Mar 31, 2018
1. Significant Accounting Policies
1.1 Basis of preparation of financial statements:
The financial statements have been prepared under the historical cost convention and on the accrual basis of accounting in accordance with the generally accepted accounting principles, unless otherwise specifically stated and in accordance with the Accounting Standards (âASâ) notified under section 133 of the Companies Act, 2013 (the âActâ) read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016, and as per the directions and guidelines issued by Reserve Bank of India to the extent applicable to Systemically Important Non-Deposit taking NBFC (âNBFC Regulationâ). The notified Accounting Standards (AS) are followed by the Company insofar as they are not inconsistent with the NBFC Regulation.
1.2 Use of Estimates
The preparation of financial statements in conformity with GAAP in India requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates. On an ongoing basis, estimates are evaluated based on historical experience and on various other assumptions that are believed to be reasonable, the results of which forms the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates. Any revision to estimates or difference between the actual result and estimates are recognised in the period in which the results are known/ materialised.
1.3 Revenue Recognition
(i) Interest income on loans is accounted for by applying the Internal Rate of Return (IRR), implicit in the agreement, on the diminishing balance of the financed amount over the period of the agreement so as to maintain a constant periodic rate of return on the net amount.
(ii) Future accrual of interest is suspended for loan accounts that are contractually delinquent for more than 90 days, after setting-off of collateral amounts. Suspended income is recognized as and when collected.
(iii) Processing fees and other servicing fees is recognized on accrual basis.
(iv) Dividend income on investments is accounted for as and when the right to receive is established.
(v) Profit/ loss on sale of loan assets through direct assignment/ securitization are recognized over the residual life of loan/ pass through certificates in terms of RBI guidelines. Loss arising on account of direct assignment/ securitization is recognized upfront.
(vi) Interest income on fixed deposits is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
(vii) Income on account of overdue interest and bouncing, foreclosure and penal charges,and servicing fees on assignment of loans is recognized on receipt basis, as a consistent practice considering that the same are not material transactions.
1.4 Property Plant and Equipment
(i) Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
(ii) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
(iii) Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
1.5 Depreciation
(i) Depreciation on property, plant and equipment is provided on straight-line method over the useful life of the assets estimated by the management, in the manner prescribed in Schedule II of the Companies Act, 2013. Immovable assets at the leased premises including civil works, fixtures and electrical items etc. are capitalized as leasehold improvements and are amortized over the primary period of lease subject to maximum of two years.
(ii) The useful lives in the following case is different from those prescribed in Schedule II of the Companies Act, 2013.
Based on usage pattern, internal assessment and technical evaluation carried out, the management believes that the useful lives as given above best represent the period over which the management expects to use these assets. Hence the useful lives of these assets is different from the lives as prescribed in Schedule II of the Companies Act, 2013.
(iii) Depreciation on addition or on sale / discard of an asset is calculated pro-rata from / up to the date of such addition or sale/discard.
1.6 Intangible Assets
Intangible assets are recognized only if it is probable that the future economic benefits that are attributable to assets will flow to the Company and the costs of the assets can be measured reliably. Intangible assets comprising computer software are carried at cost less amortization. Computer software including improvements are amortised over the managementâs estimate of the useful life of such intangibles. Management estimates for useful life of intangibles is 6 years.
1.7 Investment
Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long-term investments which is expected to be realized within 12 months after the reporting date is also presented under âcurrent assetsâ as âcurrent portion of long-term investmentsâ.
Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made, only if, such a decline is other than temporary in the opinion of the management. Current investments are carried at the lower of cost and quoted price / fair value. Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the statement of profit and loss.
1.8 Loan
Loans are stated at the amount advanced, as reduced by the amount received / repaid and the loans assigned, up to the Balance Sheet date. Loan origination costs such as credit verification, agreement stamping, processing fee, ROC charges and valuation charges are charged to Statement of Profit and Loss.
1.9 Sale of asset portfolios by way of assignment / securitization
The Company undertakes sale of its loan portfolios by way of securitization / assignment out of its loan portfolio. The assigned / securitized portfolio is de-recognized from the books of the Company in situations where the Company relinquishes its contractual rights over the underlying loan receivables and all risks and rewards are transferred to assignee/ buyer.
1.10 Employee Benefits:
The Company has various schemes of retirement benefits, namely provident fund, gratuity and leave encashment.
(i) Short term employee benefits:
All employee benefits payable / available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognized in the Statement of Profit and loss in the period in which the employee renders the related service.
(ii) Other long term employee benefits:
Entitlements to annual leave are recognized when they accrue to employees. Leave entitlements can be availed while in service of employment subject to restriction on the maximum number of accumulation. The Company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation carried out by an independent actuary at the year end.
(iii) Defined contribution plan:
Contributions towards Provident Fund are considered as defined contribution plan and the contributions are charged to the Statement of Profit and Loss for the year when the expense is actually incurred.
(iv) Defined benefit plans:
The Companyâs gratuity scheme is a defined benefit plan. The plan provides for a lump sum payment to vested employees on retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service. The Companyâs contribution to gratuity fund in respect of its employees is managed by a trust, which invests the funds with Life Insurance Corporation of India (âLICâ). The present value of obligations under such defined benefit plans are based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of estimated future cash flows. The discount rate used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity period approximating to the terms of related obligations. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss. Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs.
1.11 Provision for standard, sub-standard and doubtful assets
The Company makes provision for standard and non-performing assets (sub-standard and doubtful assets) in accordance with the Non-Banking Financial Company - Systemically Important NonDeposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016. Further, specific provisions are also created based on the managementâs best estimate of the recoverability of non-performing assets i.e. sub-standard and doubtful assets. In accordance with these Directions, the Company has separately shown the said provision under short term / long term provisions (as applicable) without netting off from loans.
1.12 Taxation
Provision for current taxes is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961. Deferred Tax resulting from âtiming differencesâ between taxable and accounting income is accounted for using the tax rates and laws that have been substantially enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.
1.13 Provision, contingent liabilities and contingent assets
The Company recognizes a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
1.14 Earnings per share
Basic earnings per equity share is computed by dividing net profit / loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding for the year. Diluted earnings per share is computed using the weighted average number of equity shares and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares except where results are anti-dilutive. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at the fair value.
1.15 Operating Lease
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.
1.16 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term fixed deposits / investments with an original maturity of three month or less.
