any, other than temporary, in the value of investments. Current investments are carried at the lower of cost and fair value.

h. Employee Benefits (Also refer Note 30 of Notes forming an integral part of the Financial Statements for the year ended 31st March 2014)

i) Defined Contribution Plans

1. Provident Fund (PF)

Contributions are made periodically to the PF Commissioner, under the Employees Provident Fund Scheme, in accordance with the provisions of Employees Provident Funds and Miscellaneous Provisions Act 1952. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognized as an expense in the year incurred.

2. Superannuation

The Company contributes a sum equivalent to 15% of eligible employees salary to a Superannuation Fund administered by trustees and managed by Life Insurance Corporation of India (LIC). The company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contribution as an expense in the year incurred.

ii) Defined Benefit Plans Gratuity

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity based on actuarial valuation determined by LIC as at the Balance Sheet date.

iii) Other Benefits

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits which are in the nature of staff welfare are recognized as expense in the year in which they are incurred.

Leave salary is determined for the period of 12 months ended 31st December of each year and paid fully within the end of the accounting year, as a result of which making of provision is not necessary.

i. Leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

j. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders less preference dividend by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss after tax for the year attributable to equity shareholders less preference dividend and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential of equity shares.

k. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax liability is recognized, on timing differences, being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to offset such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to recoup the value of such assets.

l. Stock on Hire

Stock on hire under Hire purchase agreements including repossessed stocks on hire are stated at agreement value less instalments received.

m. Provision as per RBI Norms

(i) Provision for Non Performing Assets

Provision for non-performing assets, doubtful debts, loans and advances have been made as per the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007.

(ii) Contingent Provision against Standard Assets

RBI by its Notification No.DNBS.222/CGM(US)-2011 dated 17th January 2011 has issued directions to all Non-Banking Financial Companies to make a provision of 0.25% on the Standard Assets.


Mar 31, 2013

A. Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention on accrual basis of accounting except for certain fixed assets which have been revalued and comply with the mandatory Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules 2006'' the relevant provisions of the Companies Act 1956 and the guidelines issued by the Reserve Bank of India applicable to Non-Banking Financial Companies.

b. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of financial statements and the results of operations during the reporting year end. Although the estimates are based on management''s best knowledge of current events and actions'' actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future period.

c. Fixed Assets

Fixed assets'' other than those which have been revalued'' are stated at historical cost less accumulated depreciation. The revalued fixed assets are restated at their estimated current replacement value.

d. Depreciation

i) Depreciation on Fixed Assets is provided'' on straight line method by adopting the rates as prescribed under Schedule XIV to the Companies Act 1956.

ii) For assets acquired costing Rs.5''000 each or below'' the total cost of the asset has been depreciated.

e. Intangible Assets

Intangible Assets viz. Computer Software are stated at the consideration paid for its acquisition. Intangible assets are amortized based on the management''s estimate of useful life of the asset. Its life is estimated to be 7 years.

f. Revenue Recognition

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non-Banking Financial Companies have been followed.

Accordingly'' revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

i) a) Hire purchase finance charges are recognized as income under the internal rate of return method.

b) Interest on advances by way of loans are accounted for'' to the extent accrued during the year.

ii) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

iii) Income from Investments by way of dividend is recognized when the right to receive the payment is established by the balance sheet date.

iv) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

g. Investments

Long-term investments are carried at cost. Provision for diminution in value is made to recognize a decline'' if any'' other than temporary'' in the value of investments. Current investments are carried at the lower of cost and fair value.

h. Employee Benefits (Also refer Note 30 of Notes forming an integral part of the Financial Statements for the year ended 31st March 2013)

i) Defined Contribution Plans

1. Provident Fund (PF)

Contributions are made periodically to the PF Commissioner'' under The Employees Provident Fund Scheme'' in accordance with the provisions of Employees’ Provident Funds and Miscellaneous Provisions Act 1952. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognized as an expense in the year incurred.

