Notes to Accounts of Indbank Merchant Banking Services Ltd.

Mar 31, 2018

Note 27: Employee benefit plans Defined contribution plans

The eligible employees of the Company are entitled to receive benefits under Provident Fund, a defined contribution plan in which both employees and the company makes monthly contributions at a specified percentage of the covered employees'' salary, the contributions as specified under the Law are paid to the Provident Fund and Pension Fund to the provident fund authorities.

Leave Encashment - The eligible Leave encashment liability to the employees other than those deputed by Indian Bank has been provided for on the basis of actuarial valuation based on number of days unutilized leave at each reporting date. The actuarial gain or loss is recognized in the Statement of Profit and Loss as per Ind AS 19.

The total expense recognized in profit or loss of Rs. 29,39,999 (for the year ended March 31, 2017 Rs.31,06,303) represents contributions payable to these plans by the Company at rates specified in the rules of the plans.

Defined benefit plans

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

The plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days'' salary payable for each completed year of service. Vesting occurs upon the completion of five years of service. The Company makes an annual contribution to gratuity fund established as a Trust through a Group Gratuity Policy with Life Insurance Corporation of India. The Company''s liability towards Gratuity is actuarially determined at the reporting date using the Project Unit Credit (PUC) method. Actuarial gains and losses on gratuity are recognized in Other Comprehensive Income as per Ind AS 19.

These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk Since the company contributes to an approved Gratutiy Fund, it is not exposed to any risk.

- The company has paid Rs. 18 lakhs for this Assessment Year in terms of the orders passed by the CIT on the stay petition filed by the company.

-- The company has paid Rs. 132 lakhs for this Assessment Year in terms of the orders passed by the CIT and High Court, Madras on the stay petition filed by the company.

ii) Sales Tax demand disputed in appeal - Rs.42.78 lakhs (Previous year Rs.42.78 lakhs).

B. Guarantees - Counter guarantee issued to bank for guarantees - Nil (Previous Year - Nil)

C. Estimated amount of contracts remaining to be executed on capital account and not provided for - Nil (Previous Year - Nil).

Note 29: Disclosure in respect of Related Parties pursuant to Ind AS 24

The Company has identified all related parties and transactions with the related parties as per details given below:

Name Relationship

Indian Bank Holding Company

Ind Bank Housing Limited Fellow Subsidiary

Key Management Personnel Mr. A K Bajpai, President & Whole Time Director

Key Management Personnel Mr. K S Sujay, Vice President & CFO

Key Management Personnel Ms. S S Deepthi, Company Secretary & Compliance Officer

Vice President & CFO of the Company is on deputation from Indian Bank and the remuneration is in accordance with the service rules of the said Bank.

Company Secretary & Compliance Officer has been recruited directly by the company and the remuneration is in accordance with the terms of offer of employment given by the company.

Note 30. Segment information

Information reported to the Chief Operating Decision Maker (CODM - Board of Directors) for the purposes of resource allocation and assessment of segment performance focuses on the Company as a whole. Hence, the management has concluded that the Company has only one segment.

Note 32: Financial instruments Capital management

The Company manages its Capital to ensure that it continues as a Going Concern while maximizing the return to its stakeholders through the optimization of equity balance.

The capital structure of the Company does not consist of any debt. The business activities are carried out using internal accruals and the equity balance of the Company.

Financial risk management objectives

The Company has fixed prudential limits for giving exposure to its clients and also has a elaborate collection process for mitigating the risks. The exposure norms prescribed by various statutory authorities (SEBI, NSDL and RBI) are being adhered to. The risk management policy shall be reviewed every two years.

The risks include market risk, credit risk and liquidity risk.

Market Risk

The Company is not exposed to market risks due to foreign currency exchange rates and interest rates as there are no borrowings and no transactions in foreign currency.

Credit risk management

The credit risk associated with broking comprises failure of the client, intermediary, clearing agents and the exchanges in meeting their respective payment obligations. The Company has a power of attorney to sell the underlying securities when there is delay in receipts from the customers at its discretion. The Company also has fixed margin requirements which have to be adhered to by the customers in order to transact with the Company. Hence, the Company''s exposure to credit risk is minimal.

