Notes to Accounts of Shriram City Union Finance Ltd.
Mar 31, 2022
Nature of security
The redemption of principal amount of secured redeemable non- convertible debentures with all interest thereon are secured by a mortgage on the specified immovable property and by way of charge on the Companyâs specifically identified assets such as book- debts/ loan receivables in favour of the trustee appointed.
These secured redeemable non-convertible debentures are redeemable at par over a period of 15 months to 120 months from the date of allotment depending on the terms of the agreement.
There are no borrowings measured at FVTPL or designated at FVTPL.
The borrowings have not been guaranteed by directors or others. The Company has not defaulted in repayment of principal and interest to its lenders.
The Company has utilised the funds raised from banks and financial institutions for the specific purpose for which they were borrowed.
The Company has borrowed funds from banks and financial institutions on the basis of security of current assets. It has filed quarterly returns or statements of current assets with banks and financial institutions and the said returns/statements are in agreement with books of accounts.
Terms/ rights attached to equity shares
The Company has only one class of equity shares having a par value of '' 10/- per share. Each holder of equity shares is entitled to one vote per share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:
The Company has issued total 6,84,614 (March 31,2021: 77,870) equity shares during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP), wherein a part of the consideration was received in form of employee service.
The Board of Directors in their meeting held on March 8, 2022 declared second interim equity dividend of 270% ('' 27/- per equity share of nominal face value of '' 10/- each fully paid up) for the financial year 2021-22, amounting to '' 1,79,82,48,195/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of second interim equity dividend was March 17, 2022. The second interim dividend was paid to eligible shareholders on March 25, 2022. The Board of Directors have not recommended final dividend. As such the interim dividend aggregating to '' 37/-per share (i.e. 370 %) shall be the final dividend for the financial year 2021-22 .
The Board of Directors in their meeting held on October 27, 2021 declared interim equity dividend of 100% ('' 10/- per equity share of nominal face value of '' 10/- each fully paid up) for the financial year 2021-22, amounting to '' 66,15,81,390/-(gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of interim equity dividend was November 12, 2021. The interim dividend was paid to eligible shareholders on November 24, 2021.
Pursuant to the final equity dividend for the financial year 2020-21 approved by the shareholders at the 35th Annual General Meeting held on July 29, 2021, the Company paid the final equity dividend of 130% ('' 13/- per equity share of nominal face value of '' 10/- each fully paid up) aggregating to '' 85,80,65,286/- (gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of final equity dividend was July 22, 2021 and the payment was made on August 21,2021. With this the total dividend for the financial year 2020-21 is '' 33 /- per share (i.e. 330 %). The Board of Directors in their meeting held on March 26, 2021 declared second interim equity dividend of 100% ('' 10/- per equity share of nominal face value of '' 10/- each fully paid up) for the financial year 2020-21, amounting to '' 66,00,50,220/-(gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of second interim dividend was April 07, 2021 and the payment was done on April 19, 2021.
The Board of Directors in their meeting held on November 2, 2020 declared first interim equity dividend of 100% ('' 10/- per equity share of nominal face value of '' 10/- each fully paid up) for the financial year 2020-21, amounting to '' 66,00,43,220/-(gross) subject to deduction of tax at source as per the applicable rate(s) to the eligible shareholders. The record date for payment of second interim dividend was November 12, 2020 and the payment was done on November 27, 2020.
Nature and purpose of reserves
Capital Reserve: Capital reserve is the excess of net assets taken over cost of consideration paid during amalgamation. Securities Premium Account: The amount received in excess of face value of the equity shares is recognised in Securities Premium Account. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium account. This amount can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
Share Option Outstanding: The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to Note 37 for further details of these plans.
Statutory Reserve: Every year the Company transfers a of sum of not less than twenty per cent of net profit of that year as disclosed in the statement of profit and loss to its Statutory Reserve pursuant to Section 45-IC of the RBI Act, 1934. The conditions and restrictions for distribution attached to statutory reserves as specified in Section 45-IC(1) in The Reserve Bank of India Act, 1934:
(1) Every non-banking financial company (NBFC) shall create a reserve fund and transfer therein a sum not less than twenty percent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
(2) No appropriation of any sum from the reserve fund shall be made by the NBFC except for the purpose as may be specified by the RBI from time to time and every such appropriation shall be reported to the RBI within twenty-one days from the date of such withdrawal. Provided that the RBI may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.
(3) Notwithstanding anything contained in sub-section (1) the Central Government may, on the recommendation of the RBI and having regard to the adequacy of the paid-up capital and reserves of a NBFC in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the NBFC for such period as may be specified in the order. Provided that no such order shall be made unless the amount in the reserve fund under sub-section (1) together with the amount in the share premium account is not less than the paid-up capital of the NBFC.
Capital Redemption Reserve: The Company has recognised Capital Redemption Reserve on redemption of Non-Convertible Redeemable Preference Shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the Non-Convertible Redeemable Preference Shares redeemed. The Company may issue fully paid up bonus shares to its members out of the capital redemption reserve account.
General Reserve: Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013.
Retained earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general reserve and dividend distributed to shareholders.
Other Comprehensive Income: Other comprehensive income consists of remeasurement of net defined benefit liability/ asset, FVTOCI financial liabilities and financial assets
Basic earnings per share (EPS) is calculated by dividing the net profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.
Diluted EPS is calculated by dividing the net profit attributable to equity holders of Company (after adjusting for interest on the convertible preference shares and interest on the convertible bond, in each case, net of tax) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares and issue of Employee stock options.
37.1 Employee Stock Option Plan (2006)
The Company provides share-based payment schemes to its Employees. There are two ongoing Employee stock option schemes:-SCUF EMPLOYEE STOCK OPTION SCHEME 2006
37.1.1. This employee equity-settled compensation scheme known as Shriram City Union Finance Limited Employees Stock Option Scheme 2006 ("SCUF ESOP Scheme 2006" or the "Scheme"). The scheme is approved and authorised by the shareholders of the Company at the Extra Ordinary General Meeting held on October 30, 2006.
The option shall vest in the hands of the Option holder after a minimum period of 12 months from the date of grant of option or such longer period as may be determined by the Committee subject to the condition that the Option grantee continues to be an employee of the Company and the performance or other conditions as may be determined by the Committee. The maximum period of vesting shall be 10 years from the date of grant.
The options vested shall be exercised within period of ten years from the vesting date. When exercisable, each option is convertible into one equity share. Any option granted shall be exercisable according to the terms and conditions as determined by the
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37.1.2. Fair value of the options granted:
The Company has recorded employee stock-based compensation expense relating to the options granted to the employees on the basis of fair value of options.
The fair value of the options granted is mentioned below as per vesting period. The fair value of the options is determined using Black-Scholes model which takes into account the exercise price, the term of the option (time to maturity), the share price as at the grant date and expected price volatility (standard deviation) of the underlying share, the expected dividend yield and risk-free interest rate for the term of the option.
The options shall vest in the hands of the Option holder after a minimum period of 12 months from the date of grant of option or such longer period as may be determined by the Committee subject to the condition that the Option grantee continues to be an employee of the Company and the performance or other conditions as may be determined by the Committee. The maximum period of vesting shall be 5 years from the date of grant.
The options vested shall be exercised within period of ten years from the vesting date. When exercisable, each option is convertible into one equity share. Any option granted shall be exercisable according to the terms and conditions as determined by the Scheme.
37.2.2 Fair value of the options granted:
The Company has recorded employee stock-based compensation expense relating to the options granted to the employees on the basis of fair value of options.
The fair value of the options granted is mentioned below as per vesting period. The fair value of the options is determined using Black-Scholes model which takes into account the exercise price, the term of the option (time to maturity), the share price as at the grant date and expected price volatility (standard deviation) of the underlying share, the expected dividend yield and risk-free interest rate for the term of the option.
37.2.3 Rationale for the variables used :
The variables used for calculating the fair values and their rationale are as follows:
a. Stock Price
The latest available closing market price on the National Stock Exchange (NSE) date on which options are granted has been considered for the purpose of valuation.
Under the ESOP Plan of the Company, one option entitles an employee to one equity share of the Company.
b. Volatility
Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes option pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time.
The period to be considered for volatility must be adequate to represent a consistent trend in the price movements. Accordingly, the annualised volatility has been computed based on the share price data of past one year, from the date of the valuation.
The fair value is very sensitive to this variable. Higher the volatility, higher is the fair value. The rationale being, the more volatile a stock is, the more is its potential to go up (or come down), and the more is the probability to gain from the movement in the price. Accordingly, an option to buy a highly volatile stock is more valuable than the one to buy a less volatile stock, since the probability of gaining is lesser in the latter case.
c. Risk free interest rate
The risk-free interest rate being considered for the calculation is the interest rate applicable on Government securities -having 10 year maturity period.
d. Exercise price
We have considered the exercise price of the options granted to employees based on the Scheme approved by the Board of Directors.
e. Time to maturity / expected life of options
Time to maturity / expected life of options is the period from the grant date to the date on which option is expected to be exercised. The minimum life of stock option is the minimum period before which the options cannot be exercised and maximum life is the period after which the options cannot be exercised.
Considering the deep discount on the market price i.e. 55% to 70%, it is expected that the options will be exercised in 1 year from the vesting date. As such the average expected life of options is considered at 2 years.
37.2.4 Effect of the employee share-based payment plans on the profit and loss account and on its financial position
The Company has recorded employee stock-based compensation cost of '' 9,867.63 Lakhs in the Statement of profit and loss for the year ended March 31,2022 (March 31,2021: '' 1,847.93 Lakhs).
The share option outstanding in the Balance Sheet as at March 31,2022 is '' 8,366.39 Lakhs (March 31,2021: '' 1,872.52 Lakhs)
A defined contribution plan is a pension plan under which the Company pays fixed contributions; there is no legal or constructive obligation to pay further contributions. The assets of the plan are held separately from those of the Company in a fund under the control of trustees.
The Company makes Provident fund and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognised '' 4,447.69 Lakhs (March 31, 2021: '' 3,745.45 Lakhs) for Provident fund contributions and '' 1,074.50 Lakhs (March 31,2021: '' 1,011.95 Lakhs) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.
b. Defined benefit plan Gratuity
The Company has a defined benefit gratuity plan (funded). The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and last drawn salary. The fund is managed by third party fund managers.
Each year, the Board of Trustees reviews the level of funding in the gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The Board of Trustees decides contribution to be made by the Company based on the results of this annual review. The Board of Trustees aim to keep annual contributions of the Company relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
Future cash outflows in respect of above are determinable only on receipt of judgements /decisions pending with various forums/authorities. It is not practicable for the Company to estimate the timings of the cashflows, if any, in respect of the above pending resolution of the respective proceedings. The Company does not expect any reimbursement in respect of the above contingent liabilities. The Company is of the opinion that above demands are not sustainable and expects to succeed in its appeals. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company''s financial position and results of operations.
* The Company neither holds any shares in the above entities nor these entities hold any shares in the Company except Shriram Value Services Limited (SVSL) - Shriram Financial Ventures (Chennai) Private Limited (SFVPL). However these entities are "subsidiaries/ associates" of Shriram Capital Limited and hence these entities are treated as "associates" as per paragraph 9(b) (ii) of IND- AS 24 and transactions made with these entities are disclosed.
There are no transactions with relatives of Key Management Personnel for the year ended March 31,2022.
The Company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the Company.
As an NBFC, the RBI requires the Company to maintain a minimum capital to risk weighted assets ratio ("CRAR") consisting of Tier I and Tier II capital of 15% of our aggregate risk weighted assets. Further, the total of our Tier II capital cannot exceed 100% of our Tier I capital at any point of time. The capital management process of the Company ensures to maintain a healthy CRAR at all the times.
The primary objectives of the Companyâs capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.
The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.
NOTE 44: FAIR VALUE MEASUREMENT44.1 Valuation Principle
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained in Note 5.1.(xiii)
44.2 Fair Value Hierarchy of assets and liabilities
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
44.3 Valuation techniques Equity Instruments
Quoted equity instruments on recognised stock exchanges are valued at Level 1 hierarchy being the unadjusted quoted price as at the reporting date.
Unquoted equity instruments are valued at Level 3 hierarchy being unobservable inputs that are significant to the measurement as a whole. Accordingly, the valuation technique involves the net worth of the investee company.
Units held in funds are measured based on their published net asset value (NAV), taking into account redemption and/or other restrictions. Such instruments are generally Level 2.
Derivative Financial Instruments
Foreign exchange contracts include foreign exchange forward and swap contracts, interest rate swaps and over- the-counter foreign exchange options. These instruments are valued by either observable foreign exchange rates, observable or calculated forward points and option valuation models. With the exception of contracts where a directly observable rate is available which are disclosed as Level 1, the Company classifies foreign exchange contracts as Level 2 financial instruments when no unobservable inputs are used for their valuation or the unobservable inputs used are not significant to the measurement (as a whole).
44.4 Transfer between fair value hierarchy levels
During the year there were no transfers between level 1 and level 2. Similarly, there were no transfers from or transfer to level 3.
44.5 Movements in Level 3 financial instruments measured at fair value
There are no level 3 financial instruments measured at fair value for the year ended March 31,2022 and March 31,2021
44.6 Impact on fair value of level 3 financial instruments measured at fair value of changes to key assumptions There are no level 3 financial instruments measured at fair value for the year ended March 31,2022 and March 31,2021
44.7 Sensitivity of fair value measurements to changes in unobservable market data
There are no level 3 financial instruments measured at fair value for the year ended March 31,2022 and March 31,2021
The management assessed that cash and cash equivalents, trade receivables, trade payables, other current assets, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
44.9 Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Companyâs financial statements. These fair values were calculated for disclosure purposes only. The below methodologies and assumptions relate only to the instruments in the above tables and, as such, may differ from the techniques and assumptions.
Short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: Cash and cash equivalents, Trade receivables, other receivables, balances other than cash and cash equivalents and trade payables without a specific maturity.
Loans and advances to customers
The fair values of loans and receivables are estimated by discounted cash flow models based on contractual cash flows using actual or estimated yields.
These instruments include asset backed securities. The market for these securities is not active. Therefore, the Company uses a variety of valuation techniques to measure their fair values. Expected cash flow levels are estimated by using quantitative and qualitative measures regarding the characteristics of the underlying assets including prepayment rates, default rates and other economic drivers such as loan-to-value ratios, emergence period estimation, indebtedness and rental income levels. Securities with no significant unobservable valuation inputs are classified as Level 2, while instruments with no comparable instruments or valuation inputs are classified as Level 3.
Financial assets at amortised cost
The fair values of financial assets held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterpartiesâ credit risk.
The fair value of issued debt is estimated by a discounted cash flow model incorporating the Companyâs own credit risk. The Company estimates and builds its own credit spread from market-observable data such as secondary prices for its traded debt and the credit spread on credit default swaps and traded debt of itself.
The fair value of issued debt is estimated by a discounted cash flow model incorporating the Companyâs own credit risk. The Company estimates and builds its own credit spread from market-observable data.
The fair value of public deposits and deposit from corporates is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for deposits of similar tenure and scheme (cumulative/non-cumulative). Intercorporate deposits are estimated at their carrying amounts due to the short-term maturities of these deposits.
Estimated fair values of off-balance sheet positions are based on the carrying amounts due to the short-term maturities of these positions.
Whilst risk is inherent in the Companyâs activities, it is managed through an integrated risk management framework including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Companyâs continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks.
45.1 Introduction and Risk Profile45.1.1 Risk management structure
The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.
The Board has constituted the Audit & Risk management committee which is responsible for monitoring the overall risk process within the Company.
The Audit & Risk management committee has the overall responsibility for the development of the risk strategy and implementing principles, frameworks, policies and limits. The Audit & Risk management committee is responsible for managing risk decisions and monitoring risk levels.
The Chief Risk officer is responsible for implementing and maintaining risk related procedures to ensure an independent control process is maintained. The Risk Owners within each department will report to the Risk Committee.
The Risk Owners are responsible for monitoring compliance with risk principles, policies and limits across the Company. Each department has its Risk owner who is responsible for the control of risks, including monitoring the actual risk of exposures against authorised limits and the assessment of risks.
The Companyâs Treasury is responsible for managing its assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Company.
