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Notes to Accounts of IFCI Ltd.

Mar 31, 2023

Measurement of fair values

i. Fair value hierarchy

The fair value of investment property has been determined by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. However, the valuation has been determined by the IFCI Limited internally duting the reported period ended March 31, 2023.

The fair value measurement for all of the investment property has been categorised as a Level 3 fair value based on the inputs to the valuation technique used.

ii. Valuation technique

The Company follows direct sale comparison technique. The valuation model considers the value of the subject property by comparing recent sales / listing of similar interest in the properties located in the surrounding area. By analysing sales which qualify as ‘arms-lenght’ transactions, between willing buyers and salers, adjustments would be made for size, location, time, amenities and other relevant factors when comparing such sales price against the subject property. This approach is commonly used to value standard properties when realisable sales evidence is available.

Reserve u/s 45IC of RBI Act

Pursuant to increase in shareholding of Govt. of India more than 50% of the paid-up Share Capital, the Company has become Government Company u/s 2(45) of the Companies Act, 2013 and the Company being a Government Company u/s 2(45) of the Companies Act, 2013 was exempt from such provisions under RBI Act upto 31/03/2019. Since there is net loss in the current year, no transfer has been made to the Reserve.

Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961

Section 36(1)(viii) of the Income Tax Act allows financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Tax Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f FY 1997-98. Any withdrawal would attract tax liability. Upto FY 1996-97, utilisation of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Tax Liability (DTL) has been created on the reserve transferred after FY 1997-98.

Capital Reserve

Capital Reserve represents proceeds of forfeited shares

Securities Premium Reserve

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013. Capital Redemption Reserve

Capital Redemption Reserve represents amount transferred from surplus in statement of profit and loss towards redemption of preference shares without fresh issue of capital, as was required under section 55 of the Companies Act, 2013.

Debenture Redemption Reserve

Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non Convertible Debentures issued by IFCI Ltd. through public offer. Later vide Notification GSR-574(E) dated 16/08/19, Ministry of Corporate Affairs (MCA) has notified amended rules for Share Capital and Debentures (Rules 2014), no additional DRR has to be created either for public issue of bonds or for private placements in case of existing bonds and debentures.

General Reserve

General reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations.

Deemed equity contribution

Deemed equity contribution on account of preferential rate borrowings from shareholders.

Retained Earnings

Represents as at date accumulated surplus/(deficit) of the profits earned by the Company.

Debt instruments through Other Comprehensive Income

This comprises changes in the fair value of debt instruments recognised in other comprehensive income and accumulated within equity. The Company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

Equity instruments through Other Comprehensive Income

This comprises changes in the fair value of certain identified equity instruments recognised in other comprehensive income and accumulated within equity.

Remeasurements of the defined benefit plans

Remeasurements of defined benefit liability (asset) comprises actuarial gains and losses and return on plan assets (excluding interest income).

36 Certain balances appearing under trade receivables and payables are subject to confirmation.

37 The Company has received '' 100 crore on September 17, 2022 from the Government of India towards subscription to the share capital during the Financial Year 2022-23 as share application money. In this regard, during the period under report the Company had made preferential allotment of 9,29,36,802 number of equity shares of face value of '' 10/- each to the Government of India on October 27, 2022 @ '' 10.76/- per equity share (including security premium of '' 0.76/- per equity share). Further, an amount of '' 400 crore was received from GOI on March 07, 2023, towards subscription to the share capital of the Company for the FY 2022-23 as share application money. In this regard, the Committee of Directors had allotted 29,36,85,756 number of equity shares of face value of '' 10/- each to the GOI on April 27, 2023 @ '' 13.62/- per equity share (including security premium of '' 3.62/- per equity share).

38 The Company is consistently following the policy of provision on loan assets on the basis of Ind AS norms vs IRAC norms, whichever is higher. As on March 31, 2023, Impairment allowance under Ind AS 109 is higher than RBI Prudential (IRACP) Norms (including standard assets provisioning). Accordingly the company has provided for the amount as per Ind AS in the books of accounts as on March 31, 2023. The existing impairment reserve of '' 34.54 crores created upto March 31, 2023 has not been reversed. Though ECL on Loan Assets is computed on portfolio basis, however full impairment allowance has been made on loan accounts declared as fraud as per RBI norms.

39 The Company has changed its accounting policy whereby interest income on stage 3 assets ( except on assets which are standard under IRAC norms) shall not be recognized in books of accounts with effect from 01st April 2021. Accordingly interest income is lower by '' 209.50 crore (net of ECL) for the financial year. The company has sought clarification from RBI in this regard and their reply is awaited.

40 The global economy has subsumed the impact of Covid-19 and is gradually recovering. The company does not envisage any major disruptions and impact on its operations moving forward.

41 The valuation of Investments in subsidiary companies has been considered on the basis of financial statements of the subsidiaries for the period ended 31st December 2022, instead of 31st March 2023. There is no material impact of this on the financial statements of the company.

42 In the context of reporting business/geographical segment as required by Ind AS 108 - “Operating Segments”, the Company operations comprise of only one business segment of financing . Hence, there is no reportable segment as per Ind AS 108.

42.1 On all the secured bonds and debentures issued by the Company and outstanding as on 31st March 2023, 100% security cover has been maintained against principal and interest, by way of floating charge on book debts/receivables of the Company .

42.2 These financial statements have been prepared as per Schedule III Division III of the Companies Act, 2013 which has been notified by the Ministry of Corporate Affairs and published in the official Gazette on 11th October 2018. Any application guidance/ clarifications/ directions issued by RBI or other regulators will be implemented as and when they are issued/ applicable.

43 IFCI is carrying the investment in subsidiary companies at cost net of impairment loss (if any) and opted for one time exemption under IndAS 101 for deemed cost being the carrying value of investment as at transition date i.e. April 1, 2017. As on March 31, 2023, the Company had investment in 27,91,54,700 no. of Equity shares in its subsidiary, IFCI Factors Ltd. (IFL) and 3,93,63,809 no. of Equity shares in its subsidiary, IFCI Financial Services Ltd. (IFIN). The company got the shares of IFL & IFIN fair valued internally, per which, the fair value of investments in shares of IFL was determined at '' 21.77 crore and the fair value of investments in shares of IFIN was determined at '' 62.86 crore, using the generally accepted valuation methodologies against breakup value, in line with Indian Accounting Standards and accordingly, the resultant impairment loss has been charged in the Profit & Loss Account.

43.1 The company has Deferred Tax Asset (Net) of '' 1739.12 crore as on March 31, 2023. The company has appointed a management consultant for formulation of revival plan of the company. The consultant’s report has been shared with the administrative ministry and the revival plan is under active consideration of the Government of India. The government has already infused the share capital of '' 100 crore in FY 2021-22 and '' 500 crore in FY 2022-23 in IFCI to support the operations of the company. Thus, the management is confident of availability of sufficient income in future to offset deferred tax assets available with the company.

44 Uses of Funds

No funds are borrowed from banks and financial institutions during the year.

44.1 Change due to revaluation

During the year the company has not revalued its Proeprty Plant and Equipment (PPE) and intangible assets

44.2 Other additional regulatory disclosures as required under Schedule III

a. Loans and advances

The company has not granted any loans and advances in the nature of loans to promoters, directors, Key Managerial Personnel (KMPs) and the related parties, repayable on demand and where terms or period of repayment are not defined.

b. Ageing Analysis of Capital Work in Progress

There is no Capital work in progress in the current year as well as preceeding financial year.

c. Ageing Analysis of Intangible Assets under Development

There is no Intangible Assets under Development in the current year as well as preceeding financial year.

d. Benami Property:

No proceedings have been initiated or pending against the company for holding any Benami property under the Benami Transaction (Prohibition)Act, 1988 (45 of 1988) and rules made thereunder.

e. Borrowing against security of Current Assets

The company has no borrowings from bank or financial institutions against security of current assets.

f. Wilful Defaulter:

The company has not been declared as wilful defaulter by any bank or financial institution or any other lender during the year.

g. Relationship with Struck off company:

The compnay has no transanction with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

h. Registration of Charges or satisfaction with Registrar of Companies (ROC)

There is no charge or satisfaction yet to be registered with ROC beyond the Statutory period.

i. Companies with number of Layer of Companies:

Company being a NBFC, clause(87) of section 2 of the Act is not applicable.

j. Scheme of arrangement

During the year there is no Scheme of Arrangements has been approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013.

k. Utilization of borrowed funds:

(i) The company has not advanced or loaned or invested any funds to any other person(s) or entity(ies), with the understanding that the intermediary shall directlly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(ii) The company has not received any funds from any other person(s) or entity(ies) including foreign entities, with the understanding that the intermediary shall directlly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

l. Undisclosed Income:

During the year the Company has not disclosed any income in terms of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961), unless there is immunity for disclosure under any scheme.

m. Details of Crypto Currency or Virtual Currency:

The company has not traded in Crypto Currency or Virtual Currency during the financial year.

ii. Defined benefit plan

A. Gratuity

The Company has a defined benefit gratuity plan in India, governed by the IFCI Gratuity Regulations, 1968. This plan entitles an employee, a sum equal to one month’s pay plus dearness allowance for each completed year of service in IFCI or part thereof in excess of six months, subject to a maximum of twenty months pay plus dearness allowance or Rupees Eighteen Lakh whichever is less, for first twenty years of service.. The scheme is fully funded with Life Insurance Corporation of India (LIC). This defined benefit plan expose the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2023. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

(a) Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC). The funding requirements are based on the gratuity fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section D below. Employees do not contribute to the plan. Expected contributions to gratuity plan for the year ending 31 March 2021 is '' 1.10 crore.

Salary Increases : Actual salary increases will increase the Plan’s liability. Increase in salary increase rate assumption in future valuations will also increase the liability.

Investment Risk : If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities. Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

B. Post Retirement Medical Benefit

IFCI is extending post-retirement medical benefits to the employees and eligible dependent family members after their retirement. As per the scheme, employees who are members of Voluntary Welfare Scheme (VWS) are eligible for reimbursement of medical expenses after retirement The benefits under the scheme are extended to the retired employees, his/her spouse and dependent children and entitlement for reimbursement, although within the ceilings and is based upon the Grade in which an employee retires, subject to the condition that spouse of the concerned employee is not availing of any medical benefits from his/her employer, if any. Reimbursement of the medical bills is made at the rates applicable to the employees at the center at which the employee resides after retirement as per the rates circulated by IFCI for its working employees time to time.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the Medical Benefit plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

Medical Cost Increase - increase in actual medical cost per retiree will increase the Plan’s liability. Increase in medical Cost per Retiree rate assumption will also increase the liability.

Investment Risk - If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities. Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

C. Provident Fund

The Company has a defined benefit provident fund, governed by the IFCI Employees’ Provident Fund Regulations. Monthly contributions to the Provident Fund is being charged against revenue. IFCI has been paying interest on the provident fund balance at the rate notified by the Employees’ Provident Fund Organization (EPFO) for the relevant year. The Provident Fund is administered through duly constituted and approved administrators. The Committee of Administrators of IFCI Employees’ Provident Fund has approved earmarking of specific investments against the PF liability in the current financial year. For the purpose, investments have been earmarked towards PF liability in line with the notification issued by Ministry of Labour & Employment notifying the pattern of investment for EPFO and EPF exempted establishments.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the provident fund plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

(a) Funding

During the Financial year 2018-19, the Company has earmarked some of its investments in government securities, mutual funds against Provident fund liability.

Expected contributions to provident fund plan for the year ending 31 March 2023 is '' 1.07 crore.

Investment Risk : If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities. Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

50 OPERATING SEGMENTS

The Board of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, “Operating Segments.” The Company’s operating segments are established in the manner consistent with the components of the Company that are evaluated regularly by the Chief Operating Decision Maker as defined in ‘Ind AS 108 - Operating Segments.’ The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108.

a. Information about products and services:

The company deals in only one product i.e. granted loans to corporate customers. Hence, no separate disclosure is required.

b. Information about geographical areas:

The entire sales of the Company are made to customers which are domiciled in India. Also, all the assets of the Company are located in India.

c. Information about major customers (from external customers):

The Company does not earn revenues from the customers which amount to 10 per cent or more of Company’s revenues

51 TRANSFERS OF FINANCIAL ASSETS

In the ordinary course of business, the Company enters into transactions that result in the transfer of loans and advances given to customers. In accordance with the accounting policy set out in Note 2, the transferred financial assets continue to be recognised in their entirety or to the extent of the Company’s continuing involvement, or are derecognised in their entirety.

The Company transfers financial assets that are not derecognised in their entirety are primarily through the sale of NPA loans to asset reconstruction companies (ARCs).

A. Transferred financial assets that are not derecognised in their entirety Sale of NPA loans to asset reconstruction companies (ARCs)

Sale of NPA loans to asset reconstruction companies (ARCs)’ are transactions in which the Company sells loan and advances to an unconsolidated special vehicle and simultaneously purchases the majority portion of security receipts issued by said vehicle. The security receipts are collateralised by the loans purchased by the vehicle and hence the cash flow of the security receipts is dependent on the recovery of purchased loans.

The Company continues to recognise that part of the loans in their entirety against which security receipts have been subscribed by the Company because it retains substantially all of the risks and rewards of ownership w.r.t that part of the transferred loan. The part of loan transferred against which cash consideration is received is derecognised.

B. Transferred financial assets that are derecognised in their entirety Sale of NPA loans to asset reconstruction companies (ARCs)

The Company has taken derecognition exemption and de-recognise the loans in their entirety against which security receipts have been subscribed by the Company. The Company has classified said invsetment in security receipts subsequently measured at fair value through profit and loss.

During the year the Company has recognised a fair value gain/(loss) of '' 89.77 crore ('' 40.98 crore in 2021-22). The fair value gain/(loss) on the security receipts as on 31 March 2023 is '' -2.43 crore (31 March 2022 - '' -36.83 crore)

The following table sets out the details of the assets that represents the Company’s continuing involvement with the transferred assets that are derecognised in their entirety.

B. Valuation framework

The respective operational department performs the valuation of financial assets and liabilities required for financial reporting purposes, either externally or internally for every quaterly reporting period. Specific controls for valuation includes verification of observable pricing, review of siginificant unobservable inputs and valuation adjustments.

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements. Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 : The fair value of financial instruments that are not traded in active markets is determined using valuation techniques which maximize the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3 : If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants’ assumptions about risk and the risk premium required by market participants in order to bear that risk. It develops Level 3 inputs based on the best information available in the circumstances.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments measured at fair value in the balance sheet, as well as the significant unobservable inputs used.

C. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are:

53 FINANCIAL RISK MANAGEMENT

The company’s activities are primarily subjected to credit risk, market risk and operational risk for managing risk management committee exsists. The function of the committee is to identify, monitor, manage and mitigate these risks. The company also makes sure that it adheres to internal policies and procedures, complies with the regulatory guidelines and maintains sufficient loan documentation.

With regards to its lending activity, the company has established various limits and restrictions to manage the risks. There are various reports which are prepared and presented to senior management by the risk management committee at regular intervals and on ad-hoc basis which helps in risk monitoring. The company has also set-up procedures to mitigate the risks in case of any breach.

A. Risk management framework

The Company’s Board of Directors have overall responsibility for the establishment and oversight of the risk management framework. The board of directors have established the Risk Management and Asset Liability Management Committee of the Directors (RALMCD) which is responsible for developing and monitoring the Company’s integrated risk management policies. The RALMCD is assisted in its oversight role by the Risk and Asset Liability Management Committee of Executives (RALMCE). The Integrated Risk Management Department undertakes regular reviews of risk management controls and procedures, the results of which are reported to the RALMCE on monthly basis.

B. Credit risk

Credit risk arises from loans and advances, cash and cash equivalents, investment in debt securties and deposits with banks and financial institutions and any other financial assets.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s loans and advances to customers, trade receivables from customers; loans and investments in debt securities.

a) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer/obligor. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry, business specific risk, management risk, transition specific risk and project related risks.

A financial asset is considered ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

- Significant financial difficulty of the issuer or the borrower

- A breach of contract, such as default

- The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower concession(s) that the lender(s) would not otherwise consider

- It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation

- The disappearance of the active market for that financial asset because of financial difficulties

- Purchase or origination of a financial asset at a deep discount that reflects the incurred credit loss

The risk management committee has established a credit policy under which each new customer is analyzed individually for credit worthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes minimum finalised internal rating, external ratings, if they are available, background verification, financial statements, income tax returns, credit agency information, industry information, etc. Credit limits have been established for each customer and reviewed periodically and modifications are done, as and when required. Any loan exceeding prescribed limits require approval from the respective competent authority.

b) Probablity of defalut (PD)

The Probability of Default (PD) defines the probability that the borrower will default on its obligations in the future. Ind AS 109 requires the use of separate PD for a 12 month duration and lifetime duration based on the stage allocation of the borrower. A PD used for Ind AS 109 should reflect the institution’s view of the future and should be unbiased (i.e. it should not include any conservatism or optimism).

