Notes to Accounts of Cholamandalam Investment & Finance Company Ltd.
Mar 31, 2023
a) Statutory reserve represents the reserve created as per Section 45IC of the RBI Act, 1934, pursuant to which a Non-Banking Financial Company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit annually as disclosed in the Statement of Profit and Loss account, before any dividend is declared.
b) Capital reserve represents the reserve created on account of amalgamation of Chola Factoring Limited in the year 2013-14.
c) Capital redemption reserve represents the amount equal to the nominal value of shares that were redeemed during the prior years. The reserve can be utilized only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013
d) Securities premium reserve is used to record the premium on issue of shares. The premium received during the year represents the premium received towards allotment of shares. The reserve can be utilized only for limited purposes such as issuance of bonus shares, buy back of its own shares and securities in accordance with the provisions of the Companies Act, 2013.
e) The general reserve is a free reserve, retained from Company''s profits and can be utilized upon fulfilling certain conditions in accordance with specific requirement of Companies Act, 2013.
f) Under IND AS 102, fair value of the options granted is required to be accounted as expense over the life of the vesting period as employee compensation costs, reflecting the period of receipt of service. Share based payment reserve represents the among of reserve created for recognition of employee compensation cost at grant date and fair value of options vested and but not execersied by the employess and unvested options are recoginised in statement of profit and loss account
g) The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the financial position of the Company and also considering the requirements of the Companies Act, 2013. Thus, the amounts reported in retained earnings are not distributable in entirety.
h) Cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the Company accounting policies.
i) FVOCI Reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through Other Comprehensive Income.
Proposed dividend
The Board of Directors of the Company have recommended a final dividend of 35% being ? 0.70 per share on the equity shares of
the Company, for the year ended March 31, 2023 ( ? 0.70 per share - March 31, 2022) which is subject to approval of shareholders.
Consequently the proposed dividend has not been recognised in the books in accordance with IND AS 10.
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions and where there is no legal or constructive obligation to pay further contributions. During the year, the Company recognised '' 48.11. crore (Previous Year - '' 34.73 crore) to Provident Fund under Defined Contribution Plan, '' 4.91 crore (Previous Year - '' 4.03 crore) for Contributions to Superannuation Fund and '' 0.24 crore (Previous Year - '' 0.32 crore) for Contributions to Employee State Insurance Scheme in the Statement of Profit and Loss.
B) Defined Benefit Plan1) Gratuity
The Company''s defined benefit gratuity plan requires contributions to be made to a separately administered fund. The gratuity plan is funded with Life Insurance Corporation of India (LIC). 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 member''s length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans :
1. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
2. The Company''s best estimate of contribution during the next year is ? 20.94 Crores.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
4. The entire Plan Assets are invested in insurer managed funds with Life Insurance Corporation of India (LIC).
5. The above sensitivity analysis are based on change in an assumption which is holding all the other assumptions constant. In practice, this is unlikely to occur, and changes in some assumptions may be correlated. When calculating the sensitivity of defined benefit obligation to significant actuarial assumptions the same method of present value of defined benefit obligations calculated with Projected unit cost method at the end of the reporting period has been applied while calculating defined benefit liability recognised in the balance sheet.
6. The method and type of assumptions used in preparing the sensitivity analysis does not change as compared to the prior period
DESCRIPTION OF RISK EXPOSURES
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary over time. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
(a) Interest Rate risk:The plan exposes the company to the risk of fall in interest rates . A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability(as shown in financial statements).
(b) Liquidity Risk: This is the risk that the company is not able to meet the short-term gratuity payouts .This may arise due to nonavailability of enough cash/cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
(c) Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future .Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
(d) Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
(e) Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act,1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity pay-outs (e.g.Increase in the maximum limit on gratuity of '' 20,00,000)
(f) Asset Liability Mismatching or Market Risk: The duration of the liability is longer compared to duration of assets, exposing the Company to market risk for volatilities/fall in interest rate.
(g) Investment Risk:The probability or likelihood of occurrence of losses relative to the expected return on an particular investment.
1. The Company has not funded its Compensated Absences liability and the same continues to remain as unfunded as at March 31,2023.
2. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India
During year ending 31 March 2023, For management purposes, the Company has been organised into the following operating segments based on products and services, as follows
Vehicle Finance Loans - Loans to customers against purchase of new/used vehicles, tractors, construction equipment and loan to automobile dealers.
Loan against property - Loans to customer against immovable property
Home Loans - Loans given for acquisition of residential property and loan against residential property Other loans - This includes, SME loans and other secured and unsecured loans
The Chief Operating Decision Maker (CODM) monitors the operating results of its business units separately for making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses and is measured consistently with operating profits or losses in the financial statements. However, income taxes are managed on an entity as a whole basis and are not allocated to operating segments.
Undrawn loan commitments are commitments under which the Company is required to provide a loan under pre-sanctioned terms to the customer.
The undrawn commitments provided by the Company represents limits provided for automobile dealers, bill discounting customers and partly disbursed loans for other loans. The undrawn loan commitments amount outstanding as at March 31, 2023 is ? 2,820.44 Crore (? 1,485.88 crore as at March 31, 2022).
The Company creates expected credit loss provision on the undrawn commitments outstanding as at the end of the reporting period and the related expected credit loss on these commitments as at March 31, 2023 is ? 11.79 crore (? 1.20 crore as at March 31, 2022)
Note : 40 ESOP DISCLOSURE ESOP 2007
The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 1,904,162 Equity Shares (prior to share split) in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines.
ESOP 2016
The Board at its meeting held on October 7, 2016, approved to create, and grant from time to time, in one or more tranches, not exceeding 1,56,25,510 Employee Stock Options to or for the benefit of such person(s) who are in permanent employment of the company including some of subsidiaries, managing director and whole time director, (other than promoter/promoter group of the company, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the company), as may be decided by the board, exercisable into not more than 1,56,25,510 equity shares of face value of Rs.2/- each fully paid-up, on such terms and in such manner as the board may decide in accordance with the provisions of the applicable laws and the provisions of ESOP 2016.
In this regard, the Company has recognised expense amounting to Rs. 30.60 crores for employees services received during the year, shown under Employee Benefit Expenses (Refer Note 28).
The shareholders of the Company, at the 34th Annual General Meeting held on July 30, 2012, authorised extension of exercise period from 3 years from the date of vesting to 6 years from the date of vesting. Accordingly, the Company has measured the fair value of the options using the Black Scholes model immediately before and after the date of modification to arrive at the incremental fair value arising due to the extension of the exercise period. The incremental fair value so calculated is recognised from the modification date over the vesting period in addition to the amount based on the grant date fair value of the stock options.
The incremental (benefit)/cost due to modification of the exercise period from 3 years to 6 years from the date of vesting for the year ended March 31,2023 is ? Nil (March 31,2022- ? Nil)
The fair value of the options has been calculated using the Black Scholes model on the date of modification.
The Company shares certain costs / service charges with other companies. These costs have been allocated between the Companies on a basis mutually agreed between them, which has been relied upon by the Auditors.
Note : 42.1 CAPITAL MANAGEMENT
The Company maintains an actively managed capital base to cover risks inherent in the business, meeting the capital adequacy requirements of Reserve Bank of India (RBI), maintain strong credit rating and healthy capital ratios in order to support business and maximise shareholder value. The adequacy of the Company''s capital is monitored by the Board using, among other measures, the regulations issued by RBI.
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.
The Company has complied in full with the capital requirements prescribed by RBI over the reported period. The Capital adequacy ratio as of March 31,2023 is 17.13% (March 31,2022- 19.62%) as against the regulatory requirement of 15%.
Note : 42.2 FINANCIAL RISK MANAGEMENT
The key financial risks faced by the company are credit and market risks comprising liquidity risk, interest rate risk and foreign currency risks.
Credit risk arises when a borrower is unable to meet his financial obligations to the lender. This could be either because of wrong assessment of the borrower''s payment capabilities or due to uncertainties in his future earning potential. The effective management of credit risk requires the establishment of appropriate credit risk policies and processes.
Note : 42 CAPITAL MANAGEMENT (Contd.)42.2.1.1 ASSESSMENT METHODOLOGY
The company has comprehensive and well-defined credit policies across various businesses, products and segments, which encompass credit approval process for all businesses along with guidelines for mitigating the risks associated with them. The appraisal process includes detailed risk assessment of the borrowers, physical verifications and field visits. The company has a robust post sanction monitoring process to identify credit portfolio trends and early warning signals. This enables it to implement necessary changes to the credit policy, whenever the need arises. Also, being in asset financing business, most of the company''s lending is covered by adequate collaterals from the borrowers. The company has a robust online application underwriting model to assess the credit worthiness of the borrower for underwriting decisions for its vehicle finance, Loan Against Property and home loan business. The company also has a well- developed model for the vehicle finance portfolio, to help business teams plan volume with adequate pricing of risk for different segments of the portfolio.
42.2.1.2 RISK MANAGEMENT AND PORTFOLIO REVIEW
The company has a robust portfolio review mechanism. Key metrics like early delinquency, default rates are tracked, monitored and reviewed daily. Business teams review key trends in these Key Risk Indicators and location level strategies are adopted.
The Company records allowance for expected credit losses for all financial assets including loan commitments, other than those measured at FVTPL. Equity instruments carried at cost are not subject to impairment under the ECL methodology.
42.2.1.4 ASSUMPTIONS AND ESTIMATION TECHNIQUES
The Company calculates ECLs to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. ECL is computed on collective basis. The portfolio is segmented based on shared risk characteristics for the computation of ECL.
The key elements of the ECL are summarised below:
The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio. While computing probability of default, significant outlier events are suitably handled to ensure it does not skew the outcomes.
A 12M marginal PD is computed by creating cohorts of accounts starting in Stage 1 at the beginning of the year and subsequently moving to Stage 3 at any point in time during the year.
A conditional average probability of default is computed by taking cohort of which were in Stage 2 at the beginning the year and subsequently moved to Stage 3 anytime in each subsequent year.
The Exposure at Default is an estimate of the exposure at a future default date (in case of Stage 1 and Stage 2), taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments. In case of Stage 3 loans EAD represents exposure when the default occurred.
The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.The recoveries are discounted back to the default date using customer IRR. This present value of recovery is used for LGD computation. A recovery rate (RR) computed as the ratio of present value of recovery to the EAD (1 - RR), gives the LGD.
42.2.1.5 MECHANICS OF THE ECL METHOD Stage 1:
All loans (other than purchased credit impaired asset) are categorised as Stage 1 on initial recognition.The 12 months ECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12 months ECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR.
Stage 2:
Loans which are past due for more than 30 days are categorised as Stage 2. When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECLs PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR.
Stage 3:
Loans which are past due for more than 90 days are categorised as Stage 3. For loans considered credit-impaired, the Company recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%
Restructured loans are categorised as Stage 3 on the date of restructuring and remain so for a period of one year. Post this, regular staging criteria applies.
Loans which have been renegotiated or modified in accordance with RBI Notifications for COVID-19 related stress, has been classified as Stage 2 due to significant increase in credit risk.
The Post Implementation Staging of Loans restructured under Covid Resolution framework shall follow the Days Past Due of respective loan agreements.
In respect of new lending products, where historical information is not available, the company follows simplified matrix approach for determining impairment allowance based on industry practise. These loans constitute around 10% of the total loan book.
Loan Movement across stages during the year is given in a note 9.1 Loan commitment:
When estimating LTECLs for undrawn loan commitments, the Company estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan. For an undrawn loan commitment, ECLs are calculated and presented under provisions.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on other financial assets. The application of simplified approach does not require the Company to track changes in credit risk and calculated on case-by-case approach, taking into consideration different recovery scenarios.
42.2.1.6 Incorporation of forward looking statements in ECL model
The Company considers a broad range of forward looking information with reference to external forecasts of economic parameters such as GDP growth,Inflation, Government Expenditure etc., as considered relevant so as to determine the impact of macro-economic factors on the Company''s ECL estimates.
The inputs and models used for calculating ECLs are recalibrated periodically through the use of available incremental and recent information. Further, internal estimates of PD, LGD rates used in the ECL model may not always capture all the characteristics of the market / external environment as at the date of the financial statements. To reflect this, qualitative adjustments or overlays are made as temporary adjustments to reflect the emerging risks reasonably.
Annual data from 2010 to 2026 (including forecasts for 5 years) were obtained from World Economic Outlook, October 2021 published by International Monetary Fund (IMF). IMF provides historical and forecasted data for important economic indicators country-wise. The data provided for India is used for the analysis. Macro variables that were compared against default rates at segment level to determine the key variables having correlation with the default rates using appropriate statistical techniques. Vasicek model has been incorporated to find the Point in Time (PIT) PD. The company has formulated the methodology for creation of macro-economic scenarios under the premise of economic baseline, upside and downside condition. A final PIT PD is arrived as the scenario weighted PIT PD under different macroeconomic scenarios.
42.2.1.8 Concentration of credit risk and Collateral and Credit Enhancements 42.2.1.8(a) Concentration of credit risk
Concentration of credit risk arise when a number of counterparties or exposures have comparable economic characteristics, or such counterparties are engaged in similar activities or operate in same geographical area or industry sector so that collective ability to meet contractual obligations is uniformly affected by changes in economic, political or other conditions. The Company is in retail lending business on pan India basis targeting primarily customers who either do not get credit or sufficient credit from the traditional banking sector. Vehicle Finance (consisting of new and used Commercial Vehicles, Passenger Vehicles, Tractors, Construction Equipment and Trade advance to Automobile dealers) is lending against security (other than for trade advance) of Vehicle/ Tractor / Equipment and contributes to 63% of the loan book of the Company as of March 31, 2023 (69% as of March 31, 2022). Hypothecation endorsement is made in favour of the Company in the Registration Certificate in respect of all registerable collateral. Portfolio is reasonably well diversified across South, North, East and Western parts of the country. Similarly, sub segments within Vehicle Finance like Heavy Commercial Vehicles, Light Commercial Vehicles, Car and Multi Utility Vehicles, three wheeler and Small Commercial Vehicles, Refinance against existing vehicles, older vehicles (first time buyers), Tractors and Construction Equipment have portfolio share between 8% and 7% leading to well diversified sub product mix. Loan Against Property is mortgage loan against security of existing immovable property (primarily self-occupied residential property) to self- employed non-professional category of borrowers and contributes to 20 % of the lending book of the Company as of March 31, 2023 (22% as of March 31, 2022). Portfolio is concentrated in North 30% with small presence in East 5%. South has 40% and West contributes 25% of the overall exposure of the company.
The Concentration of risk is managed by Company for each product by its region and its sub-segments. Company did not overly depend on few regions or sub-segments as of March 31, 2023.
42.2.1.8(b) Collateral and Credit enhancements
Although collateral can be an important mitigation of credit risk, it is the Company''s practice to lend on the basis of the customer''s ability to meet the obligations out of cash flow resources other than placing primary reliance on collateral and other credit risk enhancements. The Company obtains first and exclusive charge on all collateral that it obtains for the loans given. Vehicle Finance and Loan Against Property loans are secured by collateral at the time of origination. In case of Vehicle loans, Company values the vehicle either through proforma invoice (for new vehicles) or using registered valuer for used vehicles. In case of Loan against Property, the value of the property at the time of origination will be arrived by obtaining two valuation reports from Company''s empanelled valuers.
Hypothecation endorsement is obtained in favour of the Company in the Registration Certificate of the Vehicle/ Tractor / Equipment funded under the vehicle finance category.
Immovable Property is the collateral for Loan Against Property. Security Interest in favour of the Company is created by Mortgage through deposit of title deed which is registered wherever required by law.
In respect of Other loans, Home loans follow the same process as Loan Against Property and pledge is created in favour for the Company for loan against securities. 93% of the Company''s term loan are secured by way of tangible Collateral.
In respect of some unsecured lending, the company obtains First Loss Default Guarantee or similar arrangement from external service providers as partial cover against potential credit default.
a) Vehicles including construction equipment and tractors are valued at original cost less 20%depreciation per year on WDV
b) Immovable property is valued based on the amount as per the valuation report at the time of sanctioning of loan
c) Other loans are valued based on book debts at cost or securities at market value
Market Risk is the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates. The company''s exposure to market risk is a function of asset liability management and interest rate sensitivity assessment. The company is exposed to interest rate risk and liquidity risk, if the same is not managed properly. The company continuously monitors these risks and manages them through appropriate risk limits. The Asset Liability Management Committee (ALCO) reviews market-related trends and risks and adopts various strategies related to assets and liabilities, in line with the company''s risk management framework. ALCO activities are in turn monitored and reviewed by a board sub-committee. In addition, the company has put in an Asset Liability Management (ALM) support group which meets frequently to review the liquidity position of the company.
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources and adopted a policy of availing funding in line with the tenor and repayment pattern of its receivables and monitors future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of unencumbered receivables which could be used to secure funding by way of assignment if required. The Company also has lines of credit that it can access to meet liquidity needs. These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The ALCO provides strategic direction and guidance on liquidity risk management. A sub-committee of the ALCO, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the ALM perspective. This sets the boundaries for daily cash flow management. Analysis of Financial assets and Financial liabilities by remaining contractual maturities given in note -47.
The Company being in the business of lending raises money from diversified sources like market borrowings, term Loan from banks and financial institutions, foreign currency borrowings etc. Financial assets and liabilities constitute significant portion, changes in market interest rates can adversely affect the financial condition. The fluctuations in interest rates can be due to internal and external factors. Internal factors include the composition of assets and liabilities across maturities, existing rates and re-pricing of various sources of borrowings. External factors include macro-economic developments, competitive pressures, regulatory developments and global factors. The movement in interest rates (upward / downward) will impact the Net Interest Income depending upon rate sensitivity of the asset or liability. The company uses traditional gap analysis report to determine the vulnerability to movements in interest rates. The Gap is the difference between Rate Sensitive Assets (RSA) and Rate Sensitive Liabilities (RSL) for each time bucket. A positive gap indicates that the company can benefit from rising interest rates while a negative gap indicates that the company can benefit from declining interest rates. Based on market conditions, the company enters into interest rate swap to mitigate interest rate risk.
42.2.2.3 Foreign Currency Risk
Foreign currency risk for the Company arise majorly on account of foreign currency borrowings. The Company manages this foreign currency risk by entering in to cross currency swaps and forward contract. When a derivative is entered in to for the purpose of being as hedge, the Company negotiates the terms of those derivatives to match with the terms of the hedge exposure.
The Company holds derivative financial instruments such as Cross currency interest rate swap to mitigate risk of changes in exchange rate in foreign currency and floating interest rate.
The Counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in market place.
The Company''s policy is to fully hedge its foreign currency borrowings at the time of drawdown and remain so till repayment and hence the hedge ratio is 1:1.
The Company has taken office premises on lease for its operations.
The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain certain financial ratios. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below.
The Company also has certain leases of machinery with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemptions for these leases.