1.17 Impairment of Assets
The management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An impaired loss is recognized wherever the carrying value of an asset exceeds its recoverable amount. The recoverable amount is the higher of the assetâs net selling price and value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss for an asset is reversed, if and only if, the reversal can be related objectively to an event occurring after the impairment loss was recognized, the carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss being recognized for the asset in prior year/s.
1.18 Current versus non-current classification
The Company has classified all its assets / liabilities into current / non- current portion based on the time frame of 12 months from the date of financial statements. Accordingly assets / liabilities expected to be realized / settled within 12 months from the date of financial statements are classified as current and other assets / liabilities are classified as non-current.
Mar 31, 2016
1 Corporate information
Intec Capital Limited (âthe Companyâ) incorporated in India on 15 February 1994,is registered with the Reserve Bank of India (âRBIâ) as a Non-Banking Financial Company (âNBFCâ) vide Certificate No. B-14.00731 dated 4 May 1998 in the name of Intec Securities Limited. Subsequently, due to change in name of the Company, the Company received a revised Certificate of Registration (âCoRâ) in the name of Intec Capital Limited on 4 November 2009 under Section 45-1A of the Reserve Bank of India Act, 1934. It is a systemically important non-deposit taking Non-Banking Financial Company (NBFC-ND-SI). The Company is primarily engaged in the business of providing machinery loans to Small and Medium Enterprises (âSMEâ) customers. During the financial year 2014-15, Company has been registered as an Asset Finance Company (âAFCâ), as defined by the RBI.
2 Significant accounting policies
(a) Basis of preparation of financial statements:
The financial statements have been prepared to comply in all material respects with the Accounting Standards (âASâ) notified under section 133 of the Companies Act, 2013 (the âActâ) read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and other accounting principles generally accepted in India (IGAAP) and as per the guidelines issued by Reserve Bank of India (âRBIâ) as applicable to a Non-Banking Financial (Non-deposit accepting or holding) Companies (âNBFC Regulationâ). The financial statements have been prepared on an accrual basis and under the historical cost convention. The notified Accounting Standards (AS) are followed by the Company insofar as they are not inconsistent with the NBFC Regulation.
The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year except mentioned below.
(i) Change in Accounting Policy
The Company has changed the method of appropriating the cash collateral against its over-dues balances; previously cash collateral was applied towards the overdue principal whereas w.e.f. April 01, 2015, cash collateral is applied towards the overdue principal and interest for delinquent loans. The change has resulted in an increase in the profit before tax for the year ended March 31, 2016 by Rs..447.98 Lakhs
(b) Current / non-current classification of assets / liabilities
As required by Revised Schedule III, the Company has classified assets and liabilities into current and non- current based on the operating cycle. An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Since in case of non-banking financial Company normal operating cycle is not readily determinable, the operating cycle has been considered as 12 months.
(c) use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from the estimates used in preparing the accompanying financial statements. Any changes in estimates are recognized prospectively.
(i) Change in estimates
The RBI vide itâs notification no DNBR. 011/CGM (CDS)-2015 dt. March 27, 2015 has revised the asset classification norms for Non-performing assets and substandard assets under its prudential norms applicable to NBFCs in a phased manner commencing from financial year ending March 31, 2016 up to the financial year ending March 31, 2018 which would result in an additional provision. The Company follows prudential norms for income recognition, asset classification and provisioning for Non-performing assets as prescribed by RBI for NBFCs and has also been making additional provision on a prudential basis. Consequent of such change, the provision is higher by Rs.5.08 Lakhs for the year ended March 31, 2016.
(d) Revenue Recognition
(i) Interest income on loans is accounted for by applying the Internal Rate of Return (IRR), implicit in the agreement, on the diminishing balance of the financed amount, over the period of the agreement so as to provide a constant periodic rate of return on the net amount outstanding on the contracts.
(ii) Future accrual of interest is suspended for accounts that are contractually delinquent for more than 150 days, after setting-off of collateral amounts. Suspended income on such accounts is recognized as and when collected. Reversal of income not collected for these assets are being netted-off against income as required by the Prudential Norms.
(iii) Loan installments received are apportioned between interest income and principal portion. The principal amount is reduced from the loan outstanding, so as to achieve the constant rate of interest on the remaining balance.
(iv) Processing fees and other servicing fees is recognized as income on accrual basis and servicing fees on assignment of loans in respect of loans agreement is recognized as income on receipt basis.
(v) Dividend income on investments is accounted for as and when the right to receive the same is established.
(vi) Profit/ loss on sale of loan assets through direct assignment/ securitization are recognized over the residual life of loan/ pass through certificates in terms of RBI guidelines. Loss arising on account of direct assignment/ securitizations recognized upfront.
(vii) Interest income on fixed deposits recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
(viii) Income on account of overdue interest, bouncing charges received, foreclosure charges and penal charges is recognized on receipt basis.
(e) Fixed assets, intangibles and related depreciation/ amortization/ impairment
Tangible assets
(i) Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
(ii) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
(iii) Gains or losses arising from de recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Intangible assets
(i) Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in an amalgamation in the nature of purchase is their fair value as at the date of amalgamation. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
(ii) Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
(iii) The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS-5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
(iv) Gains or losses arising from recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Depreciation on Tangible asset / Amortization of
Intangible asset
(i) The Company follows the straight-line method for computing the depreciation charge. Other fixed assets are depreciated on a straight line basis over their estimated economic useful lives as estimated by the management, except leasehold improvements, which are being amortized over the lease period. Such rates are higher than the corresponding depreciation rates prescribed in Schedule II of the Companies Act, 2013.
(iii) The Company has estimated the useful life of the following assets lower than the useful life given in the Schedule II of the Companies Act, 2013.The lower life is estimated on the basis of the usage of the assets in past.
(f) Investment
Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long-term investments which is expected to be realized within 12 months after the reporting date is also presented under âcurrent assetsâ as âcurrent portion of long-term investmentsâ in consonance with the current/non-current classification.
Long-term investments are stated at cost. Provision of diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.
Current investments are carried at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments i.e., equity shares, preference shares, convertible debentures, etc.
Any reductions in the carrying amount and any reversals of such reductions are charged or credited to the Statement of Profit and Loss.
(g) Commercial paper
Commercial paper is recognized at redemption value. The difference between redemption value and issue value is charged to profit and loss account on a Straight line method (SLM).