To arrive at historical probability of default, transition matrix approach has been applied using IFCI internal obligor ratings.

c) Definition of default

Default’ has not been defined under Ind AS. An entity shall apply a default definition that is consistent with the definition used for internal credit risk management purposes and consider qualitative indicators when appropriate. A loan is considered as defaulted and therefore Stage-3 (credit impaired) for ECL calculations in the following cases:

- On deterioration of the IFCI internal combined ratings of the borrower to CR-9 or CR-10 (Comparison to be done between origination rating and current rating).

- On asset being classified as NPA as per RBI prudential norms

- On restructuring of assets with impairment in loan value

- On asset being more than 90 days past dues.

d) Exposure at default (EAD)

The exposure at default (EAD) represents the gross carrying amount of the financial instruments which is subject to the impairment calculation.

e) Loss given default (LGD)

LGD is an estimate of the loss from the transaction given that a default occurs. The LGD component of ECL is independent of deterioration of asset quality, and thus applied uniformly across various stages. With respect to loan portfolio, NPA accounts which have originated in past 7 years and have been closed, along with NPA accounts ageing more than 5 years (assumed as closed), have been considered for LGD computation.

f) Significant increase in credit risk

At each reporting date, an entity shall assess whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, an entity shall use the change in the risk of the default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit loss. To make that assessment, an entity shall compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. An entity may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.

For the assessment of the SICR for the loans and advances, the following conditions have been considered:

- Deterioration of the IFCI internal combined ratings of the borrowers by 3 rating grades. (Comparison to be done between origination rating and current rating).

- Deterioration of the ratings of the borrowers from the investment grade to the sub-investment grade.

- On restructuring of assets without impairment in loan value

- On asset overdue beyond 60 days past dues

i) Collateral held and other credit enhancements

Collateral securing each individual loan may not be adequate in relation to the value of the loan. All borrowers must meet the Company’s internal credit assessment procedures, regardless of whether the loan is secured. In addition to the collateral stated above, the Company holds other types of collateral such as second charges and floating charges for which specific values are generally not available. The company has internal policised on the accepatability of specific classes of collateral or credit risk mitigation.The prinicipal collateral types for loans and advances are:

1 Mortgage of Immovable properties

2 Hypothecation of Movable property

3 Bank and Government Guarantees

4 Pledge of instruments through which promoter’s contribution is infused in the project

5 Pledge of Promoter Shareholding

6 Corporate and Personal Guarantees of Promoters

k) Modified / Restructured loans

When the Company grants concession, for economic or legal reasons related to a borrower’s financial difficulties, for other than an insignificant period of time, the related loan is classified as a Troubled Debt Restructuring (TDR). Concessions could include a reduction in the interest rate below current market rates, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered TDRs.

From a risk management point of view, once an asset is forborne or modified, the Company’s special department for distressed assets continues to monitor the exposure until it is completely and ultimately derecognised.

A loan that is renegotiated is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms or if the terms of the existing agreement are modified such that the renegotiated loan is a substantially different instrument.

Where the renegotiation of such loans are not derecognised, impairment continues to be assessed for significant increases in credit risk compared to the initial origination credit risk rating.

The are were no modified assets which were forborne during the period and accordingly no loss were suffered by the Company.

l) Governance Framework

As required by the RBI Notification no. “DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13 th March 2020, where provision requirement as per extant RBI norms is higher than ECL as computed under IndAS, the provision as per RBI norms shall be adopted, on portfolio basis. Further, in accordance with RBI Guidelines, where impairment allowance under Ind AS 109 is lower than the provisioning required under IRACP (including standard asset provisioning), the difference shall be appropriated from the net profit or loss after tax to a separate ‘Impairment Reserve’.

C. Liquidity risk

Liquidity risk is the potential inability to meet the institution’s liabilities as they become due. From IFCI perspective, it basically originates from the mismatches in the maturity pattern of assets and liabilities. Analysis of liquidity risk involves the measurement of not only the liquidity position of the

institution on an ongoing basis but also examining how funding requirements are likely to be affected under sever but plausible scenarios. Net funding requirements are determined by analysing the institution’s future cash flows based on assumptions of the future behaviour of assets and liabilities that are classified into specified time buckets, utilizing the maturity ladder approach and then calculating the cumulative net flows over the time frame for liquidity assessment.

For the present, for measuring and managing net funding requirements, the use of maturity ladder and calculation of cumulative surplus or deficit of funds at selected maturity dates is being utilized as a standard tool.

The ALM format prescribed by RBI in this regard is being utilized for measuring cash flow mismatches in different time bands. The cash flows are placed in different time bands based on projected future behaviour of assets, liabilities and off-balance sheet items. Apart from the above cash flows, the institution would also track the impact of prepayments of loans, premature closure of liabilities and exercise of options built in certain instruments which offer put/call options after specified times. Thus, cash outflows can be ranked by the date on which liabilities fall due, the earliest date a liability holder could exercise an early repayment option or the earliest date contingencies could be crystallized.

The company has initiated an exercise to identify its High Quality Liquid Investments and compute Liquidity Coverage Ratio.

In addition, the Company maintains the following lines of credit:

- '' 128.3 crore overdraft facility that is secured. Interest would be payable between 7.75 percent and 8.21 percent.

- '' 130 crore facility that is unsecured and can be drawn down to meet short-term financing needs. Interest would be payable at a rate of 9.57 percent (weighted average rate)

The inflows/(outflows) disclosed in the above table represents contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contract maturity. The disclosure shows net cash flow amounts for derivatives that are net cash settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross settlement.

The interest payments on variable interest rate loans in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. The future cash flows on contingent consideration and derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the contingency change. Except for these financial liabilities, it is not expected that cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. The table below shows the contractual expiry by maturity of the Company’s contingent liabilities and commitments. Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down.

D. Market risk

Market the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. In line with regulatory guidelines, the Company classifies exposures to market risk into either Current or Long term portfolios and manages each of those portfolios separately.

The market risk management framework in IFCI comprises risk identification, setting up of limits & triggers, risk measurement, risk monitoring, risk reporting and taking corrective actions where necessitated. It is pertinent to highlight that the details pertaining to threshold investment grade rating, investment limits, approval authority, control mechanism including stop-loss triggers, compliances required, etc. for different treasury products including equity trading have been clearly outlined in the extant Treasury & Investment Policy of IFCI.

(a) Market risk - trading portfolios

The Company does not have any trading portfolios.

(b) Market risk - Non-trading portfolios

(i) Currency risk

The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which borrowings are denominated and the respective functional currencies of Company. The functional currency for the company is '' The currency in which these transactions are primarily denominated is EURO.

Currency risks related to the principal amounts of the Company’s EURO bank loans, have been fully hedged using forward contracts that mature on the same dates as the loans are due for repayment.

Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company -primarily '' In addition, interest on borrowings is denominated in the currency of the borrowing. This provides an economic hedge without derivatives being entered into and therefore hedge accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company’s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

(ii) Interest rate risk

The Company makes attempts to minimize the gap between floating rate liabilities and floating rate assets, in order to minimize interest rate risk. This is achieved by way of borrowings at a floating rate and lending at rates linked to IFCI benchmark rate, which in turn is linked to, among others, its cost of borrowings. Further, analysis of impact of change in market rates of interest is carried out on a periodic basis, to undertsand impact on Net Interest Income of IFCI and Market Value of Equity of IFCI. In line with extant regulatory guidelines, Interest rate Sensitivity statement is prepared on a monthly basis and anlysed to understand gaps in various time buckets.

(iii) Equity price risk

Equity price risk is the risk that the fair value of equities declines as a result of changes in the level of equity indices and market price of individual stocks. The non-trading equity price risk exposure arises from equity securities classified at Fair Value. The equity price risk same is more applicable to securities held for the purpose of trading. As the Company focuses on long term investments and curent investments are kept low (investments held for tradng purposes), IFCI may not be exposed to significant equity price risk.

54 CAPITAL MANAGEMENT

The basic approach of capital adequacy framework is that, a financial institution should have sufficient capital to absorb shocks on account of any unexpected losses arising from the risks in its business.

As per RBI guidelines, IFCI as a Government owned NBFC-ND-SI is required to maintain a minimum capital to risk weighted asset ratio. Capital management entails optimal utilization of scarce capital to meet extant regulatory capital requirements. IFCI has put in place an appropriate Risk Appetite framework and computes its capital requirements and adequacy as per extant regulatory guidelines.

i. Regulatory capital

The Company’s regulatory capital consists of the sum of the following elements :

- Common equity Tier 1 (CET1) capital, which includes ordinary share capital, related share premiums, retained earnings and reserves after adjustment for dividend declared and deduction for goodwill, intangible assets and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

ii. Capital allocation

The amount of capital allocated to each operation or activity is undertaken with the objective of minimisation of return on the risk adjusted capital. Allocation of capital is to various lines of business basis annual business plan drawn at the beginning of the year. Various consideration for allocating capital include synergies with existing operations and activities, availability of management and other resources, and benefit of the activity with the company’s long term strategic objectives.

55 The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies. Ind AS adjsutements have not been made in these disclosures unless specifically stated :

(i) The company is registered with Securities and Exchange Board of India as debenture trustee having registration code i.e. “IND000000002”.

(ii) ‘ ‘There are no penalties imposed by RBI and other regulator during the year ended March 31, 2023. However, the Stock Exchanges had been imposing fines for non-compliance with the provisions of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, relating to composition of the Board of Directors and Committees namely Audit Committee, Nomination and Remuneration Committee, Stakeholders’ Relationship Committee and Risk Management Committee, in the absence of Independent Directors on the Board of IFCI.

In response to the fines levied by the Stock Exchanges, it was submitted that being a Government Company, the power to appoint Independent Directors on the Board of IFCI Limited, vests with the Department of Financial Services, being the Administrative Ministry in charge. Once the Independent Directors are appointed, the Committees will be reconstituted as per the applicable regulatory provisions and the Stock Exchanges were requested not to impose fine or to take any action on the Company.

Considering our submissions, BSE had waived the fines imposed for the above said non-compliances for the period ended upto December 31, 2020, except for an amount of '' 1,82,000 for Regulation 20 w.r.t. composition of Stakeholders’ Relationship Committee for the period ended June 30, 2020. No corresponding waiver has been granted by NSE yet. However, NSE had replied that waiver application can be placed only after the Company complies with the corresponding Regulations of SEBI Listing Regulations and advised IFCI to first appoint Directors as required to comply with applicable Regulations and subsequently apply for the waiver application.

As on date, the total consolidated outstanding fines imposed by the Stock Exchanges is '' 3,47,47,740/-(inclusive of applicable taxes) for the quarters ended September 2018 to March 2023.”

5 7 Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.001 million (Previous Year ended March 2022: USD0.001 million) and EUR -0.01 million (Previous Year ended March 2022: EUR 2502 million) equivalent to '' 0.08 crore (Previous Year ended March 2022: '' 2.10 crore).

59 Previous year figures have been re-grouped/ re-arranged/ restated wherever necessary, to conform to current period’s presentation.


Mar 31, 2022

Reserve u/s 45IC of RBI Act

Pusuant to increase in shareholding of Govt, of India more than 50% of the paid-up Share Capital, the Company has become Government Company u/s 2(45) of the Companies Act, 2013 and the Company being a Government Company u/s 2(45) of the Companies Act, 2013 was exempt from such provisions under RBI Act upto 31/03/2019. Since there is net loss in the current year, no transfer has been made to the Reserve

Special Reserve under Section 30(l)(viii) of the Income Thx Act, 1901

Section 36(l)(viii) of the Income Thx Act allowes financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Thx Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f FY 1997-98. Any withdrawal would attract tax liability. Upto FY 1996-97, utilisation of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Thx Liability (DTL) has been created on the reserve transferred after FY 1997-98.

Capital Reserve

Capital Reserve represents proceeds of forfeited shares Securities Premium Reserve

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013. Capital Redemption Reserve

Capital Redemption Reserve represents amount transferred from surplus in statement of profit and loss towards redemption of preference shares without fresh issue of capital, as was required under section 55 of the Companies Act, 2013.

Debenture Redemption Reserve

Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non Convertible Debentures issued by IFCI Ltd. through public offer. Later vide Notification GSR-574(E) dated 16/08/19, Ministry of Corporate Affairs (MCA) has notified amended rules for Share Capital and Debentures (Rules 2014), no additional DRR has to be created either for public issue of bonds or for private placements in case of existing bonds and debentures.

General Reserve

General reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations.

Deemed equity contribution

Deemed equity contribution on account of preferential rate borrowings from shareholders.

Retained Earnings

Represnets as at date accumulated surplus/(deficiet) of the profits earned by the Company.

Debt instruments through Other Comprehensive Income

This comprises changes in the fair value of debt instruments recognised in other comprehensive income and accumulated within equity. The Company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

Equity instruments through Other Comprehensive Income

This comprises changes in the fair value of certain identified equity instruments recognised in other comprehensive income and accumulated within equity. Remeasurements of the defined benefit plans

Remeasurements of defined benefit liability (asset) comprises actuarial gains and losses and return on plan assets (excluding interest income).

36 Certain balances appearing under trade receivables and payables are subject to confirmation.

37 The Company had received ? 200 crore on March 15,2021 from Government of India (GOI) towards subscription to the share capital of the Company during the Financial Year 2020-21 as share application money. In this regard, the Committees of Directors had allotted 14,59,85,401 number of equity shares of face value of ^ 10/- each to GOI on April 23, 2021 @ T 13.70/- per equity share (including security premium of ^ 3.70/- per equity share). Further, an amount of T 100 crore was received from GOI on January 17, 2022, towards subscription to the share capital of the Company for the FY 2021-22 as share application money. In this regard, the Committee of Directors had allotted 6,10,12,812 number of equity shares of face value of ^ 10/- each to the GOI on February 25, 2022 @ ^ 16.39/- per equity share (including security premium of ^ 6.39/- per equity share).

38 The Company is consistently following the policy of provision on loan assets on the basis of Ind AS norms vs IRAC norms, whichever is higher. As on March 31, 2022, Impairment allowance under Ind AS 109 is higher than RBI Prudential (IRACP) Norms (including standard assets provisioning). Accordingly the company has provided for the amount as per Ind AS in the books of accounts as on March 31, 2022. The existing impairment reserve of ^ 34.54 crores created upto March 31, 2022 has not been reversed. Though ECL on Loan Assets is computed on portfolio basis, however full impairment allowance has been made on loan accounts declared as fraud as per RBI norms.

39 The Company has changed its accounting policy whereby interest income on stage 3 assets ( except on assets which are standard under IRAC norms) shall nut be recognized in books of accounts with effect from 01st April 2021. Accordingly interest income is lower by T 248.03 crore (net of ECL) for the reporting period.

40 The global economy has subsumed the impact of Covid-19 and is gradually recovering. The company does not envisage any major disruptions and impact on its operations moving forward.

41 The valuation of Investments in subsidiary companies has been considered on the basis of financial statements of the subsidiaries for the period ended 31st December 2021, instead of 31st March 2022. There is no material impact of this on the financial statements of the company.

42 In the context of reporting business/geographical segment as required by Ind AS 108 - “Operating Segments”, the Company operations comprise of only one business segment of financing. Hence, there is no reportable segment as per Ind AS 108.

42.1 On all the secured bonds and debentures issued by the Company and outstanding as on 31st March 2022, 100% security cover has been maintained against principal and interest, by way of floating charge on book debts/receivables of the Company. Further, asset cover for unsecured non convertible debentures issued by the company is 1.15 times as at 31st March 2022, on the basis of external valuation obtained by the Company from an independent expert.

42.2 These financial statements have been prepared as per Schedule III Division III of the Companies Act, 2013 wMch has been notified by the Ministry of Corporate Affairs and published in the official Gazette on 11th October 2018. Any application guidance/ clarifications/ directions issued by RBI or other regulators will be implemented as and when they are issued/ applicable.

43 IFCI is carrying the investment in subsidiary companies at cost net of impairment loss (if any) and opted for one time exemption under Ind AS 101 for deemed cost being the carrying value of investment as at transition date i.e. April 1, 2017. As on March 31,2022, the Company had investment in 27,91,54,700

no. of Equity shares in its subsidiary, IFCI Fhctors Ltd. (IFL). The company got the shares of IFL fair valued internally, per which, the fair value of investments in shares of IFL was determined at? 17.58 crore, using the generally accepted valuation methodologies against brealcup value, in line with Indian Accounting Standards and accordingly, the resultant impairment loss has been charged in the Profit & Loss Account.

44 USES OF FUNDS

No funds are borrowed from banks and financial institutions during the year.