Set out below are the carrying amounts of lease liabilities included under financial liabilities and right to use asset included in Property, Plant and Equipment and the movements during the period:
Lease expenses relating to short term leases aggregated to '' 2.60 crores (''1.12 crores - March 31, 2022) during the year ended March 31, 2023. Lease liabilities are recognised at weighted average incremental borrowing rate ranging from 8% to 12%.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to the lease liabilities as and when they fall due.
The Company has several lease contracts that includes extension and termination contracts. These options are negotiated by the Management to provide flexibility in managing the leased-asset portfolio and align with Company''s business needs. Management exercises significant judgement in determining whether these extension and termination are reasonably certain to be exercised.
The company has not defaulted in its lease obligations RBI Disclosures
The regulatory disclosures provided in these financial statements are in accordance with the requirements of the RBI''s Directions, 2021 dated September 24, 2021 (wherever applicable).
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources and adopted a policy of availing funding in line with the tenor and repayment pattern of its receivables and monitors future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of unencumbered receivables which could be used to secure funding by way of assignment if required. The Company also has lines of credit that it can access to meet liquidity needs. These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The ALCO provides strategic direction and guidance on liquidity risk management. A sub-committee of the ALCO, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the ALM perspective. This sets the boundaries for daily cash flow management.
Notes:
1) A "Significant Counterparty" is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of NBFC-NDSI''s total liabilities.
2) A "significant instrument/product" is defined as a single instrument/product of group of similar instruments/products which in aggregate amount to more than 1% of the NBFC-NDSI''s total liabilities.
3) Total Borrowing has been computed as Gross Total Debt basis extant regulatory ALM guidelines.
4) Total Liabilities has been computed as Total Assets less Equity share capital less Reserve & Surplus and computed basis extant regulatory ALM guidelines.
5) Commercial Paper for stock ratio is the Gross outstanding (i.e.Maturity amount).
6) Other Short-term Liabilities has been computed as Total Short-term Liabilities less Commercial Paper less Non-convertible debentures (Original maturity of less than one year), basis extant regulatory ALM guidelines.
7) Public Funds = Total Borrowings as computed above.
Refer Note No 47 for the summary of maturity profile of undiscounted cash flows of the Company''s financial assets and financial liabilities as at reporting period.
The Liquidity Coverage Ratio (LCR) is a key compliance requirement for a resilient and stable financial sector. Its objective is the promotion of short-term resilience of the liquidity risk profile of financial institutions by ensuring that it has sufficient High Quality Liquid Assets (HQLA) to survive a significant stress scenario lasting for one month. The Liquidity Coverage Ratio is expected to improve the financial sector''s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spill over from the financial sector to the real economy.
Liquidity Management of the company is supervised by the Asset Liability Committee. The management is of the view that the company has in place robust processes to monitor and manage liquidity risks and sufficient liquidity cover to meet its likely future short-term requirements.
The company has a diversified mix of borrowings with respect to the source, type of instrument, tenor and nature of security. The Asset Liability Committee constantly reviews and monitors the funding mix and ensures the optimum mix of funds based on the cash flow requirements, market conditions and keeping the interest rate view in consideration. Additionally, the Company has lines of credit that it can access to meet liquidity needs.
These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The Asset Liability Committee provides strategic direction and guidance on liquidity risk management. A sub-committee of the Asset Liability Committee, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the Asset Liability Management perspective. This sets the boundaries for daily cash flow management.
In line with RBI regulations, the cash outflows and inflows have been stressed by 115% and 75% of their respective original values for computing LCR. The key drivers on the inflow side are the expected collections from the performing assets of the company and on the outflow side the scheduled maturities. The High Quality Liquid Assets are entirely held in Government Securities which are classified as Level 1 assets with no haircut.
The LCR has been consistently maintained above 100% throughout the year which is well over the regulatory threshold of 70%. The company has internal risk thresholds for LCR approved by the Risk Managing Committee which is higher than the regulatory requirement. The High Quality Liquid Assets (HQLA) as on March 31,2023 is held in the form of Government Securities to meet the LCR requirements
The company has maintained LCR well above the regulatory threshold of 70% throughout the financial year. All foreign currency borrowings are fully hedged at the time of drawl of each loan. Hence there is no risk to the company on account of derivatives or collateral calls thereof or mismatch in currency.
Mar 31, 2022
The Company has a Board approved policy for entering into derivative transactions. Derivative transaction comprises of Currency, Interest Rate Swaps and forward contracts. The Company undertakes such transactions for hedging interest / foreign exchange risk on borrowing. The Asset Liability Management Committee and Business Committee periodically monitors and reviews the risks involved.
The notional amount for interest rate swap represents the foreign currency borrowing on which Company has entered to hedge the variable interest rate.
All loans are in India and have been granted to individuals or entities other than public sector
The Company has not granted loans and advances in the nature of loans to Promoters, Directors , Key Managerial Personnel or related parties u/s2(76) either repayable on demand or without specifying terms/period. Refer related party disclosure(Note 37)
Secured indicates loans secured, wholly or partly, by way of hypothecation of automobile assets and / or pledge of securities and / or equitable mortgage of property and / or equipment and including undertaking to create a security.
Term loans includes unsecured short term loans to a subsidiary and associate. These loans have been classified under Stage 1 Category at the various reporting periods and related impairment provision as per the Company''s accounting policy has been created. The details of the same are disclosed below:
1. Details of Immovable properties of land and buildings (Owned Assets), whose title deeds have been pledged in favour of Trustees for the benefit of debenture holders as security, has been explained in Note 17.1
2. The Company has elected to include ROU assets pertaining to lease of buildings as part of the Property, plant and equipment as permitted under paragraph 47 of Ind AS 116.
3. The Title Deeds of the Immovable Properties mentioned above are in the name of the company.
4. Company has not carried out any revaluation of property, plant and equipment during the year ended March 31,2022
All debt securities have been contracted in India17.1 Security
(i) Redeemable Non-Convertible Debentures - Medium-term is secured by way of specific charge on assets under hypothecation relating to Vehicle Finance, Loan against property, Bills discounted and other loans and pari passu charge on immovable property which are owned assets of the Company situated at Chennai.
(ii) The Company has not defaulted in the repayment of dues to its lenders.
(i) Secured term loans from banks and financial institution are secured by way of specific / pari passu charge on assets under hypothecation relating to automobile financing and loans against immovable property.
(ii) Loan repayable on demand is in the nature of Cash Credit from banks and is secured by way of floating charge on assets under hypothecation and other assets.
(iii) The Company has not defaulted in the repayment of dues to its lenders.
(iv) Securitisation rupee loan represents the net outstanding value (Net of Investment in Pass- through Certificates) of the proceeds received by the Company from securitisation trust in respect of loan assets transferred by the Company pursuant to Deed of Assignment. The Company has provided Credit enhancement to the trust by way of cash collateral and Bank guarantee.
(v) The Company has utilised the borrowings for the purpose for which it was obtained
(vi) The quarterly statements or returns of current assets filed by the company with banks are in agreement with books of accounts
i) Terms/rights attached to Equity shares
The Company has only one class of equity shares having a par value of '' 2 (March 2019 - '' 10) per share. All these shares have the same rights and preferences with respect to payment of dividend, repayment of capital and voting. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except for interim dividend.
Repayment of capital will be in proportion to the number of equity shares held.
d) Shares held by Promoters as on March 31,2022 - Please refer Annexure A
As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.
a) Statutory reserve represents the reserve created as per Section 45IC of the RBI Act, 1934, pursuant to which a Non-Banking Financial Company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit annually as disclosed in the Statement of Profit and Loss account, before any dividend is declared.
b) Capital reserve represents the reserve created on account of amalgamation of Chola Factoring Limited in the year 2013-14.
c) Capital redemption reserve represents the amount equal to the nominal value of shares that were redeemed during the prior years. The reserve can be utilized only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013
d) Securities premium reserve is used to record the premium on issue of shares. The premium received during the year represents the premium received towards allotment of shares. The reserve can be utilized only for limited purposes such as issuance of bonus shares, buy back of its own shares and securities in accordance with the provisions of the Companies Act, 2013.
e) The general reserve is a free reserve, retained from Company''s profits and can be utilized upon fulfilling certain conditions in accordance with specific requirement of Companies Act, 2013.
f) Under IND AS 102, fair value of the options granted is required to be accounted as expense over the life of the vesting period as employee compensation costs, reflecting the period of receipt of service. Share based payment reserve represents the among of reserve created for recognition of employee compensation cost at grant date and fair value of options vested and but not execersied by the employess and unvested options are recoginised in statement of profit and loss account
g) The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the financial position of the Company and also considering the requirements of the Companies Act, 2013. Thus, the amounts reported in retained earnings are not distributable in entirety.
h) Cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the Company accounting policies.
i) FVOCI Reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through Other Comprehensive Income.
The Board of Directors of the Company have recommended a final dividend of 35% being '' 0.70 per share on the equity shares of
the Company, for the year ended March 31, 2022 ('' 0.70 per share - March 31, 2021) which is subject to approval of shareholders.
Consequently the proposed dividend has not been recognised in the books in accordance with IND AS 10.
c) There is no dividend paid in foreign currency.Note : 35 RETIREMENT BENEFITA) Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions and where there is no legal or constructive obligation to pay further contributions. During the year, the Company recognised '' 3,473 lakhs (Previous Year - '' 2,953 lakhs) to Provident Fund under Defined Contribution Plan, '' 403 lakhs (Previous Year - '' 337 lakhs) for Contributions to Superannuation Fund and '' 32 lakhs (Previous Year - '' 49 lakhs) for Contributions to Employee State Insurance Scheme in the Statement of Profit and Loss.
B) Defined Benefit Plan
The Company''s defined benefit gratuity plan requires contributions to be made to a separately administered fund. The gratuity plan is funded with Life Insurance Corporation of India (LIC). 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 member''s length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans :
1. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
2. The Company''s best estimate of contribution during the next year is '' 2,432 lakhs.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
4. The entire Plan Assets are invested in insurer managed funds with Life Insurance Corporation of India (LIC).
5. The above sensitivity analysis are based on change in an assumption which is holding all the other assumptions constant. In practice, this is unlikely to occur, and changes in some assumptions may be correlated. When calculating the sensitivity of defined benefit obligation to significant actuarial assumptions the same method of present value of defined benefit obligations calculated with Projected unit cost method at the end of the reporting period has been applied while calculating defined benefit liability recognised in the balance sheet.
6. The method and type of assumptions used in preparing the sensitivity analysis does not change as compared to the prior period
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory framework which may vary over time. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
(a) Interest Rate risk:The plan exposes the company to the risk of fall in interest rates . A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability(as shown in financial statements).
(b) Liquidity Risk: This is the risk that the company is not able to meet the short-term gratuity payouts .This may arise due to nonavailability of enough cash/cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
(c) Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future .Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan''s liability.
(d) Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.
(e) Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act,1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (e.g.Increase in the maximum limit on gratuity of '' 20,00,000)
(f) Asset Liability Mismatching or Market Risk: The duration of the liability is longer compared to duration of assets, exposing the Company to market risk for volatilities/fall in interest rate.
1. The Company has not funded its Compensated Absences liability and the same continues to remain as unfunded as at March 31,2022.
2. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India
During year ending 31 March 2022, For management purposes, the Company has been organised into the following operating segments based on products and services, as follows
Vehicle Finance - Loans to customers against purchase of new/used vehicles, tractors, construction equipment and loan to automobile dealers.
Loan against property - Loans to customer against immovable property Home Loans - loans given for acquisition of residential property Other loans - This includes, loan against shares and other unsecured loans
The Chief Operating Decision Maker (CODM) monitors the operating results of its business units separately for making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses and is measured consistently with operating profits or losses in the financial statements. However, income taxes are managed on a entity as whole basis and are not allocated to operating segments.
c) The Code on Social Security, 2020 (''The Code'') relating to employee benefits during employment and post-employment benefits, received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Ministry of Labour and Employment has also released draft rules thereunder on 13 November 2020 and has invited suggestions from stakeholders, which are under consideration by the Ministry. The Company will evaluate the rules, assess the impact, if any, and account for the same once the rules are notified and become effective.
Undrawn loan commitments are commitments under which the Company is required to provide a loan under pre-sanctioned terms to the customer.
The undrawn commitments provided by the Company are predominantly in the nature of limits provided for Automobile dealers based on the monthly loan conversions and partly disbursed loans for immovable properties. These undrawn limits are converted within a short period of time and do not generally remain undisbursed / undrawn beyond one year from the reporting date. The undrawn loan commitments amount outstanding as at March 31, 2022 is '' 1,48,588 lakhs ('' 1,24,190 lakhs as at March 31,2021).
The Company creates expected credit loss provision on the undrawn commitments outstanding as at the end of the reporting period and the related expected credit loss on these commitments as at March 31, 2022 is '' 120 lakhs ('' 104 lakhs as at March 31, 2021)
Note : 40 ESOP DISCLOSURE ESOP 2007
The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 1,904,162 Equity Shares (prior to share split) in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines.
ESOP 2016
The Board at its meeting held on October 7, 2016, approved to create, and grant from time to time, in one or more tranches, not exceeding 1,56,25,510 Employee Stock Options to or for the benefit of such person(s) who are in permanent employment of the company including some of subsidiaries, managing director and whole time director, (other than promoter/promoter group of the company, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the company), as may be decided by the board, exercisable into not more than 1,56,25,510 equity shares of face value of ''2/- each fully paid-up, on such terms and in such manner as the board may decide in accordance with the provisions of the applicable laws and the provisions of ESOP 2016.
In this regard, the Company has recognised expense amounting to '' 2020 lakhs for employees services received during the year, shown under Employee Benefit Expenses (Refer Note 28).
Note: Includes options (vested and unvested) issued employees of subsidiary as at March 31,2021 - 11,276 options prior to share split (March 31,2020 - 11,276 options)
*Equity shares of face value of '' 10/- have been split into face value of '' 2 per share on June 18, 2019, pursuant to resolution passed through postal ballot on June 3, 2019
The shareholders of the Company, at the 34th Annual General Meeting held on July 30, 2012, authorised extension of exercise period from 3 years from the date of vesting to 6 years from the date of vesting. Accordingly, the Company has measured the fair value of the options using the Black Scholes model immediately before and after the date of modification to arrive at the incremental fair value arising due to the extension of the exercise period. The incremental fair value so calculated is recognised from the modification date over the vesting period in addition to the amount based on the grant date fair value of the stock options.
The incremental (benefit)/cost due to modification of the exercise period from 3 years to 6 years from the date of vesting for the year ended March 31,2022 is '' Nil (March 31,2021- '' Nil)
The fair value of the options has been calculated using the Black Scholes model on the date of modification.
The Company shares certain costs / service charges with other companies. These costs have been allocated between the Companies on a basis mutually agreed between them, which has been relied upon by the Auditors.
Note : 42.1 CAPITAL MANAGEMENT
The Company maintains an actively managed capital base to cover risks inherent in the business, meeting the capital adequacy requirements of Reserve Bank of India (RBI), maintain strong credit rating and healthy capital ratios in order to support business and maximise shareholder value. The adequacy of the Company''s capital is monitored by the Board using, among other measures, the regulations issued by RBI.
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.
The Company has complied in full with the capital requirements prescribed by RBI over the reported period. The Capital adequacy ratio as of March 31,2022 is 19.62% (March 31,2021- 19.10%) as against the regulatory requirement of 15%.
Note : 42.2 FINANCIAL RISK MANAGEMENT
The key financial risks faced by the company are credit and market risks comprising liquidity risk, interest rate risk and foreign currency risks.
Credit risk arises when a borrower is unable to meet his financial obligations to the lender. This could be either because of wrong assessment of the borrower''s payment capabilities or due to uncertainties in his future earning potential. The effective management of credit risk requires the establishment of appropriate credit risk policies and processes.
42.2.1.1 ASSESSMENT METHODOLOGY
The company has comprehensive and well-defined credit policies across various businesses, products and segments, which encompass credit approval process for all businesses along with guidelines for mitigating the risks associated with them. The appraisal process includes detailed risk assessment of the borrowers, physical verifications and field visits. The company has a robust post sanction monitoring process to identify credit portfolio trends and early warning signals. This enables it to implement necessary changes to the credit policy, whenever the need arises. Also, being in asset financing business, most of the company''s lending is covered by adequate collaterals from the borrowers. The company has a robust online application underwriting model to assess the credit worthiness of the borrower for underwriting decisions for its vehicle finance, Loan Against Property and home loan business. The company also has a well- developed model for the vehicle finance portfolio, to help business teams plan volume with adequate pricing of risk for different segments of the portfolio.
42.2.1.2 RISK MANAGEMENT AND PORTFOLIO REVIEW
The company has a robust portfolio review mechanism. Key metrics like early delinquency, default rates are tracked, monitored and reviewed daily. Business teams review key trends in these Key Risk Indicators and location level strategies are adopted.
The Company records allowance for expected credit losses for all financial assets including loan commitments, other than those measured at FVTPL. Equity instruments carried at cost are not subject to impairment under the ECL methodology.
42.2.1.4 ASSUMPTIONS AND ESTIMATION TECHNIQUES
The Company calculates ECLs to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. ECL is computed on collective basis. The portfolio is segmented based on shared risk characteristics for the computation of ECL.
The key elements of the ECL are summarised below:
The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio. While computing probability of default, significant outlier events are suitably handled to ensure it does not skew the outcomes.
A 12M marginal PD is computed by creating cohorts of accounts starting in Stage 1 at the beginning of the year and subsequently moving to Stage 3 at any point in time during the year.
A conditional average probability of default is computed by taking cohort of which were in Stage 2 at the beginning the year and subsequently moved to Stage 3 anytime in each subsequent year.
The Exposure at Default is an estimate of the exposure at a future default date (in case of Stage 1 and Stage 2), taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments. In case of Stage 3 loans EAD represents exposure when the default occurred.
The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.The recoveries are discounted back to the default date using customer IRR. This present value of recovery is used for LGD computation. A recovery rate (RR) computed as the ratio of present value of recovery to the EAD (1 - RR), gives the LGD.
42.2.1.5 MECHANICS OF THE ECL METHOD Stage 1:
All loans (other than purchased credit impaired asset) are categorised as Stage 1 on initial recognition.The 12 months ECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12 months ECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR.
Stage 2:
Loans which are past due for more than 30 days are categorised as Stage 2. When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECLs PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR.
Stage 3:
Loans which are past due for more than 90 days are categorised as Stage 3. For loans considered credit-impaired, the Company recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%
Restructured loans are categorised as Stage 3 on the date of restructuring and remain so for a period of one year. Post this, regular staging criteria applies.
Loans which have been renegotiated or modified in accordance with RBI Notifications for COVID-19 related stress, has been classified as Stage 2 due to significant increase in credit risk.
The Post Implementation Staging of Loans restructured under Covid Resolution framework shall follow the Days Past Due of respective loan agreements.
In respect of new lending products introduced during the year, the company follows simplified matrix approach for determining impairment allowance based on industry practise in the absence of historical information. These loans constitutes less than 1% of the total loan book.