(h) Borrowing Cost
Borrowing costs consists of interest and other ancillary cost that an entity incurs in connection with borrowing of funds. Ancillary costs incurred in connection with the arrangement of borrowings are amortized over the tenor of borrowings.
(i) Loan
Loans are stated at the amount advanced, as reduced by the amount received up to the balance sheet date and loans assigned and less collateral money received from borrowers.
(j) Loan origination cost
Loan origination costs such as credit verification, agreement stamping, processing fee, ROC charges and valuation charges are charged to statement of profit and loss account.
(k) Sale of asset portfolios by way of assignment/ securitization
The Company undertakes sale of its loan portfolios by way of securitization/ assignment out of its loan portfolio. The assigned/ securitized portfolio is derecognized from the books of the Company in situations where the Company relinquishes its contractual rights over the underlying loan receivables and all risks and rewards are transferred to assignee/ buyer.
(l) Employee Benefits:
The Company has various schemes of retirement benefits, namely provident fund, gratuity and leave encashment.
(i) Short term employee benefits:
All employee benefits payable/ available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognized in the Statement of Profit and Loss in the period in which the employee renders the related service.
(ii) Other long term employee benefits:
Entitlements to annual leave are recognized when they accrue to employees. Leave entitlements can be availed while in service of employment subject to restriction on the maximum number of accumulation. The company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation carried out by an independent actuary at the year end.
(iii) Defined contribution plan:
Contributions towards Provident Fund are considered as defined contribution plan and the contributions are charged to the Statement of Profit and Loss for the year when the expense is actually incurred.
(iv) Defined benefit plans:
The Companyâs gratuity scheme is a defined benefit plan. The Company pays gratuity to employees who retire or resign after a minimum period of five years of continuous service. The Companyâs contribution to gratuity fund in respect of its employees is managed by a trust, which invests the funds with Life Insurance Corporation of India (âLICâ). The present value of obligations under such defined benefit plans are based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of estimated future cash flows. The discount rate used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity period approximating to the terms of related obligations. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.
Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs.
(m) Provision for standard, sub-standard and doubtful assets
Provision for standard and sub-standard and doubtful assets is recognized in accordance with prudential norms and guidelines issued by Reserve Bank of India from time to time. Further, specific provisions are also created based on the managementâs best estimate of the recoverability of non-performing assets.
In accordance with the Prudential Norms, the Company has separately shown provision for loans under short term/ long term provisions (as applicable) without netting off from loans.
(n) Current and deferred tax
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as âMAT Credit Entitlement.â The Company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
(o) Provision, contingent liabilities and contingent assets
The Company recognizes a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
(p) Earnings per share
Basic earnings per equity share is computed by dividing net profit/ loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding for the year. Diluted earnings per share is computed using the weighted average number of equity shares and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares except where results are anti-dilutive. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at the fair value.
(q) Operating Lease
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.
(r) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term fixed deposits/ investments with an original maturity of three month or less.
Mar 31, 2015
Corporate information
Intec Capital Limited ('the Company') incorporated in India on 15
February 1994, is registered with the Reserve Bank of India ('RBI') as
a Non-Banking Financial Company ('NBFC') vide Certificate No.
B-14.00731 dated 4 May 1998 in the name of Intec Securities Limited.
Subsequently, due to change in name of the Company, the Company
received a revised Certificate of Registration ('CoR') in the name of
Intec Capital Limited on 4 November 2009 under Section 45-1A of the
Reserve Bank of India Act, 1934. It is a systemically important
non-deposit taking Non-Banking Financial Company (NBFC-ND-SI). The
Company is primarily engaged in the business of providing machinery
loans to Small and Medium Enterprises ('SME') customers. During the
financial year 2014- 15, Company has been registered as an Asset
Finance Company ('AFC'), as defined by the RBI.
(a) Basis of preparation of financial statements:
The financial statements have been prepared to comply in all material
respects with the Accounting Standards ('AS') notified under section
133 of the Companies Act, 2013 (the 'Act') read together with paragraph
7 of the Companies (Accounts) Rules, 2014 and other accounting
principles generally accepted in India (IGAAP) and as per the
guidelines issued by Reserve Bank of India ('RBI') as applicable to a
Non-Banking Financial (Non-deposit accepting or holding) Companies
('NBFC Regulation'). The financial statements have been prepared on an
accrual basis and under the historical cost convention. The notified
Accounting Standards (AS) are followed by the Company insofar as they
are not inconsistent with the NBFC Regulation.
The accounting policies adopted in the preparation of financial
statements are consistent with those of the previous year.
(b) Current / non-current classification of assets / liabilities
As required by Revised Schedule III, the Company has classified assets
and liabilities into current and non-current based on the operating
cycle. An operating cycle is the time between the acquisition of assets
for processing and their realisation in cash or cash equivalents. Since
in case of non-banking financial Company normal operating cycle is not
readily determinable, the operating cycle has been considered as 12
months.
(c) Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results may differ from the estimates used in preparing the
accompanying financial statements. Any changes in estimates are
recognised prospectively.
I) Change in estimates
i) Provision on Loans
During the year ended March 31, 2015, the Company has changed its
estimates related to provisioning for all loans in order to align the
same in accordance with RBI Prudential norms on Non-Performing Assets
(NPA). Consequent to the change in such estimates, provision and write
off is lower by H1,525.99 Lakhs for the year ended March 31, 2015. The
above mentioned change has been carried out in view of management
re-assessment of recoverability of its NPA, considering the quality and
quantum of primary and collateral security available with the Company.
ii) Depreciation on Fixed Assets
Pursuant to the Companies Act, 2013 (the "Act") becoming effective from
April 01, 2014, the Company has recomputed the depreciation based on
the useful life of the assets as prescribed in Schedule II of the Act.
This has resulted in additional charge of depreciation of H48.58 Lakhs
for the year ended March 31, 2015. Further, as per the transitional
provision, the Company has adjusted H11.23 Lakhs (net of deferred tax)
in the opening balance of Reserves and Surplus of Profit and Loss
Account.
iii) Useful lives of Fixed Assets
Till the previous year, the Company was depreciating its assets in
accordance with the rates as per Schedule XIV of the Companies Act.
During the year ended March 31, 2015, the Company revised the estimated
useful life of fixed assets. Accordingly, depreciation on fixed assets
for the year has been provided on the basis of revised estimated useful
lives.