Interest Rate Risk Management

The Company has not obtained any borrowings. Hence, it has no exposure due to interest rate fluctuations.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk

Note 33: First-time adoption of Ind AS

These financial statements, for the year ended 31 March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at end for the year ended 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''s opening balance sheet was prepared as at 1 April 2016, the Company''s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

1 Since there is no change in the functional currency, the Company has elected to continue with the carrying value as at 1st April, 2016 for all of its investment property and property plant & equipment as recognized in its Previous GAAP financial as deemed cost at the transition date.

2 Under previous GAAP, long term investments were measured at cost less diminution in value which is other than temporary. Under Ind AS, the investments in Bought Out Deals have been classified as at FVTOCI and that in equity instruments have been classified as at FVTPL.

3 Under previous GAAP, current investments were measured at lower of cost or fair value. Under Ind AS, the investments in equity instruments have been classified as FVTPL on the date of transition. The fair value changes are recognized in profit or loss.

4 Under previous GAAP, there was no concept of other comprehensive income. Under Ind AS, specified items of income, expense, gains, or losses are required to be presented in other comprehensive income.

5 Under previous GAAP, actuarial gains and losses were recognized in profit or loss. Under Ind AS, the actuarial gains and losses form part of remeasurernent of the net defined benefit liability / asset which is recognized in other comprehensive income. The actuarial gains for the year ended March 31, 2018 were Rs.6.98 lakhs and for March 31, 2017 were Rs.2.72 lakhs.

Effect of the Transition to Ind AS

Reconciliations of the Company''s balance sheets prepared under Indian GAAP and Ind AS as of April 1, 2016 and March 31, 2017 are also presented in Note 34 & 35. Reconciliations of the Company''s income statements for the year ended March 31, 2017 prepared in accordance with Indian GAAP and Ind AS in Note 36.

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Mar 31, 2016

1. AS-24 - Discontinuing operations and Segment reporting

The Company had discontinuing fund-based activities consequent to SEBI regulations coming into force with effect from December 1997 and had decided to undertake only fee-based activities. The existing fund based exposures as on December 1997 are continued to run down to their contracted period. The Company had obtained cancellation of registration as NBFC from RBI consequent to repayment of fixed deposits and transfer of unclaimed fixed deposits to an escrow account with a nationalized bank for repayment as and when claimed. The Company is now governed only by SEBI regulations.

The business segments have been identified as the Primary Segment considering the nature of service, organizational structure and internal financial reporting system. The services of the reported domestic business segments are classified as "Discontinuing operations" (Fund Based) and "Continuing Operations" (Fee Based). Discontinuing operations consists of Leasing, Hire purchase, Inter corporate deposits and Investments. Continuing operations include Merchant Banking, Stock Broking, Depository Participant services, Distribution of Financial Products and allied activities. There is no Secondary Reportable Segment.

2. Interest on Income tax refund / excess interest reversed

Based on the orders under section 154 of the Income Tax Act, received during the year, the interest allowed by the department on the refunds due under the Income Tax Act has been reckoned in the accounts for various assessment years as under:

3. A sum of Rs.7.19 lakhs deducted by Indian Bank as TDS on interest accrued on Fixed Deposit of Rs.93.15 lakhs placed with them in terms of Court Order passed on 10.02.2010 for the recovery of Client dues from M/s Shreeji Investments is considered as an asset and corresponding liability is also provided for in the books of accounts.

4. Indian Bank, the parent Bank, has approved a moratorium period of 3 years from September 2013 to September 2016 for repayment of the amount of Rs. 897.48 lakhs payable to them under the Right of Recompense clause with repayment of Rs. 75 lakhs per half year to commence from the half year ending 31.03.2017 without any interest charge for the period of moratorium/repayment. Hence no liability has been provided in the books for the current financial year.