The Companyâs policy is that risk management processes throughout the Company are audited annually by the Internal Audit function, which examines both the adequacy of the procedures and the Companyâs compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to Audit & Risk management committee.
45.1.2 Risk mitigation and risk culture
As part of its overall risk management, the Company can use derivatives and other instruments to manage exposures resulting from changes in interest rates and foreign currencies associated with foreign currency transactions.
45.1.3 Risk measurement and reporting systems
The Companyâs risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment, as necessary.
The Companyâs policy is to measure and monitor the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities.
Information compiled from all the departments is examined and processed in order to analyse, control and identify risks on a timely basis. This information is presented and explained to the Audit & Risk management committee and the head of each department. The Audit & Risk management committee receives a comprehensive risk report once a quarter which is designed to provide all the necessary information to assess and conclude on the risks of the Company.
It is the Companyâs policy to ensure that a robust risk awareness is embedded in its organisational risk culture. Employees are expected to take ownership and be accountable for the risks the Company is exposed to that they decide to take on. The Companyâs continuous training and development emphasises that employees are made aware of the Companyâs risk appetite and they are supported in their roles and responsibilities to monitor and keep their exposure to risk within the Companyâs risk appetite limits. Compliance breaches and internal audit findings are important elements of employeesâ annual ratings and remuneration reviews.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on spreading its lending portfolio across all the states with a cap on maximum limit of exposure for a state and also for an individual / Group.
Credit risk is the risk that the Company will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical concentrations, and by monitoring exposures in relation to such limits.
Credit risk is monitored by the credit department of the Company. It is their responsibility to review and manage credit risk, including environmental and social risk for all types of counterparties. Credit risk consists of line credit managers who are responsible for their business lines and manage specific portfolios and experts who support both the line credit manager, as well as the business with tools like credit risk systems, policies, models and reporting.
The Company has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties.
The credit quality review process aims to allow the Company to assess the potential loss as a result of the risks to which it is exposed and take corrective actions.
45.2.1 Derivative financial instruments
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the balance sheet.
With gross-settled derivatives, the Company is also exposed to a settlement risk, being the risk that the Company honours its obligation, but the counterparty fails to deliver the counter value.
The references below show where the Companyâs impairment assessment and measurement approach is set out in this report. It should be read in conjunction with the Summary of significant accounting policies.
The Company''s definition and assessment of default (Note 45.2.2.1).
- How the Company defines, calculates and monitors the probability of default, exposure at default and loss given default (Notes 45.2.2.2 to 45.2.2.4).
- When the Company considers there has been a significant increase in credit risk of an exposure (Note 45.2.2.5).
- The Companyâs policy of segmenting financial assets where ECL is assessed on a collective basis (Note 45.2.2.5)
- The details of the ECL calculations for stage 1, stage 2 and stage 3 assets (Note 5.1.xi).
45.2.2.1 Definition of default
The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a customer is in default, the Company also considers a variety of instances that may indicate unlikeliness to pay. When such events occur, the Company carefully considers whether the event should result in treating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2 is appropriate. Such events include:
- The borrower requesting emergency funding from the Company.
- A material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral.
- A covenant breach not waived by the Company.
- The debtor (or any legal entity within the debtorâs Company) filing for bankruptcy application/protection.
- All the facilities of a borrower are treated as Stage 3 when one of his facility becomes 90 days past due i.e. credit impaired.
45.2.2.2 PD estimation process
It is an estimate of the likelihood of default over a given time horizon. PD estimation process is done based on historical internal data available with the Company. While arriving at the PD, the Company also ensures that the factors that affects the macro economic trends are considered to a reasonable extent, wherever necessary. Company calculates the 12 month PD by taking into account the past historical trends of the portfolio and its credit performance. In case of assets where there is a significant increase in credit risk, lifetime PD has been applied which is computed based on survival analysis. For credit impaired assets, a PD of 100% has been applied.
45.2.2.3 Exposure at Default (EAD)
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the ability to increase its exposure while approaching default and potential early repayments too.
To calculate the EAD for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12 months ECL.
For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.
In case of undrawn loan commitments, a credit conversion factor of 100% is applied for expected drawdown.
45.2.2.4 Loss Given Default (LGD)
LGD is an estimate of the loss arising in case where a default occurs. It is based on the difference between the contractual cash flows due and those that the Company would expect to receive, including from the realisation of any security.
45.2.2.5 Significant increase in credit risk (SICR)
The Company continuously monitors all assets subject to ECLs in order to determine whether an instrument or a portfolio of instruments is subject to 12 month ECL or lifetime ECL. The Company assesses whether there has been an event which could cause a significantly increase in the credit risk of the underlying asset or the customers ability to pay and accordingly change the 12 month ECL to a lifetime ECL.
In certain cases, the Company may also consider that events explained in Note 45.2.2.1 are a significant increase in credit risk as opposed to a default. Regardless of the above, if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
When estimating ECLs on a collective basis for a Company of similar assets (as set out in Note 45.2.2.6), the Company applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.
45.2.2.6 Forward looking information
The Company has incorporated forward looking information and macro-economic factors while calculating PD and LGD rate. Refer note no 68.8 for impact of COVID-19 on estimate of PD, LGD and SICR.
In assessing the Company''s liquidity position, consideration shall be given to: (!) present and anticipated asset quality (2) present and future earnings capacity (3) historical funding requirements (4) current liquidity position (5) anticipated future funding needs, and (6) sources of funds. The Company maintains a portfolio of marketable assets that are assumed to be easily liquidated and undrawn cash credit limits which can be used in the event of an unforeseen interruption in cash flow. The Company also enters into securitisation deals (direct assignment as well as pass through certificates) of their loan portfolio, the funding from which can be accessed to meet liquidity needs. In accordance with the Companyâs policy, the liquidity position is assessed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Company. Net liquid assets consist of cash, short-term bank deposits and investments in mutual fund available for immediate sale, less issued securities and borrowings due to mature within the next month. Borrowings from banks and financial institutions, issue of debentures and bonds and acceptance of public deposits are considered as important sources of funds to finance lending to customers. They are monitored using the advances to borrowings ratio, which compares loans and advances to customers as a percentage of secured and unsecured borrowings. Asset Liability Management Committee(ALCO) reviews or monitors Asset Liability Management (ALM) mismatch. ALCO conducts periodic reviews relating to the liquidity position and stress test assuming various what if scenarios.
The Board of Directors also approves constitution of Asset Liability Committee (ALCO), Asset Liability Management Committee(ALCO) reviews or monitors Asset Liability Management (ALM) mismatch. ALCO conducts periodic reviews relating to the liquidity position and stress test assuming various what if scenarios. The ALCO is responsible for ensuring adherence to the limits set by the Board as well as for deciding the business strategy of the Company in line with the Company''s budget and decided risk management objectives. The ALCO is a decision-making unit responsible for balance sheet planning from risk-return perspective including strategic management of interest rate and liquidity risks. The ALCO also evaluates the Borrowing Plan of subsequent quarters on the basis of previous borrowings of the Company. The ALCO will be responsible for ensuring the adherence to the target set by the Board of Directors. The meetings of ALCO are held at quarterly intervals. The ALM Support Groups consisting of operating staff are responsible for analysing, monitoring and reporting the risk profiles to the ALCO. ALCO support group meets every fortnight. The minutes of ALCO meetings are placed before the Audit & Risk Management Committee and the Board of Directors in its next meeting for its ratification.
45.3.1. Analysis of financial assets and liabilities by remaining contractual maturities
The table below summarises the maturity profile of the undiscounted cash flows of the Companyâs financial assets and liabilities. All derivatives used for hedging and natural hedges are shown by maturity, based on their contractual undiscounted payment obligations. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Company expects that many customers will not request repayment on the earliest date as it could be required to pay and the table does not reflect the expected cash flows indicated by its deposit retention history.
Market risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The Company classifies exposures to market risk into either trading or non-trading portfolios and manages each of those portfolios separately.
The Company''s exposure to changes in interest rates relates to the Company''s outstanding floating rate liabilities. Outstanding liability which are on fixed rate basis are not subject to interest rate risk. Only borrowings that are linked to rate benchmarks such as Bank MCLR and Mumbai Inter-Bank Offer Rate (MIBOR) are subject to interest rate risk. The sensitivity of the Company''s floating rate borrowings to change in interest rate (assuming all other variables constant) is given below:
The Company is primarily engaged in the business of financing and there are no separate reportable segments identified as per the Ind AS 108 - Segment Reporting.
NOTE 48: EXPENDITURE IN FOREIGN CURRENCY : Nil (March 31,2021: '' 623.25 Lakhs).
NOTE 49: The Company had no discontinuing operations during the year ended March 31,2022 and March 31,2021.
NOTE 50: EVENTS AFTER REPORTING DATE
There have been no events after the reporting date, which warrants adjustments to be made in the financial statement prepared for the year ended March 31,2022.
NOTE 51: FLOATING CHARGE ON INVESTMENT IN GOVERNMENT SECURITIES
In accordance with the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 dated August 25, 2016, the Company has created a floating charge on the statutory liquid assets comprising of investment in government securities, treasury bills & deposit (face value) to the extent of '' 73,190.25 Lakhs, '' 31,226.36 Lakhs and '' 14,000.00 Lakhs respectively (March 31,2021: '' 8,200 Lakhs, '' 65,695.83 Lakhs and '' 21,000.00 Lakhs respectively) in favour of trustees representing the public deposit holders of the Company.
Qualitative disclosure around Liquidity Coverage Ratio (LCR)
The Reserve Bank of India has prescribed Guidelines on Maintenance of Liquidity Coverage Ratio (LCR). All non-deposit taking NBFCs with asset size of ''10,000 crores and above, and all deposit taking NBFCs irrespective of their asset size, is required to maintain a liquidity buffer in terms of LCR which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. The stock of HQLA to be maintained by the NBFCs shall be minimum of 100% of total net cash outflows over the next 30 calendar days. The LCR requirement was applicable from December 1, 2020 with the minimum HQLAs to be held being 50% of the LCR, progressively reaching a level upto 60%. 70%, 85% and 100% by December 1, 2021, December 1, 2022, December 1, 2023, December 1,2024 respectively.
Liquidity Coverage Ratio (LCR) ratio comprises of high quality liquid assets (HQLAs) as numerator and net cash outflows in 30 days as denominator.
The average LCR for the quarter ended March 31,2021 is computed as simple averages of monthly observations over the previous quarter (i.e. average of three months ie. January 2021, February 2021 and March 2021 for the quarter ended March 31,2021). The average LCR for the quarter ended June 30, 2021 onwards is computed as simple averages of daily observations over the previous quarter (i.e. daily average of the quarter ended June 30, 2021, September 30, 2021, December 31, 2021 and March 31,2022).
HQLA primarily includes cash on hand, bank balances in current account, Treasury Bills and Government securities (such unencumbered approved securities held as per the provisions of section 45 IB of RBI Act, is reckoned as HQLA only to the extent of 80% of the required holding).
The Company has maintained LCR well above the regulatory threshold.
The Company Auctioned 3,757 loan accounts (March 31,2021: 167 accounts) during the financial year and the outstanding dues on these loan accounts were '' 1,735.25 Lakhs (March 31,2021: '' 36.25 Lakhs) till the respective dates of auction. The Company realised '' 1,686.21 Lakhs (March 31,2021 : '' 37.44 Lakhs) on auctioning of gold jewellery taken as security on these loans. The Company confirms that none of its sister concerns participated in the above auctions.
NOTE 74: The Company invoked resolution plans to relieve COVID-19 pandemic related stress to eligible borrowers. The resolution plans are based on the parameters laid down in the resolution policy approved by the Board of Directors of the Company and in accordance with the guidelines issued by the RBI on August 6, 2020 and May 5, 2021. The staging of accounts and provisioning for the eligible accounts where the resolution plans are invoked and implemented is in accordance with the Board Approved Policy in this regard.
NOTE 75: Hon''ble Supreme Court, in a public interest litigation (Gajendra Sharma vs. Union of India & Anr). vide an interim order dated September 3, 2020, has directed that accounts which were not declared NPA till August 31, 2020 shall not be declared as NPA till further orders. However, such accounts had been classified as stage 3 and provision had been made accordingly. The interim order stood vacated on March 23, 2021 vide the judgement of the Hon''ble Supreme Court in the matter of Small Scale Industrial manufacturers Association v/s UOI & Ors. and other connected matters. In accordance with the instructions in paragraph 5 of the RBI circular no. RBI/2021-22/17 DOR. STR. REC. 4/ 21.04.048/ 2021-22, dated April 07, 2021 issued in this connection, the Company was already classifying the NPA accounts as Stage 3 and provision was made accordingly, without considering the above mentioned asset classification benefit for accounting purpose, there is no change in asset classification on account of the interim order dated March 23, 2021.
NOTE 76: The Company had credited an ex-gratia amount of '' 10,423.34 Lakhs for the payment of difference between the compound interest and simple interest to the accounts of borrowers in specified loan accounts between March 1, 2020 and August 31,2020 as per the eligibility criteria and other features as mentioned in the notification dated October 23, 2020 issued by Government of India, Ministry of Finance, Department of Financial Services. The Company had filed a claim with the State Bank of India for reimbursement of the said ex-gratia amount as specified in the notification and same was received on March 31,2021.
NOTE 77: In accordance with the RBI circular dated April 07, 2021 and the Indian Banks'' Association (''IBA'') advisory letter dated April 19, 2021 consequent to the judgement dated March 23, 2021 of Hon''ble Supreme Court, the Company has put in place a policy approved by the Board of Directors to refund/ adjust the ''interest on interestâ charged to borrowers (other than specified borrowers as referred to in Note 12 above) during the moratorium period .i.e. March 1,2020 to August 31,2020. The Company has estimated the said amount and made a provision in the financial statements for the year ended March 31,2021.
NOTE 78: DISCLOSURES PERTAINING TO FUND RAISING BY ISSUANCE OF DEBT SECURITIES BY LARGE CORPORATE
The Company, as per the SEBI circular SEBI/HO/DDHS/CIR/P/2018/144 dated November 26, 2018, and the definitions therein, is a Large Corporate and hence is required to disclose the following information about its borrowings.
NOTE 79: The Code on Social Security, 2020 (the Code) has been enacted, which would impact contribution by the Company towards Provident Fund and Gratuity. The effective date from which changes are applicable is yet to be notified and the rules thereunder are yet to be announced. The actual impact on account of this change will be evaluated and accounted for when notification becomes effective.
NOTE 80: COMPLIANCE WITH APPROVED SCHEME(S) OF ARRANGEMENTS
The Board of Directors of the Company in its meeting held on December 13, 2021 has approved a Composite Scheme of Arrangement and Amalgamation ("Scheme"), inter alia, involving amalgamation of Shriram Capital Limited (after de-merger of a few undertakings from the said Shriram Capital Limited) and the Company with Shriram Transport Finance Company Limited under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. The said Scheme is effective upon approval of shareholders, creditors, Hon''ble National Company Law Tribunal, Reserve Bank of India and other regulatory and statutory approvals as applicable with an appointed date of April 1, 2022. The Company has already initiated process for the approval of the Scheme by various statutory authorities. The Company has received Observation letters dated March 15, 2022 and March 16, 2022 from BSE Limited (designated Stock Exchange) and National Stock Exchange of India Limited respectively. The financial statements are for the year ended March 31,2022, which is prior to the appointed date i.e. April 1,2022 and as such the approval/implementation of Scheme has no implications on these financial statements.
NOTE 81: CHANGE IN THE PROCESS OF NPA CLASSIFICATION
Pursuant to the RBI circular dated November 12, 2021 - âPrudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Clarifications", the Company has aligned its definition of default from âDays Past Due Approach as on reporting date" to âDays Past Due Approach as on Day end" with effect from November 12, 2021. Had the Company followed the earlier method, the profit before tax for the period ended March 31, 2022 would have been higher by ''5,992.26 Lakhs.
NOTE 82: TITLE DEEDS OF IMMOVABLE PROPERTIES NOT HELD IN NAME OF THE COMPANY
The Company does not possess any immovable property (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held in the name of the Company during the financial year ended March 31,2022 and March 31,2021.
NOTE 84: DETAILS OF CRYPTO CURRENCY OR VIRTUAL CURRENCY
The Company has not traded or invested in Crypto currency or Virtual currency during the financial years ended March 31,2022 and March 31,2021.