The management's revised estimate of the useful lives of the various
fixed assets is as follows:
(d) Revenue Recognition
(i) Interest income on loans is accounted for by applying the Internal
Rate of Return (IRR), implicit in the agreement, on the diminishing
balance of the financed amount, over the period of the agreement so as
to provide a constant periodic rate of return on the net amount
outstanding on the contracts.
(ii) Future accrual of interest is suspended for accounts that are
contractually delinquent for more than 180 days, after setting-off of
collateral amounts. Suspended income on such accounts is recognised as
and when collected. Reversal of income not collected for these assets
are being netted-off against income as required by the Prudential
Norms.
(iii) Loan installments received are apportioned between interest
income and principal portion. The principal amount is reduced from the
loan outstanding, so as to achieve the constant rate of interest on the
remaining balance.
(iv) Processing fees and other servicing fees and servicing fees on
assignment of loans in respect of loans agreement is recognized as
income on accrual basis.
(v) Dividend income on investments is accounted for as and when the
right to receive the same is established.
(vi) Profit/ loss on sale of loan assets through direct assignment/
securitization are recognized over the residual life of loan/ pass
through certificates in terms of RBI guidelines. Loss arising on
account of direct assignment/ securitization is recognized upfront.
(vii) Interest income on fixed deposits recognised on a time proportion
basis taking into account the amount outstanding and the rate
applicable.
(viii) Income on account of overdue interest, bouncing charges
received, foreclosure charges and penal charges is recognized on
receipt basis.
(e) Fixed assets, intangibles and related depreciation/ amortisation/
impairment
a. Fixed assets are stated at cost, net of accumulated depreciation
and accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
b. Subsequent expenditure related to an item of fixed asset is added
to its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
c. Gains or losses arising from derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
d. Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
e. Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the cash-
generating unit level. All other intangible assets are assessed for
impairment whenever there is an indication that the intangible asset
may be impaired.
f. The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS-5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
g. Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
h. The Company follows the straight-line method for computing the
depreciation charge. Other fixed assets are depreciated on a straight
line basis over their estimated economic useful lives as estimated by
the management, except leasehold improvements, which are being
amortised over the lease period. Such rates are higher than the
corresponding depreciation rates prescribed in Schedule II of the
Companies Act, 2013. Depreciation is charged on a pro-rata basis for
assets purchased/ sold during the year.
(f) Investment
Investments that are readily realisable and intended to be held for not
more than a year from the date of acquisition are classified as current
investments. All other investments are classified as long-term
investments. However, that part of long- term investments which is
expected to be realised within 12 months after the reporting date is
also presented under 'current assets' as "current portion of long-term
investments" in consonance with the current/non-current classification.
Long-term investments are stated at cost. Provision of diminution in
the value of long-term investments is made only if such a decline is
other than temporary in the opinion of the management.
Current investments are carried at the lower of cost and fair value.
The comparison of cost and fair value is done separately in respect of
each category of investments i.e., equity shares, preference shares,
convertible debentures, etc.
Any reductions in the carrying amount and any reversals of such
reductions are charged or credited to the Statement of Profit and Loss.
(g) Commercial Paper
Commercial paper is recognized at redemption value. The difference
between redemption value and issue value is charged to profit and loss
account on a Straight line method (SLM).
(h) Borrowing Cost
Borrowing costs consists of interest and other ancillary cost that an
entity incurs in connection with borrowing of funds. Ancillary costs
incurred in connection with the arrangement of borrowings are amortized
over the tenor of borrowings.
(i) Loan origination cost
Loan origination costs such as credit verification, agreement stamping,
processing fee, ROC charges and valuation charges are charged to
statement of profit and loss account.
(j) Sale of asset portfolios by way of assignment/ securitization
The Company undertakes sale of its loan portfolios by way of
securitization/ assignment out of its loan portfolio. The assigned/
securitized portfolio is de-recognised from the books of the Company in
situations where the Company relinquishes its contractual rights over
the underlying loan receivables and all risks and rewards are
transferred to assignee/ buyer.
(k) Employee Benefits:
The Company has various schemes of retirement benefits, namely
provident fund, gratuity and leave encashment.
(a) Short term employee benefits: All employee benefits payable/
available within twelve months of rendering the service are classified
as short-term employee benefits. Benefits such as salaries, wages and
bonus etc., are recognised in the Statement of Profit and Loss in the
period in which the employee renders the related service.
(b) Other long term employee benefits: Entitlements to annual leave are
recognized when they accrue to employees. Leave entitlements can be
availed while in service or en-cashed at the time or retirement /
termination of employment subject to restriction on the maximum number
of accumulation. The company determines the liability for such
accumulated leave entitlements on the basis of actuarial valuation
carried out by an independent actuary at the year end.
(c) Defined contribution plan: Contributions towards Provident Fund are
considered as defined contribution plan and the contributions are
charged to the Statement of Profit and Loss for the year when the
expense is actually incurred.
(d) Defined benefit plans: The Company's gratuity scheme is a defined
benefit plan. The Company pays gratuity to employees who retire or
resign after a minimum period of five years of continuous service. The
Company's contribution to gratuity fund in respect of its employees is
managed by a trust, which invests the funds with Life Insurance
Corporation of India ('LIC'). The present value of obligations under
such defined benefit plans are based on actuarial valuation carried out
by an independent actuary using the Projected Unit Credit Method, which
recognises each period of service as giving rise to additional unit of
employee benefit entitlement and measures each unit separately to build
up the final obligation.
The obligation is measured at the present value of estimated future
cash flows. The discount rate used for determining the present value of
obligation under defined benefit plans, is based on the market yields
on Government securities as at the Balance Sheet date, having maturity
period approximating to the terms of related obligations. Actuarial
gains and losses are recognised immediately in the Statement of Profit
and Loss. Gains or losses on the curtailment or settlement of any
defined benefit plan are recognised when the curtailment or settlement
occurs.
(l) Provision for standard, sub-standard and doubtful assets
Provision for standard and sub-standard and doubtful assets is
recognised in accordance with prudential norms and guidelines issued by
Reserve Bank of India from time to time. Further, specific provisions
are also created based on the management's best estimate of the
recoverability of non-performing assets.
In accordance with Para 10 of Prudential Norms, the Company has
separately shown provision for loans under short term/ long term
provisions (as applicable) without netting off from loans.