5. Sales Tax demand disputed in appeal - Rs.42.78 lakhs (Previous year Rs.42.78 lakhs).

6. Guarantees - Counter guarantee issued to bank for guarantees - Rs.200.00 lakhs (Previous Year- Rs.200.00 lakhs)

7. Estimated amount of contracts remaining to be executed on capital account and not provided for - Nil (Previous Year - Nil).

President and Whole Time Director of the Company is on deputation from Indian Bank and the remuneration is in accordance with the service rules of the said Bank and also in terms of appointment as ''Whole Time Director'' by the shareholders of the Company.

8. As at March 31, 2016, the Company has no outstanding dues to medium and small enterprises. There is no liability towards interest on delayed payments under the Micro, Small and Medium Enterprises Development Act, 2006 during the year.

9. In the opinion of the Management all Fixed Assets, Current Assets, Loans & Advances will have value on realization in the ordinary course of business at least equal to the amounts at which they are stated in the accounts.

10. The previous year''s figures in the Balance Sheet, Profit and Loss Account and Cash Flow Statement have been regrouped and reclassified, wherever necessary, to conform to the current year''s classification.

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Mar 31, 2015

1. Prior period adjustments

During the year 2014-15 there was no prior period expenses (previous year Rs. 83633/-)

2. Tax expenses

a. In view of losses (as per Income tax) as well as book losses (as per MAT computation) no provision for tax is required for the year.

b. No provision is made for the disputed demands of income tax keeping in view the judicial pronouncements and/or legal opinion on the issues.

c. The provision for deferred tax (net) for the year is Rs.98.47 lakhs (Previous year Rs.1.37 lakhs) which has been charged to profit & loss account.

3. AS-24 - Discontinuing operations and Segment reporting

The Company had discontinuing fund-based activities consequent to SEBI regulations coming into force with effect from December 1997 and had decided to undertake only fee-based activities. The existing fund based exposures as on December 1997 are continued to run down to their contracted period. The Company had obtained cancellation of registration as NBFC from RBI consequent to repayment of fixed deposits and transfer of unclaimed fixed deposits to an escrow account with a nationalized bank for repayment as and when claimed. The Company is now governed only by SEBI regulations.

The business segments have been identified as the Primary Segment considering the nature of service, organizational structure and internal financial reporting system. The services of the reported domestic business segments are classified as "Discontinuing operations" (Fund Based) and "Continuing Operations" (Fee Based). Discontinuing operations consists of Leasing, Hire purchase, Inter corporate deposits and Investments. Continuing operations include Merchant Banking, Stock Broking, Depository Participant services, Distribution of Financial Products and allied activities. There is no Secondary Reportable Segment.

4. Indian Bank, the parent Bank, has approved a moratorium period of 3 years from September 2013 to September 2016 for repayment of the amount of Rs. 897.48 lakhs payable to them under the Right of Recompense clause with repayment of Rs. 75 lakhs per half year to commence from the half year ending 31.03.2017 without any interest charge for the period of moratorium/repayment. Hence no liability has been provided in the books for the current financial year.

5. AS-29 - Contingent Liability

A. Disputed demand on taxes

i) Income Tax Rs.Lakhs 2014-15 Asst Year Tax Demand Interest Total

1997- 98 0.00 0.00 0.00

1998- 99 32.13 0.00 32.13

2007- 08* 462.02 155.45 617.47

2008- 09** 832.56 296.49 1129.05

2009- 10 72.23 0.00 72.33

Total 1398.94 451.94 1850.98

2013-14

Asst year Tax Demand Interest Total

1997-98 20.13 0.00 20.13

1998-99 45.31 0.00 45.31

2007-08 462.02 155.45 617.47

2008-09 832.56 296.49 1129.05

2009-10 72.23 0.00 72.23

1432.25 451.94 1884.19

*The company has paid Rs. 18 lakhs for this Assessment Year in terms of the orders passed by the CIT on the stay petition filed by the company.

**The company has paid Rs. 132 lakhs for this Assessment Year in terms of the orders passed by the CIT and High Court, Madras on the stay petition filed by the company.