2. Superannuation

The Company contributes a sum equivalent to 15% of eligible employees salary to a Superannuation Fund administered by trustees and managed by Life Insurance Corporation of India (LIC). The company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contribution as an expense in the year incurred.

ii) Defined Benefit Plans

Gratuity

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity based on actuarial valuation determined by LIC as at the Balance Sheet date.

iii) Other Benefits

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits which are in the nature of staff welfare are recognized as expense in the year in which they are incurred.

Leave salary is determined for the period of 12 months ended 31st December of each year and paid fully within the end of the accounting year'' as a result of which making of provision is not necessary.

i. Leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

j. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders less preference dividend by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share'' the net profit or loss after tax for the year attributable to equity shareholders less preference dividend and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential of equity shares.

k. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax liability is recognized'' on timing differences'' being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to offset such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to recoup the value of such assets.

l. Stock on Hire

Stock on hire under Hire purchase agreements including repossessed stocks on hire are stated at agreement value less instalments received.

m. Provision as per RBI Norms

i) Provision for Non Performing Assets

Provision for non-performing assets'' doubtful debts'' loans and advances have been made as per the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions 2007.

ii) Contingent Provision against Standard Assets

RBI by its Notification No.DNBS.222/CGM(US)-2011 dated 17th January 2011 has issued directions to all Non-Banking Financial Companies to make a provision of 0.25% on the Standard Assets.


Mar 31, 2012

A. Fixed Assets

Fixed assets, other than those which have been revalued, are stated at historical cost less accumulated depreciation. The revalued fixed assets are restated at their estimated current replacement value.

b. Depreciation

i) Depreciation on Fixed Assets is provided, on straight line method by adopting the rates as prescribed under Schedule XIV to the Companies Act 1956.

ii) For assets acquired costing Rs.5,000 each or below, the total cost of the asset has been depreciated.

c. Intangible Assets

Intangible Assets viz. Computer Software are stated at the consideration paid for its acquisition. Intangible assets are amortized based on the management's estimate of useful life of the asset. Its life is estimated to be 7 years.

d. Revenue Recognition

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non - Banking Financial Companies have been followed.

Accordingly, revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

i) a) Hire purchase finance charges are recognized as income under the internal rate of return method.

b) Interest on advances by way of loans are accounted for, to the extent accrued during the year.

ii) Income from Investments by way of dividend is recognized when the right to receive the payment is established by the balance sheet date.

iii) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

iv) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

e. Investments

Long-term investments are carried at cost. Provision for diminution in value is made to recognize a decline, if any, other than temporary, in the value of investments. Current investments are carried at the lower of cost and fair value.

f. Retirement Benefits (Also refer Note 30 of Notes forming an integral part of the Financial Statements for the year ended 31st March 2012)

i) Defined Contribution Plans

1. Provident Fund (PF)

Contributions are made periodically to the PF Commissioner, under the Employees Provident Fund Scheme, in accordance with the provisions of PF and Miscellaneous Provisions Act 1952. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognized as an expense in the year incurred.

2. Superannuation

The Company contributes a sum equivalent to 15% of eligible employees salary to a Superannuation Fund administered by trustees and managed by Life Insurance Corporation of India (LIC). The company has no liability for future Superannuation Fund benefits other than its annual contribution and recognizes such contribution as an expense in the year incurred.

ii) Defined Benefit Plans Gratuity

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity based on actuarial valuation determined by LIC as at the Balance Sheet date.

iii) Other Benefits

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits which are in the nature of staff welfare are recognized as expense in the year in which they arise.