(m) Current and deferred tax
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
(n) Provision, contingent liabilities and contingent assets
The Company recognises a provision when there is present obligation as
a result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each Balance Sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognised in the period in which the
change occurs.
(o) Earnings per share
Basic earnings per equity share is computed by dividing net profit/
loss attributable to the equity shareholders for the year by the
weighted average number of equity shares outstanding for the year.
Diluted earnings per share is computed using the weighted average
number of equity shares and also the weighted average number of equity
shares that could have been issued on the conversion of all dilutive
potential equity shares except where results are anti-dilutive. The
dilutive potential equity shares are adjusted for the proceeds
receivable, had the shares been actually issued at the fair value.
(p) Operating Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease charges are recognised as an expense
in the Statement of Profit and Loss on a straight line basis over the
lease term.
(q) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
short-term fixed deposits/ investments with an original maturity of
three month or less.
Mar 31, 2014
(a) Basis of preparation of financial statements:
The financial statements have been prepared and presented under the
historical cost convention on a going concern basis, on the accrual
basis of accounting, in accordance with the Indian Generally Accepted
Accounting Principles (''GAAP''), Accounting Standards prescribed
under the Companies (Accounting Standards) Rules, 2006, relevant
pronouncements of the Institute of Chartered Accountants of India
(''ICAI'') and the presentation requirements of the Companies Act,
1956 as adopted consistently by the Company and guidelines issued by
the RBI, as applicable to the Company.
The Company complies with the prudential norms relating to income
recognition, accounting principles, asset classification and the minimum
provisioning for standard, Substandard and doubtful debts, specified in
the directions issued by the RBI in terms of Non- Banking Financial
(Non-Deposit Accepting or Holding) Companies Prudential Norms
(Reserve Bank) Directions, 2007 (''Prudential Norms''), as applicable to it.
(b) Current / non-current classification of assets / liabilities
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the
following criteria:
i) it is expected to be realised in, or is intended for sale or
consumption in, the Company''s normal operating cycle;
ii) it is held primarily for the purpose of being traded;
iii) it is expected to be realised within 12 months after the reporting
date; or
iv) it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non- current financial
assets. All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the
following criteria:
i) it is expected to be settled in the Company''s normal operating
cycle;
ii) it is held primarily for the purpose of being traded;
iii) it is due to be settled within 12 months after the reporting date;
or
iv) the company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date.
Current liabilities include current portion of non- current financial
liabilities. All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents.
(c) Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results may differ from the estimates used in preparing the
accompanying financial statements. Any changes in estimates are
recognised prospectively.
(d) Revenue Recognition
(i) Interest income on loans is accounted for by applying the Internal
Rate of Return (IRR), implicit in the agreement, on the diminishing
balance of the financed amount, over the period of the agreement so as
to provide a constant periodic rate of return on the net amount
outstanding on the contracts.
(ii) Future accrual of interest is suspended for accounts that are
contractually delinquent for more than 180 days, after setting-off of
collateral amounts. Suspended income on such accounts is recognised as
and when collected. Reversal of income not collected for these assets
are being netted-off against income as required by the Prudential
Norms.
(iii) Loan installments received are apportioned between interest
income and principal portion. The principal amount is reduced from the
loan outstanding, so as to achieve the constant rate of interest on the
remaining balance of the liability.
(iv) Processing fees and other servicing fees and servicing fees on
assignment of loans in respect of loans agreement is recognized as
income on accrual basis.
(v) Dividend income on investments is accounted for as and when the
right to receive the same is established.
(vi) Profit/ loss on sale of loan assets through direct assignment/
securitization are recognized over the residual life of loan/ pass
through certificates in terms of RBI guidelines. Loss arising on
account of direct assignment/ securitisation is recognized upfront.
(vii) Interest income on fixed deposits recognised on a time proportion
basis taking into account the amount outstanding and the rate
applicable.
(viii) Income on account of overdue interest, bouncing charges
received, foreclosure charges and penal charges is recognized on
receipt basis.
(e) Fixed assets, intangibles and related depreciation/ amortisation/
impairment
a. Fixed assets are stated at cost less accumulated depreciation. Cost
of acquisition is inclusive of freight, taxes and other incidental
expenses incurred to put the asset to the intended use.
b. Acquired intangible assets are recorded at the consideration paid
for their acquisition. In respect of internally generated assets, the
expenditure incurred by the Company in form of salaries of full time
employees and professional services billings from outsourced vendors
which are directly attributed or allocated on a reasonable and
consistent basis, for creating, producing and making the asset ready
for its intended use, being enduring in nature, is capitalised.
c. The Company follows the straight-line method for computing the
depreciation charge. Assets costing Rs. 5,000 or less are depreciated
fully in the year of purchase. Other fixed assets are depreciated on a
straight line basis over their estimated economic useful lives as
estimated by the management, except leasehold improvements, which are
being amortised over the lease period. Such rates are higher than the
corresponding depreciation rates prescribed in Schedule XIV of the
Companies Act, 1956. Depreciation is charged on a pro-rata basis for
assets purchased/ sold during the year.
Till the previous year, the Company was depreciating its assets in
accordance with the rates as per Schedule XIV of the Companies Act.
During the year ended 31stMarch, 2014, the Company revised the
estimated useful life of fixed assets. Accordingly, depreciation on
fixed assets for the year has been provided on the basis of revised
estimated useful lives.
The management''s revised estimate of the useful lives of the various
fixed assets are as follows:
Asset description Useful life (in years)
Computers and peripherals 6
Furniture and Fixtures 16
Vehicles 11
Air conditioners 10
Office equipment 10
Electrical installations 8
As a result of the change in estimated useful lives, depreciation for
the year is higher by Rs.18.67 lacs and consequently, profit before tax
for the year and reserves and surplus and net fixed assets as at the
year-end are lower by that amount.
d. Management periodically assesses using external and internal sources
whether there is an indication that an asset may be impaired.
Impairment occurs where the carrying value exceeds its recoverable
amount. The impairment loss to be expensed is determined as the excess
of the carrying value over the higher of the asset''s net sales price
or the present value of future cash flows expected to arise from the
continuing use of the asset and its eventual disposal. An impairment
loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only
to the extent that the asset''s carrying value does not exceed the
carrying value that would have been determined net of depreciation or
amortisation, if no impairment loss had been recognised.