Loan Movement across stages during the year is given in a note 9.1 Loan commitment:
When estimating LTECLs for undrawn loan commitments, the Company estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan. For an undrawn loan commitment, ECLs are calculated and presented under provisions.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on other financial assets. The application of simplified approach does not require the Company to track changes in credit risk and calculated on case by case approach, taking into consideration different recovery scenarios.
Based on Management''s assessment of ECL on trade receivables/ other financial assets, the provisions are not material to financial statements (Nil as at March 31, 2021).
42.2.1.6 Incorporation of forward looking statements in ECL model
The Company considers a broad range of forward looking information with reference to external forecasts of economic parameters such as GDP growth,Inflation, Government Expenditure etc., as considered relevant so as to determine the impact of macro-economic factors on the Company''s ECL estimates.
The inputs and models used for calculating ECLs are recalibrated periodically through the use of available incremental and recent information. Further, internal estimates of PD, LGD rates used in the ECL model may not always capture all the characteristics of the market / external environment as at the date of the financial statements. To reflect this, qualitative adjustments or overlays are made as temporary adjustments to reflect the emerging risks reasonably.
Annual data from 2010 to 2026 (including forecasts for 5 years) were obtained from World Economic Outlook, October 2021 published by International Monetary Fund (IMF). IMF provides historical and forecasted data for important economic indicators country-wise. The data provided for India is used for the analysis. Macro variables that were compared against default rates at segment level to determine the key variables having correlation with the default rates using appropriate statistical techniques. Vasicek model has been incorporated to find the Point in Time (PIT) PD. The company has formulated the methodology for creation of macro-economic scenarios under the premise of economic baseline, upside and downside condition. A final PIT PD is arrived as the scenario weighted PIT PD under different macroeconomic scenarios.
42.2.1.8 Concentration of credit risk and Collateral and Credit Enhancements 42.2.1.8(a) Concentration of credit risk
Concentration of credit risk arise when a number of counterparties or exposures have comparable economic characteristics, or such counterparties are engaged in similar activities or operate in same geographical area or industry sector so that collective ability to meet contractual obligations is uniformly affected by changes in economic, political or other conditions. The Company is in retail lending business on pan India basis targeting primarily customers who either do not get credit or sufficient credit from the traditional banking sector. Vehicle Finance (consisting of new and used Commercial Vehicles, Passenger Vehicles, Tractors, Construction Equipment and Trade advance to Automobile dealers) is lending against security (other than for trade advance) of Vehicle/ Tractor / Equipment and contributes to 69% of the loan book of the Company as of March 31,2022 (72% as of March 31,2021). Hypothecation endorsement is made in favour of the Company in the Registration Certificate in respect of all registerable collateral. Portfolio is reasonably well diversified across South, North, East and Western parts of the country. Similarly, sub segments within Vehicle Finance like Heavy Commercial Vehicles, Light Commercial Vehicles, Car and Multi Utility Vehicles, three wheeler and Small Commercial Vehicles, Refinance against existing vehicles, older vehicles (first time buyers), Tractors and Construction Equipment have portfolio share between 10% and 6% leading to well diversified sub product mix.
Loan Against Property is mortgage loan against security of existing immovable property (primarily self-occupied residential property) to self- employed non-professional category of borrowers and contributes to 22 % of the lending book of the Company as of March 31, 2022 (22% as of March 31, 2021). Portfolio is concentrated in North 35% with small presence in East 5%. South has 35% and West contributes 25% of the overall exposure of the company.
The Concentration of risk is managed by Company for each product by its region and its sub-segments. Company did not overly depend on few regions or sub-segments as of March 31, 2022.
42.2.1.8(b) Collateral and Credit enhancements
Although collateral can be an important mitigation of credit risk, it is the Company''s practice to lend on the basis of the customer''s ability to meet the obligations out of cash flow resources other than placing primary reliance on collateral and other credit risk enhancements. The Company obtains first and exclusive charge on all collateral that it obtains for the loans given. Vehicle Finance and Loan Against Property loans are secured by collateral at the time of origination. In case of Vehicle loans, Company values the vehicle either through proforma invoice (for new vehicles) or using registered valuer for used vehicles. In case of Loan against Property, the value of the property at the time of origination will be arrived by obtaining two valuation reports from Company''s empanelled valuers.
Hypothecation endorsement is obtained in favour of the Company in the Registration Certificate of the Vehicle/ Tractor / Equipment funded under the vehicle finance category.
Immovable Property is the collateral for Loan Against Property. Security Interest in favour of the Company is created by Mortgage through deposit of title deed which is registered wherever required by law.
In respect of Other loans, Home loans follow the same process as Loan Against Property and pledge is created in favour for the Company for loan against securities. 99% of the Company''s term loan are secured by way of tangible Collateral.
In respect of some unsecured lending, the company obtains First Loss Default Guarantee or similar arrangement from external service providers as partial cover against potential credit default.
a) Vehicles including construction equipment and tractors are valued at original cost less 20% depreciation per year on WDV
b) Immovable property is valued based on the amount as per the valuation report at the time of sanctioning of loan
c) Other loans are valued based on book debts at cost or securities at market value
Market Risk is the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates. The company''s exposure to market risk is a function of asset liability management and interest rate sensitivity assessment. The company is exposed to interest rate risk and liquidity risk, if the same is not managed properly. The company continuously monitors these risks and manages them through appropriate risk limits. The Asset Liability Management Committee (ALCO) reviews market-related trends and risks and adopts various strategies related to assets and liabilities, in line with the company''s risk management framework. ALCO activities are in turn monitored and reviewed by a board sub-committee. In addition, the company has put in an Asset Liability Management (ALM) support group which meets frequently to review the liquidity position of the company.
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources and adopted a policy of availing funding in line with the tenor and repayment pattern of its receivables and monitors future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of unencumbered receivables which could be used to secure funding by way of assignment if required. The Company also has lines of credit that it can access to meet liquidity needs. These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The ALCO provides strategic direction and guidance on liquidity risk management. A sub-committee of the ALCO, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the ALM perspective. This sets the boundaries for daily cash flow management. Analysis of Financial assets and Financial liabilities by remaining contractual maturities given in note -47.
The Company being in the business of lending raises money from diversified sources like market borrowings, term Loan from banks and financial institutions, foreign currency borrowings etc. Financial assets and liabilities constitute significant portion, changes in market interest rates can adversely affect the financial condition. The fluctuations in interest rates can be due to internal and external factors. Internal factors include the composition of assets and liabilities across maturities, existing rates and re-pricing of various sources of borrowings. External factors include macro-economic developments, competitive pressures, regulatory developments and global factors. The movement in interest rates (upward / downward) will impact the Net Interest Income depending upon rate sensitivity of the asset or liability. The company uses traditional gap analysis report to determine the vulnerability to movements in interest rates. The Gap is the difference between Rate Sensitive Assets (RSA) and Rate Sensitive Liabilities (RSL) for each time bucket. A positive gap indicates that the company can benefit from rising interest rates while a negative gap indicates that the company can benefit from declining interest rates. Based on market conditions, the company enters into interest rate swap to mitigate interest rate risk.
42.2.2.3 Foreign Currency Risk
Foreign currency risk for the Company arise majorly on account of foreign currency borrowings. The Company manages this foreign currency risk by entering in to cross currency swaps and forward contract. When a derivative is entered in to for the purpose of being as hedge, the Company negotiates the terms of those derivatives to match with the terms of the hedge exposure.
The Company holds derivative financial instruments such as Cross currency interest rate swap to mitigate risk of changes in exchange rate in foreign currency and floating interest rate.
The Counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in market place.
The Company''s policy is to fully hedge its foreign currency borrowings at the time of drawdown and remain so till repayment and hence the hedge ratio is 1:1.
The Management assessed that cash and cash equivalents, bank balance other than Cash and cash equivalents, receivable, other financial assets, payables and other financial liabilities approximates their carrying amount largely due to short term maturities of these instruments.
Note 44.2 - Fair value hierarchy
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values of financial assets or liabilities disclosed under level 2 category.
i) The fair value of loans have estimated by discounting expected future cash flows using discount rate equal to the rate near to the reporting date of the comparable product.
ii) The fair value of debt securities, borrowings other than debt securities and subordinated liabilities have estimated by discounting expected future cash flows discounting rate
iii) Derivatives are fair valued using observable inputs / rates
iv) The fair value of investment in Government securities are derived from rate equal to the rate near to the reporting date of the comparable product.
The Company has taken office premises on lease for its operations.
The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain certain financial ratios. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below.
The Company also has certain leases of machinery with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemptions for these leases.
Set out below are the carrying amounts of lease liabilities included under financial liabilities and right to use asset included in Property, Plant and Equipment and the movements during the period:
Lease expenses relating to short term leases aggregated to '' 112 lakhs ('' 109 lakhs - March 31,2021) during the year ended March 31, 2022. Lease liabilities are recognised at weighted average incremental borrowing rate ranging from 8% to 12%.
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to the lease liabilities as and when they fall due.
The Company has several lease contracts that includes extension and termination contracts. These options are negotiated by the Management to provide flexibility in managing the leased-asset portfolio and align with Company''s business needs. Management exercises significant judgement in determining whether these extension and termination are reasonably certain to be exercised.
The company has not defaulted in its lease obligations
No proceedings have been initiated on or are pending against the group for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.
The Company has not been declared wilful defaulter by any bank or financial institution or Government or any Government authority.
As per the inforamation available with the company, Company has no transactions with the companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.
There has been no charges or satisfaction yet to be registered with ROC beyond the statutory period.
The Company being an non-banking finance company, as part of its normal business, grants loans and advances to its customers, other entities and persons ensuring adherence to all regulatory requirements. Further, the company has also borrowed funds from banks, financial institutions in compliance with regulatory requirements in the ordinary course of business
Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has also not received any fund from any parties (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries_
Note : 52 DISCLOSURE OF FRAUDS REPORTED DURING THE YEAR ENDED MARCH 31, 2021 VIDE DNBS. PD. CC NO. 256/ 03.10.042/ 2011-12 DATED MARCH 02, 2012
There were 107 cases (March 31, 2021 - 66 cases) of frauds amounting to'' 780 lakhs (March 31, 2021 - ''731 lakhs) reported during the year. The Company has recovered an amount of ''112 lakhs (March 31,2021 - '' 45 lakhs). The un-recovered amounts are either pending settlement with the insurance companies or have been fully provided/ written off.
1) As required by the RBI Notification dated March 13, 2020, the Company has complied with the requirements of Ind AS and the Guidelines and Policies approved by the Board in recognition of impairment of financial instruments. The overall impairment provision made under Ind AS is higher than the prudential floor (including the provision requirement specified in the notification referred to in Note 9) prescribed by RBI
2) Gross carrying amount as per Ind AS represents gross exposures inclusive of securitisation balances transferred by the Company but will not qualify for de-recognition and interest income on Stage III assets which will not form part of Provisions required as per IRACP norms
(vi) Institutional set-up for liquidity risk management:
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources and adopted a policy of availing funding in line with the tenor and repayment pattern of its receivables and monitors future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of unencumbered receivables which could be used to secure funding by way of assignment if required. The Company also has lines of credit that it can access to meet liquidity needs. These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The ALCO provides strategic direction and guidance on liquidity risk management. A sub-committee of the ALCO, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the ALM perspective. This sets the boundaries for daily cash flow management.
Notes:
1) A "Significant Counterparty" is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of total liabilities.
2) A "significant instrument/product" is defined as a single instrument/product of group of similar instruments/products which in aggregate amount to more than 1% of the total liabilities.
3) Total Borrowing has been computed as Gross Total Debt basis extant regulatory ALM guidelines.
4) Total Liabilities has been computed as Total Assets less Equity share capital less Reserve & Surplus and computed basis extant regulatory ALM guidelines.
5) Commercial Paper for stock ratio is the Gross outstanding (i.e. Maturity amount).
6) Other Short-term Liabilities represents liabilities other than borrowings which are payable within one year ,basis extant regulatory ALM guidelines.
7) Public Funds = Total Borrowings as computed above.
Refer Note No 47 for the summary of maturity profile of undiscounted cash flows of the Company''s financial assets and financial liabilities as at reporting period.
The Liquidity Coverage Ratio (LCR) is a key compliance requirement for a resilient and stable financial sector. Its objective is the promotion of short-term resilience of the liquidity risk profile of financial institutions by ensuring that it has sufficient High Quality Liquid Assets (HQLA) to survive a significant stress scenario lasting for one month. The Liquidity Coverage Ratio is expected to improve the financial sector''s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spill over from the financial sector to the real economy.
Liquidity Management of the company is supervised by the Asset Liability Committee. The management is of the view that the company has in place robust processes to monitor and manage liquidity risks and sufficient liquidity cover to meet its likely future short-term requirements.
The company has a diversified mix of borrowings with respect to the source, type of instrument, tenor and nature of security. The Asset Liability Committee constantly reviews and monitors the funding mix and ensures the optimum mix of funds based on the cash flow requirements, market conditions and keeping the interest rate view in consideration. Additionally, the Company has lines of credit that it can access to meet liquidity needs.
These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The Asset Liability Committee provides strategic direction and guidance on liquidity risk management. A sub-committee of the Asset Liability Committee, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the Asset Liability Management perspective. This sets the boundaries for daily cash flow management.
In line with RBI regulations, the cash outflows and inflows have been stressed by 115% and 75% of their respective original values for computing LCR. The key drivers on the inflow side are the expected collections from the performing assets of the company and on the outflow side the scheduled maturities. The High Quality Liquid Assets are entirely held in Government Securities which are classified as Level 1 assets with no haircut.
The company has maintained LCR well above the regulatory threshold of 60% throughout the financial year. All foreign currency borrowings are fully hedged at the time of drawn of each loan. Hence there is no risk to the company on account of derivatives or collateral calls thereof or mismatch in currency.
Mar 31, 2021
a) Statutory reserve represents the reserve created as per Section 45IC of the RBI Act, 1934, pursuant to which a Non-Banking
Financial Company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit annually
as disclosed in the Statement of Profit and Loss account, before any dividend is declared.
b) Capital reserve represents the reserve created on account of amalgamation of Chola Factoring Limited in the year 2013-14.
c) Capital redemption reserve represents the amount equal to the nominal value of shares that were redeemed during the prior years.
The reserve can be utilized only for limited purposes such as issuance of bonus shares in accordance with the provisions of the
Companies Act, 2013
d) Securities premium reserve is used to record the premium on issue of shares. The premium received during the period represents the premium received towards allotment of 4,57,370 shares. The reserve can be utilized only for limited purposes such as issuance of bonus shares, buy back of its own shares and securities in accordance with the provisions of the Companies Act, 2013.
e) The general reserve is a free reserve, retained from Company''s profits and can be utilized upon fulfilling certain conditions in accordance with specific requirement of Companies Act, 2013.
f) Under IND AS 102, fair value of the options granted is required to be accounted as expense over the life of the vesting period as employee compensation costs, reflecting the period of receipt of service.
g) The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the financial position of the Company and also considering the requirements of the Companies Act, 2013. Thus, the amounts reported in retained earnings are not distributable in entirety.
h) Cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the Company accounting policies.
i) FVOCI Reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through Other Comprehensive Income.
j) Share application money pending allotment as at March 31,2020 represents amount received towards 5,000 equity shares of the Company pursuant to ESOP scheme and have been subsequently allotted.
A) Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions and where there is no legal or constructive obligation to pay further contributions. During the year, the Company recognised '' 2,953 lakhs (Previous Year - '' 2,849 lakhs) to Provident Fund under Defined Contribution Plan, '' 337 lakhs (Previous Year - '' 333 lakhs) for Contributions to Superannuation Fund and '' 49 lakhs (Previous Year - '' 106 lakhs) for Contributions to Employee State Insurance Scheme in the Statement of Profit and Loss.
B) Gratuity
The Company''s defined benefit gratuity plan requires contributions to be made to a separately administered fund. The gratuity plan is funded with Life Insurance Corporation of India (LIC). 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 member''s length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans :
1. The Company has not funded its Compensated Absences liability and the same continues to remain as unfunded as at March 31,2021.
2. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
Note : 36 SEGMENT INFORMATION
The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India
During year ending 31 March 2021, For management purposes, the Company has been organised into three operating segments based on products and services, as follows
Vehicle Finance Loans - Loans to customers against purchase of new/used vehicles, tractors, construction equipment and loan to automobile dealers.
Loan against property - Loans to customer against immovable property Home Loans - loans given for acquisition of residential property Other loans - This includes, loan against shares and other unsecured loans
The Chief Operating Decision Maker (CODM) monitors the operating results of its business units separately for making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses and is measured consistently with operating profits or losses in the financial statements. However, income taxes are managed on a entity as whole basis and are not allocated to operating segments.
(c) The Code on Social Security, 2020 ('' The Code'') relating to employee benefits during employment and post-employment benefits, received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Ministry of Labour and Employment has also released draft rules thereunder on 13 November 2020 and has invited suggestions from stakeholders, which are under consideration by the Ministry. The Company will evaluate the rules, assess the impact, if any, and account for the same once the rules are notified and become effective.
Undrawn loan commitments are commitments under which the Company is required to provide a loan under pre-sanctioned terms to the customer.
The undrawn commitments provided by the Company are predominantly in the nature of limits provided for Automobile dealers based on the monthly loan conversions and partly disbursed loans for immovable properties. These undrawn limits are converted within a short period of time and do not generally remain undisbursed / undrawn beyond one year from the reporting date. The undrawn commitments amount outstanding as at March 31, 2021 is ? 1,24,190 lakhs (? 84,535 lakhs as at March 31,2020).
The Company creates expected credit loss provision on the undrawn commitments outstanding as at the end of the reporting period and the related expected credit loss on these commitments as at March 31,2021 is ? 104 lakhs (? 131 lakhs as at March 31,2020).
Note : 40 ESOP DISCLOSURE ESOP 2007
The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 1,904,162 Equity Shares (prior to share split) in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines.
ESOP 2016
The Board at its meeting held on October 7, 2016, approved to create, and grant from time to time, in one or more tranches, not exceeding 31,25,102 Employee Stock Options to or for the benefit of such person(s) who are in permanent employment of the company including some of subsidiaries, managing director and whole time director, (other than promoter/promoter group of the company, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the company), as may be decided by the Board, exercisable into not more than 31,25,102 equity shares of Face value of '' 10 each fully paid-up, on such terms and in such manner as the Board may decide in accordance with the provisions of the applicable laws and the provisions of ESOP 2016.
In this regard, the Company has recognised expense amounting to '' 561 lakhs for employees services received during the year, shown under Employee Benefit Expenses (Refer Note 28).
The Company shares certain costs / service charges with other companies. These costs have been allocated between the Companies on a basis mutually agreed between them, which has been relied upon by the Auditors.