NOTE 85: DETAILS OF BENAMI PROPERTY HELD
No proceedings have been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder in the financial years ended March 31, 2022 and March 31,2021.
The Company is not declared as a wilful defaulter by any bank or financial institution or other lender in the financial years ended March 31,2022 and March 31,2021.
NOTE 87: RELATIONSHIP WITH STRUCK OFF COMPANIES
The Company has not undertaken any transactions with any Company whose name is struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956 in the financial years ended March 31,2022 and March 31,2021.
* There is no shortfall in the CSR amount required to be spent by the Company as per section 135(5) of the Act for the financial years ended March 31,2022.
** There was a shortfall of '' 333.00 Lakhs in the CSR amount required to be spent by the Company as per section 135(5) of the Act for the financial years ended March 31, 2021. The shortfall was due to COVID 19 related lockdown / restrictions impact on the ongoing projects / CSR tie-ups. The said amount was transferred to Unspent CSR account as per section 135(6) on April 29, 2021. During the year ended March 31, 2022, '' 332.00 Lakhs have been utilised for CSR activities from this Unspent CSR bank account.
CSR activities include Education, Preservation of Art, Culture and Heritage, Preventive Healthcare, Scholarship Scheme, Training and Skill Development, Road Safety Awareness Program, Contribution towards Primary, Secondary and Higher Education and other activities which are specified under Schedule VII of Companies Act, 2013.
The Company has neither made any CSR Contributions towards its related parties nor recorded any provision for CSR expenditure during the financial years ended March 31,2022 and March 31,2021.
NOTE 89: REGISTRATION OF CHARGES OR SATISFACTION WITH REGISTRAR OF COMPANIES (ROC)
All charges or satisfaction are registered with ROC within the statutory period for the
Mar 31, 2019
1. CORPORATE INFORMATION
Shriram City Union Finance Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on BSE Limited and National Stock Exchange of India Limited. The Company is primarily engaged in the business of financing small and medium enterprises, two-wheelers and pledged jewels. It also provides personal loans and auto loans. The Company is a Deposit Accepting Non- Banking Finance Company (NBFC) registered as a Loan Company with the Reserve Bank of India (RBI) and Ministry of Corporate Affairs. The registration details are as follows:
RBI 07-00458
Corporate Identity Number (CIN) L65191TN1986PLC012840
Shriram Capital Limited is the promoter of the Company.
The registered office of the Company is at No.123, Angappa Naicken Street, Chennai - 600 001. The principal place of business is at No.144, Santhome High Road, Mylapore, Chennai - 600 004. The financial statements of the Company for the year ended March 31, 2019 were approved for issue in accordance with the resolution of the Board of Directors on April 24, 2019.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time). The financial statements have been prepared under the historical cost convention, as modified by the application of fair value measurements required or allowed by relevant Accounting Standards. Accounting policies have been consistently applied to all periods presented, unless otherwise stated.
The preparation of financial statements requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosed amount of contingent liabilities. Areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the Company are discussed in Note 6 - Significant accounting judgements, estimates and assumptions.
The financial statements are presented in Indian Rupees (Rs. ) and all values are rounded to the nearest lacs, except when otherwise indicated.
3. PRESENTATION OF FINANCIAL STATEMENT
The financial statements of the Company are presented as per Schedule III (Division III) of the Companies Act, 2013 applicable to NBFCs, as notified by the Ministry of Corporate Affairs (MCA). Financial assets and financial liabilities are generally reported on a gross basis except when, there is an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event and the parties intend to settle on a net basis in the following circumstances:
i. The normal course of business
ii. The event of default
iii. The event of insolvency or bankruptcy of the Company and/or its counterparties
Derivative assets and liabilities with master netting arrangements (e.g. International Swaps and Derivative Association Arrangements) are presented net if all the above criteria are met.
4. STATEMENT OF COMPLIANCE
These standalone or separate financial statements of the Company have been prepared in accordance with Indian Accounting Standards as per the Companies (Indian Accounting Standards) Rules, 2015 as amended and notified under Section 133 of the Companies Act, 2013 and the other relevant provisions of the Act.
5. NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE
The Standards that are issued, but not yet effective, are disclosed below. The Company intends to adopt these standards when they became effective:
Ind AS 116 Leases was notified on March 30, 2019 and it replaces Ind AS 17 on Leases. Ind AS 116 is effective for annual periods beginning on or after April 01, 2019. Ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. The standard includes two recognition exemptions for lessees - leases of âlow-valueâ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. As the Company does not have any material leases, therefore the adoption of this standard is not likely to have a material impact in its Financial Statements.
6. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with the Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosure and the disclosure of contingent liabilities, at the end of the reporting period. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes:
6.1 Business Model Assessment
Classification and measurement of financial assets depends on the results of the SPPI and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost or fair value through other comprehensive income that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Companyâs continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.
6.2 Defined employee benefit assets and liabilities
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate; future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed annually.
6.3 Fair value measurement:
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using various valuation techniques. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
6.4 Impairment of loans portfolio
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
It has been the Companyâs policy to regularly review its models in the context of actual loss experience and adjust when necessary.
The impairment loss on loans and advances is disclosed in more detail in Note 6.1(xi) Overview of ECL principles.
6.5 Contingent liabilities and provisions other than impairment on loan portfolio
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
6.6 Effective Interest Rate (EIR) method
The Companyâs EIR methodology, recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans given / taken and recognises the effect of potentially different interest rates at various stages and other characteristics of the product life cycle (including prepayments and penalty interest and charges).
This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments, as well expected changes to Indiaâs base rate and other fee income/ expense that are integral parts of the instrument
6.7 Other estimates:
These include contingent liabilities, useful lives of tangible and intangible assets etc.
7. FIRST TIME ADOPTION
These financial statements, for the year ended March 31, 2019, are the first financial statements the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2018, the Company prepared its financial statements in accordance with Accounting Standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2019, together with the comparative period data as at and for the year ended March 31, 2018, as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at April 01, 2017, the Companyâs date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 01, 2017 and the financial statements as at and for the year ended March 31, 2018.
Exemptions applied
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
7.1 Investment in Subsidiaries, associates
Ind AS 101 permits a first time adopter to measure its investment, at the date of transition, at cost determined in accordance with Ind AS 27, or deemed cost. The deemed cost of such investment shall be its fair value at the Companyâs date of transition to Ind AS, or Previous GAAP carrying amount at that date. The Company has elected to measure its investment in subsidiary at the Previous GAAP carrying amount as its deemed cost on the transition date.
7.2 Lease arrangements
Appendix C to Ind AS 17 requires entity to assess whether contract or arrangement contains a lease. In accordance with same, this assessment should be carried out at the inception of arrangement. However, the company has used exemption under Ind AS 101 and assessed all arrangements based on conditions in place as on date of transition.
7.3 Property, plant, equipment & intangible assets
On transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant and equipment and intangible assets as at March 31, 2017, measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment and intangible assets as on April 01, 2017.
7.4 Business Combination
Ind AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses under Ind AS that occurred before April 01, 2017. Use of this exemption means that the Indian GAAP carrying amounts of assets and liabilities, that are required to be recognised under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with respective Ind AS.
7.5 Derecognition of previously recognised financial instruments
As per Ind AS 101 - An entity shall apply the exception to the retrospective application in case of âderecognition of financial assets and financial liabilitiesâ wherein a first-time adopter shall apply the derecognition requirements in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind ASs. For example, if a first-time adopter derecognised non-derivative financial assets or non-derivative financial liabilities in accordance with its previous GAAP as a result of a transaction that occurred before the date of transition to Ind ASs, it shall not recognise those assets and liabilities in accordance with Ind ASs (unless they qualify for recognition as a result of a later transaction or event). The Company has opted not to re-evaluate financial assets derecognised in the past. However, for loans and advances securitised, the Company has applied the derecognition requirements retrospectively.
7.6 Fair value measurement of financial assets or financial liabilities at initial recognition
Under Ind AS 109, if an entity measures a financial instrument on initial recognition based on valuation techniques that only use observable market data or current market transactions in the same instrument, and the fair value at initial recognition is different from the transaction price, then it is required to recognise the âday oneâ gain or loss at initial recognition of this financial instrument. Ind AS 101 allows an entity to apply the âday oneâ gain or loss recognition requirement of Ind AS 109 prospectively to transactions entered into on or after the date of transition to Ind AS. The Company has opted for this exemption to recognise the âday oneâ gain or loss on initial recognition arising due to difference in transaction cost and fair value prospectively for transactions entered into on or after the date of transition to Ind AS.
Following mandatory exceptions are applicable to the Company:
8.1 Estimates
An entityâs estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies).
8.2 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the company and earn interest at the respective short-term deposit rates. The company has not taken bank overdraft, therefore the cash and cash equivalent for cash flow statement is same as cash and for cash equivalent given above.
Fixed deposit and other balances with banks earns interest at fixed rate.
*Includes deposits Rs. 500.48 lacs (March 31, 2018: NIL April 1, 2017: NIL) as margin for foreign currency derivative contract
NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into derivatives for risk management purposes. Derivatives held for risk management purposes include hedges that either meet the hedge accounting requirements or hedges that are economic hedges, but the Company has elected not to apply hedge accounting requirements.
The table below shows the fair values of derivative financial instruments recorded as assets or liabilities together with their notional amounts.
The notional amounts indicate the value of transactions outstanding at the year end and are not indicative of either the market risk or credit risk.
Hedging activities and derivatives
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative instruments are foreign currency risk and interest rate risk. The Companyâs risk management strategy and how it is applied to manage risk are explained in Note 50.
Derivatives designated as hedging instruments
The Company has not designated any derivatives as hedging instruments.
Nature of security
The repayment of secured redeemable non convertible debentures of Rs. 1,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
Nature of security
The repayment of secured redeemable non convertible debentures of Rs. 1 ,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
Nature of security
The repayment of secured redeemable non convertible debentures of Rs. 1,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
Nature of security
The redemption of principal amount of secured redeemable non- convertible debentures with all interest thereon are secured by a mortgage on the specified immovable property and by way of charge on the Companyâs specifically identified movable assets such as book- debts/ loan receivables in favour of the trustee appointed.
These secured redeemable non-convertible debentures are redeemable at par over a period of 12 months to 60 months from the date of allotment depending on the terms of the agreement.
Outstanding as at March 31, 2018 and April 01,2017 : Rs. Nil.
Nature of Security
Term Loans from banks are secured by an exclusive charge by way of hypothecation of specific assets under financing.
Nature of Security
Term Loans from banks are secured by an exclusive charge by way of hypothecation of specific assets under financing.
Terms/ rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The dividend is subject to the approval of the shareholders in the ensuing annual general meeting.
During the year ended March 31, 2019, the amount of per equity share dividend proposed in total for distributions to equity shareholders is Rs. 22.00 (March 31, 2018 : Rs. 18.00). Out of the said total dividend proposed for the year ended March 31, 2019, amount of interim dividend paid during the year was Rs. 6.00 (March 31, 2018 : Rs. 6.00) per equity share and amount of final dividend proposed by the Board of Directors is Rs. 16.00 (March 31, 2018: Rs. 12.00) per equity share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Aggregate number of equity shares issued for consideration other than cash during the period of five years immediately preceding the reporting date:
The Company has issued total 128,045 (March 31, 2018 : 318,540 April 01, 2017 : 315,311) equity shares during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP), wherein a part of the consideration was received in form of employee service.
As per the records of the company, including its register of shareholders/members and other declarations received from shareholders/members regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
Refer note 48 - Capital for the companyâs objectives, policies and processes for managing capital
Nature and purpose of reserve
Securities Premium Reserve: The amount received in excess of face value of the equity shares is recognised in Securities Premium Reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium reserve. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.
Capital Reserve: Capital reserve is the excess of net assets taken over cost of consideration paid during amalgamation. This is not available for distribution of dividend.
Capital Redemption Reserve: The Company has recognised Capital Redemption Reserve on redemption of NonConvertible Redeemable Preference Shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount of the Non-Convertible Redeemable Preference Shares redeemed. The Company may issue fully paid up bonus shares to its members out of the capital redemption reserve account.
Debenture Redemption Reserve: (1)Pursuant to Section 71 of the Companies Act, 2013 and circular 04/2013, read with notification issued date June 19, 2016 issued by Ministry of Corporate Affairs, the Company is required to transfer 25% of the value of the outstanding debentures issued through public issue as per the present SEBI (Issue and Listing of Debt Securities) Regulation, 2008 to Debenture Redemption Reserve (DRR) and no DRR is required in case of privately placed debenture. Also the Company is required before 30th day of April of each year to deposit or invest, as the case may be, a sum which shall not be less than 15% ofthe amount of its debenture issued through public issue maturing within one year from the balance sheet date. (2) In respect of the debentures issued through public issue, the Company has created DRR of Rs. 366.14 lacs (March 31, 2018: Rs. 2,059.53 lacs; April 01, 2017: Rs. 2,247.40 lacs ). The Company has deposited a sum of Rs. 1,722.00 lacs (March 31, 2018: Rs. 1,750.00 lacs , April 1,2017: Rs. 3,400.00 lacs ) with scheduled banks, representing 15% of the debenture issued through public issue, which are due for redemption within one year from the balance sheet date.
General Reserve: Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013.
Statutory Reserve: Pursuant to Section 45-IC(1) in The Reserve Bank of India Act, 1934. (1) Every non-banking financial company shall create a reserve fund and transfer therein a sum not less than twenty percent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
Retained earnings: Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, debenture redemption reserve, general reserve, dividends distributions paid to shareholders and transfer from debenture redemption reserve.
Other Comprehensive Income: Other comprehensive income consists of remeasurement of net defined benefit liability/ asset, FVTOCI financial liabilities and financial assets and currency translation.
Share Option Outstanding: The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration. Refer to Note 41 for further details of these plans.
Reconciliation of the total tax charge:
The tax charge shown in the statement of profit and loss differs from the tax charge that would apply if all profits had been charged at India corporate tax rate. A reconciliation between the tax expense and the accounting profit multiplied by Indiaâs domestic tax rate for the periods ended March 31, 2019 and March 31, 2018 is, as follows:
NOTE 10: EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing the net profit for the year attributable to equity holders of the company by the weighted average number of equity shares outstanding during the year.
Diluted EPS is calculated by dividing the net profit attributable to equity holders of company (after adjusting for interest on the convertible preference shares and interest on the convertible bond, in each case, net of tax) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares and issue of Employee Stock Options.
11. EMPLOYEE STOCK OPTION PLAN
11.1 The Company provides share-based payment schemes to its Employees. For the period ended March 31, 2019 an Employee Stock Option Plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below:
Date of Shareholderâs approval : October 30, 2006
Date of grant : October 19, 2007
Date of Board Approval : October 19, 2007
Number of options granted : 1,355,000
Method of Settlement (Cash/Equity) : Equity Graded vesting period :
After 1 years of grant date : 10% of options granted
After 2 years of grant date : 20% of options granted
After 3 years of grant date : 30% of options granted
After 4 years of grant date : 40% of options granted
Exercisable period : 10 years from vesting date
Vesting Conditions : On achievement of pre-determined targets
STOCK OPTIONS GRANTED
The weighted average fair value of stock options granted was Rs. 227.42. The Black Scholes model has been used for computing the weighted average fair value of options considering the following inputs:
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank NIFTY which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it was assumed that the employees would exercise the options within six months from the date of vesting in view of the exercise price being significantly lower than the market price.
Since the company used the intrinsic value method the impact on the reported net profit and earnings per share by applying the fair value based method is as follows:
In March 2005, the ICAI issued a guidance note on âAccounting for Employees Share Based Paymentsâ applicable to Employee based share plan, the grant date in respect of which falls on or after April 1 2005. The said guidance note requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock compensation accounting in the financial statements. Applying the fair value based method defined in the said guidance note the impact on the reported net profit and earnings per share would be as follows:
11.2 A new ESOP scheme âSCUF Employees Stock Option Scheme 2013â was approved at an EGM on May 31, 2013. Accordingly 2,627,000 equity shares @ Rs. 10 each have been reserved under this scheme with an exercise price of Rs. 300 per option and with a maximum vesting period of five years from the date of grant.