44.1 Change due to revaluation

During the year the company has not revalued its Proeprty Plant and Equipment (PPE) and intangible assets

44.2 Other additional regulatory disclosures as required under Schedule III

a. Loans and advances

The company has not granted any loans and advances in the nature of loans to promoters, directors, Key Managerial Personnel (KMPs) and the related parties, repayable on demand and where terms or period of repayment are not defined.

b. Ageing Analysis of Capital Work in Progress

There is no Capital work in progress in the current year as well as proceeding financial year.

c. Ageing Analysis of Intangible Assets under Development

There is no Intangible Assets under Development in the current year as well as proceeding financial year.

d. Benami Property:

No proceedings have been initiated or pending against the company for holding any Benami property under the Benami Transaction (Prohibition)Act, 1988 (45 of 1988) and rules made thereunder.

e. Borrowing against security of Current Assets

The company has no borrowings from bank or financial institutions against security of current assets.

f. Wilful Defaulter:

The company has not been declared as wilful defaulter by any bank or financial institution or any other lender during the year.

g. Relationship with Struck off company:

The compnay has no transanction with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

h. Registration of Charges or satisfaction with Registrar of Companies (ROC)

There is no charge or satisfaction yet to be registered with ROC beyond the Statutory period.

i. Companies with number of Layer of Companies:

Company being a NBFC, clause(87) of section 2 of the Act is not applicable.

j. Scheme of arrangement

During the year there is no Scheme of Arrangements has been approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013.

k. Utilization of borrowed funds:

(i) The company has not advanced or loaned or invested any funds to any other person(s) or entity(ies), with the understanding that the intermediary shall directlly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(ii) The company has not received any funds from any other person(s) or entity(ies) including foreign entities, with the understanding that the intermediary shall directlly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (ultimate beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

l. Undisclosed Income:

During the year the Company has not disclosed any income in terms of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Thx Act, 1961), unless there is immunity for disclosure under any scheme.

m. Details of Crypto Currency or Virtual Currency:

The company has not traded in Crypto Currency or Virtual Currency during the financial year.

ii. Defined benefit plan

A. Gratuity

The Company has a defined benefit gratuity plan in India, governed by the IFCI Gratuity Regulations, 1968. This plan entitles an employee, a sum equal to one month’s pay plus dearness allowance for each completed year of service in IFCI or part thereof in excess of six months, subject to a maximum of twenty months pay plus dearness allowance or Rupees Eighteen LaLh whichever is less, for first twenty years of service.. The scheme is fully funded with Life Insurance Corporation of India (LIC). This defined benefit plan expose the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2022. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

(a] Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC). The funding requirements are based on the gratuity fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section D below. Employees do not contribute to the plan. Expected contributions to gratuity plan for the year ending 31 March 2021 is ? 1.62 cr

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow -

Salary Increases : Actual salary increases will increase the Plan’s liability. Increase in salary increase rate assumption in future valuations will also increase the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities. Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

B. Post retirement medical benefit

IFCI is extending post-retirement medical benefits to the employees and eligible dependent family members after their retirement. As per the scheme, employees who are members of Voluntary Welfare Scheme (VWS) are eligible for reimbursement of medical expenses after retirement The benefits under the scheme are extended to the retired employees, his/her spouse and dependent children and entitlement for reimbursement, although within the ceilings and is based upon the Grade in which an employee retires, subject to the condition that spouse of the concerned employee is not availing of any medical benefits from his/her employer, if any. Reimbursement of the medical bills is made at the rates applicable to the employees at the center at which the employee resides after retirement as per the rates circulated by IFCI for its working employees time to time.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the Medical Benefit plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

Medical Cost Increase - increase in actual medical cost per retiree will increase the Plan’s liability. Increase in medical Cost per Retiree rate assumption will also increase the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities. Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

C. Provident Fund

The Company has a defined benefit provident fund, governed by the IFCI Employees’ Provident Fund Regulations. Monthly contributions to the Provident Fund is being charged against revenue. IFCI has been paying interest on the provident fund balance at the rate notified by the Employees’ Provident Fund Organization (EPFO) for the relevant year. The Provident Fund is administered through duly constituted and approved administrators. The Committee of Administrators of IFCI Employees’ Provident Fund has approved earmarking of specific investments against the PF liability in the current financial year. For the purpose, investments have been earmarked towards PF liability in line with the notification issued by Ministry of Labour & Employment notifying the pattern of investment for EPFO and EPF exempted establishments.

Valuations axe based on certain assumptions, which axe dynamic in nature and vary over time. As such company is exposed to various risks as follow -

Investment Risk: If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities. Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

50 OPERATING SEGMENTS

The Board of the Company has been identified as the Chief Operating Decision Maher [CODM] as defined by Ind AS 108, “Operating Segments.” The Company’s operating segments are established in the manner consistent with the components of the Company that are evaluated regularly by the Chief Operating Decision Maher as defined in ‘Ind AS 108 - Operating Segments.’ The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108.

a. Information about products and services:

The company deals in only one product i.e. granted loans to corporate customers. Hence, no separate disclosure is required.

b. Information about geographical areas:

The entire sales of the Company are made to customers which are domiciled in India. Also, all the assets of the Company are located in India.

c. Information about major customers (from external customers]:

The Company does not earn revenues from the customers which amount to 10 per cent or more of Company’s revenues

51 TRANSFERS OF FINANCIAL ASSETS

In the ordinary course of business, the Company enters into transactions that result in the transfer of loans and advances given to customers. In accordance with the accounting policy set out in Note 2, the transferred financial assets continue to be recognised in their entirety or to the extent of the Company’s continuing involvement, or are derecognised in their entirety.

The Company transfers financial assets that are not derecognised in their entirety are primarily through the sale of NPA loans to asset reconstruction companies (ARCs).

A. Transferred financial assets that are not derecognised in their entirety Sale of NPA loans to asset reconstruction companies (ARCs]

Sale of NPA loans to asset reconstruction companies (ARCs)’ are transactions in which the Company sells loan and advances to an unconsolidated special vehicle and simultaneously purchases the majority portion of security receipts issued by said vehicle. The security receipts are collateralised by the loans purchased by the vehicle and hence the cash flow of the security receipts is dependent on the recovery of purchased loans.

The Company continues to recognise that part of the loans in their entirety against which security receipts have been subscribed by the Company because it retains substantially all of the risks and rewards of ownership w.r.t that part of the transferred loan. The part of loan transferred against which cash consideration is received is derecognised.

B. Transferred financial assets that are derecognised in their entirety Sale of NPA loans to asset reconstruction companies (ARCs]

The Company has taken derecognition exemption and de-recognise the loans in their entirety against which security receipts have been subscribed by the Company. The Company has classified said invsetment in security receipts subsequently measured at fair value through profit and loss.

During the year the Company has recognised a fair value gain/(loss] of ^ 40.98 crore (? 193.26 crore in 2020-21]. The fair value gain/(loss] on the security receipts as on 31 March 2022 is ^ -36.83 crore (31 March 2021 - ^ -7.01 crore]

During the year the Company has sold 5 loan assets to ARC on cash basis. For details refer Note No.55 (xxii]

B. Valuation framework

The respective operational department performs the valuation of financial assets and liabilities required for financial reporting purposes, either externally or internally for every quaterly reporting period. Specific controls for valuation includes verification of observable pricing, review of siginificant unobservable inputs and valuation adjustments.

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements. Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 : The fair value of financial instruments that are not traded in active markets is determined using valuation techniques winch maximize the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3 : If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants’ assumptions about risk and the risk premium required by market participants in order to bear that risk. It develops Level 3 inputs based on the best information available in the circumstances.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments measured at fair value in the balance sheet, as well as the significant unobservable inputs used.

Financial instruments valued at carrying value

The respective carrying values of certain on-balance sheet financial instruments approximated their fair value. These financial instruments include cash in hand, balances with other banks, trade receivables, trade payables and certain other financial assets and liabilities. Carrying values were assumed to approximate fair values for these financial instruments as they are short-term in nature and their recorded amounts approximate fair values or are receivable or payable on demand.

53 FINANCIAL RISK MANAGEMENT

The company’s activities are primarily subjected to credit risk, market risk and operational risk for managing risk management committee exsists. The function of the committee is to identify, monitor, manage and mitigate these risks. The company also makes sure that it adheres to internal policies and procedures, complies with the regulatory guidelines and maintains sufficient loan documentation.

With regards to its lending activity, the company has established various limits and restrictions to manage the risks. There are various reports which are prepared and presented to senior management by the risk management committee at regular intervals and on ad-hoc basis which helps in risk monitoring. The company has also set-up procedures to mitigate the risks in case of any breach.

A. Risk management framework

The Company’s Board of Directors have overall responsibility for the establishment and oversight of the risk management framework. The board of directors have established the Risk Management and Asset Liability Management Committee of the Directors (RALMCD) which is responsible for developing and monitoring the Company’s integrated risk management policies. The RALMCD is assisted in its oversight role by the Risk and Asset Liability Management Committee of Executives (RALMCE). The Integrated Risk Management Department undertakes regular reviews of risk management controls and procedures, the results of which are reported to the RALMCE on monthly basis.

B. Credit risk

Credit risk arises from loans and advances, cash and cash equivalents, investment in debt securties and deposits with banks and financial institutions and any other financial assets.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s loans and advances to customers, trade receivables from customers; loans and investments in debt securities,

a] Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer/obligor. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry, business specific risk, management risk, transition specific risk and project related risks.

A financial asset is considered ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

- Significant financial difficulty of the issuer or the borrower

- A breach of contract, such as default

- The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower concession(s) that the lender(s) would not otherwise consider

- It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation

- The disappearance of the active market for that financial asset because of financial difficulties

- Purchase or origination of a financial asset at a deep discount that reflects the incurred credit loss

The risk management committee has established a credit policy under which each new customer is analyzed individually for credit worthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes minimum finalised internal rating, external ratings, if they are available, background verification, financial statements, income tax returns, credit agency information, industry information, etc. Credit limits have been established for each customer and reviewed periodically and modifications are done, as and when required. Any loan exceeding prescribed limits require approval from the respective competent authority.

b) Probablity of defalut (PD]

The Probability of Default (PD) defines the probability that the borrower will default on its obligations in the future. Ind AS 109 requires the use of separate PD for a 12 month duration and lifetime duration based on the stage allocation of the borrower. A PD used for Ind AS 109 should reflect the institution’s view of the future and should be unbiased (i.e. it should not include any conservatism or optimism).

Tb arrive at historical probability of default, transition matrix approach has been applied using IFCI internal obligor ratings.

c) Definition of default

Default’ has not been defined under Ind AS. An entity shall apply a default definition that is consistent with the definition used for internal credit risk management purposes and consider qualitative indicators when appropriate. A loan is considered as defaulted and therefore Stage-3 (credit impaired) for ECL calculations in the following cases:

- On deterioration of the IFCI internal combined ratings of the borrower to CR-9 or CR-10 (Comparison to be done between origination rating and current rating).

- On asset being classified as NPA as per RBI prudential norms

- On restructuring of assets with impairment in loan value

- On asset being more than 90 days past dues.

d) Exposure at default (EAD)

The exposure at default (EAD) represents the gross carrying amount of the financial instruments which is subject to the impairment calculation.

e) Loss given default (LGD)

LGD is an estimate of the loss from the transaction given that a default occurs. The LGD component of ECL is independent of deterioration of asset quality, and thus applied uniformly across various stages. With respect to loan portfolio, NPA accounts which have originated in past 7 years and have been closed, along with NPA accounts ageing more than 5 years (assumed as closed), have been considered for LGD computation.

f) Significant increase in credit risk

At each reporting date, an entity shall assess whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, an entity shall use the change in the risk of the default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit loss. Tb make that assessment, an entity shall compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. An entity may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.

For the assessment of the SICR for the loans and advances, the following conditions have been considered:

- Deterioration of the IFCI internal combined ratings of the borrowers by 3 rating grades. (Comparison to be done between origination rating and current rating).

- Deterioration of the ratings of the borrowers from the investment grade to the sub-investment grade.

- On restructuring of assets without impairment in loan value

- On asset overdue beyond 60 days past dues

i] Collateral held and other credit enhancements

Collateral securing each individual loan may not be adequate in relation to the value of the loan. All borrowers must meet the Company’s internal credit assessment procedures, regardless of whether the loan is secured. In addition to the collateral stated above, the Company holds other types of collateral such as second charges and floating charges for which specific values are generally not available. The company has internal policised on the accepatability of specific classes of collateral or credit risk mitigation.The prinicipal collateral types for loans and advances are:

1 Mortgage of Immovable properties

2 Hypothecation of Movable property

3 Bank and Government Guarantees

4 Pledge of instruments through which promoter’s contribution is infused in the project

5 Pledge of Promoter Shareholding

6 Corporate and Personal Guarantees of Promoters

k] Modified / Restructured loans

When the Company grants concession, for economic or legal reasons related to a borrower’s financial difficulties, for other than an insignificant period of time, the related loan is classified as a Troubled Debt Restructuring (TDR). Concessions could include a reduction in the interest rate below current market rates, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered TDRs.

From a risk management point of view, once an asset is forborne or modified, the Company’s special department for distressed assets continues to monitor the exposure until it is completely and ultimately derecognised.

A loan that is renegotiated is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms or if the terms of the existing agreement are modified such that the renegotiated loan is a substantially different instrument.

Where the renegotiation of such loans are not derecognised, impairment continues to be assessed for significant increases in credit risk compared to the initial origination credit risk rating.

The are were no modified assets which were forborne during the period and accordingly no loss were suffered by the Company.

l] Governance Framework

As required by the RBI Notification no. “DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13th March 2020, where provision requirement as per extant RBI norms is higher than ECL as computed under IndAS, the provision as per RBI norms shall be adopted, on portfolio basis. Further, in accordance with RBI Guidelines, where impairment allowance under Ind AS 109 is lower than the provisioning required under IRACP (including standard asset provisioning), the difference shall be appropriated from the net profit or loss after tax to a separate ‘Impairment Reserve’.

C. Liquidity risk

Liquidity risk is the potential inability to meet the institution’s liabilities as they become due. From IFCI perspective, it basically originates from the mismatches in the maturity pattern of assets and liabilities. Analysis of liquidity risk involves the measurement of not only the liquidity position of the institution on an ongoing basis but also examining how funding requirements are likely to be affected under sever but plausible scenarios. Net funding requirements are determined by analysing the institution’s future cash flows based on assumptions of the future behaviour of assets and liabilities that

axe classified into specified time buckets, utilizing the maturity ladder approach and then calculating the cumulative net flows over the time frame for liquidity assessment.

For the present, for measuring and managing net funding requirements, the use of maturity ladder and calculation of cumulative surplus or deficit of funds at selected maturity dates is being utilized as a standard tool.

The ALM format prescribed by RBI in this regard is being utilized for measuring cash flow mismatches in different time bands. The cash flows are placed in different time bands based on projected future behaviour of assets, liabilities and off-balance sheet items. Apart from the above cash flows, the institution would also track the impact of prepayments of loans, premature closure of liabilities and exercise of options built in certain instruments which offer put/call options after specified times. Thus, cash outflows can be ranked by the date on which liabilities fall due, the earliest date a liability holder could exercise an early repayment option or the earliest date contingencies could be crystallized.

The company has initiated an exercise to identify its High Quality Liquid Investments and compute Liquidity Coverage Ratio.

Iln addition, the Company maintains the following lines of credit:

T 94 crore overdraft facility that is secured. Interest would be payable between 7.75 percent and 8.21 percent.

T 130 crore facility that is unsecured and can be drawn down to meet short-term financing needs. Interest would be payable at a rate of 9.57 percent (weighted average rate).

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amount are gross and undiscounted, and excludes contractual interest payments and exclude the impact of netting agreements.

The inflows/! outflows) disclosed in the above table represents contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contract maturity. The disclosure shows net cash flow amounts for derivatives that are net cash settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross settlement.

The interest payments on variable interest rate loans in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. The future cash flows on contingent consideration and derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the contingency change. Except for these financial liabilities, it is not expected that cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. The table below shows the contractual expiry by maturity of the Company’s contingent liabilities and commitments. Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down.

D. Market risk

Market the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. In line with regulatory guidelines, the Company classifies exposures to market risk into either Current or Long term portfolios and manages each of those portfolios separately.

The market risk management framework in IFCI comprises risk identification, setting up of limits & triggers, risk measurement, risk monitoring, risk reporting and talcing corrective actions where necessitated. It is pertinent to highlight that the details pertaining to threshold investment grade rating, investment limits, approval authority, control mechanism including stop-loss triggers, compliances required, etc. for different treasury products including equity trading have been clearly outlined in the extant Treasury & Investment Policy of IFCI.

(a) Market risk - trading portfolios

The Company does not have any trading portfolios.

(b) Market risk - Non-trading portfolios (i) Currency risk

The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which borrowings are denominated and the respective functional currencies of Company. The functional currency for the company is ? The currency in which these transactions are primarily denominated is EURO.

Currency risks related to the principal amounts of the Company’s EURO bank loans, have been fully hedged using forward contracts that mature on the same dates as the loans are due for repayment.

Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company -primarily ? In addition, interest on borrowings is denominated in the currency of the borrowing. This provides an economic hedge without derivatives being entered into and therefore hedge accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company’s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

54 CAPITAL MANAGEMENT

The basic approach of capital adequacy framework is that, a financial institution should have sufficient capital to absorb shocks on account of any unexpected losses arising from the risks in its business.