Note : 42 CAPITAL MANAGEMENT
The Company maintains an actively managed capital base to cover risks inherent in the business, meeting the capital adequacy requirements of Reserve Bank of India (RBI), maintain strong credit rating and healthy capital ratios in order to support business and maximise shareholder value. The adequacy of the Company''s capital is monitored by the Board using, among other measures, the regulations issued by RBI.
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.
The Company has complied in full with the capital requirements prescribed by RBI over the reported period. Refer Note 51A(i) for disclosure of capital adequacy as per applicable RBI regulations.
42.1 RISK MANAGEMENT
The company is committed to create value for its stakeholders through sustainable business growth and with that intent has put in place a robust risk management framework to promote a proactive approach in reporting, evaluating and resolving risks associated with the business. Given the nature of the business the company is engaged in, the risk framework recognizes that there is uncertainty in creating and sustaining such value as well as in identifying opportunities. Risk management is therefore made an integral part of the company''s effective management practice.
Risk Management Framework:
Company''s risk management framework is based on
(a) Clear understanding and identification of various risks
(b) Disciplined risk assessment by evaluating the probability and impact of each risk
(c) Measurement and monitoring of risks by establishing key risk indicators with thresholds for all critical risks and
(d) Adequate review mechanism to monitor and control risks.
Company''s risk management division works as a value center by constantly engaging with the business providing reports based on key analysis and insights. The key risks faced by the company are credit risk, liquidity risk, interest rate risk, operational risk, reputational and regulatory risk, which are broadly classified as credit risk, market risk and operational risk. The company has a well-established risk reporting and monitoring framework. The in-house developed risk monitoring tool, Chola Composite Risk Index, measures the movement of top critical risks. This provides the level and direction of the risks, which are arrived at based on the two level risk thresholds for the identified key risk indicators and are aligned to the overall company''s risk appetite framework approved by the board. The company''s risk management initiatives and risk MIS are reviewed monthly by the top management. This process enables the company to reassess the top critical risks in a changing environment that need to be focused on.
Risk Governance structure:
The company''s overall risk governance is handled by three lines of defense to ensure the effectiveness of an organization''s risk management framework including monitoring and assurance functions within the organization.
a) Under the first line of defence, risk champions are identified in each functional and business unit to take ownership, responsibility and accountability for directly assessing, controlling and mitigating risks.
b) The risk management team under the guidance of the risk management committee acts as the second line of defense. The risk management division has established a comprehensive risk management framework across the business and provides appropriate reports on risk exposures and analysis in its pursuit of creating awareness across the company about risk management. The RMC of the board meets minimum of four times a year and reviews the risk management policy, implementation of risk management framework, monitoring of critical risks, and review of various other initiatives with a structured annual plan.
c) Third line of defense constitutes internal auditors, internal external auditors and statutory auditors provide assurance to the audit committee and senior management on the effectiveness of internal governance and risk processes.
42.2 CREDIT RISK
Credit risk arises when a borrower is unable to meet his financial obligations to the lender. This could be either because of wrong assessment of the borrower''s payment capabilities or due to uncertainties in his future earning potential. The effective management of credit risk requires the establishment of appropriate credit risk policies and processes. The company has comprehensive and well-defined credit policies across various businesses, products and segments, which encompass credit approval process for all businesses along with guidelines for mitigating the risks associated with them. The appraisal process includes detailed risk assessment of the borrowers, physical verifications and field visits. The company has a robust post sanction monitoring process to identify credit portfolio trends and early warning signals. This enables it to implement necessary changes to the credit policy, whenever the need arises. Also, being in asset financing business, most of the company''s lending is covered by adequate collaterals from the borrowers. The company has a robust online application underwriting model to assess the credit worthiness of the borrower for underwriting decisions for its vehicle finance, Loan Against Property and home loan business. The company also has a well-developed model for the vehicle finance portfolio, to help business teams plan volume with adequate pricing of risk for different segments of the portfolio.
42.3 MARKET RISK
Market Risk is the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates and other asset prices. The company''s exposure to market risk is a function of asset liability management and interest rate sensitivity assessment. The company is exposed to interest rate risk and liquidity risk, if the same is not managed properly. The company continuously monitors these risks and manages them through appropriate risk limits. The Asset Liability Management Committee (ALCO) reviews market-related trends and risks and adopts various strategies related to assets and liabilities, in line with the company''s risk management framework. ALCO activities are in turn monitored and reviewed by a board sub-committee. In addition, the company has put in an Asset Liability Management (ALM) support group which meets frequently to review the liquidity position of the company.
42.4 CONCENTRATION OF RISK/EXPOSURE
Concentration of credit risk arise when a number of counterparties or exposures have comparable economic characteristics, or such counterparties are engaged in similar activities or operate in same geographical area or industry sector so that collective ability to meet contractual obligations is uniformly affected by changes in economic, political or other conditions. The Company is in retail lending business on pan India basis targeting primarily customers who either do not get credit or sufficient credit from the traditional banking sector. Vehicle Finance (consisting of new and used Commercial Vehicles, Passenger Vehicles, Tractors, Construction Equipment and Trade advance to Automobile dealers) is lending against security (other than for trade advance) of Vehicle/ Tractor / Equipment and contributes to 72% of the loan book of the Company as of March 31, 2021 (73% as of March 31, 2020). Hypothecation endorsement is made in favour of the Company in the Registration Certificate in respect of all registerable collateral. Portfolio is reasonably well diversified across South, North, East and Western parts of the country. Similarly, sub segments within Vehicle Finance like Heavy Commercial Vehicles, Light Commercial Vehicles, Car and Multi Utility Vehicles, three wheeler and Small Commercial Vehicles, Refinance against existing vehicles, older vehicles (first time buyers), Tractors and Construction Equipment have portfolio share between 10% and 6% leading to well diversified sub product mix.
Loan Against Property is mortgage loan against security of existing immovable property (primarily self-occupied residential property) to selfemployed non-professional category of borrowers and contributes to 22% of the lending book of the Company as of March 31,2021 (21% as of March 31, 2020). Portfolio is concentrated in North 38% with small presence in East (4%). The remaining is evenly distributed between South and Western parts of the country. South has 32% and West contributes 25%.
The Concentration of risk is managed by Company for each product by its region and its sub-segments. Company did not overly depend on few regions or sub-segments as of March 31, 2021.
42.5 OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. The operational risks of the company are managed through comprehensive internal control systems and procedures and key back up processes. In order to further strengthen the control framework and effectiveness, the company has established risk control self-assessment at branches to identify process lapses by way of exception reporting. This enables the management to evaluate key areas of operational risks and the process to adequately mitigate them on an ongoing basis. The company also undertakes risk based audits on a regular basis across all business units / functions. While examining the effectiveness of control framework through self-assessment, the risk-based audit would assure effective implementation of selfcertification and internal financial controls adherence, thereby, reducing enterprise exposure.
The company has put in place a robust Disaster Recovery (DR) plan, which is periodically tested. Business Continuity Plan (BCP) is further put in place to ensure seamless continuity of operations including services to customers, when confronted with adverse events such as natural disasters, technological failures, human errors, terrorism, etc. Periodic testing is carried out to address gaps in the framework, if any. DR and BCP audits are conducted on a periodical basis to provide assurance regarding the effectiveness of the company''s readiness. The company is continuously engaged in creating risk awareness and culture across the organisation through training on risk management tools and communication through risk e-newsletters.
(vi) Institutional set-up for liquidity risk management:
Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources and adopted a policy of availing funding in line with the tenor and repayment pattern of its receivables and monitors future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of unencumbered receivables which could be used to secure funding by way of assignment if required. The Company also has lines of credit that it can access to meet liquidity needs. These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The ALCO provides strategic direction and guidance on liquidity risk management. A sub-committee of the ALCO, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the ALM perspective. This sets the boundaries for daily cash flow management.
Notes:
1) A "Significant Counterparty" is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of NBFC-NDSI''s, NBFC- D''s total liabilities and 10% for other non deposit taking NBFCs.
2) A "significant instrument/product" is defined as a single instrument/product of group of similar instruments/products which in aggregate amount to more than 1% of the NBFC- NDSI''s, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs.
3) Total Borrowing has been computed as Gross Total Debt basis extant regulatory ALM guidelines.
4) Total Liabilities has been computed as Total Assets less Equity share capital less Reserve & Surplus and computed basis extant regulatory ALM guidelines.
5) Commercial Paper for stock ratio is the Gross outstanding (i.e. Maturity amount).
6) Other Short-term Liabilities has been computed as Total Short-term Liabilities less Commercial paper less Non-convertible debentures (Original maturity of less than one year), basis extant regulatory ALM guidelines.
7) Public Funds = Total Liabilities as computed above.
Refer Note No 47 for the summary of maturity profile of undiscounted cash flows of the Company''s financial assets and financial liabilities as at reporting period.
Refer Note no 56 for Liquidity Coverage Ratio 42.7 FOREIGN CURRENCY RISK
Foreign Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk for the Company arise majorly on account of foreign currency borrowings. The Company manages this foreign currency risk by entering in to cross currency swaps and forward contract. When a derivative is entered in to for the purpose of being as hedge, the Company negotiates the terms of those derivatives to match with the terms of the hedge exposure. The Company''s policy is to fully hedge its foreign currency borrowings at the time of drawdown and remain so till repayment.
The Company holds derivative financial instruments such as Cross currency interest rate swap to mitigate risk of changes in exchange rate in foreign currency and floating interest rate.
The Counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in market place.
42.9 Collateral and other Credit Enhancements
Although collateral can be an important mitigation of credit risk, it is the Company''s practice to lend on the basis of the customer''s ability to meet the obligations out of cash flow resources other than placing primary reliance on collateral and other credit risk enhancements.
The Company obtains first and exclusive charge on all collateral that it obtains for the loans given. Vehicle Finance and Loan Against Property loans are secured by collateral at the time of origination. In case of Vehicle loans, Company values the vehicle either through proforma invoice (for new vehicles) or using registered valuer for used vehicles. In case of Loan Against Property loans, the value of the property at the time of origination will be arrived by obtaining two valuation reports from Company''s empanelled valuers.
Hypothecation endorsement is obtained in favour of the Company in the Registration Certificate of the Vehicle/ Tractor / Equipment funded under the vehicle finance category.
Immovable Property is the collateral for Loan Against Property loans. Security Interest in favour of the Company is created by Mortgage through deposit of title deed which is registered wherever required by law.
In respect of Other loans, Home loans follow the same process as Loan Against Property and pledge is created in favour for the Company for loan against securities.
The Company does not obtain any other form of credit enhancement other than the above. 99% of the Company''s term loan are secured by way of tangible Collateral.
Any surplus remaining after settlement of outstanding debt by way of sale of collateral is returned to the customer / borrower.
The Management assessed that cash and cash equivalents, bank balance other than Cash and cash equivalents, receivable, other financial assets, payables and other financial liabilities approximates their carrying amount largely due to short term maturities of these instruments. The fair value of the investments have been considered as the carrying value of these investments since these investments have been made in the subsidiaries of the Company.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values of financial assets or liabilities disclosed under level 2 category.
i) The fair value of loans have estimated by discounting expected future cash flows using discount rate equal to the rate near to the reporting date of the comparable product.
ii) The fair value of debt securities, borrowings other than debt securities and subordinated liabilities have estimated by discounting expected future cash flows discounting rates.
iii) Derivatives are fair valued using observable inputs / rates.
iv) The fair value of investment in Government securities are derived from rate equal to the rate near to the reporting date of the comparable product.
The Company has taken office premises on lease for its operations.
The Company''s obligations under its leases are secured by the lessor''s title to the leased assets. Generally, the Company is restricted from assigning and subleasing the leased assets and some contracts require the Company to maintain certain financial ratios. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below.
The Company also has certain leases of machinery with lease terms of 12 months or less. The Company applies the ''short-term lease'' recognition exemptions for these leases.
The Liquidity Coverage Ratio (LCR) is a key reform recommended by the Basel Committee for a resilient and stable financial sector.
In order to complement the "Sound Principles of Liquidity Risk Management and Supervision" introduced in 2008 by the Committee, the Committee has further strengthened its liquidity framework by developing two minimum standards for funding liquidity. One of these standards is the Liquidity Coverage Ratio and has as its objective the promotion of short-term resilience of the liquidity risk profile of financial institutions by ensuring that it has sufficient High Quality Liquid Assets (HQLA) to survive a significant stress scenario lasting for one month. The Liquidity Coverage Ratio is expected to improve the financial sector''s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy.
Compliance with the prescribed Liquidity Coverage Ratio ensures that Non-Banking Financial Companies have an adequate stock of unencumbered High-quality liquid assets (HQLA) that can be converted easily and immediately into cash to meet their liquidity needs for a 30 calendar day liquidity stress scenario. The cash outflows and inflows have been stressed by 115% and 75% of their respective original values. The key drivers on the inflow side are the expected collections from the performing assets of the company and on the outflow side the scheduled maturities.
The RBI notified the Liquidity Coverage Ratio as applicable for Non-Banking Financial Companies with effect from December 1,2020 (vide circular dated November 4, 2019 on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies). The company has been monitoring liquidity from the Liquidity Coverage Ratio standpoint from Q1 of the financial year, for the purpose of disclosure, the company has reported Liquidity Coverage Ratio from December 1,2020, the date on which the regulation came into force. The disclosures on Liquidity coverage ratio are made for Q3 (comprising only December 2020) and Q4 (comprising January, February and March 2021). The movements in the drivers of Liquidity Coverage Ratio outlined in the following paragraphs have to be read in this context.
The Liquidity Coverage Ratio maintained by the company for the quarters ended December 31,2020 and March 31,2021 stand at 168% and 99% respectively. The quarterly Liquidity Coverage Ratio is based on the simple average of monthly observations for each quarter and are well above the minimum regulatory requirement of 50%.
The average High quality liquid assets held in Q3 and Q4 20-21 was '' 1,52,770 lakhs and '' 1,48,093 lakhs respectively and was entirely held in Government Securities which are classified as Level 1 assets with no haircut.
The net cash outflow position has gone up from '' 3,64,789 lakhs in Q3 to '' 5,98,662 lakhs in Q4. This increase of '' 2,33,873 lakhs is on account of Q4 being a heavy month in terms of loan maturities. The net cash inflow position reduced marginally from '' 5,77,852 lakhs in Q3 to '' 5,40,941 lakhs in Q4 driven mainly by investment surpluses in the form of term deposits and current account balances. Contracted undrawn commitments with customers constitute 18% of the stressed cash outflows. Contingent liabilities which are likely to materialize in 30 days constitute 2% of the stressed cash outflow. The company has fully hedged all its foreign currency borrowings at the time of drawal of each loan. Hence there is no risk to the company on account of derivatives or collateral calls thereof or mismatch in currency.
Liquidity Management of the company is supervised by the Asset Liability Committee. The management is of the view that the company has in place robust processes to monitor and manage liquidity risks and sufficient liquidity cover to meet its likely future short term requirements.
The company has a diversified mix of borrowings with respect to the source, type of instrument, tenor and nature of security. The Asset Liability Committee constantly reviews and monitors the funding mix and ensures the optimum mix of funds based on the cash flow requirements, market conditions and keeping the interest rate view in consideration. Additionally, the Company has lines of credit that it can access to meet liquidity needs.
These are reviewed by the Asset Liability Committee (ALCO) on a monthly basis. The Asset Liability Committee provides strategic direction and guidance on liquidity risk management. A sub-committee of the Asset Liability Committee, comprising members from the Treasury and Risk functions, monitor liquidity risks on a weekly basis and decisions are taken on the funding plan and levels of investible surplus, from the Asset Liability Management perspective. This sets the boundaries for daily cash flow management.
Prior period figures have been regrouped, wherever necessary, to conform to the current period presentation.
Mar 31, 2019
1. Corporate information
(âthe Companyâ) (CIN L65993TN1978PLC007576) is a public limited company domiciled in India. The Company is listed on Bombay Stock Exchange and National Stock Exchange. The Company is one of the premier diversified non-banking finance companies in India, engaged in providing vehicle finance, home loans and Loan against property.
The standalone financial statements are presented in INR which is also functional currency of the Company.
2. Basis of preparation
The standalone 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).
For all periods up to and including the year ended March 31, 2018, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). These financial statements for the year ended 31 March 2019 are the first the Company has prepared in accordance with Ind AS. Refer to notes for information on how the Company adopted Ind AS.
The standalone financial statements have been prepared on a historical cost basis, except for fair value through other comprehensive income (FVOCI) instruments, derivative financial instruments and certain financial assets and financial liabilities measured at fair value (refer accounting policy regarding financial instruments).
The standalone financial statements are presented in Indian Rupees (INR) and all values are rounded to the nearest lakhs, except when otherwise indicated.
The regulatory disclosures as required by Master Directions for Non-Banking Financial Company - Systemically Important Non-Deposit taking Company Directions, 2016 issued by the RBI (-RBI Master Directions-) to be included as a part of the Notes to Accounts are not prepared as per the Ind AS financial statements. Note 49 to the standalone financial statements provides the basis of preparation of such regulatory disclosures included in Note 50 to Note 53.
2.1 Presentation of financial statements
The Company presents its balance sheet in order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (noncurrent) is presented in notes to the financial statements.
Financial assets and financial liabilities are generally reported gross in the balance sheet. They are only offset and reported net when, in addition to having an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event, the parties also intend to settle on a net basis in all of the following circumstances
- The normal course of business
- The event of default
- The event of insolvency or bankruptcy of the Company and/or its counterparties
All loans are in India granted to individuals or entities other than public sector
Secured means exposures secured wholly or partly by hypothecation of automobile assets and / or pledge of securities and / or equitable mortgage of property and/ or corporate guarantees or personal guarantees and/ or undertaking to create a security.
Term loans Includes unsecured short term loans to a subsidiary and associate. These loans have been classified under Stage 1 Category at the various reporting periods and related impairment provision as per the Company-s accounting policy has been created. The details of the same are disclosed below:
Note: The Company has elected to continue with the carrying value for all of its property as recognised in the financial statements as at the date of transition to Ind AS i.e. 1st April, 2017, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. The carrying value as at 1st April, 2017 amounting to Rs.5 lakhs of Investment Property represents gross cost of Rs.12 lakhs net of accumulated depreciation of Rs.7 lakhs as at March 31, 2017
*Additions represents transfer from Property plant and Equipment.
The Company-s investment property consists of 3 properties as at 31st March, 2019. Company has let out one property as of 31st March, 2019.
Note
1. The company has elected to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS i.e. 1st April, 2017, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. The carrying value as at 1st April, 2017 amounting to Rs.11,809 lakhs of Property, plant and equipment represents gross cost of Rs.23,534 lakhs net of accumulated depreciation of Rs.11,725 lakhs as at 31st March, 2017.
2. Details of Immovable properties of land and buildings whose title deeds have been pledged in favour of Trustees for the benefit of debenture holders as security has been explained in Note 17.1
The Company has elected to continue with the carrying value for all of its intangible assets as recognised in the financial statements as at the date of transition to Ind AS i.e. 1st April, 2017, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. The carrying value as at 1st April, 2017 amounting to Rs.2,195 lakhs of Intangible assets represents gross cost of Rs.6,105 lakhs net of accumulated depreciation of Rs.3,910 lakhs as at 31st March, 2017.