Sales Tax demand disputed in appeal - Rs.42.78 lakhs (Previous year Rs.57.37 lakhs).

B. Guarantees - Counter guarantee issued to bank for guarantees - Rs.200.00 lakhs (Previous Year- Rs.200.00 lakhs)

C. Estimated amount of contracts remaining to be executed on capital account and not provided for - Nil (Previous Year - Nil).

President and Whole Time Director of the Company is on deputation from Indian Bank and the remuneration is in accordance with the service

rules of the said Bank and also in terms of appointment as 'Whole Time Director' by the shareholders of the Company.

6. As at March 31,2015, the Company has no outstanding dues to medium and small enterprises. There is no liability towards interest on delayed payments under the Micro, Small and Medium Enterprises Development Act, 2006 during the year.

7. In the opinion of the Management all Fixed Assets, Current Assets, Loans & Advances will have value on realization in the ordinary course of business at least equal to the amounts at which they are stated in the accounts.

8. The previous year's figures in the Balance Sheet, Profit and Loss Account and Cash Flow Statement have been regrouped and reclassified, wherever necessary, to conform to the current year's classification.

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Mar 31, 2014

1. Prior period adjustments

During the year 2013-14 a sum of Rs. 83633 pertaining to expenses of previous year has been shown under prior period expenses.

2. Tax expenses

a) In view of losses (as per Income tax) as well as book losses (as per MAT computation) no provision for tax is required for the year.

b) No provision is made for the disputed demands of income tax keeping in view the judicial pronouncements and/or legal opinion on the issues.

c) The provision for deferred tax (net) for the year is Rs. 1.37 lakhs (Previous year Rs. 29.35 lakhs) which has been charged to profit & loss account.

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Mar 31, 2013

1. Interest onIncome tax / interest tax refund due

Based on the orders received during the year, the interest allowed by the department on the refunds due under Income Tax/Interest Tax has been reckoned inthe accounts for various assessment yearsasunder:

2. Prior period adjustments

During the year 2011-12, based on the orders of the Income tax department for interest on income tax/interest tax refunds due an amount of Rs. 455.81 lakhs was reckoned in the accounts. Howeverthe said orders were revised by the department on 29.06.2012 as there was an error in the interest calculations and the excess interest of Rs. 204.62 lakhs was reversed. Consequent to the above, the interest provision of Rs. 247.48 lakhs made in the accounts in the year 2011 -12 towards the interest payable to Indian Bank under the right of recompense was reversed during the year and the net resultant amount of Rs. 42.86 lakhs is shown under prior period adjustment. Consequent to the above, the balance interest payable to Indian Bank under the right of recompense is Rs. 897.48 lakhs. The bank has permitted the company to pay the balance on or before 30.9.2013.

3. Tax expenses

a) In view of losses (as per Income tax) as well as book losses (as per MAT computation) no provision for tax is required forthe year.

b) No provision is made forthe disputed demands of income tax keeping in view the judicial pronouncements and/or legal opinion on the issues.

c) The provision for deferred tax (net) forthe year is Rs.29.35 lakhs (Previous year Rs.11.62 lakhs) which has been charged to profit & loss account.

4. AS-24 - Discontinuing operations and Segment reporting

The Company had discontinued fund-based activities consequent to SEBI regulations coming into force with effect from December 1997 and had decided to undertake only fee-based activities. The existing fund based exposures as on December 1997 are continued to run down to their contracted period. The Company had obtained cancellation of registration as NBFC from RBI consequent to repayment of fixed deposits and transfer of unclaimed fixed deposits to an escrow account with a nationalized bank for repayment as and when claimed. The Company isnow governed only bySEBI regulations.