As per RBI guidelines, IFCI as a Government owned NBFC-ND-SI is required to maintain a minimum capital to risk weighted asset ratio. Capital management entails optimal utilization of scarce capital to meet extant regulatory capital requirements. IFCI has put in place an appropriate Risk Appetite framework and computes its capital requirements and adequacy as per extant regulatory guidelines, i. Regulatory capital

The Company’s regulatory capital consists of the sum of the following elements :

- Common equity Tier 1 (CETl) capital, which includes ordinary share capital, related share premiums, retained earnings and reserves after adjustment for dividend declared and deduction for goodwill, intangible assets and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

ii. Capital allocation

The amount of capital allocated to each operation or activity is undertaken with the objective of minimisation of return on the risk adjusted capital. Allocation of capital is to various lines of business basis annual business plan drawn at the beginning of the year. Various consideration for allocating capital include synergies with existing operations and activities, availability of management and other resources, and benefit of the activity with the company’s long term strategic objectives.

55 The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies. Ind AS adjsutements have not been made in these disclosures unless specifically stated :

(i) The company is registered with Securities and Exchange Board of India as debenture trustee having registration code i.e. “IND000000002”.

(ii) “There are no penalties imposed by RBI and other regulator during the year ended March 31, 2022. However, NSE & BSE had levied fine of T 1,68,07,920/- & ? 65,76,420/- inclusive of taxes (for the quarters ended September, 2018 to March 2022), for non-compliance with the provisions of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, relating to composition of the Board of Directors and Committees namely Audit Committee, Nomination and Remuneration Committee, Stakeholders’ Relationship Committee and Risk Management Committee, in the absence of Independent Directors on the Board of IFCI. Accordingly, the Stock Exchanges have till date levied consolidated fine of ^ 2,33,84,340/-.

In view of the abovementioned fines imposed by the Stock Exchanges, it was submitted that as IFCI is a Government Company, hence, as per Section 149(6) of the Companies Act, 2013, the power to appoint Independent Directors vests with the Department of Financial Services, Ministry of Finance, Government of India, being the Ministry Administratively in-charge of the Company. Accordingly, owing to the regulatory constraints, the Board of the Company cannot appoint Independent Directors on its own. It was also informed that several request letters have already been sent to the Department of Financial Services, requesting appointment of Independent Directors. However, the appointments are still awaited.

Once the Independent Directors are appointed, the committees will accordingly be reconstituted.

59 PREVIOUS YEAR FIGURES HAVE BEEN RE-GROUPED/ RE-ARRANGED/ RESTATED WHEREVER NECESSARY, TO CONFORM TO CURRENT PERIOD’S PRESENTATION.


Mar 31, 2021

Reserve u/s 45IC of RBI Act

Pusuant to increase in shareholding of Govt. of India more than 50% of the paid-up Share Capital, the Company has become Government Company u/s 2(45) of the Companies Act, 2013 and the Company being a Government Company u/s 2(45) of the Companies Act, 2013 was exempt from such provisions under RBI Act upto 31/03/2019. Since there is net loss in the current year, no transfer has been made to the Reserve.

Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961

Section 36(1)(viii) of the Income Tax Act allowes financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Tax Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f FY 1997-98. Any withdrawal would attract tax liability. Upto FY 1996-97, utilisation of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Tax Liability (DTL) has been created on the reserve transferred after FY 1997-98.

Capital Reserve

Capital Reserve represents proceeds of forfeited shares.

Securities Premium Reserve

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Capital Redemption Reserve

Capital Redemption Reserve represents amount transferred from surplus in statement of profit and loss towards redemption of preference shares without fresh issue of capital, as was required under section 55 of the Companies Act, 2013.

Debenture Redemption Reserve

Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non Convertible Debentures issued by IFCI Ltd. through public offer. Later vide Notification GSR-574(E) dated 16/08/19, Ministry of Corporate Affairs (MCA) has notified amended rules for Share Capital and Debentures (Rules 2014), no additional DRR has to be created either for public issue of bonds or for private placements in case of existing bonds and debentures.

General Reserve

General reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations.

Deemed equity contribution

Deemed equity contribution on account of preferential rate borrowings from shareholders.

Retained Earnings

Represents as at date accumulated surplus/(deficiet) of the profits earned by the Company.

Debt instruments through Other Comprehensive Income

This comprises changes in the fair value of debt instruments recognised in other comprehensive income and accumulated within equity. The Company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

Equity instruments through Other Comprehensive Income

This comprises changes in the fair value of certain identified equity instruments recognised in other comprehensive income and accumulated within equity. Remeasurements of the defined benefit plans

Remeasurements of defined benefit liability (asset) comprises actuarial gains and losses and return on plan assets (excluding interest income).

36 Certain balances appearing under trade receivables and payables are subject to confirmation.

37 The shareholders at its 27th Annual General Meeting held on December 22, 2020 approved the increase in Authorised Equity Share Capital from extant ''2000 Crore comprising of 200 Crore number of equity shares of ''10 each to ''4,000 Crore comprising of 400 Crore number of equity shares of ''10 each. Further, the Company has received ''200 crores from GOI, Department of Financial Services, Ministry of Finance, on March 23, 2020, towards subscription to the share capital of the Company. The same has been classified under Other Equity ( Share application money pending allotment) as on 31st March 2020. The Company has subsequently allotted 20 crore number of equity shares @ ''10 each to the President of India (Government of India) on May 21, 2020. Also, the Company received ''200 crore on March 15, 2021 from the Government of India towards subscription to the share capital during the Financial Year 2020-21 as share application money. In this regard, the Committees of Directors had allotted 14,59,85401 number of equity shares of face value of ''10/- each to the Government of India on April 23, 2021 @ ''13.70/- per equity share (including security premium of ''3.70/- per equity share)”.

38 ‘In accordance with the RBI Circular No. RBI/2021-22/17 DOR.STR.REC.4/21.04.048/2021-22 dated April 7, 2021 for refund/adjustment of ‘ interest on interest’ charged during moratorium period i.e. March 1, 2020 to August 31, 2020, an amount of ''8.23 crore has been estimated. Accordingly such provision has been created in books of account by debiting interest income.

39 As on March 31, 2021, Impairment allowance under Ind AS 109 is higher than RBI Prudential (IRACP) Norms (including standard assets provisioning). Accordingly the company has provided for the amount as per Ind As norms in the books of accounts as on 31st March 2021. The existing impairment reserve of ''34.54 crores created upto March 31, 2021 has not been reversed.

Though ECL on Loan Assets is computed on portfolio basis, however during the current year, full impairment allowance has been made on loan accounts declared as fraud as per RBI norms.

40 During FY21 , the company has derecognised stage 3 income on cases categorised as C3 & D as per IRAC norms. Accordingly, an amount of ''613.71 crore ( net of ECL impairment allowance of ''833.38 crore) has been charged to P&L account. Thus the loss for the year is higher by ''613.71 crore and gross loan assets are lower by ''1447.08 crore.

40.1 During FY21, to arrive at historical probability of default, last 7 years rating migration has been used as input to ECL model against 5 years taken previously. Consequently, weighted average ECL has reduced by ''19.78 crore

41 The (Covid-19) pandemic globally and in India is causing significant disturbance in the financial Markets. On 11.03.2020, the Covid-19 outbreak was declared a global pandemic by the World Health Organization ( WHO). It has resulted in significant disruption in global and Indian economic activities. The situation has been under close watch by the Company to take prompt actions for continuity of business operation is optimized manner. The Company believes that going forward, the impact of this outbreak will not be significant on its business and financial position.

42 The valuation of Investments in subsidiary companies has been considered on the basis of financial statements of the subsidiaries for the period ended 31st December 2020, instead of 31st March 2021. There is no material impact of this on the financial statements of the company.

43 In the context of reporting business/geographical segment as required by Ind AS 108 - “Operating Segments”, the Company operations comprise of only one business segment of financing . Hence, there is no reportable segment as per Ind AS 108.

43.1 On all the secured bonds and debentures issued by the Company and outstanding as on 31st March 2021, 100% security cover has been maintained against principal and interest, by way of floating charge on receivables of the Company and/or Government Securities owned by the Company.

43.2 These financial statements have been prepared as per Schedule III Division III of the Companies Act, 2013 which has been notified by the Ministry of Corporate Affairs and published in the official Gazette on 11th October 2018. Any application guidance/ clarifications/ directions issued by RBI or other regulators will be implemented as and when they are issued/ applicable.

44 IFCI is carrying the investment in subsidiary companies at cost net of impairment loss (if any) and opted for one time exemption under IndAS 101 for deemed cost being the carrying value of investment as at transition date i.e. April 1, 2017. As on March 31, 2021, the Company had investment in 27,91,54,700 no. of Equity shares in its subsidiary, IFCI Factors Ltd. (IFL). The company got the shares of IFL fair valued internally, per which, the fair value of investments in shares of IFL was determined at ''112.49 crore, using the generally accepted valuation methodologies against breakup value, in line with Indian Accounting Standards and accordingly, the resultant impairment loss has been charged in the Profit & Loss Account.

ii. Defined benefit plan

A. Gratuity

The Company has a defined benefit gratuity plan in India, governed by the IFCI Gratuity Regulations, 1968. This plan entitles an employee, a sum equal to one month’s pay plus dearness allowance for each completed year of service in IFCI or part thereof in excess of six months, subject to a maximum of twenty months pay plus dearness allowance or Rupees Eighteen Lakh whichever is less, for first twenty years of service.. The scheme is fully funded with Life Insurance Corporation of India (LIC). This defined benefit plan expose the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2021. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC). The funding requirements are based on the gratuity fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section D below. Employees do not contribute to the plan.

Expected contributions to gratuity plan for the year ending 31 March 2021 is ''1.62 cr

Salary Increases : Actual salary increases will increase the Plan’s liability. Increase in salary increase rate assumption in future valuations will also increase the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities.

Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

B. Post retirement medical benefit

IFCI is extending post-retirement medical benefits to the employees and eligible dependent family members after their retirement. As per the scheme, employees who are members of Voluntary Welfare Scheme (VWS) are eligible for reimbursement of medical expenses after retirement The benefits under the scheme are extended to the retired employees, his/her spouse and dependent children and entitlement for reimbursement, although within the ceilings and is based upon the Grade in which an employee retires, subject to the condition that spouse of the concerned employee is not availing of any medical benefits from his/her employer, if any. Reimbursement of the medical bills is made at the rates applicable to the employees at the center at which the employee resides after retirement as per the rates circulated by IFCI for its working employees time to time.

Medical Cost Increase - increase in actual medical cost per retireewill increase the Plan’s liability. Increase in medical Cost per Retireerate assumption will also increase the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities.

Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

C. Provident Fund

The Company has a defined benefit provident fund, governed by the IFCI Employees’ Provident Fund Regulations. Monthly contributions to the Provident Fund is being charged against revenue. IFCI has been paying interest on the provident fund balance at the rate notified by the Employees’ Provident Fund Organization (EPFO) for the relevant year. The Provident Fund is administered through duly constituted and approved administrators. The Committee of Administrators of IFCI Employees’ Provident Fund has approved earmarking of specific investments against the PF liability in the current financial year. For the purpose, investments have been earmarked towards PF liability in line with the notification issued by Ministry of Labour & Employment notifying the pattern of investment for EPFO and EPF exempted establishments.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the provident fund plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

Funding

During the Financial year 2018-19, the Company hasearmarked some of its investments in government securities, mutual funds against Provident fund liability.

Expected contributions to provident fund plan for the year ending 31 March 2021 is ''1.49 cr Reconciliation of the net defined benefit (asset) / liability

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset) liability and its components:

Investment Risk : If Plan is funded then assets liabilities mismatch & actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.

Discount Rate : Reduction in discount rate in subsequent valuations can increase the plan’s liability.

Mortality & disability : Actual deaths & disability cases proving lower or higher than assumed in the valuation can impact the liabilities.

Withdrawals : Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

OPERATING SEGMENTS

The Board of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by Ind AS 108, “Operating Segments.” The Company’s operating segments are established in the manner consistent with the components of the Company that are evaluated regularly by the Chief Operating Decision Maker as defined in ‘Ind AS 108 - Operating Segments.’ The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108.

(a) Information about products and services:

The company deals in only one product i.e. granted loans to corporate customers. Hence, no separate disclosure is required.

(b) Information about geographical areas:

The entire sales of the Company are made to customers which are domiciled in India. Also, all the assets of the Company are located in India.

(c) Information about major customers (from external customers):

The Company does not earn revenues from the customers which amount to 10 per cent or more of Company’s revenues

TRANSFERS OF FINANCIAL ASSETS

In the ordinary course of business, the Company enters into transactions that result in the transfer of loans and advances given to customers. In accordance with the accounting policy set out in Note 2, the transferred financial assets continue to be recognised in their entirety or to the extent of the Company’s continuing involvement, or are derecognised in their entirety.

The Company transfers financial assets that are not derecognised in their entirety are primarily through the sale of NPA loans to asset reconstruction companies (ARCs).

A. Transferred financial assets that are not derecognised in their entirety Sale of NPA loans to asset reconstruction companies (ARCs)

Sale of NPA loans to asset reconstruction companies (ARCs)’ are transactions in which the Company sells loan and advances to an unconsolidated special vehicle and simultaneously purchases the majority portion of security receipts issued by said vehicle. The security receipts are collateralised by the loans purchased by the vehicle and hence the cash flow of the security receipts is dependent on the recovery of purchased loans.

The Company continues to recognise that part of the loans in their entirety against which security receipts have been subscribed by the Company because it retains substantially all of the risks and rewards of ownership w.r.t that part of the transferred loan. The part of loan transferred against which cash consideration is received is derecognised.

Transferred financial assets that are derecognised in their entirety Sale of NPA loans to asset reconstruction companies (ARCs)

The Company has taken derecognition exemption and de-recognise the loans in their entirety against which security receipts have been subscribed by the Company. The Company has classified said invsetment in security receipts subsequently measured at fair value through profit and loss.

During the year the Company has recognised a fair value gain/(loss) of ''193.26 crore (''-275.50 crore in 2019-20). The cumulative fair value gain/(loss) on the security receipts as on 31 March 2021 is ''-7.01 crore (31 March 2020 - ''-34.34 crore).

The following table sets out the details of the assets that represents the Company’s continuing involvement with the transferred assets that are derecognised in their entirety.

Valuation framework

The respective operational department performs the valuation of financial assets and liabilities required for financial reporting purposes, either externally or internally for every quaterly reporting period. Specific controls for valuation includes verification of observable pricing, review of siginificant unobservable inputs and valuation adjustments.

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 : The fair value of financial instruments that are not traded in active markets is determined using valuation techniques which maximize the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3 : If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants’ assumptions about risk and the risk premium required by market participants in order to bear that risk. It develops Level 3 inputs based on the best information available in the circumstances.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments measured at fair value in the balance sheet, as well as the significant unobservable inputs used.

Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are:

(a) recognised and measured at fair value and

(b) measured at amortised cost and for which fair values are disclosed in the financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

FINANCIAL RISK MANAGEMENT

The company’s activities are primarily subjected to credit risk, market risk and operational risk for managing risk management committee exsists. The function of the committee is to identify, monitor, manage and mitigate these risks. The company also makes sure that it adheres to internal policies and procedures, complies with the regulatory guidelines and maintains sufficient loan documentation.

With regards to its lending activity, the company has established various limits and restrictions to manage the risks. There are various reports which are prepared and presented to senior management by the risk management committee at regular intervals and on ad-hoc basis which helps in risk monitoring. The company has also set-up procedures to mitigate the risks in case of any breach.

A. Risk management framework

The Company’s Board of Directors have overall responsibility for the establishment and oversight of the risk management framework. The board of directors have established the Risk Management and Asset Liability Management Committee of the Directors (RALMCD) which is responsible for developing and monitoring the Company’s integrated risk management policies. The RALMCD is assisted in its oversight role by the Risk and Asset Liability Management Committee of Executives (RALMCE). The Integrated Risk Management Department undertakes regular reviews of risk management controls and procedures, the results of which are reported to the RALMCE on monthly basis.

B. Credit risk

Credit risk arises from loans and advances, cash and cash equivalents, investment in debt securties and deposits with banks and financial institutions and any other financial assets..

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s loans and advances to customers, trade receivables from customers; loans and investments in debt securities.

(a) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer/obligor. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry, business specific risk, management risk, transition specific risk and project related risks.

A financial asset is considered ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable 111

- Significant financial difficulty of the issuer or the borrower

- A breach of contract, such as default

- The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower concession(s) that the lender(s) would not otherwise consider

- It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation

- The disappearance of the active market for that financial asset because of financial difficulties

- Purchase or origination of a financial asset at a deep discount that reflects the incurred credit loss

The risk management committee has established a credit policy under which each new customer is analyzed individually for credit worthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes minimum finalised internal rating, external ratings, if they are available, background verification, financial statements, income tax returns, credit agency information, industry information, etc. Credit limits have been established for each customer and reviewed periodically and modifications are done, as and when required. Any loan exceeding prescribed limits require approval from the respective competent authority..