All debt securities in india
3.1 Security
(i) Redeemable Non-Convertible Debentures - Medium-term is secured by way of specific charge on assets under hypothecation relating to Vehicle Finance, Home Equity, Bills discounted and other loans and pari passu charge on immovable property situated at Ahmedabad and Chennai.
(ii) The company has not defaulted in the repayment of dues to its lenders.
(iii) Details of repayment such as date of repayment, interest rate and amount to be paid have been disclosed in note 17.2 based on the Contractual terms basis.
4.1 Security
(i) Secured term loans from banks and financial institution are secured by way of specific /paripassu charge on assets under hypothecation relating to automobile financing and loans against immovable property.
(ii) Loan repayable on demand is in the nature of Cash Credit from banks are secured by way of floating charge on assets under hypothecation and other assets
(iii) The Company has not defaulted in the repayment of dues to its lenders.
(iv) Securitisation borrowing represents the net outstanding value (Net of Investment in Pass-through Certificates) of the sale proceeds received by the Company from securitisation trust in respect of loan assets transferred by the Company pursuant to Deed of Assignment. The Company has provided Credit enhancement to the trust by way of cash collateral and Bank guarantee. Refer note 31(1) & 50(a) for further details.
(v) Details of repayment such as date of repayment, interest rate and amount to be paid have been disclosed in note 18.2 based on Contractual terms basis.
All Subordinated liabilities have been contracted in India
The Company has not defaulted in the repayment of dues to its lenders.
Details of repayment such as date of repayment, interest rate and amount to be paid have been disclosed in note 19.1 based on the Contractual terms basis.
a) Terms/rights attached to Equity shares
The Company has only one class of equity shares having a par value of Rs.10 per share. All these shares have the same rights and preferences with respect to payment of dividend, repayment of capital and voting. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except for interim dividend.
Repayment of capital will be in proportion to the number of equity shares held.
a) Statutory reserve represents the reserve created as per Section 45IC of the RBI Act, 1934, pursuant to which a Non-Banking Financial Company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the Statement of Profit and Loss account, before any dividend is declared.
b) Capital reserve represents the reserve created on account of amalgamation of Cholamandalam Factoring Limited in the year 2013Rs.14.
c) Capital redemption reserve represents the amount equal to the nominal value of shares that were redeemed during the prior years. The reserve can be utilized only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013
d) Securities premium reserve is used to record the premium on issue of shares. The premium received during the year represents the premium received towards allotment of 27,742 shares. The reserve can be utilized only for limited purposes such as issuance of bonus shares, buy back of its own shares and securities in accordance with the provisions of the Companies Act, 2013.
e) The general reserve is a free reserve, retained from Group-s profits and can be utilized upon fulfilling certain conditions in accordance with statute of the relevant Act.
f) Under IND AS 102, fair value of the options granted is required to be accounted as expense over the life of the vesting period as employee compensation costs, reflecting the period of receipt of service. Stock options granted but not vested as on the transition date were valued for expired period, calculated from the grant date till date of transition, and were credited to Share Based Payment reserve.
g) The amount that can be distributed by the Company as dividends to its equity shareholders is determined based on the financial position of the Company and also considering the requirements of the Companies Act, 2013. Thus, the amounts reported above are not distributable in entirety.
h) Cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging instruments entered into for cash flow hedges, which shall be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the company accounting policies.
i) FVOCI Reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through Other Comprehensive Income.
Proposed dividend
The Board of Directors of the company have recommended a final dividend of 20% being Rs.2 per share on the equity shares of the company, for the year ended 31st March, 2019 ( Rs.2 per share Rs.31st March, 2018) which is subject to approval of shareholders. Consequently the proposed dividend has not been recognised in the books in accordance with IND AS 10.
d) Due to Company-s nature of business and the type of contracts entered with the customers, the company does not have any difference between the amount of revenue recognized in the statement of profit and loss and the contracted price.
e) Impairment recognised for Contract asset is Nil (Nil Rs.31st March, 2018)
f) Performance Obligation:
Servicing and Collection fee on Assignment: to collect the receivable from the customer and transfer the same to the assignee representative.
Other Servicing Income: To enable space for advertising at the branches and other related services.
g) There are no significant return / refund / other obligations for any of the above mentioned services.
a) Share application money pending allotment as at March 31, 2017 represents amount received towards 10,261 Equity shares of the Company pursuant to ESOP scheme and have been subsequently allotted.
c) Income tax reconciliation
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 India-s domestic tax rate for the years ended 31st March 2019 and 2018 is, as follows:
Note : 5 TRANSFER OF FINANCIAL ASSETS
5.1 Transferred financial assets that are not derecognised in their entirety
The following tables provide a summary of financial assets that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition, together with the associated liabilities:
A) Securitisation
The company has Securitised certain loans, however the company has not transferred substantially all risks and rewards, hence these assets have not been de-recognised in its entirety.
B) Direct bilateral assignment
The company has sold some loans (measured at amortised cost) by way of direct bilateral assignment, as a source of finance.
As per the terms of these deals, since substantial risk and rewards related to these assets were transferred to the buyer, the assets have been de-recognised from the Company-s balance sheet.
Note : 6 MICRO, SMALL & MEDIUM ENTERPRISES
Based on and to the extent of the information received by the company from the suppliers during the year regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and relied upon by the auditors, there are no amounts due to MSME as at 31st March 2019 and as at 31st March 2018.
Note : 7 RETIREMENT BENEFIT
A) Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions and where there is no legal or constructive obligation to pay further contributions. During the year, the Company recognised Rs.2,181 lakhs (Previous Year -Rs.1,827 lakhs) to Provident Fund under Defined Contribution Plan, Rs.256 lakhs (Previous Year - Rs.199 lakhs) for Contributions to Superannuation Fund and Rs.208 lakhs (Previous Year - Rs.361 lakhs) for Contributions to Employee State Insurance Scheme in the Statement of Profit and Loss.
B) Gratuity
The company-s defined benefit gratuity plan requires contributions to be made to a separately administered fund. The gratuity plan is funded with Life Insurance Corporation of India (LIC). 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 member-s length of service and salary at retirement age. The following tables summarise the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet for the respective plans :
Notes:
1. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
2. The Company-s best estimate of contribution during the next year is Rs.1,738 lakhs.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
4. The entire Plan Assets are invested in insurer managed funds with Life Insurance Corporation of India (LIC).
Notes:
1. The company has not funded its Compensated Absences liability and the same continues to remain as unfunded as at 31st March, 2019.
2. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
Note : 8 SEGMENT INFORMATION
The Company is primarily engaged in the business of financing. All the activities of the company revolve around the main business. Further, the Company does not have any separate geographic segments other than India
During year ending 31st March 2019, For management purposes, the Company has been organised into three operating segments based on products and services, as follows
Vehicle Finance Loans - Loans to customers against purchase of new/used vehicles, tractors, construction equipment and loan to automobile dealers. Home equity - Loans to customer against immovable property Other loans - This includes loans given for acquisition of residential property, loan against shares and other unsecured loans
The Chief Operating Decision Maker (CODM) monitors the operating results of its business units separately for making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses and is measured consistently with operating profits or losses in the financial statements. However, income taxes are managed on a entity as whole basis and are not allocated to operating segments.
In computing the segment information, certain estimates and assumptions have been made by the management, which have been relied upon.
As the asset are allocated to segment based on certain assumptions, hence additions to the Property, plant and equipment have not disclosed separately for each specific segment.
There are no revenue from transactions with a single external customer or counter party which amounted to 10% or more of the Company-s total revenue in the Current year and Previous year.
Note : 9 RELATED PARTY DISCLOSURES
List of Related Parties
- Holding Company : Cholamandalam Financial Holdings Limited (formerly known as TI Financial Holdings Limited)
- Entity having significant influence over holding company: Ambadi Investments Limited
- Subsidiaries of Entity having significant influence over holding company: Parry Enterprises Limited and Parry Agro Limited.
- Fellow Subsidiaries: Cholamandalam MS General Insurance Company Limited, Cholamandalam Health Insurance Limited
- Joint Venture of Holding Company: Cholamandalam MS Risk Services Limited
- Subsidiaries: Cholamandalam Securities Limited, Cholamandalam Home Finance Limited (Formerly known as Cholamandalam Distribution Services Limited), White Data Systems India Private Limited (upto September 2018)
- Associate : White Data Systems India Private Limited (Effective October 2018)
- Key Managerial Personnel:
a) Mr. S. Vellayan, Managing Director (upto August 19, 2017)
b) Mr. N. Srinivasan, Executive Vice Chairman and Managing Director (from August 19, 2017 upto August 18, 2018) ;
c) Mr. Arun Alagappan, Executive Director (From August 19, 2017)
d) Mr. D. Arulselvan, Chief Financial Officer
e) Ms. P. Sujatha, Company Secretary
- Non-Executive Directors
1. Mr. M.B.N. Rao (upto July 26, 2018)
2. Mr. V. Srinivasa Rangan
3. Ms. Bharati Rao
4. Mr. Ashok Kumar Barat
5. Mr. Nalin Mansukhlal Shah (Upto July 27, 2017)
6. Mr. M.M. Murugappan (Upto October 31, 2017 for FY 17Rs.18, From May 31, 2018 for FY 18Rs.19)
7. Mr. N. Ramesh Rajan (From October 30, 2018)
8. Mr. Rohan Verma (From March 25, 2019))
i) The company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.
ii) 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.
iii) The company does not expect any reimbursement in respect of the above contingent liabilities.
iv) Future Cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various forums/authorities.
(c) The Supreme Court had passed judgement on 28th February 2019 that all allowances paid to employees are to be considered for the purposes of PF wage determination. There are numerous interpretative issues relating to the above judgement. As a matter of caution, the company has complied the same on prospective basis from the date of the SC order.
Undrawn loan commitments are commitments under which the Company is required to provide a loan under pre-sanctioned terms to the customer.
The undrawn commitments provided by the Company are predominantly in the nature of limits provided for Automobile dealers based on the monthly loan conversions and partly disbursed loans for immovable properties. These undrawn limits are converted within a short period of time and do not generally remain undisbursed / undrawn beyond one year from the reporting date. The undrawn commitments amount outstanding as at 31st March, 2019 is Rs.73,345 lakhs (Rs.56,632 lakhs as at 31st March, 2018 and Rs.38,670 lakhs as at 1st April, 2017).
The Company creates expected credit loss provision on the undrawn commitments outstanding as at the end of the reporting period and the related expected credit loss on these commitments as at 31st March, 2019 is Rs.51 lakhs (Rs.12 lakhs as at 31st March, 2018 and Rs.10 lakhs as at 1st April, 2017).
Note : 10. ESOP DISCLOSURE ESOP 2007
The Board at its meeting held on 22nd June, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 1,904,162 Equity Shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines.
ESOP 2016
The Board at its meeting held on 27th October, 2016, approved to create, and grant from time to time, in one or more tranches, not exceeding 31,25,102 Employee Stock Options to or for the benefit of such person(s) who are in permanent employment of the company including some of subsidiaries managing director and whole time director, (other than promoter/promoter group of the company, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the company), as may be decided by the board, exercisable into not more than 31,25,102 equity shares of face value of Rs.10/- each fully paid-up, on such terms and in such manner as the board may decide in accordance with the provisions of the applicable laws and the provisions of ESOP 2016.
In this regard, the Company has recognised expense amounting to Rs.798 lakhs for employees services received during the year, shown under Employee Benefit Expenses (Refer Note 28).
The shareholders of the company, at the 34th Annual General Meeting held on July 30, 2012, authorised extension of exercise period from 3 years from the date of vesting to 6 years from the date of vesting. Accordingly, the Company has measured the fair value of the options using the Black Scholes model immediately before and after the date of modification to arrive at the incremental fair value arising due to the extension of the exercise period. The incremental fair value so calculated is recognised from the modification date over the vesting period in addition to the amount based on the grant date fair value of the stock options.
The incremental (benefit)/cost due to modification of the exercise period from 3 years to 6 years from the date of vesting for the year ended 31st March, 2019 is Rs.Nil (31st March, 2018 â Rs. Nil)
The fair value of the options has been calculated using the Black Scholes model on the date of modification.
Note : 11. SHARING OF COSTS
The company shares certain costs / service charges with other companies in the Group. These costs have been allocated between the Companies on a basis mutually agreed between them, which has been relied upon by the Auditors.
Note : 12. CAPITAL MANAGEMENT
The company maintains an actively managed capital base to cover risks inherent in the business, meeting the capital adequacy requirements of Reserve Bank of India (RBI), maintain strong credit rating and healthy capital ratios in order to support business and maximise shareholder value. The adequacy of the Company-s capital is monitored by the Board using, among other measures, the regulations issued by RBI.
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.
The company has complied in full with the capital requirements prescribed by RBI over the reported period. Refer Note 52A(i) for disclosure of capital adequacy as per applicable RBI regulations.
12.1 Risk Management
The company has put in place a robust risk management framework to promote a proactive approach in reporting, evaluating and resolving risks associated with the business. Given the nature of the business, the company is engaged in, the risk framework recognizes that there is uncertainty in creating and sustaining value as well as in identifying opportunities. Risk management is therefore made an integral part of the company-s effective management practice.
Risk Management Framework: The company-s risk management framework is based on (a) clear understanding and identification of various risks (b) disciplined risk assessment by evaluating the probability and impact of each risk (c) Measurement and monitoring of risks by establishing Key Risk Indicators with thresholds for all critical risks and (d) adequate review mechanism to monitor and control risks.
The company has a well-established risk reporting and monitoring framework. The in-house developed risk monitoring tool, Chola Composite Risk Index, highlights the movement of top critical risks. This provides the level and direction of the risks, which are arrived at based on the two level risk thresholds for the identified Key Risk Indicators and are aligned to the overall company-s risk appetite framework approved by the board. The company also developed such risk reporting and monitoring mechanism for the risks at business / vertical level. The company identifies and monitors risks periodically. This process enables the company to reassess the top critical risks in a changing environment that need to be focused on.
Risk Governance structure: The Company-s risk governance structure operates with a robust board and risk management committee with a clearly laid down charter and senior management direction and oversight. The board oversees the risk management process and monitors the risk profile of the company directly as well as through a board constituted risk management committee. The committee, which meets a minimum of four times a year, reviews the risk management policy, implementation of risk management framework, monitoring of critical risks, and review of various other initiatives with a structured annual plan. The risk management division has established a comprehensive risk management framework across the business and provides appropriate reports on risk exposures and analysis in its pursuit of creating awareness across the company about risk management. The company-s risk management initiatives and risk MIS are reviewed monthly by the managing director and business heads. The key risks faced by the company are credit risk, liquidity risk, interest rate risk, operational risk, foreign currency risk, reputational and regulatory risk, which are broadly classified as credit risk, market risk, operational risk, liquidity and foreign currency risk.
12.2 Credit Risk
Credit risk arises when a borrower is unable to meet financial obligations to the lender. This could be either because of wrong assessment of the borrower-s payment capabilities or due to uncertainties in future. The effective management of credit risk requires the establishment of appropriate credit risk policies and processes.
The company has comprehensive and well-defined credit policies across various businesses, products and segments, which encompass credit approval process for all businesses along with guidelines for mitigating the risks associated with them. The appraisal process includes detailed risk assessment of the borrowers, physical verifications and field visits. The company has a robust post sanction monitoring process to identify credit portfolio trends and early warning signals. This enables it to implement necessary changes to the credit policy, whenever the need arises. Also, being in asset financing business, most of the company-s lending is covered by adequate collaterals from the borrowers. The company developed application scoring model to assess the credit worthiness of the borrower for underwriting decisions for its vehicle finance, home equity and home loan business.
The company also has a well developed business planning model for the vehicle finance portfolio, to help business teams plan volume with adequate pricing of risk for different segments of the portfolio.
12.3 Market Risk
Market Risk is the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates and other asset prices. The company-s exposure to market risk is a function of asset liability management activities. The company is exposed to interest rate risk and liquidity risk.
The Company continuously monitors these risks and manages them through appropriate risk limits. The Asset Liability Management Committee (ALCO) reviews market-related trends and risks and adopts various strategies related to assets and liabilities, in line with the company-s risk management framework. ALCO activities are in turn monitored and reviewed by a board sub-committee.
12.4 Concentration of Risk/Exposure
Concentration of credit risk arise when a number of counterparties or exposures have comparable economic characteristics, or such counterparties are engaged in similar activities or operate in same geographical area or industry sector so that collective ability to meet contractual obligations is uniformly affected by changes in economic, political or other conditions. The Company is in retail lending business on pan India basis targeting primarily customers who either do not get credit or sufficient credit from the traditional banking sector. Vehicle Finance (consisting of new and used Commercial Vehicles, Passenger Vehicles, Tractors, Construction Equipment and Trade advance to Automobile dealers) is lending against security (other than for trade advance) of Vehicle/ Tractor / Equipment and contributes to 74% of the loan book of the Company as of 31st March, 2019 (73% as of 31st March, 2018). Hypothecation endorsement is made in favour of the Company in the Registration Certificate in respect of all registerable collateral. Portfolio is reasonably well diversified across South, North, East and Western parts of the country. Similarly, sub segments within Vehicle Finance like Heavy Commercial Vehicles, Light Commercial Vehicles, Car and Multi Utility Vehicles, three wheeler and Small Commercial Vehicles, Refinance against existing vehicles, older vehicles (first time buyers), Tractors and Construction Equipment have portfolio share between 5% and 22% leading to well diversified sub product mix.
Home Equity is mortgage loan against security of existing immovable property (primarily self-occupied residential property) to self employed non-professional category of borrowers and contributes to 21% of the lending book of the company as of 31st March, 2019 (24% as of 31st March, 2018). Portfolio is concentrated in North (41%) with small presence in East (4%). The remaining is evenly distributed between South and Western parts of the country.
The Concentration of risk is managed by company for each product by its region and its subsegments. Company did not overly depend on few regions or sub-segments as of March 31, 2019.
12.5 Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events.
The operational risks of the company are managed through comprehensive internal control systems and procedures and key back up processes. In order to further strengthen the control framework and effectiveness, the company has established risk control self assessment at branches to identify process lapses by way of exception reporting. This enables the management to evaluate key areas of operational risks and the process to adequately mitigate them on an ongoing basis. The company also undertakes Risk based audits on a regular basis across all business units / functions. While examining the effectiveness of control framework through self-assessment, the risk-based audit would assure effective implementation of self-certification and internal financial controls adherence, thereby, reducing enterprise exposure.
The company has put in place a robust Disaster Recovery (DR) plan, which is periodically tested. Business Continuity Plan (BCP) is further put in place to ensure seamless continuity of operations including services to customers, when confronted with adverse events such as natural disasters, technological failures, human errors, terrorism, etc. Periodic testing is carried out to address gaps in the framework, if any. DR and BCP audits are conducted on a periodical basis to provide assurance regarding the effectiveness of the company-s readiness.