NOTE 12: RETIREMENT BENEFIT PLAN
Defined Contribution Plan
A defined contribution plan is a pension plan under which the Company pays fixed contributions; there is no legal or constructive obligation to pay further contributions. The Company makes Provident Fund, Employee State Insurance Scheme contributions, National Pension scheme contributions and Labour welfare Fund contributions which are defined contribution plans for qualifying employees. Under the Schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs. 4,225.08 lacs (March 31, 2018: Rs. 2,722.83 lacs) for Provident Fund contributions, Rs. 1,492.88 lacs (March 31, 2018: Rs. 1,463.81 lacs) for Employee State Insurance Scheme contributions, Rs. 10.45 lacs (March 31, 2018: Rs. 10.48 lacs) for Labour welfare Fund contributions and Rs 47.10 lacs (March 31, 2018: Rs. 37.56 lacs) for National Pension scheme in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the Schemes.
Defined Benefit Plan
The Company has a defined benefit gratuity plan (funded). The Companyâs defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund. The gratuity plan is governed by the Payment of Gratuity Act, 1972 (the Act). Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the memberâs length of service and last drawn salary The fund is managed by third party fund managers. Each year the level of funding in the gratuity plan is reviewed. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The contribution is decided based on the results of annual review. Generally, it aims to have a portfolio mix of equity instruments, property and debt instruments. Generally equity instruments and property should not exceed 30% of total portfolio. The Aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.
Risk associated with defined benefit plan
Gratuity is a defined benefit plan and company is exposed to the following Risks:
Interest Risk: A fall in the discount rate which is linked to the Govt. Sec. Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.
Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the planâs liability. Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of the Income Tax Rules, 1962, this generally reduces ALM risk.
Mortality Risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.
Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.
Characteristics of defined benefit plans
During the year, there were no plan amendments, curtailments and settlements.
Compensated absences
The company has a policy on compensated absences which is accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using Projected Unit Credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. The Company recognized expense amounting Rs. 925.63 lacs (March 31, 2018: Rs. 479.01 lacs ) for Leave encashment
The Following Table Summarises the components of net benefit expense recognised in statement of profit and loss and funded status and amounts recognised in balance sheet for the gratuity plan
The Company expects to contribute Rs. 134.14 lacs to the fund in the next financial year.
The weighted average duration of the defined benefit obligation as at 31 March 2019 is 13 years (March 31 2018: 13 years) Asset Liability Matching Strategies
The Company has purchased insurance policy, which is a year-on-year cash accumulation plan in which the interest rate is declared on yearly basis and is guaranteed for a period of one year. The insurance Company, as part of the policy rules, makes payment of all gratuity outgoes happening during the year(subject to sufficiency of funds under the policy). The policy thus, mitigates the liquidity risk. However, being a cash accumulation plan, the duration of assets is shorter compared to the duration of liabilities. Thus, the Company is exposed to movement in interest rate (in particular, the significant fall in interest rates, which should result in a increase in liability without corresponding increase in the asset).
Future cash outflows in respect of (a), (b) and (c) above are determinable only on receipt of judgements /decisions pending with various forums/authorities. The Company is of the opinion that above demands are not sustainable and expects to succeed in its appeals. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Companyâs financial position and results of operations.
The company has issued a guarantee for Rs. 2,500.00 lacs against refinance obtained by subsidary, Shriram Housing Finance Limited for NHB.
(C) Lease Disclosures As a lessee Operating Lease :
The Company has taken various office premises under operating lease. The lease expenses recognised in the Statement of Profit and Loss are Rs. 5,859.50 lacs (March 31, 2018: Rs. 5,307.93 lacs). Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The non-cancellable operating lease agreements are ranging for a period 11 to 180 months. There are no restrictions imposed by lease arrangements.
NOTE 13: CAPITAL
The Company maintains an actively managed capital base to cover risks inherent in the business which includes issued equity capital, share premium and all other equity reserves attributable to equity holders of the Company.
As an NBFC, the RBI requires us to maintain a minimum capital to risk weighted assets ratio ("CRAR") consisting of Tier I and Tier II capital of 15% of our aggregate risk weighted assets. Further, the total of our Tier II capital cannot exceed 100% of our Tier I capital at any point of time. The capital management process of the company ensures to maintain a healthy CRAR at all the times.
Capital Management
The primary objectives of the Companyâs capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value.
The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.
Regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings including current year profit less accrued dividends . Certain adjustments are made to Ind AS-based results and reserves, as prescribed by the Reserve Bank of India. The other component of regulatory capital is other Tier 2 Capital Instruments,which includes contingent convertible bonds.
The Company is meeting the capital adequacy requirements of Reserve Bank of India (RBI) of India.
Consequent to the transition of the company to the Indian Accounting Standards (Ind AS) with effect from 1st April 2018, the books of account of the company are being maintained under Ind AS as required by the Companies Act, 2013. In the absence of any clarification from the Reserve Bank Of India (RBI) the company has continued filing various Returns to RBI based on directions issued by RBI which are in accordance with the previous Indian GAAP. This has been communicated by the company to RBI vide its letter dated 9th July, 2018.
NOTE 14: FAIR VALUE MEASUREMENT
14.1 Valuation Principle
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique. In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained in Note 49.3.
14.2 Fair Value Hierarchy of assets and liabilities
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
14.3 Valuation techniques Equity instruments
Quoted equity instruments on recognised stock exchanges are valued at Level 1 hierarchy being the unadjusted quoted price as at the reporting date.
Unquoted equity instruments are valued at Level 3 hierarchy being unobservable inputs that are significant to the measurement as a whole. Accordingly, the valuation technique involves the networth of the investee company
Mutual Funds
Units held in funds are measured based on their published net asset value (NAV), taking into account redemption and/or other restrictions. Such instruments are generally Level 2.
Foreign exchange contracts
Foreign exchange contracts include foreign exchange forward and swap contracts, interest rate swaps and over- the-counter foreign exchange options. These instruments are valued by either observable foreign exchange rates, observable or calculated forward points and option valuation models. With the exception of contracts where a directly observable rate is available which are disclosed as Level 1, the Company classifies foreign exchange contracts as Level 2 financial instruments when no unobservable inputs are used for their valuation or the unobservable inputs used are not significant to the measurement (as a whole).
During the year there were no transfers between level 1 and level 2. Similarly, there were no transfers from or transfer to level 3.
Movements in Level 3 financial instruments measured at fair value
The following tables show a reconciliation of the opening and closing amounts of Level 3 financial assets and liabilities which are recorded at fair value. Transfers from Level 3 to Level 2 occur when the market for some securities became more liquid, which eliminates the need for the previously required significant unobservable valuation inputs. Since the transfer, these instruments have been valued using valuation models incorporating observable market inputs. Transfers into Level 3 reflect changes in market conditions as a result of which instruments become less liquid. Therefore, the Company requires significant unobservable inputs to calculate their fair value.
14.4 Impact on fair value of level 3 financial instruments measured at fair value of changes to key assumptions
The table summarises the valuation techniques together with the significant unobservable inputs used to calculate the fair value of the Companyâs Level 3 assets and liabilities. The range of values indicates the highest and lowest level input used in the valuation technique and, as such, only reflects the characteristics of the instruments as opposed to the level of uncertainty to their valuation. Relationships between unobservable inputs have not been incorporated in this summary.
14.5 Sensitivity of fair value measurements to changes in unobservable market data
The table below describes the effect of changing the significant unobservable inputs to reasonable possible alternatives. All changes would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, instruments classified as FVTPL would be reflected in the Statement of profit and loss. Sensitivity data are calculated using a number of techniques, including analysing price dispersion of different price sources, adjusting model inputs to reasonable changes within the fair value methodology.
The ranges are not comparable or symmetrical as the model inputs are usually not in the middle of the favourable/ unfavourable range.
The table below shows data in relation to Level 3 inputs that are already aggregated on the underlying product levels without assuming any potential diversification effect, but including potential off-sets from economic or accounting hedge relationships in place. The Company is of the opinion that, whilst there may be some diversification benefits, incorporating these would not be significant to the analysis.
14.6 Fair value of financial instruments not measured at fair value
Set out below is a comparison, by class, of the carrying amounts and fair values of the Companyâs financial instruments that are not carried at fair value in the financial statements. This table does not include the fair values of non-financial assets and non financial liabilities.
Note:
The management assessed that cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
14.7 Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Companyâs financial statements. These fair values were calculated for disclosure purposes only. The below methodologies and assumptions relate only to the instruments in the above tables and, as such, may differ from the techniques and assumptions
Short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: cash and balances, Trade receivables, other receivables, balances other than cash and cash equivalents and trade payables without a specific maturity. Such amounts have been classified as Level 2 on the basis that no adjustments have been made to the balances in the balance sheet.
Loans and advances to customers
The fair values of loans and receivables are estimated by discounted cash flow models based on contractual cash flows using actual or estimated yields.
Pass through certificates
These instruments include asset backed securities. The market for these securities is not active. Therefore, the Company uses a variety of valuation techniques to measure their fair values. Expected cash flow levels are estimated by using quantitative and qualitative measures regarding the characteristics of the underlying assets including prepayment rates, default rates and other economic drivers such as loan-to-value ratios, emergence period estimation, indebtedness and rental income levels. Securities with no significant unobservable valuation inputs are classified as Level 2, while instruments with no comparable instruments or valuation inputs are classified as Level 3.
Financial assets at amortised cost
The fair values financial assets held-to-maturity investments are estimated using a discounted cash flow model based on contractual cash flows using actual or estimated yields and discounting by yields incorporating the counterpartiesâ credit risk.
Issued debt
The fair value of issued debt is estimated by a discounted cash flow model incorporating the Companyâs own credit risk. The Company estimates and builds its own credit spread from market-observable data such as secondary prices for its traded debt and the credit spread on credit default swaps and traded debt of itself.
Borrowings
The fair value of issued debt is estimated by a discounted cash flow model incorporating the Companyâs own credit risk. The Company estimates and builds its own credit spread from market-observable data.
Off-balance sheet positions
Estimated fair values of off-balance sheet positions are based on market prices for similar instruments or on discounted cash flow models, as explained above, which incorporate the credit risk element through the discount factor.
Note 15 Risk Management
Whilst risk is inherent in the Companyâs activities, it is managed through an integrated risk management framework including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Companyâs continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating and business risks.
15.1 Introduction and Risk Profile
15.1.1 Risk management structure
The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.
The Board has constituted the Risk Management Committee which is responsible for monitoring the overall risk process within the Company.
The Risk Management Committee has the overall responsibility for the development of the risk strategy and implementing principles, frameworks, policies and limits. The Risk Management Committee is responsible for managing risk decisions and monitoring risk levels.
The Chief Risk officer is responsible for implementing and maintaining risk related procedures to ensure an independent control process is maintained. The Risk Owners within each department will report to the Risk Committee.
The Risk Owners are responsible for monitoring compliance with risk principles, policies and limits across the Company. Each department has its Risk owner who is responsible for the control of risks, including monitoring the actual risk of exposures against authorised limits and the assessment of risks.
The Companyâs Treasury is responsible for managing its assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Company
The Companyâs policy is that risk management processes throughout the Company are audited annually by the Internal Audit function, which examines both the adequacy of the procedures and the Companyâs compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to Risk Management Committee.
15.1.2 Risk mitigation and risk culture
As part of its overall risk management, the Company can use derivatives and other instruments to manage exposures resulting from changes in interest rates and foreign currencies associated with foreign currency transactions.
15.1.3 Risk measurement and reporting systems
The Companyâs risks are measured using a method that reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment, as necessary.
The Companyâs policy is to measure and monitor the overall risk-bearing capacity in relation to the aggregate risk exposure across all risk types and activities.
Information compiled from all the departments is examined and processed in order to analyse, control and identify risks on a timely basis. This information is presented and explained to the Risk Management Committee and the head of each department. The Risk Management Committee receives a comprehensive risk report once a quarter which is designed to provide all the necessary information to assess and conclude on the risks of the Company.
It is the Companyâs policy to ensure that a robust risk awareness is embedded in its organisational risk culture. Employees are expected to take ownership and be accountable for the risks the Company is exposed to that they decide to take on. The Companyâs continuous training and development emphasises that employees are made aware of the Companyâs risk appetite and they are supported in their roles and responsibilities to monitor and keep their exposure to risk within the Companyâs risk appetite limits. Compliance breaches and internal audit findings are important elements of employeesâ annual ratings and remuneration reviews.
15.1.4 Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions.
In order to avoid excessive concentrations of risk, the Companyâs policies and procedures include specific guidelines to focus on spreading its lending portfolio across all the states with a cap on maximum limit of exposure for a state and also for an individual/Group.
15.2 Credit Risk
Credit risk is the risk that the Company will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical concentrations, and by monitoring exposures in relation to such limits.
Credit risk is monitored by the credit department of the Company. It is their responsibility to review and manage credit risk, including environmental and social risk for all types of counterparties. Credit risk consists of line credit managers who are responsible for their business lines and manage specific portfolios and experts who support both the line credit manager, as well as the business with tools like credit risk systems, policies, models and reporting.
The Company has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties.
The credit quality review process aims to allow the Company to assess the potential loss as a result of the risks to which it is exposed and take corrective actions.
15.2.1 Derivative financial instruments
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the balance sheet.
With gross-settled derivatives, the Company is also exposed to a settlement risk, being the risk that the Company honours its obligation, but the counterparty fails to deliver the counter value.
15.2.2 Impairment assessment
15.2.2.1 Definition of default
The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.
As a part of a qualitative assessment of whether a customer is in default, the Company also considers a variety of instances that may indicate unlikeliness to pay. When such events occur, the Company carefully considers whether the event should result in treating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2 is appropriate. Such events include:
- The borrower requesting emergency funding from the company
- A material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral
- A covenant breach not waived by the Company
- The debtor (or any legal entity within the debtorâs Company) filing for bankruptcy application/protection
- All the facilities of a borrower are treated as Stage 3 becomes 90 days past due i.e. credit impaired.
15.2.2.2 PD estimation process
It is an estimate of the likelihood of default over a given time horizon. PD estimation process is done based on historical internal data available with the Company. While arriving at the PD, the Company also ensures that the factors that affects the macro economic trends are considered to a reasonable extent, wherever necessary. Company calculates the 12 month PD by taking into account the past historical trends of the portfolio and its credit performance. In case of assets where there is a significant increase in credit risk, lifetime PD has been applied which is computed based on survival analysis. For credit impaired assets, a PD of 100% has been applied.
15.2.2.3 Exposure at Default (EAD)
The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the ability to increase its exposure while approaching default and potential early repayments too.
To calculate the EAD for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12 months ECL.
For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments. In case of undrawn loan commitments, a credit conversion factor of 100% is applied for expected drawdown.
15.2.2.4 Loss Given Default (LGD)
LGD is an estimate of the loss arising in case where a default occurs. It is based on the difference between the contractual cash flows due and those that the Company would expect to receive, including from the realization of any security.
15.2.2.5 Significant increase in credit risk
The Company continuously monitors all assets subject to ECLs in order to determine whether an instrument or a portfolio of instruments is subject to 12 month ECL or lifetime ECL. The Company assesses whether there has been an event which could cause a significantly increase in the credit risk of the underlying asset or the customers ability to pay and accordingly change the 12 month ECL to a lifetime ECL.
In certain cases, the Company may also consider that events explained in Note 50.2.2.1 are a significant increase in credit risk as opposed to a default. Regardless of the above, if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
When estimating ECLs on a collective basis for a Company of similar assets (as set out in Note 50.2.2.6), the Company applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.
15.2.2.6 Grouping financial assets measured on a collective basis
As explained in Note 6.1.xi dependent on the factors below, the Company calculates ECLs only on a collective basis The Company segments the exposure into smaller homogeneous portfolios, based on a combination of internal and external characteristics of the loans as described below.
1. Gold Loans
2. Auto Loans
3. MSME Loans
4. Two wheelers Loans
5. Personal Loans
15.2.3 Analysis of risk concentration
The maximum credit exposure to any individual client or counterparty as of March 31, 2019 was Rs. 4500.00 lacs (March 31, 2018: Rs. 25000.00 lacs)
15.3 Liquidity risk and funding management
In assessing the companyâs liquidity position, consideration shall be given to: (1) present and anticipated asset quality (2) present and future earnings capacity (3) historical funding requirements (4) current liquidity position (5) anticipated future funding needs, and (6) sources of funds.