(f) Investment
Investments that are readily realisable and intended to be held for not
more than a year from the date of acquisition are classified as current
investments. All other investments are classified as long-term
investments. However, that part of long-term investments which is
expected to be realised within 12 months after the reporting date is
also presented under ''current assets'' as "current portion of
long-term investments " in consonance with the current/non- current
classification scheme of revised Schedule VI.
Long-term investments are stated at cost. Provision of diminution in
the value of long-term investments is made only if such a decline is
other than temporary in the opinion of the management.
Current investments are carried at the lower of cost and fair value.
The comparison of cost and fair value is done separately in respect of
each category of investments i.e., equity shares, preference shares,
convertible debentures, etc.
Any reductions in the carrying amount and any reversals of such
reductions are charged or credited to the Statement of Profit and Loss.
(g) Sale of asset portfolios by way of assignment/ securitization
The Company undertakes sale of its loan portfolios by way of
securitization/ assignment out of its loan portfolio. The assigned/
securitized portfolio is de- recognised from the books of the Company
in situations where the Company relinquishes its contractual rights
over the underlying loan receivables and all risks and rewards are
transferred to assignee/ buyer.
The Company is maintaining minimum holding period criteria and minimum
retention requirements as prescribed by RBI vide its circular number
RBI/2012- 13/170/DNBS.PD.No.301/3.10.01/2012-13, issued on 21st August,
2012.
(h) Employee Benefits
The Company has various schemes of retirement benefits, namely
provident fund, gratuity and leave encashment.
(a) Short term employee benefits:
All employee benefits payable/ available within twelve months of
rendering the service are classified as short-term employee benefits.
Benefits such as salaries, wages and bonus etc., are recognised in the
Statement of Profit and Loss in the period in which the employee
renders the related service.
(b) Other long term employee benefits:
Entitlements to annual leave are recognized when they accrue to
employees. Leave entitlements can be availed while in service or
en-cashed at the time or retirement / termination of employment subject
to restriction on the maximum number of accumulation. The company
determines the liability for such accumulated leave entitlements on the
basis of actuarial valuation carried out by an independent actuary at
the year end.
(c) Defined contribution plan:
Contributions towards Provident Fund are considered as defined
contribution plan and the contributions are charged to the Statement of
Profit and Loss for the year when the expense is actually incurred.
(d) Defined benefit plans:
The Company''s gratuity scheme is a defined benefit plan. The Company
pays gratuity to employees who retire or resign after a minimum period
of five years of continuous service. The Company''s contribution to
gratuity fund in respect of its employees is managed by a trust, which
invests the funds with Life Insurance Corporation of India (''LIC'').
The present value of obligations under such defined benefit plans are
based on actuarial valuation carried out by an independent actuary
using the Projected Unit Credit Method, which recognises each period of
service as giving rise to additional unit of employee benefit
entitlement and measures each unit separately to build up the final
obligation.
The obligation is measured at the present value of estimated future
cash flows. The discount rate used for determining the present value of
obligation under defined benefit plans, is based on the market yields
on Government securities as at the Balance Sheet date, having maturity
period approximating to the terms of related obligations. Actuarial
gains and losses are recognised immediately in the Statement of Profit
and Loss. Gains or losses on the curtailment or settlement of any
defined benefit plan are recognised when the curtailment or settlement
occurs.
(i) Provision for standard, sub-standard and doubtful assets
Provision for standard and sub-standard and doubtful assets is
recognised in accordance with prudential norms and guidelines issued by
Reserve Bank of India from time to time. Further, specific provisions
are also created based on the management''s best estimate of the
recoverability of non-performing assets.
In accordance with Para 10 of Prudential Norms, the Company has
separately shown provision for loans under short term/ long term
provisions (as applicable) without netting off from loans.
During the current year, the Company re-evaluated the percentages at
which provision for standard and non-performing assets was being
recognised hitherto. As a result, the Board of Directors considered it
appropriate to make provisions at higher percentages of loan assets
depending on the outstanding age, as compared to the percentages being
used hitherto. Such change has resulted in an incremental provision of
Rs. 1,519.13 lacs, and consequently, profit before tax for the year and
reserves and surplus are lower by that amount.
(j) Current and deferred tax
Income-tax expense comprises current tax (i.e. amount of tax for the
period determined in accordance with the Income-tax law) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period). The
current charge for income tax is based on estimated tax liability as
computed after taking credit for allowances and exemptions in
accordance with the Income-tax laws applicable for the period. The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the notified tax rates.
Deferred tax assets are recognised only to the extent there is
reasonable certainty that the assets can be realised in future;
however, where there is unabsorbed depreciation or carried forward loss
under taxation laws, deferred tax assets are recognised only if there
is a virtual certainty of realisation of such assets. Deferred tax
assets are reviewed at each Balance Sheet date and written down or
written up to represent the amount that is reasonably/ virtually
certain to be realised.
(k) Provision, contingent liabilities and contingent assets
The Company recognises a provision when there is present obligation as
a result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each Balance Sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognised in the period in which the
change occurs.
(l) Earnings per share
Basic earnings per equity share is computed by dividing net profit/
loss attributable to the equity shareholders for the year by the
weighted average number of equity shares outstanding for the year.
Diluted earnings per share is computed using the weighted average
number of equity shares and also the weighted average number of equity
shares that could have been issued on the conversion of all dilutive
potential equity shares except where results are anti-dilutive. The
dilutive potential equity shares are adjusted for the proceeds
receivable, had the shares been actually issued at the fair value.
(m) Operating Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease charges are recognised as an expense
in the Statement of Profit and Loss on a straight line basis over the
lease term.
(n) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and
inhandandshort-termfixeddeposits/investmentswithan original maturity of
three month or less.
Terms/ rights, preferences and restrictions attached to each class
of shares
Mar 31, 2012
(a) Basis for Preparation of Accounts:
The financial statements have been prepared in conformity with
generally accepted accounting principles to comply in all material
respects with the notified Accounting Standards (AS') under Companies
Accounting Standard Rules, 2006, as amended, the relevant provisions of
the Companies Act, 1956 ('the Act') and the guidelines issued by the
Reserve Bank of India ('RBI') as applicable to a Non Banking Finance
Company ('NBFC'). The financial statements have been prepared under the
historical cost convention on an accrual basis. The accounting policies
have been consistently applied by the Company and are consistent with
those used in the previous year. The company adopts accrual system of
accounting unless otherwise stated.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year end. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates. Any revisions to the accounting estimates are
recognized prospectively in the current and future years.