Leave salary is determined for the period of 12 months ended 31st December of each year and paid fully within the end of the accounting year, as a result of which making of provision does not arise.

g. Leases

Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

h. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit or loss after tax for the year attributable to equity shareholders and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

i. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax liability is recognized, on timing differences, being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to offset such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to recoup the value of such assets.

j. Stock on Hire

Stock on hire under Hire purchase agreements including repossessed stocks on hire are stated at agreement value less instalments received.

k. Provision as per RBI Norms

i) Provision for Non Performing Assets

Provision for non-performing assets, doubtful debts, loans and advances have been made as per the Non-Banking Financial (Deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions 2007.

ii) Provision against Standard Assets

RBI by its Notification No.DNBS.222/CGM(US)-2011 dated 17th January 2011 has issued directions to all Non-Banking Financial Companies to make a provision of 0.25% on the Standard Assets.


Mar 31, 2011

1.1 BASIS OF PREPARATION

The financial statements are prepared under the historical cost convention on accrual basis of accounting except for certain fixed assets which have been revalued and comply with the mandatory Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules 2006, the relevant provisions of the Companies Act 1956 and the guidelines issued by the Reserve Bank of India applicable to Non-Banking Financial Companies.

1.2 FIXED ASSETS

Fixed assets, other than those which have been revalued, are stated at historical cost less accumulated depreciation. The revalued fixed assets are restated at their estimated current replacement value as on 31st March 2011 based on valuation reports of an external valuer.

1.3 DEPRECIATION

a) Depreciation is provided for, on straight line method by adopting the rates as prescribed under Schedule XIV to the Companies Act 1956.

b) For assets acquired costing Rs. 5,000 each or below, the total cost of the asset has been depreciated.

1.4 INTANGIBLE ASSETS

Intangible Assets viz. Computer Software are stated at the consideration paid for its acquisition. Intangible assets are amortized based on the management's estimate of useful life of the asset. It's life is estimated to be 7 years.

1.5 REVENUE RECOGNITION

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non - Banking Financial Companies have been followed.

Accordingly, revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

1) a) Hire purchase finance charges are recognized as income under the internal rate of return method.

b) Interest on advances by way of loans are accounted for, to the extent accrued during the year.

2) Income from Investments by way of dividend is recognized when the right to receive the payment is established.

3) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

4) In respect of sell-down receivables, the difference between the book value of the assets and the sale consideration, after netting of incidental expenses incurred is recognized as revenue.

5) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

1.6 INVESTMENTS

Long term investments are carried at cost. Provision for diminution in value is made to recognize a decline, if any, other than temporary, in the value of investments.

1.7 RETIREMENT BENEFITS (ALSO REFER NOTE 9.0 OF SCHEDULE-19)

I. DEFINED CONTRIBUTION PLANS PROVIDENT FUND (PF)

Contributions are made periodically to the PF Commissioner, under the Employees Provident Fund Scheme, in accordance with the provisions of Employees' Provident Fund and Miscellaneous Provisions Act 1952. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognised as an expense in the year incurred.

II. DEFINED BENEFIT PLANS

GRATUITY

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity based on actuarial valuation, determined by LIC as at the Balance Sheet date.

III.OTHER BENEFITS

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits which are in the nature of staff welfare are recognized as expense in the year in which they arise.

Leave salary is determined for the period of 12 months ended 31st December of each year and paid fully within the end of the accounting year as a result of which making of provision does not arise.

1.8 TAXES ON INCOME

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax liability is recognized, on timing differences, being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to realize such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to realize such assets.

1.9 STOCK ON HIRE

Stock on hire under Hire purchase agreements including repossessed stocks on hire are stated at agreement value less instalments received.

1.10 PROVISION AS PER RBI NORMS

1. Provision for Non Performing Assets:

Provision for non-performing assets, doubtful debts, loans and advances have been made as per the Non-Banking Financial Companies Prudential Norms (Reserve Bank of India) Directions 2007.

2. Provision against Standard Assets:

The RBI vide its Notification No.DNBS.222/CGM(US)-2011 dated 17th January 2011, has issued directions to all NBFCs to make a provision of 0.25% on the Standard Assets. Accordingly, the company has made a provision of Rs. 1,35,12,499 as at 31st March 2011 as an exceptional item.