(b) Probablity of defalut (PD)

The Probability of Default (PD) defines the probability that the borrower will default on its obligations in the future. Ind AS 109 requires the use of separate PD for a 12 month duration and lifetime duration based on the stage allocation of the borrower. A PD used for Ind AS 109 should reflect the institution’s view of the future and should be unbiased (i.e. it should not include any conservatism or optimism).

To arrive at historical probability of default, transition matrix approach has been applied using IFCI internal obligor ratings.

(c) Definition of default

Default’ has not been defined under Ind AS. An entity shall apply a default definition that is consistent with the definition used for internal credit risk management purposes and consider qualitative indicators when appropriate. A loan is considered as defaulted and therefore Stage-3 (credit impaired) for ECL calculations in the following cases:

- On deterioration of the IFCI internal combined ratings of the borrower to CR-9 or CR-10 (Comparison to be done between origination rating and current rating).

- On asset being classified as NPA as per RBI prudential norms

- On restructuring of assets with impairment in loan value

- On asset being more than 90 days past dues.

(d) Exposure at default (EAD)

The exposure at default (EAD) represents the gross carrying amount of the financial instruments which is subject to the impairment calculation.

(e) Loss given default (LGD)

LGD is an estimate of the loss from the transaction given that a default occurs. The LGD component of ECL is independent of deterioration of asset quality, and thus applied uniformly across various stages. With respect to loan portfolio, NPA accounts which have originated in past 7 years and have been closed, along with NPA accounts ageing more than 5 years (assumed as closed), have been considered for LGD computation.

(f) Significant increase in credit risk (SICR)

At each reporting date, an entity shall assess whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, an entity shall use the change in the risk of the default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit loss. To make that assessment, an entity shall compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. An entity may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.

For the assessment of the SICR for the loans and advances, the following conditions have been considered:

- Deterioration of the IFCI internal combined ratings of the borrowers by 3 rating grades. (Comparison to be done between origination rating and current rating).

- Deterioration of the ratings of the borrowers from the investment grade to the sub-investment grade.

- On restructuring of assets without impairment in loan value

- On asset overdue beyond 60 days past dues

(g) Provision for expected credit losses

The following tables sets out information about the overdue status of loans and advances, loan commitments, financial guarantees, trades receivables and other financial assets to customers in Stages 1, 2 and 3.

(k) Modified / Restructured loans

When the Company grants concession, for economic or legal reasons related to a borrower’s financial difficulties, for other than an insignificant period of time, the related loan is classified as a Troubled Debt Restructuring (TDR). Concessions could include a reduction in the interest rate below current market rates, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered TDRs.

From a risk management point of view, once an asset is forborne or modified, the Company’s special department for distressed assets continues to monitor the exposure until it is completely and ultimately derecognised.

A loan that is renegotiated is derecognised if the existing agreement is cancelled and a new agreement is made on substantially different terms or if the terms of the existing agreement are modified such that the renegotiated loan is a substantially different instrument.

Where the renegotiation of such loans are not derecognised, impairment continues to be assessed for significant increases in credit risk compared to the initial origination credit risk rating.

There were no modified assets which were forborne during the period and accordingly no loss were suffered by the Company. l) Governance Framework

As required by the RBI Notification no. “DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13th March 2020, where provision requirement as per extant RBI norms is higher than ECL as computed under Ind AS, the provision as per RBI norms shall be adopted, on portfolio basis. Further, in accordance with RBI Guidelines, where impairment allowance under Ind AS 109 is lower than the provisioning required under IRACP (including standard asset provisioning), the difference shall be appropriated from the net profit or loss after tax to a separate ‘Impairment Reserve’.

Liquidity risk

Liquidity risk is the potential inability to meet the institution’s liabilities as they become due. From IFCI perspective, it basically originates from the mismatches in the maturity pattern of assets and liabilities. Analysis of liquidity risk involves the measurement of not only the liquidity position of the institution on an ongoing basis but also examining how funding requirements are likely to be affected under severe but plausible scenarios. Net funding requirements are determined by analysing the institution’s future cash flows based on assumptions of the future behaviour of assets and liabilities that are classified into specified time buckets, utilizing the maturity ladder approach and then calculating the cumulative net flows over the time frame for liquidity assessment.

For the present, for measuring and managing net funding requirements, the use of maturity ladder and calculation of cumulative surplus or deficit of funds at selected maturity dates is being utilized as a standard tool.

The ALM format prescribed by RBI in this regard is being utilized for measuring cash flow mismatches in different time bands. The cash flows are placed in different time bands based on projected future behaviour of assets, liabilities and off-balance sheet items. Apart from the above cash flows, the institution would also track the impact of prepayments of loans, premature closure of liabilities and exercise of options built in certain instruments which offer put/call options after specified times. Thus, cash outflows can be ranked by the date on which liabilities fall due, the earliest date a liability holder could exercise an early repayment option or the earliest date contingencies could be crystallized.

The company has initiated an exercise to identify its High Quality Liquid Investments and compute Liquidity Coverage Ratio.

In addition, the Company maintains the following lines of credit:

- ''94 crore overdraft facility that is secured. Interest would be payable between 7.75 percent and 8.21 percent.

- ''130 crore facility that is unsecured and can be drawn down to meet short-term financing needs. Interest would be payable at a rate of 9.5 7 percent (weighted average rate).

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amount are gross and undiscounted, and excludes contractual interest payments and exclude the impact of netting agreements.

The inflows/(outflows) disclosed in the above table represents contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contract maturity. The disclosure shows net cash flow amounts for derivatives that are net cash settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross settlement.

The interest payments on variable interest rate loans in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. The future cash flows on contingent consideration and derivative instruments may be different from the amount in the above table as interest rates and exchange rates or the relevant conditions underlying the contingency change. Except for these financial liabilities, it is not expected that cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

D. Market risk

Market the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. In line with regulatory guidelines, the Company classifies exposures to market risk into either Current or Long term portfolios and manages each of those portfolios separately.

The market risk management framework in IFCI comprises risk identification, setting up of limits & triggers, risk measurement, risk monitoring, risk reporting and taking corrective actions where necessitated. It is pertinent to highlight that the details pertaining to threshold investment grade rating, investment limits, approval authority, control mechanism including stop-loss triggers, compliances required, etc. for different treasury products including equity trading have been clearly outlined in the extant Treasury & Investment Policy of IFCI.

(a) Market risk - trading portfolios

The Company does not have any trading portfolios.

(b) Market risk - Non-trading portfolios (i) Currency risk

The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which borrowings are denominated and the respective functional currencies of Company. The functional currency for the company is ''The currency in which these transactions are primarily denominated is EURO.

Currency risks related to the principal amounts of the Company’s EURO bank loans, have been fully hedged using forward contracts that mature on the same dates as the loans are due for repayment.

Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company - primarily ''In addition, interest on borrowings is denominated in the currency of the borrowing. This provides an economic hedge without derivatives being entered into and therefore hedge accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company’s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

Exposure to currency risk

The summary quantitative data about the Company’s exposure to currency risk as reported to the management is as follows:

54 CAPITAL MANAGEMENT

The basic approach of capital adequacy framework is that, a financial institution should have sufficient capital to absorb shocks on account of any unexpected losses arising from the risks in its business.

As per RBI guidelines, IFCI as a Government owned NBFC-ND-SI is required to maintain a minimum capital to risk weighted asset ratio. Capital management entails optimal utilization of scarce capital to meet extant regulatory capital requirements. IFCI has put in place an appropriate Risk Appetite framework and computes its capital requirements and adequacy as per extant regulatory guidelines.

(i) Regulatory capital

The Company’s regulatory capital consists of the sum of the following elements :

- Common equity Tier 1 (CET1) capital, which includes ordinary share capital, related share premiums, retained earnings and reserves after adjustment for dividend declared and deduction for goodwill, intangible assets and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

- Tier 2 capital, which includes preference shares, qualifying subordinated liabilities and any excess of impairment over expected losses.

* As required by the RBI Notification no. “DOR (NBFC).CC.PD.No. 109/22.10.106/2019-20 dated 13th March 2020 in respect of Implementation of Indian Accounting Standard(IndAS) in NBFC, the company has appropriated the difference between the impairment allowance under Ind AS 109 and the provisioning required under RBI Prudential (IRACP) Norms ( including standard assets provisioning), a sum of ''34.54 crore has been taken to “Impairment Reserve”.

# For the purpose of calculation of Net Owned Funds, DTA has been considered net of MAT credit entitlement.

(ii) Capital allocation

The amount of capital allocated to each operation or activity is undertaken with the objective of minimisation of return on the risk adjusted capital. Allocation of capital is to various lines of business basis annual business plan drawn at the beginning of the year. Various consideration for allocating capital include synergies with existing operations and activities, availability of management and other resources, and benefit of the activity with the company’s long term strategic objectives.

The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies. Ind AS adjsutements have not been made in these disclosures unless specifically stated :

(i) The company is registered with Securities and Exchange Board of India as debenture trustee having registration code i.e. “IND000000002”.

(ii) There are no penalties imposed by RBI and other regulator during the year ended March, 2020. However, NSE & BSE had levied fine of ''1,16,17,100/- & ''13,85,600 inclusive of taxes (for the quarters ended September, 2018 to March 2021), for non-compliance with the provisions of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015, relating to composition of the Board of Directors and Committees namely Audit Committee, Nomination and Remuneration Committee and Stakeholders’ Relationship Committee, in the absence of Independent Directors on the Board of IFCI. Further, BSE vide its mail dated Sep 24, 2020 & 19/4/21 had waived fines amounting to ''1,01,98,740/- for the period September 2018 to December 2020. Communication from Stock Exchanges for waiver of fine for the quarter ended March 31, 2021 is awaited.

Previous year figures have been re-grouped/ re-arranged/ restated wherever necessary, to conform to current period’s presentation.


Mar 31, 2018

Foot-notes to Note No. 2:

1. Capital Reserve represents proceeds of forfeited shares.

2. Capital Redemption Reserve represents amount transferred from surplus in statement of profit and loss towards redemption of preference shares without fresh issue of capital, as was required under section 55 of the Companies Act, 2013.

3. Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non-Convertible Debentures issued by IFCI Ltd. through public offer.

4. Section 36(1)(viii) of the Income Tax Act allows financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Tax Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f FY 1997-98. Any withdrawal would attract tax liability. Unto FY 1996-97, utilisation of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Tax Liability (DTL) has been created on the reserve transferred after FY 1997-98.

5. Pusuant to increase in shareholding of Govt. of India more than 50% of the paid-up Share Capital, the Company has become Government Company u/s 2(45) of the Companies Act, 2013 and therefore in view of the exemption available to Government Companies, no transfer has been made to the statutory reseve created u/s 45IC of RBI Act, 1934.

Foot-notes to Note No. 3

1. Privately placed Bonds of ''4,988.75 crore shown at 3.1(B) above includes Rs,1,280.58 crore of bonds which were guaranteed by the Govt. of India at the time of issue. These bonds were, subsequently, rolled over for 10 years from dates of maturity in terms of the decision at meetings of stakeholders in November 24 and December 2, 2002 under the aegis of the Govt. of India, but the guarantee did not continue. However, on the behalf of investors, Govt. of India was requested to guarantee these bonds during the rolled over period and accordingly, these bonds were shown under Bonds guaranteed by Govt. of India till March 31, 2013, with suitable disclosure of the fact in Notes to Accounts. Since all such bonds have been rolled over by March, 2012 and Govt. of India has not provided guarantee during the rolled over period, such rolled over erstwhile government guaranteed bonds are clustered under Privately Bonds as on March 31, 2018 above.

2. (a) Out of the bonds of Rs,6,974.75 disclosed as non-current at 3.1(B) above, Put/ Call Option applicable on Rs,1,782.31 crore (previous year: 1927.88 crore) of Bonds.

(b) Terms of repayment of total bonds of Rs,7,287.76 crore is annexed below.

3. (a) Out of the bank borrowings disclosed at 3.1C(a) above, Put/ Call Option applicable on Rs,2,068.50 (previous year: Rs,3,670.00 crore).

(b) Include loans of Rs,300 crore (previous year: Rs,300 crore), against escrow of cash flow/ negative lien against certain identified loan assets.

(c) Terms of repayment of total Bank & FI borrowings of Rs,8,411.60 crore is annexed

4. Terms of repayment of Tax-free Bonds and Secured Redeemable NCDs annexed.

5. Terms of repayment of foreign currency liabilities annexed.

Considering the current status of the pending litigation cases, no material financial impact is expected on the financial statements as on March 31, 2018.

and principal dues without considering due dates, except in the case of one time or negotiated settlements, where the appropriation was done as per the terms of the settlement has been revised to, appropriating such amounts due date-wise in the order of other debits, interest and principal dues, starting from the earliest due date, except in the case of one time or negotiated settlements, where the appropriation is done as per the terms of the settlement.” The loss for the current year has been increased by Rs,32.17 crore because of this change in policy.

6. The company is one of the lenders in various cases which have been referred to National Company Law Tribunal (NCLT). In terms of clarifications received by the Company from RBI, vide letter dated March 6, 2018, the Company has classified these accounts and made provisions in terms of extant norms provided in the “Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016“.

7. Gratuity,leave encashment, post retirement medical benefits & Leave Fare Concession benefit scheme liabilities have been determined and accounted on the basis of actuarial valuation in accordance with Accounting Standard 15.

8. Company has made the provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts as on March 31, 2018.

9. Certain balances appearing under trade receivables and payables are subject to confirmation. Trade receivables which are overdue for more than three years or otherwise considered as doubtful for recovery has been fully provided for.

10. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2018. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent the status of such parties identified on the basis of information available with the Company.

11. There are no material prior period items, except to the extent disclosed, included in Profit & Loss A/c required to be disclosed as per Accounting Standard-5 read with RBI guidelines.

12. During the financial year 2017-18, the accounting policy of appropriating the amounts received from borrowers against “loans and advances” in the order of other debits across due dates and then, similarly of interest

13. The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard-17, is not required.

14. Disclosure of details pertaining to related party transactions in terms of Accounting Standard-18, - “Related Party Disclosures” is as under:

* There are no potential equity shares outstanding as on March 31, 2018.

The Company has allotted 3,39,55,857 equity shares of Face Value of ''10 each, at a premium of ''19.45 per share, to the Government of India on Preferential Basis, on March 31, 2018. Therefore, these shares have not been considered for computing Earning Per Share for the quarter and for the year ended March 2018.

15. The Company has 50% interests in one joint venture viz. IFCI Sycamore Capital Advisors (P) Limited (ISCAPL) incorporated in India in November 2011 which is under voluntary liquidation and official liquidator has been appointed. The investment of IFCI Ltd. in IFCI Sycamore Capital Advisors (P) Limited as on March 31, 2018 was at ''0.01 crore Class A Equity Shares against which adequate provision has been made considering the probability and quantum of share in distribution upon liquidation of the Company.

16. The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies:

(i) The company is registered with Securities and Exchange Board of India as debenture trustee having registration code i.e. “IND000000002”.

(ii) There are no penalties imposed by RBI and other regulator during the year ended March, 2018 except in one case where SEBI has imposed penalty of ''14 lakh for failing to make required disclosures in terms of SAST (Substantial Acquisition of Shares and Takeovers) and PIT (Prohibition of Insider Trading) Regulations. In the SEBI’s order it is mentioned that following the invocation of pledge in FY 2012-13, there was an increase in IFCI’s shareholding in Glodyne Technoserve Limited (GTL) with regard to which the term lender was required to make disclosures. IFCI had contended that it is a public financial institution and Government of India undertaking engaged in the business of lending to companies and being the pledgee it had invoked the pledge only for selling the shares to recover dues. IFCI had filed an appeal against the Order of the Adjudicating Officer (AO), by which the penalty was imposed upon IFCI, before the Honb’le Securities Appellate Tribunal (SAT). The SAT vide its Order dated April 25,2018 has set aside the Order and the penalty imposed by the Adjudicating Authority and has restored the matter in the file of the AO of SEBI for fresh decision on merits in accordance with law.

(iii) Ratings assigned by credit rating agencies and migration of ratings during the period ended March, 2018

17. Open interest in the Currency Futures as at 31/03/2018 is EUR 10 million against USD, equivalent to ''80.81 crore (Previous Year ended March 2017 : NIL)

18. Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 2.509 million (Previous Year ended March 2017: USD 0.006 million) and EUR 0.049 million (Previous Year ended March 2017: EUR 0.053 million), equivalent to ''16.75 crore (Previous Year ended March 2017: ''0.41 crore).

19. Details of securities sold and purchased under Repos and Reverse Repos Transactions:

Maximum & average outstanding is based on face value of securities.

20. Previous year figures have been re-grouped/ re-arranged wherever necessary, to conform to current period’s presentation.


Mar 31, 2017

Foot-notes to Note No. 1

1 The remaining shares corresponding to expired options have been sold in the open market and the remaining monies in IFCI Employee Stock Options trust shall be transferred to Employee Welfare Trust/scheme of the Company as per SEBI share based employee benefits regulations.