(c) Fixed Assets:
Fixed assets are stated at cost less accumulated depreciation. Cost
comprises the purchase price and any attributable cost of bringing the
asset to its working condition for its intended use.
Intangible Assets expected to provide future enduring economic benefits
are carried at cost less accumulated amortization and impairment
losses, if any. Cost comprises of purchase price and directly
attributable expenditure on making the asset ready for its intended
use.
(d) Depreciation & Impairment of Assets:
Depreciation on fixed assets is provided on straight-line method, which
reflects the management's estimate of the useful lives of the
respective fixed assets, at the rates and in the manner prescribed in
Schedule XIV to the Companies Act, 1956.
The carrying amounts of assets are reviewed at each balance sheet date
to ascertain impairment based on internal or external factors.
Impairment is recognized if the carrying value exceeds the higher of
net selling price of the assets and its value in use.
Goodwill arose on account of merger of Unitel Credit Private Limited is
to be written off in Five years. However, nothing is written off in the
current financial year. Goodwill arose on account of takeover of M/s
Amulet Technologies Private Limited is written off during the current
financial year.
(e) Investment:
Long-term investments are stated at cost. Provision of diminution in
the value of long-term investments is made only if; such a decline is
other than temporary in the opinion of the management.
(f) Employee Benefits:
(i) Defined Contribution Scheme
Employees benefits in the form of Provident Fund are considered as
defined contribution plan and the contributions are charged to the
profit & Loss Account for the year when the expense is actually
incurred.
Provision for provident fund is made as per 'The Employees Provident
Fund and Miscellaneous Provisions Act, 1952' as applicable to the
company.
(ii) Defined Benefit Scheme
Retirement benefits in the form of Gratuity and leave encashment are
considered as defined obligations scheme.
Provision for gratuity has been made as per the calculation received
from Life Insurance Corporation under the Gratuity Scheme taken by the
company.
Leave encashment benefits are paid / provided in it's entirety in the
accounts for the year.
(iii) Other employee benefits are accounted for on accrual basis.
(g) Revenue Recognition:
(i) Loan Income
In respect of loan agreements, the income is accrued by applying the
implicit rate in the transaction on declining balance on the amount
financed for the period of the agreement.
(ii) Loan installments received are apportioned between interest income
and principal portion. The principal amount is reduced from the loan
outstanding, so as to achieve the constant rate of interest on the
remaining balance of the Liability.
(iii) Dividend income on investments is accounted for as and when the
right to receive the same is established.
(iv) No income is recognized in respect of Non-Performing assets, if
any, as per the prudential norms for income recognition introduced for
Non Banking Financial Corporation by Reserve Bank of India vide its
notification o.DFC.No.119/DG/ (SPT)- 98 date 31-01-1998 and revised
notification no. DNBS.192/DG (VL)-2007 dated 22/02/2007.
(v) Gains arising on direct assignment of assets are recognized over
the tenure of agreements and loss, if any is recognized upfront.
(vi) Interest income on fixed deposits recognised on a time proportion
basis taking into account the amount outstanding and the rate
applicable.
(h) Expense Accounting:
All expenditures including the interest costs are accounted for on
accrual basis.
(i) Loan Assets:
Loan Assets include loans advanced by the Company, secured by
collateral offered by the customers, if applicable. These are shown net
of assets directly assigned.
(j) Provisioning of Assets:
The Company makes provision for Standard and Non-Performing Assets as
per the Non-Banking Financial (Non-Deposit Accepting or Holding)
Companies Prudential Norms Reserve Bank) Directions, 2007, as amended
from time to time. The Company also makes additional provision towards
loan assets, to the extent considered necessary, based on the
management's best estimate.
Loan assets which as per the management are not likely to be recovered,
are considered as bad debts and written off.
Provision on standard assets is made as per the notification
DNBS.PD.CC.No.207/03.02.002 /2010-11 issued by Reserve Bank of India.
(k) Provision, Contingent Liabilities and Contingent Assets:
(i) A provision is recognised when the company has a present obligation
as a result of past event and it is probable that outflow of resources
will be required to settle the obligation and in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(ii) Contingent Liabilities are disclosed separately by way of note to
financial statement after careful evaluation by the management of the
facts and legal aspects of the matter involved in case of :
(a) a present obligation arising from the past event, when it is not
probable that an outflow of resources will be required to settle the
obligation.
(b) a possible obligation, unless the probability of outflow of
resources is remote.
(iii) Contingent Assets are neither recognized, nor disclosed in the
financial statements.
(I) Taxation:
(i) Provision for current tax is made in accordance with and at the
rates specified under the Income-Tax Act, 1961.
(ii) In accordance with Accounting Standard 22 -Accounting for taxes on
Income', issued by the Institute of Chartered Accountants of India, the
deferred tax for timing differences between the book and tax profits
for the year is accounted for using the tax rates and laws that have
been enacted or substantively enacted as of the balance sheet date. Tax
Effect of the timing difference of the current period is included in
the profit & loss account as a part of the tax expense and as deferred
tax liability in the balance sheet.
(iii) Deferred tax assets arising from the timing differences are
recognized to the extent there is reasonable certainty that the assets
can be realized in future.
(m) Earnings per share:
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
attributable taxes) by the weighted average number of equity shares
outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(n) Assets under Management
Contract assigned are de-recognised from the books of accounts.
Contingent liabilities, if any, thereof are disclosed separately.
(o) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and highly liquid investments that are readily
convertible into known amount of cash.
(p) Borrowing Cost
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalised until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use.
The ancillary costs incurred in connection with the arrangement of
borrowings are amortised over the life of underlying borrowings.
Premium payable on redemption of bonds is amortised over the tenure of
the bonds.
All other costs related to borrowings are recognised as expense in the
period in which they are incurred.
(b) Terms/Rights attached to Equity Shares
The Company has only one class of equity shares having par value of Rs.
10 per share. All these Shares have same rights & preferences with
respect to payment of dividend, repayment of capital and voting. The
dividend proposed by the board of directors is subject to approval of
the shareholders in the ensuing Annual General Meeting.
Security:
(i) Working Capital facility from banks are secured by
(a) Primary Security- first pari passu charge on present and future
Receivables of the Company,
(b) Collateral Security-Fixed deposits lien marked to banks, Immovable
properties & quoted securities- Belonging to promoter and promoters
group,
(c) Personal guarantees of directors and others.