The business segments have been identified as the Primary Segment considering the nature of service, organizational structure and internal financial reporting system. The services of the reported domestic business segments are classified as "Discontinuing operations" (Fund Based) and "Continuing Operations" (Fee Based). Discontinuing operations consists of Leasing, Hire purchase, Intercorporate deposits and Investments. Continuing operations include Merchant Banking, Stock Broking, Depository Participant services, Distribution of Financial Products and allied activities. There is no Secondary Reportable Segment.

ii) Sales Tax demand disputed in appeal - Rs. 108.87 lakhs (Previous year Rs. 110.72 lakhs). (Rs. 51.50 lakhs at Bangalore, Rs. 42.78 lakhs at Chennai and Rs. 14.59 lakhs at Rajasthan)

B. Guarantees - Counter guarantee issued to bank for guarantees - Rs.200.00 lakhs (Previous Year- Rs. 200.00 lakhs)

C. Estimated amount of contracts remaining to be executed on capital account and not provided for - Rs. 20.72 lakhs (Previous Year Rs. 109.40 lakhs).

President and Whole Time Director of the Company is on deputation from Indian Bank and the remuneration is in accordance with the service rules of the said Bank and also in terms of appointment as ''Whole Time Director'' by the shareholdersofthe Company.

5. As at March 31, 2013, the Company has no outstanding dues to medium and small enterprises. There is no liability towards interest on delayed payments under the Micro, Small and Medium Enterprises Development Act, 2006 during the year.

6. In the opinion of the Management all Fixed Assets, Current Assets, Loans & Advances will have value on realization in the ordinarycourse of businessat least equal to the amountsat which they are statedin the accounts.

7. The previous year''s figures in the Balance Sheet, Profit and Loss Account and Cash Flow Statement have been regrouped and reclassified, wherever necessary,toconformtothe current year''sclassification.

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Mar 31, 2011

1. AS-15 - Employee Benefits

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The expected rate of return is determined considering several applicable factors, mainly the composition of plan assets held, assessed risks, historical results of return on plan assets and the company's policy for plan assets management. The retirement benefit liability in respect of staff on deputation from Indian Bank is borne by Indian Bank.

The company has contributed Rs.7.92 lakhs towards Gratuity liability in the year 2010-11.

2. AS-17-Segment Reporting

The business segments have been identified as the Primary Segment considering the nature of service, organisational structure and internal financial reporting system. The services of the reported domestic business segments are classified as "Fund Based” and "Fee Based” activities. Fund Based activities consists of Leasing, Hire purchase, Intercorporate deposits and Investments. Fee Based activities include Merchant Banking, Stock Broking, Depository Participant services, distribution of Financial Products and allied activities. There is no Secondary Reportable Segment

3. AS-18 - Related Party Transactions

The Company has identified all related parties and transactions with the related parties as per details given below:

Name Relationship Indian Bank Holding Company

Ind Bank Housing Limited Fellow Subsidiary

Indfund Management Limited Fellow Subsidiary

Key Management Personnel Mr. G. Rangarajan, President & Wholetime Director

The transactions with Holding company and fellow subsidiaries has not been disclosed in view of exemption for State- controlled enterprises from making any disclosure pertaining to their transactions with other related parties which are also state-controlled enterprises.

The related party transactions with key management personnel have been disclosed in Managerial Remuneration - Note 15 of Notes on Accounts.

4. AS-19- Leases

In case of assets taken on lease

The lease agreements provide for option to the company to renew the lease period after the non-cancellable period. There are no exceptional/restrictive covenants in the lease agreements.

5. AS-22 - Provision for Taxation

a) In view of losses (as per Income tax) as well as book losses (as per MAT computation) no provision for tax is required for the year.

b) No provision is made for the disputed demands of income tax keeping in view the judicial pronouncements and/or legal opinion on the issues.

6. AS-24 - Discontinued operations

The Company had discontinued fund-based activities consequent to SEBI regulations coming into force with effect from December 1997 and had decided to undertake only fee-based activities. The existing fund based exposures as on December 1997 are continued to run down to their contracted period. The Company had obtained cancellation of registration as NBFC from RBI consequent to repayment of fixed deposits and transfer of unclaimed fixed deposits to an escrow account with a nationalised bank for repayment as and when claimed. The Company is now governed only by SEBI regulations.