Foot-notes to Note No. 2:

1. Capital Reserve represents proceeds of forfeited shares.

2. Capital Redemption Reserve represents amount transferred from surplus in statement of profit and loss towards redemption of preference shares without fresh issue of capital, as was required under section 80 of the Companies Act, 1956.

3. Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non Convertible Debentures issued by IFCI Ltd. through public offer.

4. Section 36(1)(viii) of the Income Tax Act allows financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Tax Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f. FY 1997-98. Any withdrawal would attract tax liability. Up to FY 1996-97, utilization of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Tax Liability (DTL) has been created on the reserve transferred after FY 1997-98.

5. Pursuant to increase in shareholding of Government of India more than 50% of the paid-up Share Capital, the Company has become Government Company u/s 2(45) of the Companies Act, 2013 and therefore in view of the exemption available to Government Companies, no transfer has been made to the statutory reserve created u/s 45IC of RBI Act, 1934.

Foot-notes to Note No. 3:

1. Privately placed Bonds of Rs, 5,771.91 crore shown at 3.1(B) above includes Rs, 1,643.27 crore of bonds which were guaranteed by the Govt. of India at the time of issue. these bonds were, subsequently, rolled over for 10 years from dates of maturity in terms of the decision at meetings of stakeholders in November 24 and December 2, 2002 under the aegis of the Govt. of India, but the guarantee did not continue. However, on the behalf of investors, Govt. of India was requested to guarantee these bonds during the rolled over period and accordingly, these bonds were shown under Bonds guaranteed by Govt. of India till March 31, 2013, with suitable disclosure of the fact in Notes to Accounts. Since all such bonds have been rolled over by March, 2012 and Govt. of India has not provided guarantee during the rolled over period, such rolled over erstwhile government guaranteed bonds are clustered under Privately Placed Bonds as on March 31, 2017 above.

2. (a) Out of the bonds of Rs, 7,415.11 crore disclosed as non-current at 3.1(B) above, Put/ Call Option applicable on Rs, 1,927.88 crore (previous year: Rs, 2,362.81 crore) of Bonds.

(b) Terms of repayment of total bonds of Rs, 7,886.77 crore is annexed below.

3. (a) Out of the bank borrowings disclosed at 3.1C(a) above Put/ Call Option applicable on Rs, 3,535.00 crore (previous year: Rs, 3,670.00 crore).

(b) Include loans of Rs, 300 crore (previous year: Rs, 300 crore), against escrow of cash flow / negative lien against certain identified loan assets.

(c) Terms of repayment of total Bank & FI borrowings of Rs, 10,907.33 crore is annexed.

4. Terms of repayment of Tax-free Bonds and Secured Redeemable NCDs annexed.

5. Terms of repayment of foreign currency liabilities annexed.

6. IFCI had sanctioned a Corporate loan of Rs, 150 crore to Blue Coast Hotels Ltd. in year 2010, which was secured by way of charge on the movable fixed assets and immovable property. IFCI had also taken an equity exposure to the extent of Rs, 85 crore in Silver Resorts Hotel (I) Pvt. Ltd, a group company of Blue Coast Hotels Ltd. Blue Coast Hotel Ltd. had entered into Buy Back Agreement for buying back the equity shares and to secure the performance of the Buy-Back, a charge by way of mortgage was created on the aforesaid property. Consequent to the default committed by the Company, both in repayment of the loan as well as honoring the buy-back obligation, IFCI initiated legal proceedings against the company, by issuing a 13(2) notice under the SRFA&ESI Act, 2002 on the company on 26th March, 2013. Pursuant to the aforesaid notice, IFCI undertook recovery action by selling mortgaged assets through a public auction to ITC Ltd. at a price of Rs, 515.44 crore for recovery of IFCI dues and other secured creditors in the matter. Entire transaction was concluded in FY 2014-15. Blue Coast Hotels Ltd. had challenged the said sale and filed Writ Petitions before the Hon’ble HC of Bombay. The High Court in its final Order dated 23rd March, 2016, set aside the sale conducted by IFCI and disposed of the Writ Petitions in favour of Blue Coast Hotels Ltd. Immediately, on receipt of the above judgment, IFCI had filed a Special Leave Petition challenging the Judgment of the Bombay High Court on 12th April, 2016. The Hon’ble SC was pleased to admit the petition and directed the issuance of notice to Blue Coast Hotels Ltd. The Hon’ble Supreme Court also permitted IFCI to retain the sale proceeds. In view of the above, the share of IFCI in the total sale proceeds amounting to Rs, 311.78 crore is being shown as contingent liability. The next hearing is due on 25 th July 2017.

7. There are no material prior period items, except to the extent disclosed, included in Profit & Loss A/c required to be disclosed as per Accounting Standard-5 read with RBI guidelines.

8. An amount of Rs, 19.73 crore is reduced from borrowing cost which was charged in previous financial year, following confirmation from the lender institution regarding applicable rate of interest.

9. In terms of RBI Guidelines DBR. No.BP.BC.34/21.04.132/2016-17 dated 10th November, 2016, unrealized interest of Rs, 126.50 crore in respect of SDR/ S4A cases has been reversed during 2016-17, of which Rs, 61.36 crore pertain to previous financial year(s).

10. During the financial year 2016-17, the accounting policy for recognizing liability on account of post-retirement medical benefit scheme has been changed to charging the expenses on the basis of actuarial valuation in accordance with Accounting Standard-15, Employee Benefits, as against on the basis of actual expenses incurred in earlier years. The profit for the current year has been reduced by Rs, 8.07 crore because of this change in policy.

11. In IFCI Ltd during the financial year 2016-17, the accounting policy for recognizing expenditure on account of Leave Fare Concession benefit scheme has been changed to charging the expenses on the basis of actuarial valuation in accordance with Accounting Standard-15, Employee Benefits, as against on the basis of actual expenses incurred in earlier years. The profit for the current year has been reduced by Rs, 2.04 crore because of this change in policy.

12. During the financial year 2016-17, the extant accounting policy of withdrawing an amount equivalent to the depreciation on revalued amount provided during the period from the revaluation reserve account and adjusting the same against the depreciation cost in the Profit and Loss Account, has been revised, to be credited to the General Reserve, in accordance with the provisions of Schedule-II to the Companies Act, 2013 and the Guidance Note of the Institute of Chartered Accountants of India, in this regard. The profit for the current year has been reduced by Rs, 19.72 crore because of this change in policy.

13. During the financial year 2016-17, the accounting policy for recognising expenditure towards Corporate Social Responsibility activities as an appropriation of profits has been revised to recognition of the expenditure as a charge to the Profit and Loss Account, in accordance with the Guidance Note issued by the Institute of Chartered Accountants of India in this regard. The profit has been reduced by Rs, 8.22 crore because of this change in policy.

14. Gratuity and leave encashment liabilities have been determined and accounted on the basis of actuarial valuation in accordance with Accounting Standard 15.

15. Certain balances appearing under trade receivables and payables are subject to confirmation. Trade receivables which are overdue for more than three years or otherwise considered as doubtful for recovery has been fully provided for.

16. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2017. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent the status of such parties identified on the basis of information available with the Company.

17. The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard-17, is not required.

18. Disclosure of details pertaining to related party transactions in terms of Accounting Standard-18,-“Related Party Disclosures” is as under:

1. Name of the Related Party and Nature of Relationship:

Nature of Relationship Name of the Related Party

IFCI Financial Services Ltd (IFIN)

IFCI Venture Capital Funds Ltd (IVCF)

IFCI Infrastructure Development Ltd (IIDL)

IFCI Factors Ltd (IFL)

MPCON Ltd

Stock Holding Corporation of India Ltd (SHCIL)

Subsidiaries IFIN Commodities Ltd (indirect control through IFIN)

IFIN Credit Ltd (indirect control through IFIN)

IFIN Securities Finance Ltd (indirect control through IFIN)

IIDL Realtors Pvt Ltd (indirect control through IIDL)

SHCIL Services Ltd (indirect control through SHCIL) Stockholding Document Management Services Ltd (indirect control through SHCIL)

Tourism Finance Corporation of India Ltd (TFCI)

Himachal Consultancy Organisation Ltd (HIMCON)

Associates North India Technical Consultancy Organisation Ltd (NITCON)

HARDICON Ltd (*up to March 06,2017)

KITCO Ltd

Joint Venture IFCI Sycamore Capital Advisors Pvt Ltd

Nature of Relationship Name of the Related Party Trust incorporated IFCI Social Foundation for CSR activity

Shri Sanjeev Kaushik (WTD designated as Deputy Managing Key Managerial Director) w.e.f. December 12, 2016

Personnel

Shri Malay Mukherjee (CEO & MD) upto December 11, 2016

Shri Achal Kumar Gupta (WTD designated as Deputy Managing Director) upto December 11, 2016 Shri B.N. Nayak-Chief Financial Officer Ms. Rupa Sarkar-Company Secretary

* Pursuant to the sale of our complete stake, HARDICON has ceased to be our associate with effect from March 6, 2017.

* There are no potential equity shares outstanding as on March 31, 2017.

19. The Company has 50% interest in one joint venture viz. IFCI Sycamore Capital Advisors (P) Ltd (ISCAPL) incorporated in India in November 2011 which is under voluntary liquidation and official liquidator has been appointed. The investment of IFCI Ltd in IFCI Sycamore Capital Advisors (P) Ltd as on March 31, 2017 was at Rs, 0.01 crore Class A Equity Shares against which adequate provision has been made considering the probability and quantum of share in distribution upon liquidation of the Company. The Fully Convertible Debentures of Rs, 2.64 crore has been redeemed during the year.

20. In terms of Accounting Standard 19 on ‘Leases’.

(a) The Company has entered into lease agreement at nine centers and lease rent is charged to the Statement of Profit & Loss.

(b) The year wise break up of future minimum lease payments in respect of leased premises are as under:

21. As on March 31, 2017 there were no events or changes in circumstances which indicate any impairment in the assets as defined by Accounting Standard-28-“Impairment of Assets”.

22. Expenditure on CSR activities as specified in schedule VII to the Companies Act, 2013

13. The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies:

(i) The Company is registered with Securities and Exchange Board of India as debenture trustee having registration code i.e. “IND000000002”.

(ii) There are no penalties imposed by RBI and other regulator during the year ended March 2017

(iii) Ratings assigned by credit rating agencies and migration of ratings during the year ended March, 2017

* Excl. the figures of Std Rest. Advances which do not attract higher provisioning or risk weight (if applicable).

** Recovery (3 cases, O/s Rs, 138.71 crore, 31.47 cr provision) and Restructuring withdrawn & Original Liabilities restored in books.

24. Open interest in the Currency Futures as at 31/03/2017-Nil (Previous Year ended March 2016: : NIL)

25. Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.006 million (Previous Year ended March 2016: USD 0.059 million) and EURO 0.053 million (Previous Year ended March 2016: EURO 0.011 million), equivalent to Rs, 0.41 crore (Previous Year ended March 2016: Rs, 0.47 crore).

26. Details of securities sold and purchased under Repos and Reverse Repos Transactions:

Maximum & average outstanding is based on face value of securities.

27. Previous year figures have been re-grouped/ re-arranged wherever necessary, to conform to current year’s presentation.


Mar 31, 2016

B. NOTES ON ACCOUNTS 1.

SHARE CAPITAL

1 Share capital Authorised, Issued, Subscribed and Paid up:

2. Employee Stock Option Scheme

The Company had, during the financial year 2011-12, granted options for 71,96,993 shares under Employees Stock Option Scheme 2011, subject to the vesting conditions mentioned in the Scheme. The Board in its meeting dated November 12, 2013 has withdrawn the scheme, subject to all the regulatory compliances required in this regard and no further vesting under the scheme shall be held. All applicable compliance have since been ensured and the granted options that have not vested under the scheme, have been cancelled.

Foot-notes to Note No. 2:

1. Capital Reserve represents proceeds of forfeited shares.

2. Capital Redemption Reserve represents amount transferred from surplus in statement of profit and loss towards redemption of preference shares without fresh issue of capital, as was required under Section 80 of the Companies Act, 1956.

3. Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non Convertible Debentures issued by IFCI Ltd through public offer.

4. The Board has withdrawn the ESOP scheme with no further vesting of options under the scheme. Therefore balance in amortised discount in respect of stock options granted but not vested under the head ’employee stock option plans’ has been reversed and taken to statement of profit & loss account during FY 2014-15.

5. Corporate Social Responsibility Fund was established by the Board of Directors of IFCI Ltd in FY 2010-11 to undertake corporate social responsibility initiative by IFCI Ltd With the enactment of Section 135 of the Companies Act, 2013, the corporate contribution towards social activities are guided by the specific provisions and therefore, the balance in the Corporate Social Responsibility Fund has been transferred to General Reserve during FY 2014-15.

6. Grant received from Government of India under KfW Loans was of capital nature and to be utilized for specified purposes for promotional activities of Industrial Development and stands so utilised in earlier years. Therefore, the balance in grant account has been transferred to general reserve during FY 2014-15.

7. Section 36(1)(viii) of the Income Tax Act allows financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Tax Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f. FY 1997-98. Any withdrawal would attract tax liability. Up to FY 1996-97, utilization of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Tax Liability (DTL) has been created on the reserve transferred after FY 1997-98.

8. Pursuant to increase in shareholding of Govt. of India more than 50% of the paid-up Share Capital, the Company has become Government Company u/s 2(45) of the Companies Act, 2013 and therefore in view of the exemption available to Government Companies, no transfer has been made to the statutory reserve created u/s 45IC of RBI Act, 1934.

9. Company has made the provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts as on March 31, 2016.

10. IFCI Ltd has given letters of comfort to certain banks on behalf of its subsidiary companies in connection with availing loans from those banks. Outstanding of loans/non fund based facilities availed under such letters of comfort and outstanding as on March 31, 2016 was Rs. 518.42 crore (Previous Year ended March 31, 2015: Rs. 288.62 crore).

11. Govt. of India has acquired 6 crore Cumulative Redeemable Preference Shares of Rs. 10/- each from the existing shareholders of the Company on April 07, 2015 and consequentially Company has become Government Company u/s 2(45) of the Companies Act, 2013 from that date.

12. IFCI had sanctioned a Corporate loan of Rs. 150 crore to Blue Coast Hotels Ltd in year 2010, which was secured by way of charge on the movable fixed assets and immovable property. IFCI had also taken an equity exposure to the extent of Rs. 85 crore in Silver Resorts Hotel (I) Pvt. Ltd, a group company of Blue Coast Hotels Ltd Blue Coast Hotel Ltd had entered into Buy Back Agreement for buying back the equity shares and to secure the performance of the Buy-Back, a charge by way of mortgage was created on the aforesaid property. Consequent to the default committed by the Company, both in repayment of the loan as well as honoring the buy-back obligation, IFCI initiated legal proceedings against the company, by issuing a 13(2) notice under the SRFA & ESI Act, 2002 on the company on 26th March, 2013. Pursuant to the aforesaid notice, IFCI undertook recovery action by selling mortgaged assets through a public auction to ITC Ltd at a price of Rs. 515.44 crore for recovery of IFCI dues and other secured creditors in the matter. Entire transaction was concluded in FY 2014-15. Blue Coast Hotels Ltd had challenged the said sale and filed Writ Petitions before the HonRs.ble HC of Bombay. The High Court in its final Order dated 23rd March, 2016, set aside the sale conducted by IFCI and disposed of the Writ Petitions in favour of Blue Coast Hotels Ltd Immediately, on receipt of the above judgment, IFCI had filed a Special Leave Petition challenging the Judgment of the Bombay High Court on 12th April, 2016. The HonRs.ble SC was pleased to admit the petition and directed the issuance of notice to Blue Coast Hotels Ltd The HonRs.ble Supreme Court also permitted IFCI to retain the sale proceeds. In view of the above, for disclosure purposes, IFCI is showing contingent liability of Rs. 311.78 crore, which is IFCI share out of total sale proceeds of Rs. 515.44 crore. The next hearing is due on 10 th August 2016.

13. Certain balances appearing under trade receivables and payables are subject to confirmation. Trade receivables which are overdue for more than three years or otherwise considered as doubtful for recovery has been fully provided for.

14. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2016. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent the status of such parties identified on the basis of information available with the Company.

15. There are no material prior period items, except to the extent disclosed, included in statement of Profit & Loss A/c required to be disclosed as per Accounting Standard-5 read with RBI guidelines.

16. Gratuity and leave encashment liabilities have been determined and accounted on the basis of actuarial valuation carried out as at March 31, 2016.

17. The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard-17, is not required.

18. Disclosure of details pertaining to related party transactions in terms of Accounting Standard-18, - “Related Party Disclosures” is as under:

19. In terms of Accounting Standard 19 on ‘Leases’

a) The Company has entered into lease agreement at twelve centers and lease rent is charged to the Statement of Profit & Loss.

b) The year-wise break up of future minimum lease payments in respect of leased premises are as under:

20. As on March 31, 2016 there were no events or changes in circumstances which indicate any impairment in the assets as defined by Accounting Standard-28 -“Impairment of Assets”.