The Company maintains a portfolio of marketable assets that are assumed to be easily liquidated and undrawn cash credit limits which can be used in the event of an unforeseen interruption in cash flow. The Company also enters into securitization deals (direct assignment as well as pass through certificates) of their loan portfolio, the funding from which can be accessed to meet liquidity needs. In accordance with the Companyâs policy, the liquidity position is assessed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specifically to the Company. Net liquid assets consist of cash, short-term bank deposits and investments in mutual fund available for immediate sale, less issued securities and borrowings due to mature within the next month.
Borrowings from banks and financial institutions , issue of debentures and bonds and acceptance of public deposits are considered as important sources of funds to finance lending to customers. They are monitored using the advances to borrowings ratio, which compares loans and advances to customers as a percentage of secured and unsecured borrowings.
15.3.2. Analysis of financial assets and liabilities by remaining contractual maturities
The table below summarises the maturity profile of the undiscounted cash flows of the Companyâs financial assets and liabilities as at March 31. All derivatives used for hedging and natural hedges are shown by maturity, based on their contractual undiscounted payment obligations. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Company expects that many customers will not request repayment on the earliest date it could be required to pay and the table does not reflect the expected cash flows indicated by its deposit retention history.
The table below shows the contractual expiry by maturity of the companyâs contingent liabilities and commitments: Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down.
For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.
15.4 Market Risk
Market risk is that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The Company classifies exposures to market risk into either trading or non-trading portfolios and manages each of those portfolios separately.
NOTE 16: FIRST-TIME ADOPTION OF IND AS
These financial statements, for the year ended March 31, 2019, are the first financial statements of the Company and that have been prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2018, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on March 31, 2019, together with the comparative period data as at and for the year ended March 31, 2018, as described in the summary of significant accounting policies. In preparing these financial statements, the Companyâs opening balance sheet was prepared as at April 01, 2017, the Companyâs date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 01, 2017 and the financial statements as at and for the year ended March 31, 2018.
Exemptions applied:
Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
- Ind AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses under Ind AS that occurred before 1 April 2017. Use of
Mar 31, 2018
1. CORPORATE INFORMATION
Shriram City Union Finance Limited (the Company) is a Public Company domiciled in India and is incorporated under the provisions of the Companies Act, 1956.The Corporate Identification Number (CIN) is L65191TN1986PLC012840. Its shares are listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). The Company is a Deposit Accepting Non-Banking Finance Company (NBFC) registered with Reserve Bank of India (RBI) with registration number 07-00458 as loan Company. The Company operates in India.
2. BASIS OF PREPARATION
The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards (AS) under section 133 of the Companies Act 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016 and the guidelines issued by the Reserve Bank of India (RBI) as applicable to a Non-Banking Finance Company (NBFC). The financial statements have been prepared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year except for the change in accounting policies explained below. The complete financial statements have been prepared along with all disclosures.
3.1 Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting.
For the year ended March 31, 2018, the amount of per equity share dividend proposed in total for distributions to equity shareholders is Rs.18.00 (March 31, 2017 : Rs.15.00). Out of the said total dividend proposed for the year ended March 31,2018, amount of interim dividend paid during the year was Rs.6.00 (March 31, 2017 : Rs.5.00) per equity share and amount of final dividend proposed by the Board of Directors is Rs.12.00 (March 31, 2017 : Rs.10.00) per equity share.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
3.2 Shares reserved for issue under option:
For details of share reserved for issue under the Employees Stock Option Plan (ESOP) [Refer note no-24]
3.3 The Company has issued 138,540 equity shares (March 31, 2017: 315,311) during the period of five years immediately preceding the reporting date on exercise of options granted under ESOP, wherein a part of the consideration was received in form of employee service.
4.1 Secured Loans - Long Term Borrowings
A. Secured Redeemable Non-Convertible Debentures
(i) Privately Placed Redeemable Non - Convertible Debentures (NCDs) of Rs.1,000/- each - Unquoted-Retail Terms of repayment as at March 31, 2018 Non-Current Portion-NIL Current Maturities
Nature of security
The redemption of principal amount of secured redeemable non-convertible debentures with all interest there on are secured by a mortgage on the specified immovable property and by way of charge on the Companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
These secured redeemable non-convertible debentures are redeemable at par over a period of 12 months to 60 months from the date of allotment depending on the terms of the agreement.
Nature of security
The redemption of principal amount of secured redeemable non-convertible debentures with all interest there on are secured by a mortgage on the specified immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
Secured redeemable non-convertible debenture may be bought back subject to applicable statutory and/or regulatory requirements, upon the terms and conditions as may be decided by the Company.
Nature of security
The repayment of secured redeemable non convertible debentures of Rs.1 ,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
Nature of security
The repayment of secured redeemable non convertible debentures of Rs.1,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
5.1. Mutual Fund
Since it is an equity and debt opportunities fund under the open ended scheme the maturity date will be considered as redemption date as and when required.
5.2. Mutual Fund
Since it is an equity and debt opportunities fund under the open ended scheme the maturity date will be considered as redemption date as and when required.
*Includes exempt income (subject to EIS tax u/s 115 TA of the Income Tax Act) for the year ended March 31, 2018 is NIL( March 31, 2017 : Rs.33.90 lacs).
**Includes exempt income for the period ending March 31, 2018 is NIL(March 31, 2017 : Rs.3.08 lacs).
6. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS
The Company has a funded defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of service.
Consequent to the adoption of Accounting Standard 15 âEmployee Benefitsâ (revised), the following disclosures are made as required by the standard:
Statement of Profit and Loss
Net Employee benefit expenses (recognised in the employee cost)
The estimates of future salary increases, considered in actuarial valuation, are on account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank NIFTY which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it was assumed that the employees would exercise the options within six months from the date of vesting in view of the exercise price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
Since the Company used the intrinsic value method the impact on the reported net profit and earnings per share by applying the fair value based method is as follows:
In March 2005, the ICAI issued a guidance note on ââAccounting for Employees Share Based Paymentsââ applicable to Employee based share plan, the grant date in respect of which falls on or after April 1 2005. The said guidance note requires that the proforma disclosures of the impact of the fair value method of accounting of employee stock compensation accounting in the financial statements. Applying the fair value based method defined in the said guidance note the impact on the reported net profit and earnings per share would be as follows:
7.1 A new ESOP scheme âSCUF Employees Stock Option Scheme 2013â was approved at an EGM on May 31, 2013. Accordingly 2,627,000 equity shares @ Rs.10 each have been reserved under this scheme with an exercise price of Rs.300 per option and with a maximum vesting period of five years from the date of grant.
8. SEGMENT INFORMATION
The Company has got a single reportable segment. Therefore, the segmentwise reporting has not been given.
9. RELATED PARTY DISCLOSURE
I) Key Managerial Personnel
a. Mr. R Duruvasan, Managing Director & CEO
b. Mr. R Chandrasekar, Chief Financial Officer
c. Mr. C R Dash, Company Secretary - CRD
II) Subsidiary
a. Shriram Housing Finance Limited -SHFL
III) Enterprises having significant influence
a. Shriram Capital Limited-SCL
b. Shriram Ownership Trust-SOT
c. Dynasty Acquisition FPI Limited-DAFL
d. Piramal Enterprises Limited-PEL
10. CONTINGENT LIABILITIES AND COMMITMENTS TO THE EXTENT NOT PROVIDED FOR
I) Contingent Liabilities
The Income tax assessment of the Company has been completed by Assessing officer upto the Assessment Year 2015-16 Disputed Income tax demand are on account of Disallowance of Interest on Income Tax refund u/s 234D (A.Y.2010-11 to A.Y.2013-14) -Rs.116.45 lacs and Disallowance u/s 40 a (ia) of the Income Tax Act (A.Y.2012-13 to A.Y.2014-15) - Rs.2,874.20 lacs. The above demands are determinable only on receipt of judgements / decisions pending with various forums / authorities. The Company is of the opinion that above demands are not sustainable and expects to succeed in its appeals.
Disputed tax demand under Kerala Value Added Tax is on account of sale of seized vehicles for the assessment year 2007-08 is Rs.4.65 lacs. The Company filed appeal before Dy.Commissioner ( Appeals ) Ernakulam, Kerala. For the assessment year 2011-12, the disputed tax under Kerala Value Added Tax is on account of goods in transit u/s 47 (6) is Rs.0.72 lacs after adjusting the Security deposit of Rs.0.72 lacs paid by the supplier.The Company has filed appeal before the Assistant commissioner ( Appeals) Ernakulam, Kerala.
Disputed tax demand under Tamilnadu Value Added Tax is on account of sale of seized vehicles/ Sale of Gold Jewellery / Sale of Fixed Asset for the assessment year 2007-08 to 2014-15 is Rs.125.65 lacs. The Company has paid the demand amount and filed appeal upto AY 2013-14 before Sales Tax Appellate Tribunal , Chennai. For the Assessment Year 2014-15. the Company would contest against the Order issued by Appellate Deputy Commissioner.
Disputed tax demand under Karnataka Value Added Tax is on account of sale of seized vehicles for the assessment year 2011-12 to assessment year 2012-13 is Rs.6.50 lacs. The Company would contest against the Order.
Disputed tax demand under Service Tax is on service rendered towards provision of collection of receivables in respect of Securitisation / Direct Assignment for the period AprRs.08 - SepRs.14 is Rs.3,802.12 lacs. The Company has filed an appeal with CESTAT.
The Company has issued a guarantee for Rs.2,500.00 lacs against refinance obtained by Shriram Housing Finance Limited for NHB
II) Commitments
As at March 31, 2018, Rs.305.32 lacs is the estimated amount of contracts remaining to be executed on capital account.
11. DISCLOSURE RELATING TO SECURITISATION / ASSIGNMENT A. Securitisation
(i) The information on securitisation of the Company as an originator in respect of securitisation transaction done during the year is given below
(ii) The information on securitisation of the Company as an originator in respect of outstanding amount of securitised assets is given below
12. Expenditure in Foreign Currency (Cash Basis) - Nil
13. The Company had no discontinuing operations during the year ended March 31, 2018.
14. The Company has taken various office premises under operating lease. The lease payments recognised in the statement of profit and loss account are Rs.5,303.11 lacs (March 31, 2017 - Rs.4,923.62 lacs). Certain agreements provide for cancellation by either party and certain agreements contain clauses for escalation and renewal of agreements. There are no restrictions imposed by lease arrangements. The future minimum lease payments in respect of non-cancellable operating leases as at the Balance sheet days are summarised below:
15. Details of non-performing financial assets purchased / sold - Nil
16. Details of financing of parent company products - Nil
17. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Company - Nil
18. Registration obtained from other financial sector regulators - Nil
19. Details of Penalties imposed by RBI and other regulators - Nil
20. Draw Down Reserves - Nil
21. CORPORATE SOCIAL RESPONSIBILITY EXPENSES
Section 135 of the Companies Act, 2013, which mandates CSR for specified companies, applies to the Company. Accordingly the Company is required to spend atleast 2% of the average net profits of the Company made during the three immediately preceeding financial years, which amounts to Rs.1,677.14 lacs for the year 2017-18 .The Company has spent Rs.1,400.00 lacs during the year.
22. Overseas Assets (for those with Joint Ventures and Subsidiaries abroad) - Nil
23. Off-balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms) - Nil
24. Based on the intimation received by the Company, none of the suppliers have confirmed to be registered under âMicro, Small and Medium Enterprises Development (âMSMEDâ) Act, 2006â. Therefore, the related information for this purpose stands to be Nil.
25. AUCTION DETAILS
The Company Auctioned 9,910 loan accounts (March 31,2017: 7013 accounts) during the financial year and the outstanding dues on these loan accounts were Rs.3,297.26 lacs (March 31, 2017: Rs.1,936.69 lacs) till the respective dates of auction. The company realised Rs.3,248.22 lacs (March 31, 2017 : Rs.1,784.77 lacs) on auctioning of gold jewellery taken as security on these loans. The company confirms that none of its sister concerns participated in the above auctions.
26. Additional information in Form AOC-1 with respect to subsidiary as required under Section 129(3) of the Companies Act, 2013 is attached to the Financial Statement.
28. Previous year figures have been regrouped / rearranged, wherever considered necessary, to conform with current year presentation.
Mar 31, 2017
1. Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of ''10 per share. Each holder of the equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting.
For the year ended March 31, 2017, the amount of per equity share dividend proposed in total for distributions to equity shareholders isRs,15.00 (March 31, 2016 ;Rs,15.00). Out of the said total dividend proposed for the year ended March 31,2017, amount of interim dividend paid during the year wasRs,5.00 (March 31, 2016 :Rs,5.00) per equity share and amount of final dividend proposed by the Board of Directors isRs,10.00 ( March 31, 2016:Rs,10.00) per equity share. The amount of the Proposed final Dividend ofRs,10.00 per equity share has not been recognized in the Statement of Profit and Loss due to a change in accounting policy as mentioned under Significant Accounting Policies.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
As per the records of the company, including its register of shareholders /members and other declarations received from shareholders/members regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
2. Shares reserved for issue under option:
For details of share reserved for issue under the employees stock option scheme (ESOP) [Refer note no -24]
3. The Company has issued 315,311 equity shares (March 31, 2016: 8,29,393) during the period of five years immediately preceding the reporting date on exercise of options granted under ESOP, wherein a part of the consideration was received in form of employee service.
Nature of security
The redemption of principal amount of secured redeemable non-convertible debentures with all interest there on are secured by a mortgage on the specified immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
These secured redeemable non-convertible debentures are redeemable at par over a period of 12 months to 60 months from the date of allotment depending on the terms of the agreement.
Secured redeemable non-convertible debentures may be bought back subject to applicable statutory and /or regulatory requirements, upon the terms and conditions as may be decided by the company.
(ii) Privately Placed Redeemable Non-Convertible Debenture (Institutional)
Privately Placed Redeemable Non-Convertible Debenture (NCDs) of ''10,00,000/- each - Quoted
Nature of security
The redemption of principal amount of secured redeemable non-convertible debentures with all interest there on are secured by a mortgage on the specified immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
Secured redeemable non-convertible debenture may be bought back subject to applicable statutory and /or regulatory requirements, upon the terms and conditions as may be decided by the company.
(iii) Public Issue Of Secured Redeemable Non-Convertible Debentures (NCDs) of ''1000/- each - Quoted
a. Issued in 2012
Nature of security
The repayment of secured redeemable non convertible debentures of ''1,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favor of the Trustees appointed.
Nature of security
The repayment of secured redeemable non convertible debentures ofRs,1,000/- each at face value on maturity together with interest thereon are secured by mortgage of immovable property and by way of charge on the companyâs specifically identified movable assets such as book debts / loan receivables in favour of the Trustees appointed.
In accordance with the Reserve Bank of India circular no. RBI/2006-07/225 DNBS (PD) C.C No.87/03.02.2004/2006- 07 dated January 4, 2007, the Company has created a floating charge on the statutory liquid assets comprising of investment in approved government securities being statutory liquid assets to the extent ofRs,20,997.51 lacs (March 31, 2016:Rs,16,354.41 lacs) in favor of trustees representing the public deposit holders of the Company.
4.. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS
The Company has a funded defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of service.
Consequent to the adoption of Accounting Standard 15 âEmployee Benefitsâ (revised), the following disclosures are made as required by the standard:
Statement of Profit and Loss
Net Employee benefit expenses (recognized in the employee cost)
The Company has a leave encashment policy. The leave encashment liability is computed based on actuarial valuation and stands atRs,1184.07 lacs as on March 31, 2017 ('' 752.51 lacs as on March 31, 2016)
5.. EMPLOYEE STOCK OPTION PLAN
6. The Company provides share-based payment schemes to its Employees. For the period ended March 31, 2017 an Employee Stock Option Plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below:
Date of Shareholderâs approval : October 30, 2006
Date of grant : October 19, 2007
Date of Board Approval : October 19, 2007
Number of options granted : 13,55,000
Method of Settlement (Cash/Equity) : Equity Graded vesting period :
After 1 years of grant date : 10% of options granted
After 2 years of grant date : 20% of options granted
After 3 years of grant date : 30% of options granted
After 4 years of grant date : 40% of options granted
Exercisable period : 10 years from vesting date
Vesting Conditions : On achievement of pre-determined targets
The expected volatility was determined based on historical volatility data equal to the NSE volatility rate of Bank Nifty which is considered as a comparable peer group of the Company. To allow for the effects of early exercise it was assumed that the employees would exercise the options within six months from the date of vesting in view of the exercise price being significantly lower than the market price.