12.6 Liquidity Risk
Liquidity risk is defined as the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the company on acceptable terms. To limit this risk, management has arranged for diversified funding sources and adopted a policy of availing funding in line with the tenor and repayment pattern of its receivables and monitors future cash flows and liquidity on a daily basis. The company has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of unencumbered receivables which could be used to secure funding by way of assignment if required. The company also has lines of credit that it can access to meet liquidity needs.
Refer Note No 47 for the summary of maturity profile of undiscounted cashflows of the company-s financial assets and financial liabilities as at reporting period.
12.7 Foreign Currency Risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk for the company arise majorly on account of foreign currency borrowings. The company manages this foreign currency risk by entering in to cross currency swaps and forward contract. When a derivative is entered in to for the purpose of being as hedge, the company negotiates the terms of those derivatives to match with the terms of the hedge exposure. The company-s policy is to fully hedge its foreign currency borrowings at the time of drawdown and remain so till repayment.
The company holds derivative financial instruments such as Cross currency interest rate swap to mitigate risk of changes in exchange rate in foreign currency and floating interest rate. The Counterparty for these contracts is generally a bank. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in market place.
12.8 Collateral and other Credit Enhancements
Although collateral can be an important mitigation of credit risk, it is the Company-s practice to lend on the basis of the customer-s ability to meet the obligations out of cash flow resources other than placing primary reliance on collateral and other credit risk enhancements.
The company obtains first and exclusive charge on all collateral that it obtains for the loans given. Vehicle Finance and Home Equity loans are secured by collateral at the time of origination. In case of Vehicle loans, Company values the vehicle either through proforma invoice (for new vehicles) or using registered valuer for used vehicles. In case of Home equity loans, the value of the property at the time of origination will be arrived by obtaining two valuation reports from Company-s empanelled valuers.
Hypothecation endorsement is obtained in favour of the Company in the Registration Certificate of the Vehicle/ Tractor / Equipment funded under the vehicle finance category.
Immovable Property is the collateral for Home Equity loans. Security Interest in favour of the Company is created by Mortgage through deposit of title deed which is registered wherever required by law.
In respect of Other loans, Home loans follow the same process as Home Equity and pledge is created in favour for the Company for loan against securities.
The company does not obtain any other form of credit enhancement other than the above. 99% of the Company-s term loan are secured by way of tangible Collateral.
Any surplus remaining after settlement of outstanding debt by way of sale of collateral is returned to the customer / borrower.
Note : 13 EVENTS AFTER REPORTING DATE
There have been no events after the reporting date that require disclosure in the financial statements.
Note : 14
14.1 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 company -s financial instruments that are not carried at fair value in the balance sheet. This table does not include the fair values of non-financial assets and non-financial liabilities.
The Management assessed that cash and cash equivalents, bank balance other than Cash and cash equivalents, receivable, other financial assets, payables and other financial liabilities approximates their carrying amount largely due to short term maturities of these instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values of financial assets or liabilities disclosed under level 2 category.
i) The fair value of loans have estimated by discounting expected future cash flows using discount rate equal to the rate near to the reporting date of the comparable product.
ii) The fair value of debt securities, borrowings other than debt securities and subordinated liabilities have estimated by discounting expected future cash flows discounting rate near to report date based on comparable rate / market observable data.
Note : 15 FIRST-TIME ADOPTION OF IND AS
These financial statements, for the year ended 31st March, 2019, are the first financial statements the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31st March, 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 31st March, 2019, together with the comparative period data as at and for the year ended 31st March, 2018, as described in the summary of significant accounting policies. In preparing these financial statements, the Company-s opening balance sheet was prepared as at 1st April, 2017, the Company-s 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 1st April, 2017 and the financial statements as at and for the year ended 31st March, 2018.
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/ exceptions:
i) Classification and measurement of financial assets
The company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.
ii) Impairment of financial assets
The company has applied the exception related to impairment of financial assets given in Ind AS 101. It has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial assets were initially recognized and compared that to the credit risk as at 1st April, 2017
iii) Classification of debt instruments
The company has determined the classification of debt instruments in terms of whether they meet the amortised cost criteria or the FVOCI criteria based on the facts and circumstances that existed as of the transition date
iv) Deemed cost for property, plant and equipment and intangible assets
The company has elected to continue with the carrying value of all of its plant and equipment, capital work-in-progress and intangible assets recognised as of 1st April, 2017 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date
v) Determining whether an arrangement contains a lease
The company has applied Appendix C of Ind AS 17 to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.
vi) Classification and measurement of financial assets
The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.
vii) Share based payments:
Ind AS 102 Share based Payment has not been applied to equity instruments in share-based payment transactions that vested before 1st April, 2017
viii) Investment in Subsidiaries, Joint ventures and associates
The company has elected to measure investment in subsidiaries, joint venture and associate at cost.
ix) Derecognition of financial assets and financial liabilities
The company has applied the derecognition requirements in Ind AS 109 retrospectively for securitisation and assignment transactions as the information needed to apply Ind AS 109 to these financial assets derecognised as a result of past transactions was available at the time of initially accounting for those transactions in the respective years.
x) Business combinations
In accordance with Ind AS transitional provisions, the Company has elected to apply Ind AS relating to business combinations prospectively from 1st April, 2017. As such, previous GAAP balances relating to business combinations entered into before that date, have been carried forward without adjustment.
The estimates are consistent with those made in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from FVOCI - equity shares and Impairment of financial assets based on expected Credit loss model where application of Indian GAAP did not require estimation.
Notes: 1. Loans
i) Under Indian GAAP, the Company has created provision for loans based on guidelines on prudential norms issued by RBI. Under Ind AS, impairment allowance has been determined based on Expected Credit Loss Model (ECL). The differential impact has been adjusted in Retained earnings / Profit and loss during the period.
ii) Under Indian GAAP, NPA provision along with Standard asset provision has been disclosed under Provisions. Under Ind AS the ECL provision has been adjusted against loan balance.
iii) Under Indian GAAP, transaction cost incurred in connection with loans are amortised upfront and charged to profit and loss for the period. Under Ind AS, transaction cost are included in the initial recognition amount of financial asset measured at amortised cost and charged to profit and loss using effective interest method.
iv) The Company has securitised certain assets and under Indian GAAP, it has derecognised those assets in the books, upon satisfaction of the âtrue saleâ criteria laid down by the RBI. However, as per Ind AS, the Company has not transferred substantially all the risks and rewards, the asset has been re-recognised on a basis that reflects the rights and obligations that the Company has retained (related liabilities has been recognised in Borrowings other than debt securities & related Interest income and expense has been recognised).
v) Under Indian GAAP, Income from Securitisation transaction recognised as Excess Interest Spread Where was under Ind AS, Company has recognised the interest on the loans which has been re-recognised as Interest income using Effective Interest rate. Interest on proceeds received from securitisation recognised as Finance cost.
vi) Under Indian GAAP, Company has reversed the interest on NPA accounts based on guidelines on prudential norms issued by RBI. Ind AS, Interest income for Stage 3 receivables are recognised on the amortised cost of such receivables (Gross carrying value less impairment provision) and the same is also tested for impairment.
2. Other Financial assets
Under Ind AS, with respect to assignment deals, Company has recognised an interest only strip receivable as at 31st March, 2018 and As on 1st April, 2017, with corresponding credit to retained earning/ profit and loss for the year, which has been computed by discounting excess interest spread (EIS) to present value. Necessary adjustments to credit risk has also been made.
3. Share-based payments
Under Indian GAAP, the Company recognised only the intrinsic value for the share based payment plans as an expense. Ind AS required the fair value of the share options to be determined using an appropriate pricing model recognised over the vesting period. An additional expense has been recognised in profit and loss for the period ended 31st March, 2018. Share options which were granted before and still not vested as at 1st April, 2017, have been recognised as a separate component of equity in Share based payment reserve against retained earnings as at1st April, 2017,. Further Company has granted ESOPs to employees of the subsidiary, the related cost has been transferred to subsidiary and recorded as receivable from the Subsidiary
4. Debt Securities, Borrowings(Other than Debt Securities) and Subordinated Liabilities
i) Under Indian GAAP, transaction costs incurred in connection with borrowings are amortised over the period and charged to profit and loss for the period. Under Ind AS, transaction costs are included in the initial recognition amount of financial liability and charged to profit and loss using the effective interest method.
ii) The Company has securitised certain assets and under Indian GAAP, it has derecognised those assets in the books, upon satisfaction of the âtrue saleâ criteria laid down by the RBI. However, as per Ind AS, the Company has not transferred substantially all the risks and rewards, the asset has been re-recognised on a basis that reflects the rights and obligations that the Company has retained. The proceeds from such transferred assets recognised as securitisation borrowing under the category âBorrowings other than securitisationâ.
i ii) Under Indian GAAP, Investment in pass-through certificates (-PTCs-) made by the Company pursuant to the securitisation transactions entered have been included in the carrying amount of investments computation. Under Ind AS such PTC investments have been netted off against the securitisation borrowings.
5. Deferred tax
Indian GAAP requires deferred tax accounting using the statement of profit and loss approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.
6. Other comprehensive income
Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.
7. Re-measurement of post employment benefit plans
Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.
8. Sale of Services
Under Indian GAAP, Company has recognised certain service income on upfront basis, Under Ind AS the same is required to be amortised over the period based on satisfaction of performance obligations.
9. Provision for undrawn Commitments
Under Indian GAAP, Company is not required to create provision for ECL against undrawn commitments, however under Ind AS, impairment allowance on undrawn commitment has been determined based on Expected Credit Loss Model (ECL) and shown under Provisions. The differential impact has been adjusted in Retained earnings / Profit and loss during the period
10. Figures under previous GAAP have been regrouped/ reclassified for Ind AS purpose wherever applicable.
Note : 16. BASIS OF PREPARATION OF THE REGULATORY DISCLOSURES PROVIDED IN NOTE 50 TO NOTE 53 WHICH ARE REQUIRED TO BE INCLUDED BY THE COMPANY IN THE NOTES TO THE FINANCIAL STATEMENTS PURSUANT TO REQUIREMENTS OF EXTANT REGULATIONS OF THE RBI
As mentioned in the basis of preparation detailed in Note 2 to these standalone financial statements, the company has adopted Indian Accounting Standards (-Ind AS-) notified under Section 133 of the Companies Act 2013 (-the Act-) read with Companies (Indian Accounting Standards) Rules, 2015 as amended, from1st April, 2018 and consequently these standalone financial statements for the year ended 31st March 2019 has been prepared under Ind AS.
The regulatory disclosures contained in Notes 50 to Note 53 are required to be disclosed in the financial statements by the Company in accordance with the requirements of the Master Directions for Non-Banking Financial Company - Systemically Important Non-Deposit taking Company Directions, 2016 dated 1st September, 2016 read with the applicable guidance / regulations issued by the RBI in this regard.
Pursuant to adoption of Ind AS by NBFCs, the RBI is yet to provide clarification on the basis / manner of computation of these regulatory disclosures as per the extant regulations which require presentation of various information in the notes to the Company-s financial statements. Pending clarification from RBI, the Company has prepared the disclosures contained in Note 50 to Note 53 to these standalone financial statements by making material / significant adjustments necessary to the Standalone Ind AS Financial Statements for the year ended 31st March, 2019 to comply with the requirements of the Master Directions for Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 as amended (-the NBFC Master Directions-) including framework on prudential norms, related circulars and clarifications issued by the RBI from time to time, interpretations thereon and relevant policies followed by the company (hereinafter referred to as -Regulatory GAAP-).
The information required for the preparation of the financial information for the year ended 31st March, 2019 in accordance with the Regulatory GAAP have been compiled and certified by the management. Notes 49.1 and Note 49.2 below provide the reconciliation between the information contained in the Ind AS Financial Statements and the financial information compiled by the management in accordance with the requirements of the Regulatory GAAP.
Note:
Commentary on the key accounting adjustments made to convert the Ind AS financial statements for March 2019 to Regulatory GAAP along with considerations for CRAR computation (wherever applicable):
(i) Loans:
(a) Under Ind AS, securitisation transactions entered into by the Company do not qualify for de-recognition. Hence they continue to be recognised as a part of on balance sheet assets. In preparing the financial information as per Regulatory GAAP, the Company has derecognised the assets which have been transferred through securitisation transactions and outstanding as at 31st March, 2019.
(b) Under Ind AS, Interest income for Stage 3 receivables are recognised on the amortised cost of such receivables (Gross carrying value less impairment provision) and the same is also tested for impairment. In the financial information prepared as per Regulatory GAAP, interest income is not recognised on NPA accounts and any outstanding interest on such accounts are also reversed in accordance with the applicable prudential norms issued by the RBI for NBFC-ND-SI.
(c) Under Ind AS, Effective Interest Rate (-EIR-) method is used for recognition of interest income on loans and is determined by considering all contracted cash flows along with transaction fees earned and expenses incurred. This results in amortisation of net upfront fee earned (fee less expenses) by way of adjustment to loan receivable balance. In order to follow a consistent approach with the previous years, the related adjustments have been eliminated by the Company while preparing the financial information as per Regulatory GAAP, and accordingly the net upfront fee earned is recognised immediately in the financial statements coinciding with the disbursal of the loans.
(d) Schedule III Division III applicable for NBFCs preparing their financial statements under Ind AS and Ind AS 109 on financial instruments requires impairment provisions made to be reduced from the related financial assets for presentation purposes. In the preparation of the financial information as per Regulatory GAAP, the related NPA and Standard Asset provisions made have been presented under provisions.
(e) Under Ind AS, on the assignment transactions which are outstanding as at the date of transition, the Company has taken the entire gain that it would earn through the tenure of the assignment transactions on an upfront basis as against recognising such gains on an ongoing basis on realisation of these amounts as per RBI regulations.
(ii) Investments:
Investment in pass-through certificates (-PTCs-) made by the Company pursuant to the securitisation transactions entered have been included in the carrying amount of investments as per the financial information prepared as per Regulatory GAAP and have been assigned 100% Risk Weight in the CRAR computation. Such PTC investments were netted off against the securitisation borrowings under Ind AS.
(iii) Other Financial Assets:
Adjustments in connection with interest accrued but not due on loans which were clubbed under loans for the purpose of Ind AS financial statements have been regrouped / reclassified into other financial assets in the financial information as per Regulatory GAAP.
(iv) Borrowings other than debt securities:
Under Ind AS, securitisation transactions entered into by the Company do not qualify for de-recognition. Hence they continue to be recognised as a part of on balance sheet assets. Accordingly, amounts received from the securitisation trusts are treated as borrowings in the category -other debt securities- under Ind AS. However, these transactions are in compliance with the Securitisation guidelines issued by RBI and hence qualify for de-recognition under such RBI guidelines. Hence, this is derecognised in the Regulatory GAAP balance sheet as at March 31, 2019.
(v) Debt Securities and Subordinated Debts:
The interest accrued on such borrowings which was included in the borrowings for the purpose of the Ind AS financial statements for the year ended March 31, 2019 have been reclassified into other financial liabilities in the financial information prepared as per Regulatory GAAP
(vi) Other financial liabilities:
Represents adjustments relating to the amounts payable to the Securitisation SPVs by the Company on the collections made on the loans which have been securitised by the Company and outstanding as at March 31, 2019 for the instalments collected during the month of March 2019.
(vii) Provisions:
Under Ind AS, the impairment loss allowance is determined based on the Expected Credit Loss Model (-ECL Model-) as per Ind AS 109. In the ECL Model followed by the Company, the receivables (including securitised assets which have not been derecognised in books) with overdue status of 3 months and above is considered under Stage 3 and the impairment loss is provided for based on the requirements of Ind AS 109 for the relevant pool.
The NBFC Master Directions issued by the RBI provides for the prudential norms to be followed income recognition, asset classification and provisioning by applicable NBFCs. Accordingly, the ECL provisions as per the Ind AS financial statements for the year ended March 31, 2019 have been reversed in the preparation of the financial information as per Regulatory GAAP. For the purpose of compliance with the prudential norms of the RBI, the Company has continued to apply the provisioning norms applied prior to the introduction of Ind AS and thereby provision has been made for:
(a) Standard Assets as per internal estimates, based on past experience, realisation of security and other relevant factors on the outstanding amount of Standard Assets for all types of lending, subject to the minimum provisioning requirements specified by the RBI for an NBFC-ND-SI; and
(b) Non-Performing Assets as per the provisioning norms approved by the Board for each type of lending activity, subject to the minimum provisioning requirements specified by the RBI.
(viii) Service Income / Deferred Revenue:
As per the requirements of Ind AS 115, the Company has accrued for certain income which was received and recognised in the statement of profit and loss in the previous year over a period of time. As this income was already recognised in the P&L in the previous year, this adjustment under Ind AS has been reversed in preparing the financial information as per Regulatory GAAP for the current year ended March 31, 2019.
Note : 17 DISCLOSURE OF FRAUDS REPORTED DURING THE YEAR ENDED MARCH 31, 2019 VIDE DNBS.
PD. CC NO. 256/ 03.10.042/ 2011Rs.12 DATED MARCH 02, 2012
There were 180 cases (March 31, 2018 Rs.202 cases) of frauds amounting to Rs.657 lakhs (March 31, 2018 - Rs.5,361 lakhs) reported during the year. The Company has recovered an amount of Rs.125 lakhs (March 31, 2018 - Rs.136 lakhs). The un-recovered amounts are either pending settlement with the insurance companies or have been fully provided/ written off.
Mar 31, 2018
1.) Early adoption of Provision for Non-performing assets and Standard assets
The Reserve Bank of India has prescribed the revised asset classification norms and provisioning norms which are required to be adopted in a phased manner over the period of three years, commencing from the financial year ended March 31, 2016.
In the previous year (March 31, 2017), the Company has early adopted the revised norms / provisions to the extent they are required to be complied by March 31, 2018.
4.1 Represents the amount transferred for a sum equal to the nominal value of shares redeemed during prior years.
4.2 Represents the Reserve Fund created under Section 45-IC of the Reserve Bank of India Act, 1934.
4.3 The Board of Directors of the Company have recommended a final dividend of 20% being Rs, 2 per share on the equity shares of the Company, for the year ended March 31, 2018 (Rs, 2 per share - March 31, 2017) which is subject to approval of shareholders. Consequently the proposed dividend has not been recorded in the books in accordance with AS-4 (Revised).
2 Face value of commercial paper is Rs, 2,40,000 lakhs as on March 31, 2018 (Rs, 2,66,500 lakhs - March 31, 2017)
3. Security
(i) Redeemable Non-Convertible Debentures - Medium-term is secured by way of specific charge on assets under hypothecation relating to automobile financing, corporate mortgage loans and loans against immovable property and pari passu charge on immovable property situated at Ahmedabad and Chennai.
(ii) Term loans from banks are secured by way of specific /pari passu charge on assets under hypothecation relating to automobile financing and loans against immovable property.