Mar 31, 2010

1.1 BASIS OF PREPARATION

The financial statements are prepared under the historical cost convention on accrual basis of accounting and comply with the mandatory Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules 2006, the relevant provisions of the Companies Act 1956 and the guidelines issued by the Reserve Bank of India applicable to Non-Banking Financial Companies.

1.2 FIXED ASSETS

Fixed assets are stated at historical cost less accumulated depreciation.

1.3 DEPRECIATION

a) Depreciation on assets on own use is provided for, on straight line method by adopting the rates as prescribed under Schedule XIV to the Companies Act 1956.

b) For assets under own use acquired during the current year costing Rs.5,000 each or below, the total cost of the asset has been depreciated.

1.4 REVENUE RECOGNITION

The prudential norms for Income Recognition and Provisioning for Non-performing assets as prescribed by the Reserve Bank of India for Non - Banking Financial Companies have been followed.

Accordingly, revenue recognition has been considered in the accounts on accrual basis only on those assets classified as standard assets as stated below:

1) a) Hire purchase finance charges are recognized as income under the internal rate of return

method.

b) Interest on advances by way of loans are accounted for, to the extent accrued during the year.

2) Income from Investments by way of dividend is recognized when the right to receive the payment is established.

3) Income by way of interest on Government securities is recognized on time proportion basis taking into account the amount outstanding and the rate applicable.

4) In respect of sell-down receivables, the difference between the book value of the assets and the sale consideration, after netting of incidental expenses incurred is recognized as revenue.

5) Income from power generation is recognized as per the Power Purchase Agreements with State Electricity Board and on supply of power to the grid.

1.5 INVESTMENTS

Long term investments are carried at cost. Provision for diminution in value is made to recognize a decline, if any, other than temporary, in the value of investments.

1.6 RETIREMENT BENEFITS (ALSO REFER NOTE 9.0 OF SCHEDULE-19) I. DEFINED CONTRIBUTION PLANS

PROVIDENT FUND (PF)

Contributions are made periodically to the PF Commissioner, under the Employees Provident Fund Scheme, in accordance with the provisions of PF and Miscellaneous Provisions Act. The Company does not have any obligation other than the stipulated periodical contribution to the Provident Fund. The obligations to make a fixed and determinable amount of contributions are recognised as an expense in the year incurred.

II. DEFINED BENEFIT PLANS

GRATUITY AND SICK LEAVE

The Company makes annual contributions to a Fund administered by Trustees and managed by Life Insurance Corporation of India (LIC). The Company accounts its liability for gratuity and sick leave benefits based on actuarial valuation as at the Balance Sheet date, determined every year by LIC using the Projected Unit Credit method.

III.OTHER BENEFITS

Other benefits made available to employees include contributions made by the Company under (a) ESI Scheme (b) Employees Deposit Linked Insurance (c) Group Personal Accident Insurance and (d) Group Mediclaim benefits. Obligations under these benefits, which are in the nature of staff welfare, are recognized as expense in the year in which they arise.

1.7 TAXES ON INCOME

Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with the provisions of the Income Tax Act 1961.

Deferred tax is recognized, on timing differences, being the difference between taxable income and accounting income that originates in one period and are capable of being reversed in one or more subsequent periods.

Deferred tax assets in respect of carry forward losses are recognized if there is a virtual certainty that there will be sufficient future taxable income available to realize such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to realize such assets.

1.8 STOCK ON HIRE

Stock on hire under Hire purchase agreements are stated at agreement value less instalments received.

1.9 PROVISION AS PER RBI NORMS

Provision for non-performing assets, doubtful debts, loans and advances have been made as per the Non-Banking Financial Companies Prudential Norms (Reserve Bank of India) Directions 2007.

2.0 BALANCE SHEET

2.1 RESERVES AND SURPLUS

A Statutory Reserve as per the requirements of Section 45IC of the Reserve Bank of India Act 1934 has been created at 20% of the profits after tax available for appropriation.