21. The Company has 50% interests in one joint venture viz. IFCI Sycamore Capital Advisors (P) Limited (ISCAPL) incorporated in India in November 2011 which is under voluntary liquidation and official liquidator has been appointed. The investment of IFCI Ltd in IFCI Sycamore Capital Advisors (P) Limited as on March 31, 2016 was at Rs. 0.01 crore Class A Equity Shares and Rs. 2.64 crore Fully Convertible Debentures against which adequate provision has been made considering the probability and quantum of share in distribution upon liquidation of the Company.

22. The following additional information is disclosed in terms of RBI Circulars

applicable to Non-Banking Financial Companies:

(i) The company is registered with Securities and Exchange Board of India as debenture trustee having registration code i.e. “IND000000002”.

(ii) There are no penalties imposed by RBI and other regulator during the year ended March 2016.

(iii) Ratings assigned by credit rating agencies and migration of ratings during the year.

23. Total value of outstanding Currency Swaps was USD 70.82 million against INR, EURO Nil against INR & EURO 64.92 million against USD (Previous Year: USD 77.95 million against INR, EURO 0.85 million against INR & EURO 66.08 million against USD respectively) equivalent to Rs. 958.72 crore (Previous Year: Rs. 936.87 crore) whereas total value of outstanding Forex Deals other than Currency Swaps was Nil (Previous Year: NIL).

24. Open interest in the Currency Futures as at 31.03.2016 -Nil (Previous Year : Nil).

25. Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.059 million (Previous Year: USD 0.020 million) and EURO 0.011 million (Previous Year: EURO 0.029 million), equivalent to Rs. 0.47 crore (Previous Year: Rs. 0.32 crore).

26. Details of Securities sold and purchased under Repos and Reverse Repos Transactions: 0.31 crore.

Operational income for FY 2016 was higher than that of FY 2015 by 17.52% due to increase in interest income, despite the impact of Rs. 351 crore due to reversal of interest income on account of fresh Non-Performing Assets (NPAs) (Rs. 285 crore) and interest funding in respect of restructured assets (Rs. 66 crore). The operational income included income of Rs. 233 crore from NPAs as against Rs. 249 crore in FY 2015. However, income from other financial services was higher at Rs. 379 crore vis-a-vis Rs. 353 crore in FY 2015 mainly due to higher profit on sale of shares/debentures at Rs. 280 crore in FY 2016 as against Rs. 269 crore in FY 2015. Other income at Rs. 188 crore was higher by 94.0% than Rs. 97 crore in FY 2015, the increase primarily being due to profit of Rs. 101 crore on sale of non-core real estate assets during the current year.

The cost of borrowing for FY 2016 at Rs. 2,517 crore was higher by 19.71% than Rs. 2,102 crore for FY 2015, primarily due to higher borrowing required for growth in business. The carrying cost of funds, however reduced to 9.3% as at March 31, 2016 from 9.6% as at March 31, 2015, on account of reduction in general rates of interest. During the year,

(viii) According to the information provided and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to a financial institution or bank or Government or dues to debenture holders.

(ix) According to the information provided and explanations given to us, no moneys have been raised by way of initial public offer or further public offer (including debt instruments) and the term loans raised from different banks during the year were applied for the purposes for which those are raised.

(x) According to the information and explanations given to us and to the best of our knowledge and belief, no fraud by or on the Company by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations given to us and in terms of GSR 463 (E) dated June 05, 2015, issued by the Ministry of Corporate Affairs, the provisions of Section 197 pertaining to managerial remuneration do not apply to a Government Company. Accordingly, paragraph 3(xi) of the order is not applicable.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable Accounting Standards.

(xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) According to the information provided and explanations given to us, the Company is registered under Section 45-IA of the Reserve Bank of India Act, 1934. The Company has been granted certificate of registration to commence/carry on the business of non-banking financial institution without accepting public deposits on August 18, 2009 vide registration No. is B-14.00009.


Mar 31, 2015

Note 1:

1. Capital Reserve represents proceeds of forfeited shares.

2 Capital Redemption Reserve represents amount transferred from surplus in profit and loss statement towards redemption of preference shares without fresh issue of capital, as was required under Section 80 of the Companies Act, 1956.

3. Debenture Redemption Reserve has been created in terms of Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014 for Non Convertible Debentures issued by IFCI Ltd through public offer.

4. The Board has withdrawn the ESOP scheme with no further vesting of options under the scheme. Therefore balance in amortised discount in respect of stock options granted but not vested on the options under the head ''employee stock option plan'' has been reversed and taken to ''profit & loss account''.

5. Corporate Social Responsibility Fund was established by the Board of Directors of IFCI Ltd in FY 2010-11 to undertake corporate social responsibility initiative by IFCI Ltd. With the enactment of Section 135 of the Companies Act, 2013, the corporate contribution towards social actiivties are guided by the specific provisions and therefore, the balance in the Corporate Social Responsibility Fund has been transferred to General Reserve.

6. Grant received from Government of India under KfW Loans was of capital nature and to be utilized for specified purposes for promotional activities of Industrial Development and stands so utilised in earlier years. Therefore, the balance in grant account has been transferred to general reserve.

7. Section 36(1)(viii) of the Income Tax Act allowes financial institutions to transfer 20% of profit from eligible business i.e. net income from long-term industrial financing, to this Reserve and the same is allowed as a deduction while computing taxable income. The Income Tax Act, by an amendment in Finance Act, 1998, has put a condition on maintaining the Reserve created w.e.f. FY 1997-98. Any withdrawal would attract tax liability. Upto FY 1996-97, utilisation of the said Reserve created in the earlier year did not attract tax liability and accordingly Deferred Tax Liability (DTL) has been created on the reserve transferred after FY 1997-98.

8. In terms of Section 45IC of RBI Act, 1934, every 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 and before any dividend is declared.

Note 2:

The additional charge of depreciation of Rs. 22.58 crore for the year ended March 31, 2015 (FY March 31, 2014 - Rs. 19.03 crore) on account of revaluation of Land & Buildings carried out in Financial Year 2009-10 has been charged to Statement of Profit & Loss and an equivalent amount withdrawn from Revaluation Reserve and credited to Statement of Profit and Loss. Leasehold land at New Delhi was being amortised over the period of 90 years from the date of capitalisation, however the lease was in the nature of prepetual lease. Therefore, accumulated depreciation of Rs. 8.30 crore on account of amortisation of lease premium has been reversed and Rs. 4.12 credited to the Rs. profit & loss account'' and Rs. 4.18 crore credited to revaluation reserve. Land held at Chandigarh Office has been converted into ''freehold land'' and accordingly gross block of Rs. 0.38 crore (including revaluation reserve of Rs. 0.23 crore) has been transferred from ''lease-hold land'' to ''free-hold land'' and accumulated depreciation of Rs. 0.05 crore has been reversed and credited to P&L A/c.

The Company has revised the useful life of the fixed assets in alignment with Schedule-II to the Companies Act, 2013 with effect from 1st April, 2014 and ''Written Down Value (WDV)'' of all the assets as on 31st March, 2015 has been depreciated over the remaining useful life of the fixed assets. The ''written down value'' in respect of fixed assets with no remaining useful life was Rs. 2.24 crore out of which Rs. 1.50 crore (net of deferred tax liability of Rs. 0.74 crore) has been adjusted in the retained earnings. Residual value in respect of assets other than Buildings and Vehicles are considered ''Nil ''.

In respect of certain assets which were being depreciated in the previous years following written down value (WDV) method, the Company has revised the method of calculation of depreciation to straight line method (SLM) retrospectively resulting into reversal of ''accumulated depreciation'' of Rs. 19.36 crore which has been credited to the profit & loss account. Consequentially, the charge for depreciation in the statement of profit & loss account is lower by Rs. 19.36 crore.

Note 3:

Contingent Liabilities:

(Rs. crore)

As at Year ended Year ended 31.03.2015 31.03.2014

(i) Claims not acknowledged as Debts 5.48 12.99

(ii) Bank Guarantees Provided 25.60 8.87

(iii) Guarantee Issued on behalf of third parties 5.71 76.00

(iv) Guarantee Issued on behalf of Subsdiaries companies 115.00 115.00

Tax Matters:

- Income Tax 30.37 29.58

- Service tax 13.74 13.44

Considering the current status of the pending litigation cases, no material financial impact is expected on the financial statements as on March 31, 2015.

Note 4:

Company has made the provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts as on March 31, 2015.

Note 5:

IFCI Ltd has given letters of comfort to certain banks on behalf of its subsidiary companies in connection with availing loans from those banks. Outstanding of loans/non fund based facilities availed under such letters of comfort and outstanding as on March 31, 2015 was Rs. 288.62 crore (Previous Year ended March 31, 2014 - Rs. 575 crore).

Note 6:

Govt. of India has acquired 6 crore Cumulative Redeemable Preference Shares of Rs. 10/- each from the existing shareholders of the Company on April 07, 2015 and consequentially, Company has become Government Company u/s 2(45) of the Companies Act, 2013 from that date.

Note 7:

Since, the securities held by Company represents similar rights and obligations it was considered more appropriate to follow ''Weighted Average Cost Method'' to compute carrying cost of such securities and accordingly, the method of computation of carrying cost of securities was revised during the current year to ''Weighted Average Cost Mehtod'' which hitherto was being carried at ''FIFO Cost Method''. As a result, the cost of securities held as current and long term investment as on March 31, 2015 is lower by Rs. 28.21 crore following ''Weighted Average Cost Method'' vis-a-vis ''FIFO Cost Method'' and profit on sale of investment is higher by the same amount.

Note 8:

During the year Company has issued Secured Redeemable ''Non-Convertible Debentures'' of Rs. 1,972.26 crore through public issue in two tranches (Tranche I - Rs. 1,209.19 crore and Tranche-II - Rs. 763.07 crore) which stands utlised for the purpose as described in the offer document.

Note 9:

Company has granted a loan to a borrower concern which has been classified as sub-standard assets in terms of RBI regulation, having gross outstanding of Rs. 31.89 crore and net outstanding of Rs. 28.70 crore as on March 31, 2015. Some banks have reported fraudulent act by that borrower in respect of certain facilities granted by them. However, the facility granted by the Company is different and secured by way of mortgage of immovable properties. Considering the recent developments, the available security is being assessed for element of fraud and potential threat of recovery, if any. Pending the outcome of the assessment the case has been retained in the same category i.e. sub-standard as on March 31, 2015.

Note 10:

The Company has revised the useful life of the fixed assets in alignment with Schedule-II to the Companies Act, 2013 with effect from 1st April, 2014 and ''Written Down Value (WDV)'' of all the assets as on 31st March, 2015 has been depreciated over the remaining useful life of the fixed assets. The ''written down value'' in respect of fixed assets with no remaining useful life was Rs. 2.24 crore out of which Rs. 1.50 crore (net of deferred tax liability of Rs. 0.74 crore) has been adjusted in the retained earnings. Residual value in respect of assets other than Buildings and Vehicles are considered ''Nil ''.

In respect of certain assets which were being depreciated in the previous years following written down value (WDV) method, the Company has revised the method of calculation of depreciation to straight line method (SLM) retrospectively resulting into reversal of ''accumulated depreciation'' of Rs. 19.36 crore which has been credited to the profit & loss account. Consequentially the charge for depreciation in the statement of profit & loss account is lower by Rs. 19.36 crore.

Note 11:

Certain balances appearing under trade receivables and payables are subject to confirmation. Trade receivables which are overdue for more than three years or otherwise considered as doubtful for recovery has been fully provided for.

Note 12:

There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2015. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent the status of such parties identified on the basis of information available with the Company.

Note 13:

There are no material prior period items, except to the extent disclosed, included in Profit & Loss A/c required to be disclosed as per Accounting Standard-5 read with RBI guidelines.

Note 14:

Gratuity and leave encashment liabilities have been determined and accounted on the basis of actuarial valuation carried out as at March 31, 2015.

Note 15:

The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard-17, is not required.

Note 16:

Disclosure of details pertaining to related party transactions in terms of Accounting Standard-18, - "Related Party Disclosures" is as under:

1. Name of the Related Party and Nature of Relationship:

Nature of Relationship Name of the Related Party

IFCI Financial Services Ltd (IFIN)

IFCI Venture Capital Funds Ltd (IVCF)

IFCI Infrastructure Development Ltd (IIDL)

IFCI Factors Ltd (IFL)

MPCON Ltd

Stock Holding Corporation of India Ltd (w.e.f. March 29, 2014)

Subsidiaries IFIN Commodities Ltd. (indirect control through IFIN)

IFIN Credit Ltd (indirect control through IFIN)

IFIN Securities Finance Limited (indirect control through IFIN)

IIDL Realtors Pvt Ltd (indirect control through IIDL)

SHCIL Services Ltd (indirect control through SHCIL)

SHCIL Projects Ltd (indirect control through SHCIL)

Assets Care & Reconstruction Enterprise Ltd (ACRE) (upto September 05, 2014)

Tourism Finance Corporation of India Ltd (TFCI)

Himachal Consultancy Organisation Ltd (HIMCON)

Assosciates North India Technical Consultancy Organisation Ltd (NITCON)

HARDICON Ltd

Rajasthan Consultancy Organisation Ltd (RAJCON)

KITCO Ltd

Joint Venture IFCI Sycamore Capital Advisors Pvt Ltd

Trust incorporated IFCI Social Foundation for CSR activity

Shri Malay Mukherjee (CEO & MD) - w.e.f. December 12, 2013

Shri Achal Kumar Gupta (WTD designated as Deputy Managing Director) - w.e.f. December 12, 2013

Key Managerial Shri Santosh B Nayar (CEO & MD) - from Personnel July 15, 2013 to December 11, 2013

Shri Anurag Jain (CEO & MD) - from June 01, 2013 to July 14, 2013

Shri Atul Kumar Rai (CEO & MD) - upto May 31, 2013

Note 17:

The Company has 50% interests in one joint venture viz. IFCI Sycamore Capital Advisors (P) Limited (ISCAPL) incorporated in India in November 2011 which is under voluntary liquidation and official liquidator has been appointed. The investment of IFCI Ltd in IFCI Sycamore Capital Advisors (P) Limited as on March 31, 2015 was at '' 0.01 crore Class A Equity Shares and Rs. 2.64 crore Fully Convertible Debentures against which adequate provision has been made considering the probability and quantum of share in distribution upon liquation of the Company.

Note 18:

As on March 31, 2015 there were no events or changes in circumstances which indicate any impairment in the assets as defined by Accounting Standard-28 - "Impairment of Assets".

Note 19:

The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies:

(i) The Company is registered with Securities and Exchange Board of India as debenture trustee having Registration Code i.e. "IND000000002".

(ii) There is no penalties imposed by RBI and other regulator during the year ended March 2015.

Note 20:

Total value of outstanding Currency Swaps was USD 77.95 million against INR, EURO 0.85 million against INR and EURO 66.08 million against USD (Previous Year - USD - 87.65 million against INR, EURO Nil million against INR and EURO 69.39 million against USD respectively) equivalent to Rs. 936.87 crore (Previous Year- Rs. - 1,132.09 crore) whereas total value of outstanding forex deals other than Currency Swaps was Nil (Previous Year - Nil).

Note 21:

Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.020 million (Previous Year - USD 0.50 million) and EUR 0.029 million (Previous Year - EUR 0.38 million), equivalent to Rs. 0.32 crore (Previous Year - Rs. 6.15 crore).

Note 22:

Previous year figures have been re-grouped/ re-arranged wherever necessary, to conform to current period''s presentation.


Mar 31, 2014

1. Contingent Liabilities and Commitments (to the extent not provided for):

25.1 Contingent Liabilities: (Rs. crore)

As at 31.03.2014 31.03.2013

(i) Bank Guarantees (8.87 26 50) 84.87 34.87

(ii) Performance Guarantees issued 0.02 0.02

(iii) Claims not acknowledged as debts 12.99 179.67 (iv) Tax Matters –

Income Tax 29.58 28.78

Service tax 13.44 12.39

In view of judicial pronouncements and legal opinions in respect of issues under appeal, no provision is considered necessary.

2. IFCI Ltd. has given letters of comfort to certain banks for one of its subsidiary, IFCI Factors Ltd. in connection with availing loans from those banks. Outstanding of loans availed under such letters of comfort was Rs. 690 crore as on March 31, 2014 (Previous Year - Rs. 729.00 crore).

3. In exercise of the powers conferred by Section 211(3) of the Companies Act, 1956, the Central Government vide notification dated February 08 2011, has exempted Public Financial Institutions as specified under Section 4A of the Companies Act, 1956 from disclosing company-wise details of Investments subject to fulfillment of certain conditions, which have been fulfilled. The accounts for the year ended March 31, 2014 have been prepared in accordance therewith.

4. The Company had obtained valuation of certain long term unquoted investments by an independent valuer and the report of the said expert has been considered for the purpose of assessment of the value of said long term unquoted investments.