7. AS-29-Contingent Liablities

A. Disputed demand on taxes

i) Income Tax Rs.Lakhs

2010-11 Asst Year Tax Demand Interest Total

1996-97 0.00 0.00 4.79

1997-98 55.35 0.37 55.72

1998-99 52.42 5.42 57.84

2000-01 100.14 94.20 194.34

2001-02 311.31 139.07 450.38

2003-04 11.33 10.48 21.81

2004-05 232.58 160.90 393.48

2005-06 181.56 58.60 240.16

2006-07 237.51 78.38 315.89

2007-08 778.39 254.95 1033.34

2008-09 881.37 272.39 1153.76

Total 2841.96 1074.76 3916.72



2009-10 Asst Year Tax Demand Interest Total 1996-97 4.79 0.00 4.79

1997-98 55.36 0.37 55.73

1998-99 194.78 259.12 453.90

2000-01 242.95 345.16 588.11

2001-02 311.30 136.07 450.37

2003-04 11.33 10.48 21.81

2004-05 232.58 160.90 393.48

2005-06 181.56 58.60 240.16

2006-07 237.51 78.38 315.89

2007-08 881.37 272.39 1153.76

2008-09 0.00 0.00 0.00

Total 2250.55 1307.03 3557.58

ii) Interest Tax Rs.Lakhs 2010-11 Asst Year Tax Demand Interest Total

1996-97 17.21 18.45 35.66

1997-98 5.01 11.24 16.25

2000-01 3.36 2.45 5.81

Total 25.58 32.14 57.72

Asst Year Tax Demand Interest Total

1996-97 17.21 18.45 35.66

1997-98 5.01 11.24 16.25

2000-01 3.36 2.45 5.81

Total 25.58 32.14 57.72

iii) Sales Tax demand disputed in appeal - Rs. 110.72 lakhs (Previous year Rs. 110.72 lakhs).

B Guarantees - Counter guarantee issued to bank for guarantees - Rs.200.00 lakhs (Previous Year- Rs.200.00 lakhs)

C Estimated amount of contracts remaining to be executed on capital account and not provided for - Rs. 124 Lakhs (Previous Year - Nil ).

8. Loans from lndian Bank is Secured by first charge on Assets given on Lease, Stock on Hire & other Current Assets and has been fully repaid during the year 2007-08. During the previous year the company had received a claim from Indian Bank for payment of interest of Rs.2397.48 lakhs (involving a waiver of Rs. 1808.84 lakhs) under the right of recompense clause, out of the interest waived by them in the past aggregating to Rs.4206.32 lakhs. The company has represented to the Bank for payment of the same over a period of time based on the profits generated. The bank has permitted the company to pay the balance Rs 1147.48 lakhs in instalments on or before 30.9.2013. Out of this, the company has paid Rs.250 lakhs (previous year Rs.1250 lakhs) during the year which has been considered in the accounts. The balance interest payable to IndianBank is Rs 897.48 lakh.

9. As at March 31, 2011, the Company has no outstanding dues to medium and small enterprises. There is no liability towards interest on delayed payments under the Micro, Small and Medium Enterprises Development Act, 2006 during the year.

10. Managerial Remuneration:

President and Whole Time Director of the Company is on deputation from Indian Bank and the remuneration is in accordance with the service rules of the said Bank and also in terms of appointment as Whole Time Director' by the shareholders of the Company.

11. Profit on sale of investments (Net) under investment income includes loss on sale of investments of Rs. 108.79 lakhs (Previous year - Profit of Rs.332.15 lakhs). Loss incurred under Proprietary Trading of Rs.189.80 lakhs (Previous year - Profit of Rs.29.44 lakhs) and income from reversal of provisions made for investments no longer required of Rs.207.52 lakhs (Previous year Rs.289.21 lakhs).

12. In the opinion of the Management all Fixed Assets, Current Assets, Loans & Advances will have value on realisation in the ordinary course of business atleast equal to the amounts at which they are stated in the accounts.

13. The previous year's figures in the Balance Sheet, Profit and Loss Account and Cash Flow Statement have been regrouped and reclassified, wherever necessary, to conform to the current year's classification.