Effect of the employee share-based payment plans on the profit and loss account and on its financial position:
Since the company used the intrinsic value method the impact on the reported net profit and earnings per share by applying the fair value based method is as follows:
In March 2005, the ICAI issued a guidance note on âAccounting for Employees Share Based Paymentsâ applicable to Employee based share plan, the grant date in respect of which falls on or after April 1 2005. The said guidance note requires that the preformed disclosures of the impact of the fair value method of accounting of employee stock
7. A new ESOP scheme âSCUF Employees Stock Option Scheme 2013â was approved at an EGM on May 31, 2013. Accordingly 2,627,000 equity shares @ ''10 each have been reserved under this scheme with an exercise price of ''300 per option and with a maximum vesting period of five years from the date of grant.
8.. SEGMENT INFORMATION
The company has got a single reportable segment. Therefore, the segment wise reporting has not been given.
9. RELATED PARTY DISCLOSURE
I) Key Managerial Personnel
a. Mr. R Duruvasan, Managing Director & CEO
b. Mrs. Subhasri Sriram, Chief Financial Officer (up to January 30, 2017)
c. Mr. R Chandrasekar, Chief Financial Officer (From January 30, 2017)
d. Mr. C R Dash, Company Secretary
II) Subsidiaries
a. Shriram Housing Finance Limited (SHFL)
III) Enterprises having significant influence over the Company
a. Shriram Capital Limited- SCL
b. Shriram Ownership Trust-SOT
c. Dynasty Acquisition FPI Limited
d. Piramal Enterprises Limited
The Income tax assessment of the company has been completed by Assessing officer up to the Assessment Year 2014-15
Disputed Income Tax demand are on account of Disallowance of Interest expenses u/s 234D -Rs,116.45 lacs and Disallowance u/s 40 a (ia) -Rs,2,784.20 lacs
The above demands are determinable only on receipt of judgments / decisions pending with various forums / authorities. The company is of the opinion that above demands are not sustainable and expects to succeed in its appeals.
The disputed Kerala Value Added Tax demand on account of sale of seized vehicles for the assessment year 2007 08 isRs,4.65 lacs. The company has filed appeal before the Deputy Commissioner (Appeals), Ernakulam.
The disputed Kerala Value Added Tax demand on account of goods in transit u/s 47 (6) for the assessment year 2011-12 isRs,0.72 lacs after adjusting the Security deposit ofRs,0.72 lacs paid by the supplier. The company has filed appeal before the Assistant commissioner ( Appeals) Ernakulam, Kerala.
The disputed Tamil Nadu Value Added Tax demand on account of sale of seized vehicles/ Sale of Gold Jewellery / Sale of Fixed Asset for the assessment year 2007-08 to 2014-15 isRs,125.65 lacs. The company has paid the demand amount and filed appeal before STAT, Chennai / Dy. Commissioner ( A), Chennai.
The company has issued a guarantee forRs,2500 lacs against refinance obtained by Shriram Housing Finance Limited for NHB
II) Commitments
As at March 31, 2017,Rs,119.35 lacs is the estimated amount of contracts remaining to be executed on capital account.
10.. Details of non-performing financial assets purchased / sold - Nil
11.. Details of financing of parent company products - Nil
12.. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFCs - Nil
13.. Registration obtained from other financial sector regulators - Nil
14. Details of Penalties imposed by RBI and other regulators 14.21 lacs levied and paid during the year as Penal Interest to RBI for shortfall in SLR in an earlier year,Rs,57.10 lacs levied and paid during the year as compounding fee to RBI for issuance of convertible warrants to foreign investors without prior permission of RBI in earlier years andRs,20 lacs levied and paid after the balance sheet date as penal interest to RBI for delay in complying with requirements of Fair Practices Code.
15. Corporate Social Responsibility Expenses
Section 135 of the Companies Act, 2013, which mandates CSR for specified companies, applies to the company. Accordingly the company is required to spend at least 2% of the average net profits of the company made during the three immediately preceding financial years, which amounts toRs,1,623.50 lacs for the year 2016-17 .The company has spentRs,688.55 lacs during the year.
16. Overseas Assets (for those with Joint Ventures and Subsidiaries abroad) - Nil
17. Off-balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms) - Nil
18. Based on the intimation received by the company, none of the suppliers have confirmed to be registered under âMicro, Small and Medium Enterprises Development (âMSMEDâ) Act, 2006â. Therefore, the related information for this purpose stands to be Nil.
In the ordinary course of business, loan borrowers of the Company have directly deposited cash as part of their loan repayments in the collection bank accounts of the Company with various banks, aggregating toRs,147.44 lacs during the period November 9, 2016 to December 30, 2016 the denomination wise details of which are currently not available with the Company and hence not included in the above table.
Explanation : For the purposes of this clause, the term âSpecified Bank Notesâ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8th November, 2016.
19. Auction Details
The Company auctioned 7013 loan accounts (Previous Year : 21,946 accounts) during the financial year and the outstanding dues on these loan accounts wereRs,1936.69 lacs (Previous Year :Rs,5217.96 lacs) till the respective dates of auction. The Company realizedRs,1784.77 lacs (Previous Year :Rs,5020.86 lacs) on auctioning of gold jewellery taken as security on these loans. The Company confirms that none of its sister concerns participated in the above auctions.
20. Additional information in Form AOC-1 with respect to subsidiary as required under Section 129(3) of the Companies Act, 2013 is attached to the Financial Statement.
21. Previous year figures have been regrouped / rearranged, wherever considered necessary, to conform with current year presentation.
Mar 31, 2015
1. Corporate information
Shriram City Union Finance Limited (the Company) is a public Company
domiciled in India and is incorporated under the provisions of the
Companies Act, 1956.The Corporate Identification Number (CIN) is
L65191TN1986PLC012840. Its shares are listed on Bombay Stock Exchange
Ltd.(BSE) and National Stock Exchange of India Ltd(NSE). The Company''s
shares got delisted from Madras Stock Exchange (MSE) voluntarily with
effect from February 23,2015. The Company is a Deposit Accepting Non
Banking Finance Company (NBFC) registered with Reserve Bank of India
(RBI) with registration number 07-00458 . The Company operates in
India.
2. Basis of preparation
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP), including the accounting standards notified under
Section 133 of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules 2014 and the guidelines issued by RBI as
applicable to NBFCs. The financial statements have been prepared on
accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those used in the previous year, except
the changes in accounting policy mentioned below.
3. Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs.10 per share. Each holder of the equity shares is entitled to one vote
per share. The Company declares and pays dividends in Indian rupees.
The dividend proposed by the Board of Directors is subject to approval
of the shareholders in the ensuing Annual General Meeting.
For the period ended March 31, 2015, the amount of dividend per equity
share recognised as distributions to equity shareholders is ''15 (March
31,2014 : Rs.10 including interim dividend) including interim dividend.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
3.1 Shares reserved for issue under option:
For details of share reserved for issue under the employees stock
option scheme (ESOP) [Refer note 24]
3.2 The Company issued 11,90,030 equity shares (March 31,2014:
11,48,690) during the period of five years immediately preceding the
reporting date on exercise of options granted under ESOP wherein a part
of the consideration was received in form of employee service.
In terms of the composite Scheme of Arrangement ("Scheme") among
Shriram Retail Holdings Private Limited ("SRHPL''), Shriram
Enterprise Holdings Private Limited ("SEHPL'') and Shriram City
Union Finance Limited ("SCUF"), under section 391 to 394 read with
Section 100-104 of the Companies Act, 1956 was approved by the Hon''ble
High Court of Madras on June 24, 2013. The Scheme came into effect on
August 16, 2013 with filing of Form 21 with Registrar of Companies,
Chennai on the same date. Prior to the merger, SRHPL held 26,610,571
shares of the Company. On merger 2,73,91,613 equity shares of ''10 each
fully paid of the Company were allotted to the shareholders of
Consolidated SRHPL on August 19, 2013, which resulted in increase in
paid up share capital of the Company by 7,81,042 equity shares of ''10
each.
Nature of security
The redemption of principal amount of secured redeemable
non-convertible debentures with all interest there on are secured by a
legal mortgage on the specified immovable property and by way of charge
on the Company''s specifically identified movable assets such as book
debts / loan receivables in favour of the Trustees appointed.
These secured redeemable non-convertible debentures are redeemable at
par over a period of 12 months to 60 months from the date of allotment
depending on the terms of the agreement.
Secured redeemable non-convertible debentures may be bought back
subject to applicable statutory and /or regulatory requirements, upon
the terms and conditions as may be decided by the Company. The Company
may grant loan against the security of Secured Non-Convertible
Debentures upon the terms and conditions as may be decided by the
Company and subject to applicable statutory and /or regulatory
requirements.
Nature of security
The redemption of principal amount of secured redeemable
non-convertible debentures with all interest there on are secured by a
legal mortgage on the specified immovable property and by way of charge
on the Company''s specifically identified movable assets such as book
debts / loan receivables in favour of the Trustees appointed.
Secured redeemable non-convertible debenture may be bought favour back
subject to applicable statutory and /or regulatory requirements, upon
the terms and conditions as may be decided by the Company.
Nature of security
The repayment of secured redeemable non-convertible debentures of
Rs.1,000/- each at face value on maturity together with interest thereon
are secured by mortgage of immovable property and by way of charge on
the Company''s specifically identified movable assets such as book debts
/ loan receivables in favour of the Trustees appointed.
Secured redeemable non-convertible debenture may be bought back subject
to applicable statutory and /or regulatory requirements, upon the terms
and conditions as may be decided by the Company.
During the year non-convertible debentures worth of Rs.30,347.20 lacs was
bought back and Rs.13,792 lacs was redeemed.
Nature of security
The repayment of secured redeemable non-convertible debentures of
Rs.1,000/- each at face value on maturity together with interest thereon
are secured by mortgage of immovable property and by way of charge on
the Company''s specifically identified movable assets such as book debts
/ loan receivables in favour of the Trustees appointed.
Nature of security
The repayment of secured redeemable non-convertible debentures of
Rs.1,000/- each at face value on maturity together with interest thereon
are secured by mortgage of immovable property and by way of charge on
the Company''s specifically identified movable assets such as book debts
/ loan receivables in favour of the Trustees appointed.
Nature of security
The repayment of secured redeemable non-convertible debentures of
Rs.1,000/- each at face value on maturity together with interest thereon
are secured by mortgage of immovable property and by way of charge on
the Company''s specifically identified movable assets such as book debts
/ loan receivables in favour of the Trustees appointed.
# As regards the recovery of Service tax on lease and hire purchase
transactions, the Hon''ble Supreme Court vide its order dated October
26, 2010 has directed the competent authority under the Finance act,
1994 to decide the matter in accordance with the law laid down.
*Accrued interest is up to the date of maturity. Amounts shall be
credited to Investor Education & Protection Fund to the extend
unclaimed as and when due.
3.2 CASH CREDIT AND WORKING CAPITAL DEMAND LOANS Nature of Security
Cash credit and working capital demand loan from banks are secured by
way of hypothecation of specific movable assets relating to the loans.
4. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service is eligible
for a gratuity on separation at 15 days basic salary (last drawn
salary) for each completed year of service. Consequent to the adoption
of AS 15 ''Employee Benefits'' (revised), the following disclosures are
made as required by the standard:
4.2 A new ESOP scheme "SCUF Employees Stock Option Scheme 2013"
was approved at an EGM on May 31, 2013.
Accordingly 2,627,000 equity shares @ Rs.10 each have been reserved under
this scheme with an exercise price of Rs.300 per option and with a
maximum vesting period of five years from the date of grant.
5. SEGMENT INFORMATION
The Company has got a single reportable segment. Therefore, the segment
wise reporting has not been given.
6. RELATED PARTY DISCLOSURE
I) Key Managerial Personnel
a. Mr. R Duruvasan, Managing Director & CEO
b. Mrs. Subhasri Sriram, Chief Financial Officer
c. Mr. C R Dash, Company Secretary
II) Relatives of Key Managerial Personnel
a. Ms. A. Komaleeswari (Spouse of Mr. R Duruvasan)
b. Mr. Aiyneni Ramachandra Naaidu (Father of Mr. R Duruvasan)
c. Ms. Aiyneni Ammayamma (Mother of Mr. R Duruvasan)
d. Mr. Aiyneni Vamsi Krishna (son of Mr. R Duruvasan)
e. Mr. B. Perumal (Brother of Mr. R Duruvasan)
f. Mr. S.Usha Rani (Sister of Mr. R Duruvasan)
g. Mr. Sriram (Spouse of Mrs. Subhasri Sriram)
h. Mr. Sankaralingam (Father of Mrs. Subhasri Sriram)
i. Ms. Gomathy Lingam (Mother of Mrs. Subhasri Sriram)
j. Mr. Sailesh Sriram (Son of Mrs. Subhasri Sriram)
k. Ms. Shewta Sriram (Daughter of Mrs. Subhasri Sriram)
l. Ms. Sasmita Dash (Spouse of Mr. C R Dash)
m. Mr. Durga Charan Dash (Father of Mr. C R Dash)
n. Ms. Radhamani Dash (Mother of Mr. C R Dash)
o. Mr. Abhijit Dash (Son of Mr. C R Dash)
III) Subsidiary
Shriram Housing Finance Limited
IV) Associates
a. Shriram Capital Ltd
b. TPG India Investments I INC
(I) CONTINGENT LIABILITIES Rs in lacs
As at March 31,
Income Tax 2015 2014
a. Income Tax 4,831.24 7,570.87
b. Kerala Value Added Tax - 4.654.65
The Income tax assessment of the Company has been completed up to the
Assessment Year 2012-13.
The disputed demand outstanding for the assessment Year 2012-13 is Rs.
2,337.47 lacs. For assessment year 2011-12, disputed demand outstanding
is Rs. 1,530.54 lacs. For assessment year 2010-11, disputed demand
outstanding is Rs. 963.23 lacs. The Company has filed appeal for all
these disputed cases. The appeal is pending before the Commissioner of
Income Tax Appeals, Chennai & ITAT, Chennai.
The disputed Kerala Value Added Tax demand on account of sale of seized
vehicles for the assessment year 2007-08 is Rs.4.65 lacs. The Company has
filed appeal before the Deputy Commissioner ( Appeals), Ernakulam.
(II) COMMITMENTS
As at March 31, 2015, Rs. 5.88 lacs (March 31, 2014Rs.36.89 lacs) (net of
advances) is the estimated amount of contracts remaining to be executed
on capital account.
7. DERIVATIVE INSTRUMENTS:
The amount of derivative transactions outstanding as on March 31,2015
is NIL (March 31,2014 Nil). The Company entered into a interest rate
swap to convert the floating rate into a fixed rate liability @ 10.49%
till maturity date of March 30, 2017 (underlying long term debt of
Rs.27,500 lacs).
7.1. Disclosures on Risk Exposure in Derivatives a) Qualitative
Disclosures
Currently there are no transactions involving derivatives trading and
that the existing transaction is in nature of interest rate swap (where
in the Company have converted a floating rate liability to a fixed
rate).
8. The Company had no discontinuing operations during the year ended
March 31, 2015 and during the year ended March 31,2014.
9. Details of non-performing financial assets purchased / sold - Nil
10. Details of financing of parent company products - Nil
11. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL)
exceeded by the NBFCs - Nil
12. Registration obtained from other financial sector regulators - Nil
13. Disclosure of Penalties imposed by RBI and other regulators - Nil
14. Corporate Social Responsibility
Section 135 of the Companies Act, 2013, which mandates CSR for
specified companies, applies to the Company. Accordingly the Company
is required to spend at least 2% of the average net profits of the
Company made during the three immediately preceding financial years.
which amounts to Rs. 1,313.39 lacs for the year 2014-15 .The Company has
spent Rs.9.33 lacs during the year.
15. Overseas Assets (for those with Joint Ventures and Subsidiaries
abroad) - Nil
16. Off-balance Sheet SPVs sponsored (which are required to be
consolidated as per accounting norms) - Nil
17. Additional information in Form AOC-1 with respect to subsidiary as
required under Section 129(3) of the Companies Act, 2013 is attached to
the Financial Statement.