(iii) Working Capital Demand loans and Cash Credit from banks are secured by way of floating charge on assets under hypothecation and other current assets.
Notes:
1. The entire plan assets are managed by LIC and the data on plan assets as on March 31, 2018 have not been furnished.
2. The details of Experience adjustments have been disclosed to the extent of information available.
3. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
4. Estimated amount of contribution to the funds during the year ended March 31, 2018 as estimated by the Management is Rs, 230.69 lakhs (March 31, 2017 Rs, 1,923 lakhs)
5. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
Notes:
1. The Company has not funded its Compensated Absences liability and the same continues to remain as unfunded as at March 31, 2018.
2. The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors.
3. Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.
4. The details of Experience adjustments have been disclosed to the extent of information available.
NOTE: 4. SEGMENT REPORTING
The Company is primarily engaged in the business of financing. All the activities of the Company revolve around the main business. Further, the Company does not have any separate geographic segments other than India. As such there are no separate reportable segments as per AS-17 "Segmental Reporting".
NOTE: 5. RELATED PARTY DISCLOSURES
List of Related Parties (As per AS-18):
- Entity having significant influence over the Company : TI Financial Holdings Limited (formerly known as Tube Investments of India Limited)
- Subsidiaries: Cholamandalam Securities Limited, Cholamandalam Distribution Services Limited, White Data Systems India Private Limited
- Key Managerial Personnel: Mr. Vellayan Subbiah, Managing Director (upto August 18, 2017) and Mr. N Srinivasan, Executive Vice Chairman and Managing Director (from August 19, 2017) ;
Mr. Arun Alagappan, Executive Director (From August 19, 2017)
Additional related parties as per Companies Act, 2013:
- Mr. D. Arulselvan, Chief Financial Officer
- Ms. P. Sujatha, Company Secretary
Note:
Related party relationships are as identified by the Management and relied upon by the Auditors.
i) The Company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.
ii) It is not practicable for the Company to estimate the timings of the cash flows, if any, in respect of the above pending resolution of the respective proceedings.
iii) The Company does not expect any reimbursement in respect of the above contingent liabilities.
iv) Future Cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various forums/authorities.
(c) Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances paid) - Rs, 402.09 lakhs (March 31, 2017 - Rs, 963.60 lakhs)
NOTE: 6. EMPLOYEE STOCK OPTION PLAN ESOP 2007
The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the Company (before Rights Issue) aggregating to 19,04,162 Equity Shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 subject to the approval of the shareholders under Section 81(1A) of the Companies Act, 1956. The Shareholders of the Company at the Annual General Meeting held on July 30, 2007 approved the aforesaid issue of 19,04,162 Equity Shares of the Company under one or more Employee Stock Option Scheme(s). The Compensation and Nomination Committee has approved the following grants to a list of senior level executives of the Company and some of its Subsidiaries in accordance with the Stock Option Scheme 2007.
ESOP 2016
The Board at its meeting held on October 7, 2016, approved to create, and grant from time to time, in one or more tranches, not exceeding 31,25,102 Employee Stock Options to or for the benefit of such person(s) who are in permanent employment of the company including managing director and whole time director, (other than promoter/promoter group of the company, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the company), as may be decided by the board, exercisable into not more than 31,25,102 equity shares of face value of '' 10/- each fully paid-up, on such terms and in such manner as the board may decide in accordance with the provisions of the applicable laws and the provisions of ESOP 2016.
The fair value of options used to compute Proforma net profit and earnings per Equity Share have been estimated on the date of the grant using Black-Scholes model by an independent consultant.
NOTE: 7. PREVIOUS YEAR''S FIGURES
Previous year''s figures have been reclassified to conform with the current year''s classification / presentation, wherever applicable. Previous year''s figures have been audited by predecessor auditor.
Mar 31, 2017
Cholamandalam Investment and Finance Company Limited (âthe companyâ) is one of the premier diversified nonbanking finance companies in India, engaged in providing vehicle finance, home loans and corporate mortgage loans. The company through its subsidiaries, is also engaged in the business of broking, distribution of financial products and freight data solutions.
1. a) Early adoption of Provision for Non-performing assets and Standard assets
The Reserve Bank of India has prescribed the revised asset classification norms and provisioning norms which are required to be adopted in a phased manner over a period of three years commencing from the financial year ended March 31, 2016.
In the previous year (March 31, 2016), the company had early adopted the provisioning for standard assets to the extent they are required to be complied by March 31, 2018 and the revised asset classification norms to the extent they are required to be complied by March 31, 2017. Further, on a prudent basis, the company had created a one-time additional provision of RS.5,480 lakhs in previous year against standard assets.
In the current year (March 31, 2017), the company has early adopted the revised norms / provisions to the extent they are required to be complied by March 31, 2018.
b) Pursuant to the MCA notification dated March 30, 2017, Accounting Standards 4, Contingencies and Events occurring after the Balance Sheet date, has been revised to state that the dividends declared after the balance sheet date but before the financial statements are approved are not recognised as a provision at the balance sheet date, as there is no obligation existing as that date.
2. SHARE CAPTIAL
a) Reconciliation of number of shares and amount outstanding at the beginning and at the end of the year:
b) (i) Terms/rights attached to Equity shares
The company has only one class of equity shares having a par value of Rs. 10 per share. All these shares have the same rights and preferences with respect to payment of dividend, repayment of capital and voting. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except for interim dividend.
Repayment of capital will be in proportion to the number of equity shares held.
b) (ii) Terms/rights attached to Preference shares
The CCPS have been converted into 1,22,85,012 equity shares of Rs. 10 each on September 2, 2015 at a conversion price of Rs. 407 per share (including premium of Rs. 397 per share) and have been subscribed by Dynasty Acquisition (FDI) Ltd. The preferential dividend is cumulative and paid in full upto the conversion date.
c) Equity Shares held by Holding/Entity having Significant influence over the company
d) Details of shareholding more than 5% shares in the company
e) Shares reserved for issue under options
Refer Note 34 for details of shares reserved for issue under options.
3.1 Represents the amount transferred for a sum equal to the nominal value of shares redeemed during prior years.
2.2 Represents the Reserve Fund created under Section 45-IC of the Reserve Bank of India Act, 1934.
3.3 Represents dividend payment relating to previous year in respect of 44,470 shares (March 31, 2016 - 45,251) shares which were allotted to the employees under the ESOP Scheme, 2007 after March 31, 2017 but before July 27, 2017 (book closure date).
3.4 The Board of Directors of the company have recommended a final dividend of 20% being RS.2 per share on the equity shares of the company, for the year ended March 31, 2017 which is subject to approval of shareholders. Consequently the proposed dividend has not been recorded in the books in accordance with AS-4 (Revised).
4.1 Security
(i) Redeemable Non-Convertible Debentures - Medium-term is secured by way of specific charge on assets under hypothecation relating to automobile financing, corporate mortgage loans and loans against immovable property and pari passu charge on immovable property situated at Ahmedabad and Chennai.
(ii) Term loans from banks are secured by way of specific charge on assets under hypothecation relating to automobile financing and loans against immovable property.
(iii) Working Capital Demand loans and Cash Credit from banks are secured by way of floating charge on assets under hypothecation and other current assets.
5.1 There are no amounts of Unpaid Dividend due and outstanding to be credited to the Investor Education and Protection Fund (IEPF)
5.2 As at March 31, 2017, in respect of overdue amounts totalling to Rs. 0.11 lakh (March 31, 2016 - Rs. 0.11 lakh), payments have not been made as per instructions received from the Central Bureau of Investigation.
5.3 Pursuant to the company obtaining a fresh Certificate of Registration dated December 11, 2006 from the Reserve Bank of India (RBI) for carrying on the business of Non-Banking Financial Institution without accepting public deposits and consequent to its decision to exit from deposit accepting activities effective November 1, 2006, the company has a total deposit of Rs. 0.29 lakh as at March 31, 2017 (March 31, 2016 - Rs. 2.75 lakhs) in an Escrow Account, as directed by the RBI. Also refer Note 16.
6.1 Balances with Banks on Current Account include amounts collected in respect of assets de-recognised on account of Assignment/Securitisation of Receivables pending remittance to the assignees. Refer Note 8.
6.2 Balance on Deposit Accounts - Free of lien includes deposits amounting to Rs. 1,622 lakhs (March 31, 2016 - Rs. 175.07 lakhs) which have an original maturity of more than 12 months.
7 a) Share application money pending allotment as at March 31, 2017 represents amount received towards 10,261 equity shares (1,340 Equity shares - March 31, 2016) of the company pursuant to ESOP scheme and have been subsequently alloted.
NOTE : 8 MICRO, SMALL & MEDIUM ENTERPRISES
Based on and to the extent of the information received by the company from the suppliers during the year regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and relied upon by the auditors, there are no amounts due to MSME as at 31 March 2017.
The company is primarily engaged in the business of financing. All the activities of the company revolve around the main business. Further, the company does not have any separate geographic segments other than India. As such there are no separate reportable segments as per AS-17 âSegmental Reportingâ.
NOTE : 9 RELATED PARTY DISCLOSURES
List of Related Parties (As per AS-18):
- Holding company: Tube Investments of India Limited (upto August 31, 2015).
- Entity having significant influence over the company : Tube Investments of India Limited (from September 1, 2015)
- Entity having significant influence over Holding company: Murugappa Holdings Limited (up to August 31, 2015)
- Joint venture of Holding company : Cholamandalam MS Risk Services Limited (upto August 31, 2015)
- Subsidiaries: Cholamandalam Securities Limited, Cholamandalam Distribution Services Limited, White Data Systems India Private Limited (from March 16, 2016)
- Fellow Subsidiary: Cholamandalam MS General Insurance company Limited (upto August 31, 2015)
- Key Managerial Personnel: Mr. Vellayan Subbiah, Managing Director Additional related parties as per Companies Act, 2013:
- Mr. D. Arul selvan, Chief Financial Officer
- Ms. P. Sujatha, Company Secretary
(a) Second loss credit enhancement facility towards securitisation transactions
(b) Contested Claims not provided for:
i) The company is of the opinion that the above demands are not sustainable and expects to succeed in its appeals / defence.
ii) I t 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.
iii) The company does not expect any reimbursement in respect of the above contingent liabilities.
iv) Future Cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various forums/authorities.
(c) Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances paid) - Rs. 963.60 lakhs (March 31, 2016 - Rs. 1,268.34 lakhs)
NOTE : 10 EMPLOYEE STOCK OPTION PLAN
ESOP 2007
The Board at its meeting held on June 22, 2007, approved an issue of Stock Options up to a maximum of 5% of the issued Equity Capital of the company (before Rights Issue) aggregating to 19,04,162 Equity Shares in a manner provided in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 subject to the approval of the shareholders under Section 81(1A) of the Companies Act, 1956. The Shareholders of the company at the Annual General Meeting held on July 30, 2007 approved the aforesaid issue of 19,04,162 Equity Shares of the company under one or more Employee Stock Option Scheme(s). The Compensation and Nomination Committee has approved the following grants to a list of senior level executives of the company and some of its Subsidiaries in accordance with the Stock Option Scheme-2007.
ESOP 2016
The Board at its meeting held on October 7, 2016, approved to create, and grant from time to time, in one or more tranches, not exceeding 31,25,102 Employee Stock Options to or for the benefit of such person(s) who are in permanent employment of the company including managing director and whole time director, (other than promoter/promoter group of the company, independent directors and directors holding directly or indirectly more than 10% of the outstanding equity shares of the company), as may be decided by the board, exercisable into not more than 31,25,102 equity shares of face value of Rs. 10/each fully paid-up, on such terms and in such manner as the board may decide in accordance with the provisions of the applicable laws and the provisions of ESOP 2016.
The company shares certain costs / service charges with other companies in the Group. These costs have been allocated between the Companies on a basis mutually agreed between them, which has been relied upon by the Auditors.
NOTE : 11 DISCLOSURE OF FRAUDS REPORTED DURING THE YEAR ENDED MARCH 31, 2016 VIDE DNBS. PD. CC NO. 256/ 03.10.042/ 2011-12 DATED MARCH 02, 2012
There were 139 cases (March 31, 2016 - 62 cases) of frauds amounting to Rs. 3,026.69 lakhs (March 31, 2016 - Rs. 207.47 lakhs) reported during the year. The company has recovered an amount of Rs. 107.64 lakhs (March 31, 2016 - Rs. 42.83 lakhs). The un-recovered amounts are either pending settlement with the insurance companies or have been fully provided/ written off.
Previous yearâs figures have been reclassified to conform with the current yearâs classification / presentation, wherever applicable.
Mar 31, 2015
Cholamandalam Investment and Finance Company Limited ("the Company") is
one of the premier diversified non-banking finance companies in India,
engaged in providing vehicle finance, home loans and corporate mortgage
loans. The Company through its subsidiaries, is also engaged in the
business of broking and distribution of financial products.
NOTE : 1 SEGMENT REPORTING
The Company is primarily engaged in the business of financing. All the
activities of the Company revolve around the main business. Further,
the Company does not have any separate geographic segments other than
India. As such there are no separate reportable segments as per AS-17
"Segmental Reporting".
NOTE : 2 RELATED PARTY DISCLOSURES (As per AS-18 "Related Party
Disclosures")
List of Related Parties:
- Holding Company:Tube Investments of India Limited
- Associate of Holding Company: Murugappa Holdings Limited
- Joint venture of Holding Company: Cholamandalam MS Risk Services
Limited
- Subsidiaries: Cholamandalam Securities Limited, Cholamandalam
Distribution Services Limited
- Fellow Subsidiary: Cholamandalam MS General Insurance Company
Limited
- Key Managerial Personnel: Mr. S. Vellayan, Managing Director.
Note:
Related party relationships are as identified by the Management and
relied upon by the Auditors.
NOTE : 3 CONTINGENT LIABILITIES AND COMMITMENTS
(a) Contested Claims not provided for:
Rs. in lakhs
Particulars As at As at
31.03.2015 31.03.2014
Income tax and Interest on Tax issues
where the Company is in appeal 5,280.52 3,442.76
Decided in the Company's favour by
Appellate Authorities and for which
the Department is in further 564.60 98.36
appeal with respect to Income Tax
Sales Tax issues pending before
Appellate Authorities in respect of
which the Company is in appeal. 4,220.09 1,187.66
(The Company has paid Rs. 649.15 lakhs (March 31, 2014 - Rs. 75.66 lakhs)
under protest, which is included under loans and advances - Note 13)
Disputed claims against the Company
lodged by various parties under
litigation (to the extent 3,376.36 1,676.69
quantifiable)
i) The Company is of the opinion that the above demands are not
sustainable and expects to succeed in its appeals / defence.
ii) 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.
iii) The Company does not expects any reimbursement in respect of the
above contingent liabilities.
iv) Future Cash outflows in respect of the above are determinable only
on receipt of judgements/decisions pending with various
forums/authorities.
(b) Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances paid) - Rs. 981.51 lakhs
(March 31,2014 - Rs. 985.57 lakhs)
NOTE : 4 EMPLOYEE STOCK OPTION PLAN
The Board at its meeting held on June 22, 2007, approved an issue of
Stock Options up to a maximum of 5% of the issued Equity Capital of the
Company (before Rights Issue) aggregating to 1,904,162 Equity Shares in
a manner provided in the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 subject to the
approval of the shareholders under Section 81(1A) of the Companies Act,
1956. The Shareholders of the Company at the Annual General Meeting
held on July 30, 2007 approved the aforesaid issue of 1,904,162 Equity
Shares of the Company under one or more Employee Stock Option
Scheme(s). The Compensation and Nomination Committee has approved the
following grants to a list of senior level executives of the Company
and some of its Subsidiaries in accordance with the Stock Option Scheme
-2007:
The shareholders of the Company, at the 34th Annual General Meeting
held on July 30, 2012, authorised extension of exercise period from 3
years from the date of vesting to 6 years from the date of
vesting.Accordingly, the Company has measured the fair value of the
options using the Black Scholes model immediately before and after the
date of modification to arrive at the incremental fair value arising
due to the extension of the exercise period. The incremental fair value
so calculated is recognised from the modification date over the vesting
period in addition to the amount based on the grant date fair value of
the stock options.
The incremental (benefit)/cost due to modification of the exercise
period from 3 years to 6 years from the date of vesting for the year
ended March 31,2015 is (Rs. 0.97) lakh (March 31,2014Rs.13.00 lakhs).
The fair value of the options has been calculated using the Black
Scholes model on the date of modification.
NOTE : 5 SHARING OF COSTS
The Company shares certain costs / service charges with other companies
in the Group. These costs have been allocated between the Companies on
a basis mutually agreed between them, which has been relied upon by the
Auditors.
NOTE: 6 PREVIOUS YEARS' FIGURES
Previous year's figures have been reclassified to conform with the
current year's classification / presentation, wherever applicable.
Mar 31, 2014
1. Approval of Scheme of Amalgamation
Cholamandalam Factoring Ltd (CFACT) was a Non-Banking Finance Company
(NBFC) and a wholly owned subsidiary of the Company. The Board of
Directors at their meeting held on 30 October, 2012 approved a Scheme
of Amalgamation of CFACT with the Company subject to the approval of
Hon''ble High Court of Judicature at Madras and other necessary
approvals and sanctions. The Hon''ble High Court of Judicature at Madras
sanctioned the scheme with an Appointed date of 1 April, 2012 and is
effective from 24 May, 2013, being date of fling the order with the
Registrar of Companies. In accordance with the said Scheme, the Company
has accounted for this amalgamation in the nature of merger under the
pooling-of-interest method, during the current year with retrospective
effect from the appointed date.
Consequently:
i. All the assets, debts, liabilities and obligations of CFACT have
been vested in the Company and have been recorded at their respective
book values as of 1 April, 2013.
ii. The net asset value of CFACT of Rs.411.61 lakhs as on 1 April, 2013
has been adjusted against the net investment of the Company in CFACT.
iii. The excess of net asset value of CFACT over the value of
investments held by the company in CFACT (after adjusting CFACT Capital
reserve of Rs.3.94 lakhs and Statutory reserve of Rs.12.63 lakhs) as at 1
April, 2012 amounting to Rs.4.91 lakhs has been credited to ÂGeneral
Reserve". The difference in the ÂSurplus in the Statement of Proft and
Loss" of CFACT between 1 April, 2012 and 1 April, 2013 aggregating to
Rs.49.23 lakhs has been debited to opening balance in ÂSurplus in the
Statement of Proft and Loss" of the Company.
Mar 31, 2013
Cholamandalam Investment and Finance Company Limited ("the Company") is
one of the premier diversified non- banking finance companies in India,
engaged in providing vehicle finance, home loans, corporate mortgage
loans and gold loans. The Company through its subsidiaries, is also
engaged in the business of broking and distribution of financial
products.