5. Hitherto, the interim return received, till the date of actual buy back, in certain cases of equity investment was being considered as "Amount received against unquoted investments". Due to this policy an amount of Rs. 69.02 crore was accumulated upto 31.03.2013 and was shown under Trade Payables. These equity investments were made at pre-agreed rate of return and with firm buy back commitments from the promoter(s)/promoter group company(ies). During the year, the company changed this policy to recognize the interim return, so received as income on receipt basis and amount of Rs. 104.49 crore has been recognized as income.

This amount of Rs. 104.49 crore includes Rs. 69.02 crore pertaining to previous years'' accumulation as stated above. Had this change in accounting policy not been made, the profit of the Company would have been lower by Rs. 104.49 crore and Trade Payables higher by an equivalent amount.

6. Balances appearing under loans, sundry debtors and sundry creditors are subject to confirmation.

7. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2014. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent the status of such parties identified on the basis of information available with the Company.

8. There are no material prior period items, except to the extent disclosed, included in Profit & Loss A/c required to be disclosed as per Accounting Standard-5 issued by the ICAI read with RBI guidelines.

9. Defined Benefit Plans/Long Term Compensated Absences - As per Actuarial Valuations as on March 31, 2014 and recognized in the financial statements in respect on Employee Benefit Schemes.

10. The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard-17, issued by the ICAI is not applicable.

11. The Company has 50% interests in one joint venture viz. IFCI Sycamore Capital Advisors (P) Limited (ISCAPL) incorporated in India in November 2011. The amounts invested at par were Rs. 0.01 crore Class A Equity Shares and Rs. 2.64 crore Fully Convertible Debentures. ISCAPL''s Board has approved the winding up of the company and the financials of ISCAPL for the year ended 31.03.2014 are under finalization. A firm of Chartered Accountants has certified that ISCAPL have adequate liquidity in the form of fixed deposits to honour the investment and accordingly, the Debentures are carried at cost.

12. Fixed Assets possessed by the Company are treated as ''Corporate Assets'' and not ''Cash Generating Units'' as defined by Accounting Standard-28 - "Impairment of Assets" issued by the ICAI. As on March 31, 2014, there were no events or changes in circumstances which indicate any impairment in the assets.

13. The following additional information is disclosed in terms of RBI Circulars applicable to Non-Banking Financial Companies:

(a) Loans and advances availed, inclusive of interest accrued thereon but not paid:

14. Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.50 million (Previous Year - USD 0.016 million) and EUR 0.38 million (Previous Year - EUR 0.041 million), equivalent to Rs. 6.15 crore (Previous Year - Rs. 0.37 crore).

15. Previous year figures have been re-grouped/re-arranged wherever necessary, to conform to current period''s presentation.


Mar 31, 2013

1. Effect of Changes in Shareholding Pattern:

Through exercise of option of conversion by the Government of India, the Optionally Convertible Debentures of Rs.400 crore held by GoI and Loan of Rs.523 crore provided by GoI were converted into 92.30 crore equity shares of the Company at par through necessary approvals by the Board of Directors and the shareholders, during the year. Further during the year, vesting of 12 lakh equity shares was done under the IFCI Employees Stock Option Scheme and subsequently, these shares were allotted to the IFCI Employees Stock Option Trust. With these conversions and vesting under ESOP, paid–up equity share capital stands increased from Rs.737.84 crore to Rs.1,662.04 crore. Consequent upon such increase, the Central Government alongwith Corporations owned or controlled by the Central Government hold more than 51% of the paid up share capital of the Company. Accordingly, the provisions of Section 619B read with Section 619 of the Companies Act, 1956 with regard to audit of accounts have become applicable to the Company.

2. Contingent Liabilities and Commitments (to the extent not provided for):

2.1 Contingent Liabilities: (Rs. crore) As at 31.03.2013 31.03.2012 (i) Guarantees issued in Indian Currency – 26.96 (ii) Bank Guarantees 34.87 8.87 (iii) Performance Guarantees issued 0.02 0.66 (iv) Claims not acknowledged as Debts 179.67 156.10 (v) Tax Matters

– Income Tax 28.78 27.07

– Service tax 12.39 4.84

In view of judicial pronouncements and legal opinions in respect of issues under appeal, no provision is considered necessary

2.2 Commitments: (Rs. crore)

As at 31.03.2013 31.03.2012

(i) Estimated amount of contract (including 0.62 1.32

lease contract) remaining to be executed on capital account (net of advances)

(ii) Undrawn Commitments (in line with RBI 2,624.64 392.97 Circular dated December 26, 2011)

3. In exercise of the powers conferred by Section 211(3) of the Companies Act, 1956, the Central Government vide Notification dated February 8, 2011, has exempted Public Financial Institutions as specified under Section 4A of the Companies Act, 1956 from disclosing company–wise details of Investments subject to fulfillment of certain conditions. The accounts for the year ended March 31, 2013 have been prepared in accordance therewith.

4. During the year, the Company has obtained valuation of certain long term unquoted investments by an independent valuer. The report of the said expert has been considered for the purpose of assessment of decline other than temporary in the value of said long term unquoted investments.

5. Trade payables include an amount of Rs.69.02 crore received in terms of various agreements entered into with the promoter of the investee company for Share subscription/Share buyback. These proceeds are in the nature of part payments towards specified internal rate of return and/or share buyback. Due to inherent uncertainty in respect of the final gains/losses in such transactions, if any, at the time of actual buyback, the proceeds have been treated as advance receipts in the accounts.

6. Balances appearing under loans, sundry debtors and sundry creditors except pertaining to related parties, are subject to confirmation.

7. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2013. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent the status of such parties identified on the basis of information available with the Company.

8. There are no material prior period items, except to the extent disclosed, included in Profit & Loss A/c required to be disclosed as per Accounting Standard–5 issued by the ICAI read with RBI guidelines.

9. Defined Benefit Plans/Long Term Compensated Absences – As per Actuarial Valuations as on March 31, 2013 and recognized in the financial statements in respect on Employee Benefit Schemes.

10. The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard–17, issued by the ICAI is not applicable.

11. Total value of Outstanding Currency Swaps was USD 87.13 million against INR and EURO 72.58 million against USD (Previous Year - USD 98.70 million against INR, EURO 0.60 million against INR and EURO 79.50 million against USD respectively) equivalent to Rs.1,002.34 crore (Previous Year - Rs.1,069.40 crore) whereas total value of outstanding Forex Deals other than Currency Swaps was Nil (Previous Year - USD 0.15 million against INR equivalent to Rs.0.77 crore respectively).

12. Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.016 million (Previous Year - USD 0.02 million) and EUR 0.041 million (Previous Year - EUR 0.03 million), equivalent to Rs.0.37 crore (Previous Year - Rs. 0.28 crore).

13. Details of securities sold and purchased under Repos and Reverse Repos Transactions:

14. Previous year/period figures have been re–grouped/re–arranged wherever necessary, to conform to current period''s presentation.


Mar 31, 2010

1. Contingent Liabilities not provided for in respect of:

(Rs. crore)

Year ended 31.03.2010 31.03.2009

(i) Guarantees issued in Indian Currency 50.00 186.65

(ii) Bank Guarantees 6.87 -

(iii) Performance Guarantees issued 0.67 0.62

(iv) Claims not acknowledged as debts 50.14 50.35

(v) Assets sold with recourse - 2.88

(vi) Estimated amount of contract (including lease contract) remaining to be executed on capital account (net of advances) 4.36 -

(vii) Tax Matters:

- Income Tax 314.64 186.87

- Service Tax 3.08 -

In view of judicial pronouncements and legal opinions in respect of issues under appeal, no provision is considered necessary.

2. The Company has been granted exemption as on March 31, 2010 by the Government of India, Ministry of Corporate Affairs, under Section 211(4) of the Companies Act, 1956, regarding the following requirements of Schedule VI of the Companies Act, 1956:

(i) Company-wise details of investments where the market value in case of quoted investments and cost in case of unquoted investments in any particular company not exceeding Rs.2 crore each.

(ii) Age-wise Classification of Sundry Debtors.

The accounts have been prepared in accordance therewith.

3. The stakeholders of IFCI in Financial Year (FY) 2002-03 had approved the package for restructuring of debt/liabilities, inter alia, providing for release of Rs.5,220 crore (comprising Rs.3,604 crore towards principal and Rs.1,616 crore towards interest over future years on liabilities taken over/to be serviced by Government of India) as Grant. Government of India (GoI) released Rs.2,932.31 crore, comprising Rs.523 crore as loan (FY 2002-03) and Rs.2,409.31 crore (FY 2003-04 to FY 2006-07) as Grant. The amount of Rs.2,409.31 crore received as Grant in FY 2003-04 to 2006-07 comprised of Rs.1,606.31 crore towards principal and Rs.803 crore towards interest. Out of Rs.1,606.31 crore received towards principal, Rs.1,359 crore (FY 2003-04) was accounted as extra-ordinary income and Rs.247.31 crore (FY 2004-05 to FY 2006-07) as Restructuring Reserve in the Reserves & Surplus A/c and thereafter transferred to Profit & Loss A/c, as per the guidelines conveyed by RBI. The amount of Rs.803 crore received towards interest was reduced from the cost of borrowings in respective years. In view of GoI letter dated December 12, 2007, stating that it would assist IFCI Ltd in case such a situation arises, no Grant has been received in the last three years.

4. The bonds guaranteed by GoI of Rs.2,338.84 crore include bonds of Rs.1,498.84 crore which have been rolled over for 10 years from the respective due dates in line with the minutes of meetings of stakeholders, held on November 26, and December 2, 2002. GoI has been requested to extend the guarantee for the rolled over period.

5(a) Transfer of equivalent amount to Capital Redemption Reserve Account in respect of Preference Shares of Rs.20 crore redeemed in the FY 2001-02, was complied with in FY 2007-08. However, the Companys application to the Regional Director, Northern Region for compounding is yet to be disposed off by the authorities.

5(b) During the current year, Preference Shares of Rs.82.03 crore (Previous Year - Rs.82.03 crore) have been redeemed, as per restructured terms on 01.04.2009 and necessary amount has been transferred to the Capital Redemption Reserve Account from Profit and Loss Account.

6(a) GoI has the option of converting the debentures, as shown at ‘A of Schedule III, wholly or partly into fully paid equity shares of IFCI Ltd, at par, at any time during the currency of debentures subject to compliance with provisions of SEBI guidelines, in respect of preferential allotment. IFCI also has the right to redeem the convertible debentures issued to GoI, fully or partly, at par, at any time after expiry of five years from the date of the issue with prior approval of RBI.

6(b) During the financial year 2007-08, Zero Coupon Optionally Convertible Debentures (ZCOCDs) amounting to Rs.1,323.99 crore held by Public Sector Banks and Financial Institutions were converted into equity shares of the Company. LIC had, however, stated that they would convert only as much of their ZCOCDs into equity as would maintain their shareholding at 8.39% post conversion of ZCOCDs. Accordingly, the shareholders at the AGM held on September 12, 2008 had approved reduction of share capital for aligning the stake of LIC to 8.39% as requested by LIC. The order of the High Court of Delhi passed on February 26, 2009 for reduction of Equity Share Capital by Rs.24.57 crore and Securities Premium account by Rs.238.39 crore and minutes forming part of the petition were registered by Registrar of Companies on April 15, 2009 and have been duly effected in the books of accounts.

6(c) Loan from GoI as shown at ‘D(a)(i) of Schedule III, to be issued in the form of 0.1% Optionally Convertible Debentures and redeemable on 28.03.2023 has a right of recompense on par with other stakeholders.

7. Borrowings from Banks & FIs shown at ‘D(a)(ii) of Schedule III include loans of Rs.300 crore (Previous Year - Rs.300 crore) against security of cash flow/negative lien against certain identified loan assets.

8. In respect of Investments in shares, debentures and security receipts in certain cases, scrips are yet to be received.

9. Other Loans and Advances include Rs.0.25 crore (Previous Year - Rs.0.12 crore) due from Directors. Maximum balance during the year Rs.0.25 crore (Previous Year - Rs.0.12 crore).

10. The Gross Block of Fixed Assets includes Rs.1,194.32 crore (Previous Year - Rs.595.50 crore) on account of revaluation of Land & Buildings carried out during the year on the basis of replacement value as certified by Government Approved Valuer. The resulting increase of Rs.637.44 crore (Land - Rs.322.91 crore; Building-Rs.314.53 crore) has been credited to the Revaluation Reserve. The increase in value is in addition to earlier revaluation done in FY 2006-07. The additional charge of depreciation of Rs.9.42 crore (Previous Year - Rs.9.75 crore) on revaluation carried out in earlier years has been charged to Profit & Loss Account and an equivalent amount withdrawn from Revaluation Reserve and credited to Profit and Loss Account.

11. During the year, the Company has changed the method of depreciation on Mobile Phones by providing 100% depreciation in the year of acquisition itself in place of providing depreciation on WDV method at the rates provided under Schedule XIV of Companies Act, 1956. Profit for the current year is lower by Rs.0.20 crore due to the change. The additions made in the preceeding years have also been fully depreciated.

12. Balances appearing under loans, sundry debtors and sundry creditors are subject to confirmation in certain cases.

13. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at March 31, 2010. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

14. Details of investments purchased and sold/redeemed during the year ended March 31, 2010 are enclosed as Annexure.

15. There are no material prior period items, except to the extent disclosed, included in Profit & Loss A/c required to be disclosed as per Accounting Standard-5 issued by the ICAI read with RBI guidelines.

16. Defined Benefit Plans/Long Term Compensated Absences – As per Actuarial Valuations as on March 31, 2010 and recognized in the financial statements in respect of Employee Benefit Schemes:

17. The Company operates in India and hence it is considered to operate only in domestic segment. More than 90% of revenue for the Company comes from a single segment of Financing. Accordingly, segment reporting as required under Accounting Standard-17, issued by the ICAI is not applicable.

18. Disclosure of details pertaining to related party transactions in terms of Accounting Standard-18, issued by the ICAI - "Related Party Disclosures" are as under:

19(a) Provisions of Accounting Standard-19, issued by the ICAI - "Leases" are not applicable as the Company has not entered into leasing transaction on or after April 01, 2001.

20(b) (i) The Company has entered into lease agreement at three centers. Some of the significant terms and conditions of the arrangements are:

* Agreement may generally be terminated by either party on serving a notice period.

* The lease arrangements are generally renewed on expiry of lease period subject to mutual agreement.

* The Company shall not sublet, assign or part with the possession of the premises without prior written consent of lessor.

(ii) Rent in respect of above is charged to Profit and Loss Account.

(iii) The year-wise break up of future minimum lease payments in respect of leased premises are as under:

21. Current Tax represents Minimum Alternate Tax (MAT), provided in terms of Section 115JB of the Income Ta x Act, 1961, as tax at normal rates is lower than MAT. In view of amendment to Section 115JB of Income Tax Act, 1961 vide Finance Act, 2009 w.r.e.f. 01.04.2001, additional provision of Rs.51.17 crore has been made for Financial Years 2006-07 and 2007-08. Further, MAT Credit Entitlement and income tax provision of Rs.129.17 crore has been reversed for Financial Years 2008-09 and 2009-10.

22. In terms of Accounting Standard-22, issued by the ICAI - "Accounting for Taxes on Income", Deferred Tax Assets (Net) on account of timing differences is as under:

* As evidenced from the income tax return filed by the Company For the current year, Deferred Tax charge of Rs.338.87 crore (Previous Year - Rs.311.41 crore) has been charged in the accounts.

23. Fixed Assets possessed by the Company are treated as Corporate Assets and not Cash Generating Units as defined by Accounting Standard-28 - "Impairment of Assets" issued by the ICAI. As on March 31, 2010, there were no events or changes in circumstances which indicate any impairment in the assets.

24. Movement in Provisions, in terms of Accounting Standard-29, issued by the ICAI - "Provisions, Contingent Liabilities and Contingent Assets" is given as under:

25. Total value of outstanding Currency Swaps was USD 23.20 million against INR and EUR 45.80 million against USD (Previous Year - USD 9.45 million against INR and EUR 40.80 million against USD respectively) equivalent to Rs.398.89 crore (Previous Year - Rs.236.25 crore), whereas total value of outstanding Forex Deals other than Currency Swaps was USD 8.00 million against INR and EUR 19.40 million against USD equivalent to Rs.154.28 crore (Previous Year - USD 10 million and EUR 20 million respectively).

26. Foreign Currency exposure that is not hedged by derivative instrument or otherwise is USD 0.70 million (Previous Year - USD 0.01 million) and EUR 0.16 million (Previous Year - EUR 0.02 million), equivalent to Rs.3.17 crore (Previous Year - Rs.0.16 crore).

27. Previous year figures have been re-grouped/re-arranged wherever necessary, to conform to current years, presentation.

28. Balance Sheet abstract and Companys General Business Profile as per Part IV of Schedule VI of the Companies Act, 1956 are enclosed as Appendix.

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