18. Previous year figures have been regrouped / rearranged, wherever
considered necessary, to conform with current year presentation.
Mar 31, 2014
1. Corporate information
Shriram City Union Finance Limited (the company) is a public company
domiciled in India and is incorporated under the provisions of the
Companies Act, 1956. Its shares are listed on Bombay Stock Exchange
Ltd. (BSE), National Stock Exchange of India Ltd.(NSE) and Madras Stock
Exchange Ltd.(MSE). The company is a Deposit Accepting Non Banking
Finance Company (NBFC) registered with Reserve Bank of India (RBI).
The company operates in India.
2. Basis of preparation
The financial statements of the company have been prepared in accordance
with generally accepted accounting principles in India (Indian GAAP).
The company has prepared these financial statements to comply in all
material respects with the accounting standards notified under the
Companies (Accounting Standards) Rules, 2006 as amended, the relevant
provisions of the Companies Act, 1956 and the guidelines issued by
RBI as applicable to NBFCs. The financial statements have been prepared
on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those used in the previous year, except
the changes in accounting policy mentioned be- low.
3. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS
The Company has an unfunded defend benefit gratuity plan. Every employee
who has completed five years or more of service is eligible for a
gratuity on separation at 15 days basic salary (last drawn salary) for
each completed year of service.
Consequent to the adoption of revised AS 15 ''Employee Benefits'' issued
under Companies Accounting Standard Rules, 2006, as amended, the
following disclosures are made as required by the standard:
Statement of Profit and Loss
Net Employee benefit expenses recognised in the employee cost
4. RELATED PARTY DISCLOSURE
(i) Subsidiaries
Shriram Housing Finance Limited (from 9th November 2010) (SHFL)
(ii) Other Related Parties
Enterprises having significant influence over the Company
a. Shriram Enterprises Holding Private Limited (SEHPL)*
b. Shriram Retail Holdings Private Limited (SRHPL)*
c. Shriram Capital Limited (SCL)
d. TPG India Investments I Inc. (TPGI)
e. Shriram Ownership Trust (SOT)
(iii) Key Managerial Personnel
a. R Duruvasan, Managing Director
b. G.S.Sundararajan, Managing Director
(iv) Relatives of Key Managerial Personnel
a. A. Komaleeswari (spouse of R.Duruvasan)
b. Nithya Sundararajan (spouse of G.S.Sundararajan)
5. CONTINGENT LIBILITIES AND COMMITMENTS TO THE EXTENT NOT PROVIDED
FOR
(I) CONTINGENT LIABILITIES Rs. in lacs
As at March 31,
Income Tax 2014 2013
a. Income Tax 7,570.87 10,743.64
b. Kerala Value Added Tax 4.65 -
c. Guarantees issued by the Company 100.00 250.00
d. Guarantees issued by others - -
The Income tax assessment of the company has been completed up to the
Assessment Year 2011-12.
The disputed demand outstanding for the assessment Year 2011-12 is
Rs.2605.75 lacs. For assessment year 2010-11, disputed demand
outstanding is Rs.672.55 lacs. For assessment year 2008-09, disputed
amount on account of penalty proceedings is Rs.1106.48 lacs. The
assessment has been re-opened for assessment year 2007-08 and the
disputed amount outstanding is Rs.3186.09 lacs. The company has fled
appeal for all these disputed cases and the same is pending before the
Commissioner of Income Tax Appeals, Chennai.
The Company has provided NSE with bank guarantee of Rs.100 lacs from ING
Vysya bank, Mount Road branch, Chennai and a deposit of Rs.100 lacs as
security deposit both together 1% of total public issue of secured
non-convertible debentures of Rs.20,000 lacs (refer note 28).
The disputed Kerala Value Added Tax demand on account of sale of seized
vehicles for the assessment year 2007-08 is Rs.4.65 lacs. The company has
fled appeal before the Deputy Commissioner (Appeals), Ernakulam.
(II) COMMITMENTS
(i) As at March 31, 2014, Rs. 36.89 lacs (March 31, 2013 Rs. 118.88 lacs)
(net of advances) is the estimated amount of contracts remaining to be
executed on capital account.
6. DERIVATIVE INSTRUMENTS:
The amount of derivative transactions outstanding as on March 31, 2014
is NIL (March 31, 2013 Rs. 486.75 lacs). The company entered into a
interest rate swap to convert the foating rate into a fixed rate
liability @ 10.49% till maturity date of March 30, 2017 (underlying
long term debt of Rs. 25,000 lacs )
7. The company had no discontinuing operations during the year ended
March 31, 2014 and during the year ended March 31, 2013.
8. In addition to payments made to auditors shown in Note-20, the
Company has made a payment of Rs. 8.99 lacs to auditors for services
rendered by them in connection with the public issue of non-convertible
debentures amortised as "public issue expenses for non-convertible
debentures" in accordance with the accounting policy stated under Note
2.1.(v)
9. Based on the intimation received by the company, none of the
suppliers have confirmed to be registered under "the Micro, Small and
Medium Enterprises Development (''MSMED'') Act, 2006". Therefore, the
related information for this purpose stands to be Nil.
10. The ministry of Corporate Affairs, Government of India, vide
General Circular No. 2 and 3 dated 8th February 2011 and 21st February
2011 respectively has granted a general exemption from compliance with
section 212 of the Companies Act, 1956, subject to fulfilment of
conditions stipulated in the circular and hence is entitled to the
exemption. Necessary information relating to the subsidiaries has been
included in the Consolidated Financial Statements.
11. Previous year figures have been regrouped / rearranged, wherever
considered necessary, to conform with current year presentation.
Mar 31, 2013
1. Corporate information
Shriram City Union Finance Limited (the company) is a public company
domiciled in India and is incorporated under the provisions of the
Companies Act, 1956. Its shares are listed on Bombay Stock Exchange
Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Madras
Stock Exchange Ltd. (MSE). The company is a Deposit Accepting Non
Banking Finance Company (NBFC) registered with Reserve Bank of India
(RBI). The company operates in India.
2. Basis of preparation
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006 as amended, the
relevant provisions of the Companies Act, 1956 and the guidelines
issued by RBI as applicable to NBFCs. The financial statements have
been prepared on an accrual basis and under the historical cost
convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those used in the previous year, except
the changes in accounting policy mentioned in the paragraphs below.
3.1 Terms / rights attached to equity shares
The company has only one class of equity shares having a par value of Rs.
10 per share. Each holder of the equity shares is entitled to one vote
per share. The company declares and pays dividends in Indian rupees.
The dividend proposed by the Board of Directors is subject to approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended March 31, 2013, the amount of dividend per equity
share recognised as distributions to equity shareholders is Rs.8.50
(March 31, 2012: Rs.6.50 including interim dividend) including interim
dividend.
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
3.2 Shares reserved for issue under option:
(i) For details of share reserved for issue under the employees stock
option scheme (ESOP) [Refer note 23]
(ii) Preferential issue of share warrants:
During 2011-12, 59,00,000 warrants were issued /allotted to Shriram
Capital Limited at a subscription price of not less than Rs.143/- for
each warrant conferring an option to the holder to subscribe to one
equity share per warrant at the exercise price of Rs.570/- per warrant
being a price higher than the price determined as per Regulation 76(1)
Chapter VII of the Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations, 2009. The warrants
are convertible within a period not exceeding 18 months from the date
of allotment.
During the year, 28,50,000 warrants have been converted to equity
shares, out of the total 59,00,000 warrants issued / allotted.
3.3 The company issued 13,55,000 equity shares (March 31, 2012:
13,55,000) during the period of five years immediately preceding the
reporting date on exercise of options granted under ESOP, wherein a
part of the consideration was received in form of employee service.
3.4 Preferential allotment of equity shares :
During 2011-12, 23,00,000 equity shares of the company were
issued/allotted to Shriram Capital Limited for cash at a subscription
price of Rs.570.00 per equity share (includes a premium of Rs.560.00 per
equity share) being the price higher than the price determined under
chapter VII of the Securities Exchange Board of India (Issue of Capital
and Disclosure Requirements) Regulations, 2009.(Refer note 3.1)
There was no preferential issue during the financial year 2012-13.
4. Gratuity and other post-employment benefit plans
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service is eligible
for a gratuity on separation at 15 days basic salary (last drawn
salary) for each completed year of service.
Consequent to the adoption of revised AS 15 ''Employee Benefits''
issued under Companies Accounting Standard Rules, 2006, as amended, the
following disclosures are made as required by the standard:
5. Segment Information
The company has got a single reportable segment. Therefore, the segment
wise reporting has not been given.
6. Related Party Disclosure
(i) Subsidiaries
Shriram Housing Finance Limited (from 9th November 2010) (SHFL)
(ii) Other Related Parties
Enterprises having significant influence over the Company
a. Shriram Enterprises Holding Private Limited (SEHPL)
b. Shriram Retail Holdings Private Limited (SRHPL)
c. Shriram Capital Limited (SCL)
d. TPG India Investments I Inc. (TPGI)
e. Shriram Ownership Trust (SOT)
(iii) Key Managerial Personnel
a. Mr. R Duruvasan, Managing Director
b. Mr. G.S.Sundararajan, Managing Director
c. Mr. R. Kannan
(iv) Relatives of Key Managerial Personnel
a. Mrs. D. Komaleeswari (spouse of Mr. R.Duruvasan)
b. Mrs. Nithya Sundararajan (spouse of Mr. G.S.Sundararajan)
c. Mrs. Vasanthi Kannan (spouse of Mr. R. Kannan)
7. Contingent liabilities and commitments to the extent not provided
for
(i) Contingent liabilities
Rs. in lacs
As at March 31,
Income Tax 2013 2012
a. Income tax 10,743.64 1,447.80
b. Guarantees issued by the Company 250.00 450.00
The Income tax assessment of the company has been completed upto the
Assessment Year 2010-11.
The disputed demand outstanding for the assessment Year 2010-11 is
Rs.5,718.28 lacs. For assessment year 2008-09, disputed amount on account
of penalty proceedings is Rs.1106.48 lacs. The assessment has been
re-opened for assessment year 2007-08 and the disputed amount
outstanding is Rs.3,918.88 lacs. The company has filed appeal for all
these disputed cases and the same is pending before the Commissioner of
Income Tax Appeals, Chennai.
The company has provided NSE with a bank guarantee for Rs. 250.00 lacs
from Indus Ind Bank, Nugambakkam, Chennai branch and a deposit of Rs.
250.00 lacs as security deposit both together 1% of total public issue
of secured non- convertible debentures of Rs.50,000.00 lacs.[Refer note:
27]
(ii) Commitments
(i) As at March 31, 2013 Rs. 118.88 lacs (March 31, 2012: Rs.686.76 lacs
(net of advances) is the estimated amount of contracts remaining to be
executed on capital account.
(ii) The company has got further commitments to invest in the
subsidiary company i.e. Shriram Housing Finance Limited as at March 31,
2013 Rs. 9,544.00 (March 31, 2012 Rs. 5,529.55 )
8. Utilization of money raised through public issue of debenture and
preferential issue of equity shares and warrants
(i) through public issue of debentures [Refer note 5.1 (A)(iii)]
During the year ended March 31, 2013, the company has raised Rs.43,360.00
lacs through public issue of secured redeemable non convertible
debenture of face value of Rs.1000/- each. The proceeds of issue are
utilized for the following purpose:
9. Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as
on March 31 2013, is Rs. 486.75 lacs, for interest rate swaps is Rs.12,500
lacs (March 31 2012 Rs.12,500 lacs).
10. The company had no discontinuing operations during the year ended
March 31, 2013 and during the year ended March 31, 2012.
11. In addition to payments made to auditors shown in Note-19, the
Company has made a payment of Rs. 8.99 lacs to auditors for services
rendered by them in connection with the public issue of non-convertible
debentures amortised as "public issue expenses for non-convertible
debentures" in accordance with the accounting policy stated under
Note 2.1.(v)
12. Based on the intimation received by the company, none of the
suppliers have confirmed to be registered under "the Micro, Small and
Medium Enterprises Development (''MSMED'') Act, 2006". Therefore, the
related information for this purpose stands to be Nil.
13. The ministry of Corporate Affairs, Government of India, vide
General Circular No. 2 and 3 dated 8th February 2011 and 21st February
2011 respectively has granted a general exemption from compliance with
section 212 of the Companies Act, 1956, subject to fulfilment of
conditions stipulated in the circular and hence is entitled to the
exemption. Necessary information relating to the subsidiaries has been
included in the Consolidated Financial Statements.
14. Previous year figures have been regrouped/rearranged, wherever
considered necessary, to conform with current year presentation.
Mar 31, 2012
1. Corporate information
Shriram City Union Finance Limited (the company) is a public company
domiciled in India and is incorporated under the provisions of the
Companies Act, 1956. Its shares are listed on Bombay Stock Exchange
Ltd. (BSE),National Stock Exchange of India Ltd.(NSE) and Madras Stock
Exchange Ltd.(MSE). The company is a Deposit Accepting Non Banking
Finance Company (NBFC) registered with Reserve Bank of India (RBI). The
company operates in India.
2. Basis of preparation
The financial statements of the company have been prepared in
accordance with Generally Accepted Accounting Principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006 as amended, the
relevant provisions of the Companies Act, 1956 and the guidelines issued
by RBI as applicable to NBFCs. The financial statements have been
prepared on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those used in the previous year, except
the changes in accounting policy mentioned below.
3. Terms / rights attached to equity shares
The company has only one class of equity shares having a par value of Rs
10 per share. Each holder of the equity shares is entitled to one vote
per share. The company declares and pays dividends in Indian rupees.
The dividend proposed by the Board of Directors is subject to approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended March 31,2012, the amount of dividend per equity
share recognized as distributions to equity shareholders is Rs 6.50
(March 31,2011:Rs 6.00 including interim dividend) including interim
dividend.
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
As per records of the company, including the register of shareholders
/members and other declarations received from shareholders/members
regarding beneficial interest, the above shareholding represents legal
ownerships of shares.
4. Shares reserved for issue under option:
(i) For detail of share reserved for issue under the employees stock
option scheme (ESOP) [Refer note 23]
(ii) Preferential issue of share warrants:
During the year 59,00,000 warrants were issued /allotted to Shriram
Capital Limited at a subscription price of not less than Rs 143/- for
each warrant conferring an option to the holder to subscribe to one
equity share per warrant at the exercise price of Rs 570/- per warrant
being a price higher than the price determined as per Regulation 76(1)
Chapter VII of the Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations, 2009. The warrants
are convertible within a period not exceeding 18 months from the date
of allotment.
5. The company issued 13,55,000 equity shares (March 31,
2011:13,55,000) during the period of five years immediately preceding
the reporting date on exercise of options granted under ESOP, wherein a
part of the consideration was received in form of employee service.
6. Preferential allotment of equity shares :
During the year 23,00,000 equity shares of the company were
issued/allotted to Shriram Capital Limited for cash at a subscription
price of Rs 570.00 per equity share (includes a premium of Rs 560.00 per
equity share) being the price higher than the price determined under
chapter VII of the Securities Exchange Board of India (Issue of Capital
and Disclosure Requirements) Regulations, 2009.
Nature of security
The redemption of principal amount of secured redeemable
non-convertible debentures with all interest there on are secured by a
legal mortgage on the specified immovable property and by way of charge
on the company's specifically identified movable assets such as book
debts/loan receivables in favors of the Trustees appointed.
These secured redeemable non-convertible debentures are redeemable at
par over a period of 12 months to 160 months from the date of allotment
depending on the terms of the agreement.
Secured redeemable non-convertible debentures may be bought back by the
company subject to applicable statutory and /or regulatory
requirements, upon the terms and conditions as may be decided by the
company. The company may grant loan against the security of IMCDs upon
the terms and conditions as may be decided by the company and subject to
applicable statutory and/or regulatory requirements.
Nature of security
The redemption of principal amount of secured redeemable
non-convertible debentures with all interest there on are secured by a
legal mortgage on the specified immovable property and by way of charge
on the company's specifically identified movable assets such as book
debts/loan receivables in favor of the Trustees appointed.
Secured redeemable non-convertible debentures may be bought back by the
company subject to applicable statutory and /or regulatory
requirements, upon the terms and conditions as may be decided by the
company.