(ii) Term Loan from Banks and Financial Institutions are secured by
(a) Primary Security -First pari passu charge on specific Receivables
of the Company,
(b) Collateral Security- Fixed Deposit lien marked to banks.
(c) Personal guarantees of directors and others.
Note: There is no default, continuing or otherwise, as at the balance
sheet date, in repayment of any of the above loans.
Mar 31, 2010
A) Basis for Preparation of Accounts:
The financial statement has been prepared on the historical cost
convention on accrual basis of accounting in accordance with applicable
accounting standards in India. A summary of important accounting
policies applied consistently is set out below. The financial
statements have also been, prepared with relevant presentational
requirement of the Companies Act, 1956.
b) Fixed Assets:
Fixed assets are stated at their original cost of acquisition including
taxes, duties, freight and other incidental expenses related to
acquisition, construction and installation of the assets concerned.
c) Depreciation:
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in ScheduleXIV to the Companies Act,
1956.
d) Investment:
Long-term investments are stated at cost. Provision of diminution in
the value of long-term investments is made only if; such a decline is
other than temporary in the opinion of the management. The market value
of investment is Rs NIL/- (Previous year 2,19,702/-).
e) Employee Benefits:
(I) Gratuity:
Provision for gratuity has been made as per Provision of Gratuity Act,
1972 calculated on the basis of last salary drawn and completed years
of service of eligible employees in the absence of actuarial valuation
on the basis of past behavior of employees turnover.
(ii) Leave encashment:
Leave encashment benefits are paid / provided in its entirely in the
accounts for the year.
(iii) Provident Fund:
Provision for provident fund is made as The Employees Provident Fund
and Miscellaneous Provisions Act, 1952as applicable to the company.
Other employee benefits are accounted for on accrual basis.
f) Revenue Recognition:
(i) Loan Income
In respect of loan agreements, the income is accrued by applying the
implicit rate in the transaction on declining balance on the amount
financed for the period of the agreement.
(ii) Loan installments received are apportioned between interest income
and principal portion. The principal amount is reduced from the loan
outstanding, so as to achieve the constant rate of interest on the
remaining balance of the Liability.
(iii) Dividend income on investments is accounted for as and when the
right to receive the same is established.
(iv) No income is recognized in respect of Non-Performing assets, if
any, as per the prudential norms for income recognition introduced for
Non Banking Financial Corporation by Reserve Bank of India vide its
notification no.DFC.No.119/DG/(SPT)-98 date 31-01-1998 and revised
notification no. DNBS.192/DG (VD-2007 dated 22/02/2007.
g) Expense Accounting:
(i) The Company follows the policy of paying Interest on Collateral
Money to customers on due basis.
(ii) All other expenditures are accounted for on accrual basis.
h) Provisioning:
Provisioning in the case of Non-Performing assets is made in accordance
with the guidelines of the prudential norms prescribed by the Reserve
Bankof India.
i) Taxation:
(i) Provision for current tax is made in accordance with and at the
rates specified under the Income-Tax Act, 1961.
(ii) In accordance with Accounting Standard 22 -Accounting for taxes on
Income, issued by the Institute of Chartered Accountants of India,
the deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws
that have been enacted or substantively enacted as of the balance
sheet date.
(iii)Deferred tax assets arising from the timing differences are
recognized to the extent there is reasonable certainty that the
assets can be realized in future.
Mar 31, 2009
A) Basis for Preparation of Accounts:
The financial statement has been prepared on the historical cost
convention on accrual basis of accounting in accordance with applicable
accounting standards in India. A summary of important accounting
policies applied consistently is set out below. The financial
statements have also been prepared with relevant presentational
requirement of the Companies Act, 1956.
b) Fixed Assets:
Fixed assets are stated at their original cost of acquisition including
taxes, duties, freight and other incidental expenses related to
acquisition, construction and installation of the assets concerned.
c) Depreciation:
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
d) Investment:
Long-term investments are stated at cost. Provision of diminution in
the value of long-term investments is made only if, such a decline is
other than temporary in the opinion of the management. The market value
of investment is Rs 2,19,702/- (Previous year 3,02,528/-).
e) Employee Benefits:
(i) Gratuity:
Provision for gratuity has been made as perProvision of Gratuity Act,
1972 calculated on the basis of last salary drawn and completed years
of service of eligible employees in the absence of actuarial valuation
on the basis of past behavior of employees turnover.
(ii) Leave encashment:
Leave encashment benefits are paid / provided in its entirely in the
accounts forthe year.
(iii) Provident Fund:
Provision for provident fund is not made as The Employees Provident
Fund and Miscellaneous Provisions Act, 1952 is not applicable to the
company.
Other employee benefits are accounted for on accrual basis.
f) Revenue Recognition:
(i) Loan Income
In respect of loan agreements, the income is accrued by applying the
implicit rate in the transaction on declining balance on the amount
financed for the period of the agreement.
(ii) Loan installments received are apportioned between interest income
and principal portion. The principal amount is reduced from the loan
outstanding, so as to achieve the constant rate of interest on the
remaining balance of the Liability.
(iii) Dividend income on investments is accounted for as and when the
right to receive the same is established.
(iv)No income is recognized in respect of Non-Performing assets, if
any, as per the prudential norms for income recognition introduced for
Non Banking Financial Corporation by Reserve Bank of India vide its
notification no.DFC.No.119/DG/(SPT)-98 date 31-01-1998 and revised
notification no. DNBS.192/DG (VL)-2007 dated 22/02/2007.
g) ExpenseAccounting:
(i) The Company follows the policy of paying Interest on Collateral
Money to customers on due basis. (ii) All other expenditures are
accounted for on accrual basis.
h) Provisioning:
Provisioning in the case of Non-Performing assets is made in accordance
with the guidelines of the prudential norms prescribed by the Reserve
Bank of India.
i) Taxation:
(i) Provision for current tax is made in accordance with and at the
rates specified under the Income-Tax Act, 1961.
(ii) In accordance with Accounting Standard 22 Accounting for taxes on
Income, issued by the Institute of Chartered Accountants of India, the
deferred tax for timing differences between the book and tax profits
for the year is accounted for using the tax rates and laws that have
been enacted or substantively enacted as of the balance sheet date.
(iii) Deferred tax assets arising from the timing differences are
recognized to the extent there is reasonable certainty that the assets
can be realized in future.
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