1. APPROVAL OF SCHEME OF AMALGAMATION
The Board of Directors at their meeting held on 30 October, 2012
approved a Scheme of Amalgamation of the Company''s wholly owned
subsidiary M/s.Cholamandalam Factoring Limited (CFACT) with the Company
with effect from 01 April, 2012 (the Appointed Date) subject to the
approval of Hon''ble High Court of Judicature at Madras and other
necessary approvals and sanctions. The Order of Hon''ble High Court is
awaited on the petition filed by CFACT in this regard. As per the
proposed Scheme of Amalgamation, the details of assets / liabilities
appearing in the books of CFACT as at the appointed date, proposed to
be merged into the Company are summarised below:
NOTE : 2 MICRO, SMALL & MEDIUM ENTERPRISES
Based on and to the extent of information received by the Company from
the suppliers during the year regarding their status under the Micro,
Small and Medium Enterprises Development Act, 2006 (MSMED Act) and
relied upon by the auditors, the relevant particulars as at the year
end are furnished below:
NOTE : 3 SEGMENT REPORTING
The Company is primarily engaged in the business of financing. All the
activities of the Company revolve around the main business. Further,
the Company does not have any separate geographic segments other than
India. As such there are no separate reportable segments as per AS-17
"Segmental Reporting".
NOTE : 4 CONTINGENT LIABILITIES AND COMMITMENTS
(a) Counter Guarantees provided to Banks -Rs. 115.65 lakhs (31.03.2012-
Rs. 113.49 lakhs).
(b) Contested Claims not provided for:
The Company is of the opinion that the above demands are not
sustainable and expects to succeed in its appeals / defence.
(c) Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances paid) - Rs. 528.64 lakhs
(31 March, 2012 - Rs. 572.74 lakhs)
NOTE : 5 LEASES
Assets taken on Non-cancellable operating lease consists of Plant and
Machinery, Furniture and Fixtures and Office Equipments.
NOTE : 6 EMPLOYEE STOCK OPTION PLAN
The Board at its meeting held on 22 June, 2007, approved an issue of
Stock Options up to a maximum of 5% of the issued Equity Capital of the
Company (before Rights Issue) aggregating to 1,904,162 Equity Shares in
a manner provided in the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 subject to the
approval of the shareholders under Section 81(1A) of the Companies Act,
1956. The Shareholders of the Company at the Annual General Meeting
held on 30 July, 2007 approved the aforesaid issue of 1,904,162 Equity
Shares of the Company under one or more Employee Stock Option
Scheme(s). The Compensation and Nomination Committee has approved the
following grants to a list of senior level executives of the Company
and some of its Subsidiaries in accordance with the Stock Option Scheme
-2007:
NOTE : 7 SHARING OF COSTS
The Company shares certain costs / service charges with other companies
in the Group. These costs have been allocated between the Companies on
a basis mutually agreed to between the Companies, which has been relied
upon by the Auditors.
NOTE : 8 PREVIOUS YEAR''S FIGURES
Previous year''s figures have been reclassified to conform with the
current year''s classification / presentation, wherever applicable.
Mar 31, 2012
1. CHANGE IN ACCOUNTING POLICY
During the year, the Company has, by way of bilateral assignment, sold
loan receivables aggregating to Rs70,883.45 lakhs. The interest spread
arising there from is accounted over the residual tenor of the
receivables sold as against upfront recognition of such interest spread
in earlier years. Income from operations & Profit before tax would have
been higher by Rs2,699.20 lakhs and Profit after Tax would have been
higher by Rs1,619.52 lakhs had the company recognised the said interest
spread upfront as in previous years. This change is also in line with
the draft revised guidelines on Securitisation transaction issued by
Reserve Bank of India in September 2011.
a) Terms/rights attached to Equity shares
The company has only one class of equity shares having a par value of
Rs10 per share. All these shares have the same rights and preferences
with respect to payment of dividend, repayment of capital and voting.
The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
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.
2.1 Represents the amount transferred for a sum equal to the nominal
value of shares redeemed during the prior years
2.2 Represents the Reserve Fund created under Section 45-IC of the
Reserve Bank of India Act, 1934.
4.4 Represents dividend payment relating to previous year in respect of
5,128 shares which were allotted to the employees under the Employee
Stock Option Scheme 2007 after 31 March, 2011 but before 25 July 2011
(book closure date).
3.1 Security
(i) Redeemable Non convertible debentures - Medium term is secured by
way of specific charge on assets under hypothecation relating to
automobile financing, corporate mortgage loans and loans against
immovable property and pari pasu charge on immovable property situated
at Ahmedabad.
(ii) Term loans from banks is secured by way of specific charge on
assets under hypothecation relating to automobile financing and loans
against immovable property.
(iii) Cash credit from banks and working capital demand loans are
secured by floating charge on assets under hypothecation and other
current assets.
4.1 There are no amounts of Unclaimed Dividend due and outstanding to
be credited to Investor Education and Protection Fund (IEPF)
4.2 As at March 31, 2012, there are no amounts due and outstanding to
be credited to Investor Education and Protection Fund (IEPF) in respect
of Fixed Deposits except for Rs1.86 lakhs (2011 - Rs1.86 lakhs), the
repayment of which to the depositors has been stayed by the Madras High
Court. Further, in respect of overdue amounts totaling to Rs0.11 lakhs
(2011 - Rs0.11 lakhs), payments have not been made as per instructions
received from Central Bureau of Investigation.
4.3 Pursuant to the Company obtaining a fresh Certificate of
Registration dated December 11, 2006 from the Reserve Bank of India
(RBI) for carrying on the business of Non-Banking Financial Institution
without accepting public deposits, consequent to its decision to exit
from deposit accepting activities effective November 01, 2006, the
Company has a total deposit of Rs85.21 lakhs as at March 31, 2012 (2011
- Rs97.29 lakhs) in an Escrow Account, as directed by the RBI. Also
refer Note 16.
5.1 Balances with Banks on Current Account include amounts collected
in respect of assets de-recognised on account of Assignment of
Receivables pending remittance to the assignees. Refer Note 8
5.2 Balance on Deposit Accounts - Free of lien includes deposits
amounting to Rs 4,997.83 lakhs (2011 - Rs 4,182.58 lakhs) which have an
original maturity of more than 12 months.
NOTE : 6 Segment reporting
The Company is primarily engaged in the business of financing. All the
activities of the Company revolve around the main business. Further,
the Company does not have any separate geographic segments other than
India. As such there are no separate reportable segments as per AS-17
"Segment Reporting".
NOTE : 7 CONTINGENT LIABILITIES AND COMMITMENTS
(a) Counter Guarantees provided to Banks Rs113.49 lakhs (2011-Rs78.02
lakhs) and Shortfall Undertaking provided to the lender of
Cholamandalam Factoring Limited (Subsidiary) RsNIL (2011- Rs6,000 lakhs)
(b) Contested Claims Not Provided for:
Rs in lakhs
Particulars As at As at
31.03.2012 31.03.2011
Income tax and Interest Tax issues where
the company is in appeal 2,290.20 2,128.67
Decided in the Company's favour by Appellate
Authorities and for which the 108.56 105.19
Department is in further appeal with respect
to Income Tax
Sales Tax issues pending before Appellate
Authorities in respect of which the 384.15 425.95
Company is in appeal
Disputed claims against the Company lodged by
various parties under litigation 1,062.66 912.47
(to the extent quantifiable)
The Company is of the opinion that the above demands are not
sustainable and expects to succeed in its appeals / defence.
(c) Commitments
Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances paid)
- Rs 1,747 lakhs (2011 - Rs98.58 lakhs)
NOTE : 8 LEASES
Assets taken on Non-cancellable operating lease consists of Plant and
Machinery, Furniture and Fixtures and Office Equipments. The details
of Maturity profile of Non-cancellable Future Operating Lease Payments
are given below.
NOTE:9
a) EMPLOYEE STOCK OPTION PLAN
The Board at its meeting held on June 22, 2007, approved an issue of
Stock Options up to a maximum of 5% of the issued Equity Capital of the
Company (before Rights Issue) aggregating to 19,04,162 Equity Shares in
a manner provided in the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 subject to the
approval of the shareholders under Section 81(1A) of the Companies Act,
1956. The Shareholders of the Company at the Annual General Meeting
held on July 30, 2007 approved the aforesaid issue of 19,04,162 Equity
Shares of the Company under one or more Employee Stock Option
Scheme(s). The Compensation & Nomination Committee has approved the
following grants to a list of senior level executives of the Company
and some of its Subsidiaries in accordance with the Stock Option Scheme
-2007:
The fair value of options used to compute Proforma net profit and
earnings per Equity Share have been estimated on the date of the grant
using Black-Scholes model by an independent Consultant.
b) Share application money pending allotment as on March 31, 2011
represents application money received on exercise of 3,652 options on
March 31, 2011 which were subsequently allotted on April 11, 2011.
NOTE : 10 SHARING OF COSTS
The Company shares certain costs / service charges with other companies
in the Group. These costs have been allocated between the Companies on
a basis mutually agreed to between the Companies, which has been relied
upon by the Auditors.
Notes:
1. Though the Company has become a Non-deposit taking Non-Banking
Finance Company, since the Company still has fixed deposits from the
public accepted prior to November 1, 2006 which have not yet been
liquidated (Refer Note 8), the details of the same have been disclosed
above.
2. Fixed Deposits include Matured / Unclaimed Deposits (together with
Interest on Matured / Unclaimed Deposits) amounting to Rs53.74 lakhs as
at March 31, 2012.
NOTE : 11 PREVIOUS YEAR FIGURES
The Revised Schedule VI has become effective from 1 April, 2011 for the
preparation of financial statements. This has significantly impacted
the disclosure and presentation made in the financial statements.
Previous year's figures have been regrouped / reclassified wherever
necessary to correspond with the current year's classification /
disclosure.
Mar 31, 2011
1. Termination of Shareholders Agreement
a) The Shareholders agreement dated June 16, 2005 entered into between
the Company, Tube Investments of India Limited (TII) and DBS Bank
Limited, Singapore (DBS) was terminated on April 08, 2010 pursuant to
the purchase of the entire shareholding of DBS in the Company by Tube
Investments of India Ltd., & New Ambadi Estates Private Ltd.,
(constituents of the Murugappa Group). Consequently, the Company ceased
to be a Joint Venture between Murugappa Group and DBS, with effect from
April 08, 2010 and has become a subsidiary of Tube Investments of India
Limited effectve from that date.
b) Consequent to the above, the name of the company and its
subsidiaries have been changed as follows:
i) Cholamandalam DBS Finance Limited changed to Cholamandalam
Investment and Finance Company Limited
ii) DBS Cholamandalam Securities Limited changed to Cholamandalam
Securities Limited
iii) DBS Cholamandalam Distribution Limited changed to Cholamandalam
Distribution Services Limited
2. Premature Redemption of Commercial Paper
Gain / (Loss) on premature redemption of commercial papers is
recognised in the Profit and Loss Account and included under
Miscellaneous Income (2010-11) (Schedule 13(B)) and Other Financing
Expenses (2009-10) (Schedule 14).
3. Other Financial Information
Notes :
1. In recognising the Upfront Income on Bilateral Assignment of
Receivables, the Company has obtained professional opinion confirming
that bilateral assignment of receivables is outside the purview of the
RBI Guidelines on Securitsation of Standard Assets introduced with
effect from February 1, 2006.
2. Upfront income on Bilateral Assignment of Receivables is net of
Provision for Credit Enhancements and Servicing Cost on assets
derecognized Rs.519.32 lakhs (2010 - Rs.2,411.46 lakhs).
3. During the year, the company assigned Consumer Loan Receivables
aggregating to Rs.2,515.34 lakhs (2010 - Rs.23,419.67 lakhs) having a
net book value of Rs.1,243.50 lakhs (2010 - Rs.8,573.95 lakhs) to
Cholamandalam Factoring Limited (subsidiary) on non recourse basis for
Rs.1,095.05 lakhs (2010 - Rs.8,569.22 lakhs), as determined by an
independent agency.
4. Managerial Remuneration
Notes:
i) The appointment and remuneration of the Managing Director is subject
to the approval of the shareholders in the ensuing Annual General
Meeting of the Company.
ii) In computing the Managing Directors Remuneration, perquisites have
been valued in terms of actual expenditure incurred by the company in
providing the benefits except that in case of certain expenses where
the actual amount of expenditure cannot be ascertained with reasonable
accuracy, notional amount as per Income Tax Rules has been considered.
iii) The Managing Directors Remuneration includes an amount of
Rs.21.45 lakhs being the maximum incentive payable for the year.
iv) Actuarial valuation based contribution / provision with respect to
gratuity and provision for compensated absences have not been included
as these are for the Company as a whole.
(d) Based on the above, the total remuneration as stated in 8 (a) and
(b) above are within the maximum permissible limits under the Companies
Act, 1956.
5. Segment Reporting
The Company is primarily engaged in the business of financing. All the
actvities of the Company revolve around the main business. Further, the
Company does not have any separate geographic segments other than
India. As such there are no separate reportable segments as per AS-17
"Segmental Reporting".
6. Related Party Disclosures (As per AS-18 "Related Party
Disclosures")
List of Related Partes:
- Companies holding Substantial Tube Investments of India Limited
Interest in Voting Power: DBS Bank Limited, Singapore
(upto April 7, 2010)
- Subsidiaries: Cholamandalam Securities Limited
Cholamandalam Distribution
Services Limited
Cholamandalam Factoring Limited
- Fellow Subsidiaries: Cholamandalam MS General
Insurance Company Limited
Cholamandalam MS Risk Services
Limited (w.e.f. May 11, 2010)
- Key Management Person: Mr.N.Srinivasan, Director
(Upto August 18, 2010)
Mr.Vellayan Subbiah, Managing
Director (w.e.f. August 19, 2010)
7. Contingent Liabilities
(a) Counter Guarantees provided to Banks à Rs.78.02 lakhs (2010- Rs.108
lakhs) and Shortall Undertaking provided to the lender of Cholamandalam
Factoring Limited (Subsidiary) Ã Rs.6,000 lakhs (2010- Rs.7,500 lakhs)
(b) Contested Claims Not Provided for:
Rupees in Lakhs
Particulars As at 31.03.2011 As at 31.03.2010
Income tax and Interest Tax
issues where the company is in
appeal 2,128.67 612.89
Decided in the companys favour
by Appellate Authorities and
for which the Department 105.19 39.64
is in further appeal with
respect to Income Tax
Disputed claims against the company
lodged by various parties under 912.47 895.36
litigation (to the extent
quantifiable)
Note:
The Company is of the opinion that the above demands are not
sustainable and expects to succeed in its appeals / defence.
8. Leases
Assets taken on Non-cancellable operating lease consists of Plant and
Machinery, Furniture and Fixtures and Office Equipments.
9. Employee Stock Option Plan
a) The Board at its meeting held on June 22, 2007, approved an issue of
Stock Options up to a maximum of 5% of the issued Equity Capital of the
Company (before Rights Issue) aggregating to 1,904,162 Equity Shares in
a manner provided in the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 subject to the
approval of the shareholders under Section 81(1A) of the Companies Act,
1956. The Shareholders of the company at the Annual General Meeting
held on July 30, 2007 approved the aforesaid issue of 1,904,162 Equity
Shares of the company under one or more Employee Stock Option
Scheme(s). The Compensation and Nomination Committee has approved the
following grants to a list of senior level executives of the company
and some of its Subsidiaries in accordance with the Stock Option Scheme
-2007:
b) Share application money pending allotment represents application
money received on exercise of 3,652 options on March 31, 2011 which
were subsequently allotted on April 11, 2011.
10. Sharing of Costs
The Company shares certain costs / service charges with other companies
in the Group. These costs have been allocated between the Companies on
a basis mutually agreed to between the Companies, which has been relied
upon by the Auditors.
11. Previous Year Figures
Previous years figures have been regrouped /rearranged, where
necessary to conform to current years presentation.
Mar 31, 2010
1. Segment Reporting
The Company is primarily engaged in the business of financing. All the
activities of the Company revolve around the main business. Further,
the Company does not have any separate geographic segments other than
India. As such there are no separate reportable segments as per AS-17
ÃSegmental ReportingÃ.
2. Related Party Disclosures (As per AS-18 ÃRelated Party
DisclosuresÃ)
List of Related Parties:
- Companies holding substantial interest in voting Power: Tube
Investments of India Limited and DBS Bank Limited, Singapore
- Subsidiaries: DBS Cholamandalam Securities Limited, DBS Cholamandalam
Distribution Limited, Cholamandalam Factoring Limited (from Jan 30,
2010), DBS Cholamandalam Asset Management Limited (upto Jan 19, 2010),
and DBS Cholamandalam Trustees Limited (upto Jan 19, 2010).
- Key management Person: Mr. Atul Pande, Managing Director (Upto
October 30, 2008)
Mr. N. Srinivasan, Director (From November 1, 2008)
Note: Related party relationships are as identified by the Management
and relied upon by the Auditors.
3. Contingent Liabilities
(a) Counter Guarantees provided to Banks à Rs.108 Lakhs (2009- Rs.48.36
lakhs) and Shortfall Undertaking provided to the lender of
Cholamandalam Factoring Limited (Subsidiary) Ã Rs.7,500 lakhs (2009-
NIL)
(b) Contested Claims Not Provided for:
Rupees in lakhs
Particulars As at As at
31.03.2010 31.03.2009
Income Tax and Interest Tax Issues
where the Company is in appeal 612.89 485.39
Decided in the CompanyÃs favour by
Appellate Authorities and for which
the Department is in further appeal
with respect to Income Tax and
Interest Tax 39.64 39.64
Sales Tax issues pending before
Appellate Authorities
in respect of which the Company
is in appeal 450.02 460.09
Disputed claims against the Company
lodged by various
parties under litigation (to the
extent quantifiable) 895.36 633.65
Note:
The Company is of the opinion that the above demands are not
sustainable and expects to succeed in its appeals / defence.
4. sharing of costs
The Company shares certain costs / service charges with other companies
in the Group. These costs have been allocated between the Companies on
a basis mutually agreed to between the Companies, which has been relied
upon by the Auditors.
5. Appointment of manager
The shareholders of the company approved the appointment of Ms. P.
Sujatha as the Manager of the Company under Section 269 of the
Companies Act, 1956 on July 28, 2009.
6. Previous year Figures
Previous yearÃs figures have been regrouped /rearranged, where
necessary to conform to current yearÃs presentation.
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- NSE Price History
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Cholamandalam Investment & Finance Company Ltd. Key Financial Ratios
- Ratios
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Cholamandalam Investment & Finance Company Ltd. Results
- Quarterly Results
- Half Yearly Results
- Nine Months Results
- Annual Results
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Cholamandalam Investment & Finance Company Ltd. Financial Data
- Audited Results
- Cash Flow
- Balance Sheet
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Cholamandalam Investment & Finance Company Ltd. Reports
- Accounting Policies
- Auditors Report
- Directors Report
- Notes To Account
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Cholamandalam Investment & Finance Company Ltd. Corporate Announcements
- Book Closure
- Dividend
- Board Meetings
- Change of Name
