Notes to Accounts of JM Financial Ltd.

Mar 31, 2023

Terms and rights attached to equity shares:

The Company has only one class of equity shares. The shareholders are entitled to one vote per share, dividend, as and when declared by the Board of directors and shareholders and residual assets, if any, after payment of all liabilities, in the event of liquidation of the Company.

20.1 Share application money pending allotment represents equity shares to be issued pursuant to Employee Stock Option Scheme.

20.2 Capital reserve and capital redemption reserves represents reserves created pursuant to the business combination up to year end.

20.3 Securities premium reserve represents premium received on equity shares issued, which can be utilised only in accordance with the provisions of the Companies Act, 2013 for specified purposes.

20.4 General reserve is created from time to time by transferring profits from retained earnings and can be utilised for purposes such as dividend payout, bonus issue, etc.

20.5 Statutory reserve is the reserve created by transferring the sum not less than 20% of its net profit after tax in terms of Section 45-IC of The Reserve Bank of India Act, 1934.

20.6 Stock option outstanding relates to the stock options granted by the Company to employees under an Employee Stock options Plan (refer note 31)

20.7 Retained earnings represents profits that the Company earned till date, less any transfers to General Reserve, Statutory Reserves, Dividends and other distributions paid to the shareholders.

30. Contingent Liabilities and Commitments:
30.1 Contingent liabilities* :		'' in Crore
Particulars	As at March 31,2023	As at March 31, 2022
(i) Income Tax Matters under dispute:
Primarily relates to demands received from income tax authorities for various assessment years, on account of disallowances of expenses u/s 14A of the Income Tax Act, 1961, etc.	38.67	34.11
(ii) Service Tax Matters under dispute:
Relates to demand received from central excise and service tax authorities in respect of Service Tax on FII Brokerage received in provision of Stock Broking Services, etc.	9.00	9.00
*In respect of above disputed demand, the Company is hopeful of succeeding in appeals and as such does not expect any significant liability to materialise.
30.2 Commitments:		'' in Crore
Particulars	As at March 31,2023	As at March 31, 2022
a) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)	-	0.03
b) Uncalled liability on account of commitment to subscribe to investment and other partly paid investments	44.51	55.04

31. Employee Stock Option Scheme (ESOS)

The Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options to the eligible employees and/or directors (“the Employees”) of the Company and/or its subsidiaries. The Stock Options are granted at an exercise price, which is either equal to the fair market price or at a premium, or at a discount to market price as may be determined by the Nomination and Remuneration Committee of the Board of the Company.

36. Employee Benefits

Defined contribution plans

The Company operates defined contribution plan (Provident fund) for all qualifying employees of the Company. The employees of the Company are members of a retirement contribution plan operated by the government. The Company is required to contribute a specified percentage of payroll cost to the retirement contribution scheme to fund the benefits. The only obligation of the Company with respect to the plan is to make the specified contributions.

The Company’s contribution to Provident Fund & other funds aggregating '' 3.44 Crore (Previous year '' 2.96 Crore) has been recognised in the Statement of Profit and Loss under the head Employee Benefits Expense.

Defined benefit obligation

The Company’s liabilities under the Payment of Gratuity Act,1972 are determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method.

The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. The actuarial risks associated are:

Interest Rate Risk:

The risk of government security yields falling due to which the corresponding discount rate used for valuing liabilities falls. Such a fall in discount rate will result in a larger value placed on the future benefit cash flows whilst computing the liability and thereby requiring higher accounting provisioning.

Longevity Risks:

Longevity risks arises when the quantum of benefits payable under the plan is based on how long the employee lives post cessation of service with the Company. The gratuity plan provides the benefit in a lump sum form and since the benefit is not payable as an annuity for the rest of the lives of the employees, there is no longevity risks.

Salary Risks:

The gratuity benefits under the plan are related to the employee’s last drawn salary. Consequently, any unusual rise in future salary of the employee raises the quantum of benefit payable by the Company, which results in a higher liability for the Company and is therefore a plan risk for the Company.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

There is no change in the method of valuation for the prior periods in preparing the sensitivity analysis. For change in assumptions refer to note (a) above.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation asset recognised in the balance sheet.

39. Financial Instruments

a) Capital Management

For the purpose of the Company’s capital management, capital includes issued capital and other equity reserves attributable to the equity shareholders of the Company. The primary objective of the Company, when managing capital, is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure, so as to maximise shareholders’ value. As at March 31,2023, the Company has only one class of equity shares and has low debt. Consequent to such capital structure, there are no externally imposed capital requirements. In order to maintain or achieve an optimal capital structure, the Company allocates its capital for distribution as dividend or reinvestments into business based on its long term financial plans.