2.2 SECURED LOANS

a) 295 Secured Redeemable Non-Convertible Debentures of the face value of Rs.1,000 each and 2,96,60,84,341 Secured Redeemable Non-Convertible Debentures of the face value of Re.1 each issued and redeemable at par are secured by specified Hire Purchase receivables and immovable properties; the earliest date of redemption is reckoned at 12 to 36 months from the date of first allotment for each series.

b) Term Loan from The Tamilnadu Industrial Investment Corporation Limited is secured by mortgage of immovable properties consisting of land and buildings and three Wind Electric Generators. Further, the loan is also guaranteed by two directors of the company. Amount availed and outstanding: Rs.5,22,68,000 (Sanctioned limit: Rs.6,62,68,000).

c) Term Loan from The Tamilnadu Industrial Investment Corporation Limited is secured by specified hire purchase assets and further guaranteed by two directors of the company. Amount availed and outstanding: Rs.5,88,00,000 (Sanctioned limit: Rs.7,50,00,000).

d) Term Loan from Small Industries Development Bank of India is secured by hypothecation of specified hire purchase assets and by collateral security of a lease hold land/building and further guaranteed by two directors of the company. Amount outstanding: Rs.2,76,00,000 (Sanctioned limit: Rs.6,00,00,000).

e) Term Loan from Small Industries Development Bank of India is secured by hypothecation of specified hire purchase assets and further guaranteed by two directors of the company. Amount outstanding: Rs.7,27,25,000 (Sanctioned limit: Rs.7,50,00,000).

f) Cash Credits/Working Capital Demand Loans from Scheduled Banks are secured by hypothecation of specified hire purchase assets, the related book debts and personal guarantee of directors. Amount availed and outstanding Rs.54,70,87,144 (Sanctioned limit Rs.75,50,00,000).

2.3 INVESTMENTS

In accordance with the Reserve Bank of India Circular no. RBI/2006-2007/225/DNBS(PD)C.C No.87/03.02.004/2006-07 dated 4th January 2007, the Company has created a floating charge on the statutory liquid assets comprising investment in Government Securities for Rs.902.01 lakhs and Rs.19.30 lakhs interest accrued on the above investments in favour of trustees representing the fixed deposit holders of the company.

b) Balance with Scheduled Banks in deposit accounts include Rs. 92,500 (Rs.6,25,503) pledged with Sales Tax Authorities. Deposits with scheduled banks for Statutory Liquid assets as per RBI Norms: Rs. Nil (Rs.44,00,000)

c) Bank deposits of Rs.1,34,12,584 (Rs.1,39,90,781) are under lien towards managed business.

2.6 LOANS AND ADVANCES

i) Loans and Advances include:

a) Loans considered good in respect of which the Company is fully secured: Rs.2,85,44,653 (Rs.2,58,79,716).

b) Loans considered good and unsecured in respect of which the Company holds no security other than the debtors’ personal security: Rs.5,59,84,423 (Rs.7,13,06,717).

c) Loans considered as bad and doubtful: Nil (Rs.29,60,145) for which provision has been made.

d) Amount due from an Officer of the Company Rs.1,08,525 (Rs.53,736). Maximum amount outstanding during the year Rs.1,25,889 (Rs.77,242).

e) Amount due from wholly owned subsidiary: Rs.12,19,135 (Rs.9,84,637).

2.7 CURRENT LIABILITIES

a) There is no amount due to be transferred to Investor Education and Protection Fund as on 31st March 2010.

b) Micro, Small and Medium Enterprises Development Act 2006

The Company has not received any intimation from “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act 2006 and, hence, disclosures, if any, relating to the amounts unpaid as at 31st March 2010 together with interest paid/ payable as required under the said Act have not been given.

3.0 PROFIT AND LOSS ACCOUNT

3.1 Income-tax deducted at source on interest Rs.6,16,493 (Rs.8,94,073) and on other receipts Rs.4,61,410 (Rs.5,30,951).

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