Nature of security
The repayment of secured redeemable non convertible debentures ofRs
1,000/- each at face value on maturity together with interest thereon
are secured by mortgage of specified immovable property and by way of
charge on the company's specifically identified movable assets such as
book debts/ loan receivables in favor of the Trustees appointed.
Secured redeemable non-convertible debentures may be bought back by the
company subject to applicable statutory and /or regulatory
requirements, upon the terms and conditions as may be decided by the
company.
# As regards the recovery of Service tax on lease and hire purchase
transactions, the Hon'ble Supreme Court vide its order dated October
26,2010 has directed the competent authority under the Finance act, 1994
to decide the matter in accordance with the law laid down.
*Accrued interest is up to the date of maturity. Amounts shall be
credited to Investor Education & Protection Fund as and when due to the
extent unclaimed.
7. Nature of security
Cash credit and working capital demand loans from banks are secured by
way of hypothecation of specific movable assets relating to the loans.
In accordance with the Reserve Bank of India circular no.
RBI/2006-07/225 DNBS (PD) C.C No.87/03.02.2004/2006-07 dated January 4,
2007, the company has created a floating charge on the statutory liquid
assets comprising of investment in government securities being
statutory liquid assets to the extent of Rs 101.45 Lacs (March 31,2011:
Rs 101.45 lacs) in favor of trustees representing the public deposit
holders of the company.
8.Gratuity and other post-employment benefit plans:
The company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service is eligible
for a gratuity on separation at 15 days basic salary (last drawn salary)
for each completed year of service Consequent to the adoption of
revised AS 15 'Employee Benefits' issued under Companies Accounting
Standard Rules, 2006, as amended, the following disclosures are made as
required by the standard:
The expected volatility was determined based on historical volatility
data equal to the NSE volatility rate of Bank Nifty which is considered
as a comparable peer group of the Company. To allow for the effects of
early exercise it was assumed that the employees would exercise the
options within six months from the date of vesting in view of the
exercise price being significantly lower than the market price.
9. Segment information
The company has got a single reportable segment.
10. Related party disclosure
(i) Subsidiaries
Shriram Housing Finance Limited (from 9th November 2010) (SHFL)
ii) Other related parties
Enterprises having significant influence over the company
a. Shriram Enterprises Holding Private Limited (SEHPL)
b. Shriram Retail Holdings Private Limited (SRHPL)
c. Shriram Capital Limited (SCL)
d. TPG India Investments Inc. (TPGI)
e. Shriram Ownership Trust (SOT)
11. Contingent liabilities and commitments to the extent not provided
for
(i) Contingent liabilities Rs in lacs
Income Tax For the year ended Mareh31,
2012 2011
a. Income tax 1,447.80 -
b. Guarantees issued
by the company 450.00 6.81
c. Guarantees issued
by others - 1,942.77
The Income tax assessments of the company have been completed up to the
Assessment Year 2009-10. The disputed demand outstanding up to the
assessment Year 2009-10 is Rs 1,447.80 lacs.
The company has provided NSE with a bank guarantee for Rs 450.00 lacs
from Indusind bank, Nugambakkam, Chennai branch and a deposit of Rs
300.00 lacs as security deposit both together 1% of total public issue
of secured non-convertible debentures of Rs 75,000.00 lacs.[Refer note:
27]
Standard Chartered Bank had provided guarantee for Rs 1,942.77 lacs in
favor of Bank of Maharashtra for Securitization. The guarantee was
closed on May 22,2011.
(ii) Commitments
(i) As at March 31,2012 Rs 686.76 lacs (March 31,2011: Rs 61.78 lacs (net
of advances) is the estimated amount of contracts remaining to be
executed on capital account.
(ii) The company has got further commitments to invest in the
subsidiary company i.e. Shriram Housing Finance Limited as at March 31,
2012 Rs 5529.55 (March 31,2011 Rs Nil)
12. Utilization of money raised through public issue of debentures and
preferential issue of equity shares and warrants
(i) through public issue of debentures [Refer note 5.1 (A)(iii)]
During the year ended March 31, 2012, the company has raised Rs 75,000
lacs through public issue of secured redeemable non convertible
debentures of face value of Rs 1000/- each (March 31 2011 :Nil). The
proceeds of issue are utilized for the following purposes:
13. Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as
on March 31, 2012 for interest rate swaps Rs 12,500.00 lacs (March 31
2011 Rs 12,500.00 lacs).
14. The company had no discontinuing operations during the year ended
March 31, 2012 and during the year ended March 31,2011.
15. The company operates in single reportable segment. Therefore, the
segment wise reporting has not been given.
16. in addition to auditors remuneration shown in other expenses, the
company has also incurred auditors remuneration amounting to Rs 10.00
lacs in connection with other services provided by auditors for public
issue of non-convertible debentures and the same has been amortized as
per note 2.1(v) stated under "other assets" as public issue expenditure
to the extent not written off.
17. Based on the intimation received by the company, none of the
suppliers have confirmed to be registered under "the Micro, Small and
Medium Enterprises Development ('MSMED') Act, 2006". Therefore, the
related information for this purpose stands to be Nil.
18. The ministry of Corporate Affairs, Government of India, vide
General Circular No. 2 and 3 dated 8th February 2011 and 21st February
2011 respectively has granted a general exemption from compliance with
section 212 of the Companies Act, 1956, subject to fulfillment of
conditions stipulated in the circular and hence the company is entitled
to the exemption. Necessary information relating to the subsidiaries
has been included in the Consolidated financial statements.
19. Previous Year Comparatives
Till the year ended March 31,2011, the company was using pre-revised
Schedule VI to the Companies Act, 1956, for preparation and
presentation of its financial statements. During the year ended March
31,2012 the revised Schedule VI notified under the Companies Act 1956,
has become applicable to the company. The company has reclassified
previous year figures to conform to this year1 classification. It
significantly impacts presentation and disclosures made in the
financial statements, particularly presentation of balance sheet. The
following is a summary of the effects that revised Schedule VI had on
presentation of balance sheet of the company as at March 31,2011:
Mar 31, 2011
Back Ground
Shriram City Union Finance Limited (SCUFL) was incorporated on 27th
March 1986, as a Private Limited Company and became a Public Limited
Company on 29th October 1988. The Company is a Non-Banking Finance
Company registered with Reserve Bankof India.
1. Particulars of Secured Loans
a) Privately placed Redeemable Non-convertible Debentures ofRs.1,000/-
each (Retail) Secured by equitable mortgage of title deeds of immovable
property. Further secured by charge on plant and machinery, furniture
and other fixed assets of the Company, charge on Company's
hypothecation loans, other loans, advances and investments of the
Company subject to prior charges created or to be created in favor of
the Company's bankers, financial institutions and others.
These Debentures are redeemable at par over a period of 12 months to
160 months from the date of allotment depending on the terms of the
agreement. The earliest date of redemption is April 1, 2011 (March 31,
2010; April 1, 2010). The last date of redemption is October 25, 2017
(March 31, 2010; October 25, 2017).
Debentures may be bought back subject to applicable statutory and /or
regulatory requirements, upon the terms and conditions as may be
decided by the Company. The Company may grant loan against the security
of Non Convertible Debentures upon the terms and conditions as may be
decided by the Company and subject to applicable statutory and/or
regulatory requirements.
2. Subordinated Debt
The Company has as on 31.03.2011 subordinated debt bonds amounting to
Rs. 53272.33 Lacs (March 31,2010: Rs. 53002.95 Lacs) with coupon rate
of 7.00% to 13.00% Per annum which are redeemable over a period of 60
months to 216 months.
3. Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service gets a
gratuity on separation at 15 days basic salary (last drawn salary) for
each completed year of service.
4. Related Party Disclosures
Related Parities have been identified by the Management and relied upon
by the auditors.
Subsidiary
Shriram Housing Finance Limited (from 9th November 2010)
Shriram Non-Conventional Energy Limited (till 26th June 2009)
Enterprises having significant influence over the Company
Shriram Enterprise Holdings Private Limited
Shriram Retail Holdings Private Limited
Shriram Capital Limited
Shriram Ownership Trust TPG India Investments I Inc.
Key Managerial Personnel
R Kannan Managing Director
5. In accordance with the Reserve Bank of India circular no.
RBI/2006-07/225 DNBS (PD) C.C No.87/03.02.2004/2006-07 dated January
4,2007, the Company has created a floating charge on the statutory
liquid assets comprising of investment in Government Securities to the
extent of Rs. 101.45 Lacs ( March 31,2010: Rs:101.45Lacs) in favour of
trustees representing the publicdeposit holders ofthe Company.
5. Contingent Liabilities not provided for
(Rs. in lacs)
As at As at
March 31, 2011 March 31, 2010
Guarantees issued by the Company 6.81 6.81
Guarantees issued by others 1942.77 1942.77
6. Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax
Disputed Wealth Tax/Service Tax demands contested in appeal as on March
31st, 2011. Wealth tax- Rs. 1.76 lacs (March 31st 2010 : Rs.1.76 lacs)
Service Tax - Rs.1553.08 Lacs (March 31st 2010 : Rs.1553.08 lacs)
However provision is made in the books for any liability that may
arise.
The expected volatility was determined based on historical volatility
data equal to the NSE volatility rate of Bank Nifty which is considered
as a comparable peer group of the Company. To allow for the effects of
early exercise it was assumed that the employees would exercise the
options within six months from the date of vesting in view of the
exercise price being significantly lowerthan the market price.
7. Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as
on March 31 2011 for interest rate swaps Rs. 12500 lacs (March 31
2010-12500 lacs).
8. Supplementary Statutory Information
8.1 Managing Director's Remuneration
The computation of profits under section 349 of the Act has not been
given as no remuneration / commission is payable to the Managing
Director.
9. Additional information pursuant to the provisions of paragraphs 3
4C and 4D of Part II of schedule VI to the Act
The Company does not have licensed capacity as it is a Non Banking
Finance Company.
10. Previous Year Comparatives
The figures for the previous year have been regrouped and reclassified,
wherever necessary to conform to current year's classification.
Mar 31, 2010
Back Ground
Shriram City Union Finance Limited (SCUFL) was incorporated on 27th
March 1986, as a Private Limited Company and became a Public Limited
Company on 29th October 1988. The Company is a Non-Banking Finance
Company registered with Reserve Bank of India.
a) All Debentures under (a) and (b) above are secured by exclusive
mortgage of office premise and further secured by charge on Plant and
Machinery, Furniture and other fixed assets of the Company, charge on
Companys book debts, loans, advances and other investments of the
Company subject to prior charges created or to be created in favour of
the Companys bankers, financial institutions and others.
1. Gratuity and other post-employment benefit plans:
The Company has an unfunded defined benefit gratuity plan. Every
employee who has completed five years or more of service gets a
gratuity on separation at 15 days salary (last drawn salary) for each
completed year of service.
Consequent to the adoption of revised AS15Employee Benefits issued by
the lCAl. the following disclosures have been made as required by the
standard:
2. Contingent Liabilities not provided for (RS. in lacs)
As at As at
March 31, 2010 March 31, 2009
Guarantees issued by the Company 6.81 6.81
Guarantees issued by others 1942.77 3117.77
Income Tax/Wealth Tax/Service Tax/Fringe Benefit Tax
Disputed Income tax/Wealth Tax/Service Tax/Fringe Benefit Tax demands
contested in appeal as on March 31st, 2010 amount to Rs.1553.08 lacs
(March 31st 2009: Rs.1554.83 lacs.) However provision is made in the
books for any liability that may arise.
3. The Company during the year converted 32,50,000 warrants issued on
preferential basis into equity shares of Rs. 10/- each at a premium of
Rs.390/-. The company forfeited 35,00,000 warrants for non exercise of
option and the amount of Rs.1400 lacs was transferred to Capital
Reserve.
The expected volatility was determined based on historical volatility
data equal to the NSE volatility rate of Bank Nifty which is considered
as a comparable peer group of the Company. To allow for the effects of
early exercise, it was assumed that the employees will exercise the
options within six months from the date of vesting in view of the
exercise price being significantly lowerthan the market price.
Since the enterprise used the intrinsic value method the impact on the
reported net profit and earnings per share by applying the fair value
based method is as follows:
In March 2005, ICAI has issued a guidance note on "Accounting for
Employees Share Based Payments" applicable to employee based share plan
the grant date in respect of which falls on or after April 1, 2005. The
said guidance note requires that the proforma disclosures of the impact
of the fair value method of accounting of employee stock compensation
accounting in the financial statements. Applying the fair value based
method defined in the said guidance note, the impact on the reported
net profit and earnings per share would be as follows:
4. Derivative Instruments:
The Notional principal amount of derivative transactions outstanding as
on March 31,2010 for interest rate swaps Rs. 12500 lacs (March 31,2009
12500 lacs).
5. Supplementary Statutory Information
5.1 Managing Directors Remuneration
The computation of profits under section 349 of the Act has not been
given as no remuneration / commission is payable to the Managing
Director.
Notes:
1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial
Companies Acceptance of Public Deposits (Reserve Bank) Directions,1998.
2. Provisioning norms shall be applicable as prescribed in the
Non-Banking Financial (Deposit Accepting or Holding) Companies
Prudential Norms (Reserve Bank) Directions,2007.
3. All Accounting Standards and Guidance Notes issued by ICAI are
applicable including for valuation of investments and other assets as
also assets acquired in satisfaction of debt. However, marketvalue in
respect of quoted investments and break-up/fair value/NAV in respect of
unquoted investments should be disclosed irrespective of whether they
are classified as long term or current in column(5) above.
6. Previous Year Comparatives
The figures for the previous year have been regrouped and reclassified,
wherever necessary to conform to current years classification.
Mar 31, 2000
(1) Secured Loans
(i) Redeemable Non Convertible Debentures
Redeemable at par over a period of 12 months to 100 months from the
date of allotment depending on the terms of the issue. Secured by
mortgage of building and charge on the plant and machinery and charge
on Companys book debts, leased assets, lease rentals and future
receivables subject to prior charges created or to be created in favour
of the Companys bankers.
(ii) Cash Credit from Banks
Secured by hypothecation of all movable properties covered by specific
hire purchase agreements and all present and future assets of the
Company covered by the specific hire purchase agreements.
(iii) Term Loan from Indian Renewable Energy Development Agency Limited
Secured by way of mortgage/hypothecation of all immovable / movable
assets, both present and future of the project, subsequent charge over
all other immovable/movable assets and personal guarantee of the
Managing Director.
(iv) Term Loan from Karnataka State Finance Corporation Secured by the
specific hire purchase agreements financed under the scheme, personal
guarantee of Directors and Corporate Guarantee of other bodies
corporate.
(v) ICICI Limited under Deferred Payment Guarantee Scheme Secured by
Guarantee given by a bank against hypothecation of specific equipments.
(2) In the opinion of the Board of Directors, Sundry Debtors, Current
Assets and Loans and Advances have a value on realisation, in the
ordinary course of business, at least equal to the amount at which they
are stated.
(3) Expenses in respect of common branches and infrastructure are
shared by the Company with other Companies and are booked under
respective account heads.
(4) The Company does not have any dues payable to small scale
industries.
(5) Included under Loans and Advances is Project Development Finance
amounting to Rs. 1666.07 Lakhs (Previous Year Rs. 1385.08 Lakhs),
secured, as certified by the Management by mortgage of
immovable/movable assets and current assets of assisted units as well
as guarantor companies. The Company has a long term financial
assistance agreement taking into account the gestation period of the
assisted projects. Income on these finances have been recognised as per
the options specified in the said agreements.
(7) The Company has a contingent liability in respect of guarantees
given on behalf of others amounting to Rs.461.14 Lakhs (Previous year
Rs.496.76 Lakhs)
(8) Provision for taxation for the year represents income tax due under
Minimum Alternate Tax. The said sum is available for set off in future
years in accordance with the provision of the Income Tax, 1961.
(9) Stock on hire under hire purchase agreements is net of assets
securitised for Rs. 191.97 Lakhs (Previous Year-Nil) in respect of used
vehicles. The Company is under obligation to repurchase the relevant
assets in case of default, if any.
(10) Figures for current financial year comprises nine months period
from 1st July, 1999 to 31st March, 2000 and as such are not comparable
with the figures for the previous year.
(11) Previous years figures have been regrouped wherever necessary.
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