Level 1: Fair Value measurements are based on quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of equity are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.

Level 2: These includes instruments which does not have an active market hence the fair value is determined using observable market data such as latest declared NAV/ recent market deals.

Level 3: Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Impact on observable and unobservable inputs:

Impact of illiquidity, volatility and Covid-19 pandemic have been considered on the observable and unobservable inputs used for the purpose of valuation.

During the FY 2019-20, the Company had changed the classification of certain investments in equity instruments and venture capital fund units from level 2 to level 3. The investment in venture capital units were reclassified to level 2 from level 3 in the FY 2020-21. However, level 3 classification is continued for such investment in equity instruments during the FY 2021-22. Further, necessary adjustments have been made to the timing of cash flows and values of collaterals to be realised for the purpose of determination of the fair values of financial assets carried at FVTPL.

(ii) Financial instruments measured at amortised cost:

The carrying amount of financial assets and liabilities measured at amortised cost are reasonable approximation of their fair values. Since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

d) Financial risk management

The Company has exposure to the following risks arising from financial instruments:

• Credit risk;

• Liquidity risk; and

• Market risk (including currency risk and interest rate risk)

Risk management framework

Risk management forms an integral part of the business. As a financial institution, the Company is exposed to several risks including market risk, credit risk and liquidity risk. The Company has established a risk management and audit framework to identify, assess, monitor and manage these risks. This framework is driven by the Board through the Audit Committee, Risk Management Committee and the Asset Liability Management Committee. Risk Management Committee inter alia is responsible for identifying, reviewing, monitoring and taking measures for risk profile and for risk measurement system of the Company.

i) Credit risk

Credit Risk refers to risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investments, other balances with banks, loans and other receivables.

The Company has adopted a Policy of dealing with counter parties that have sufficiently high credit rating. The Company’s exposure and credit ratings of its counter parties are continuously monitored.

Credit risk arising from trade receivables are reviewed periodically and based on past experience and history. Management is confident of recovering all the dues. Credit risk arises from Investments and other balances with banks is limited and there is no collateral held against these became the counter parties are bank and recognised financial institutions with high credit ratings assigned by the credit rating agencies.

The key elements in calculation of ECL are as follows:

PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio. The PD has been determined based on comparative external ratings.

EAD - The Exposure at Default is an estimate of the exposure at a reporting date. It shall include outstanding loan amount, accrued interest and expected drawdowns on non-discretionary loan commitments.

LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD. The LGD is determined based on valuation of collaterals and other relevant factors.

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity may be affected due to severe liquidity crunch in the market or due to market disruptions where the Company is unable to access public funds. The Company’s exposure to liquidity risk arises primarily from mismatch of maturities of financial assets and liabilities.

However the Company believes that it has a strong financial position and business is adequately capitalised, have good credit rating and appropriate credit lines available to address liquidity risks.

The Company attempts to minimise this risk through a mix of strategies such as short-term funding. The Company also monitors liquidity risk through adequate bank sanction limits at the beginning of each fiscal. Monitoring liquidity risk involves categorizing all assets and liabilities into different maturity profiles and evaluating them for any mismatches in any particular maturities, particularly in the short-term.

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and equity price risk as explained below:

a) Foreign currency risk:

The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. The Company is exposed to currency risk significantly on account of its trade payables and trade receivables denominated in foreign currency. The functional currency of the Company is Indian Rupee. The Company wherever required hedges its foreign currency risk by using Derivative Instruments (Forward Contracts).

b) Equity Price Risk:

Equity price risk is related to the change in market reference price of the instruments in quoted and unquoted securities. The fair value of some of the Company’s investments exposes to company to equity price risks. In general, these securities are not held for trading purposes.

46. Additional Disclosures:

Wilful Defaulter

The Company has not been declared wilful defaulter by any bank or financial institutions or government or any government authority.

Relationship with struck off Companies

The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

Details of benami property held

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

Compliance with number of layers of companies

The Company has complied with the requirements of the number of layers prescribed under clause (87) of section 2 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.

Compliance with approved scheme(s) of arrangements

The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year. (refer note 47)

Utilisation of Borrowed funds and Share premium

(A) During the year, the Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries); or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(B) During the year, the Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries); or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

Undisclosed Income

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

Details of crypto currency or virtual currency

The Company has not traded or invested in crypto currency or virtual currency during the current or previous year.

Valuation of PP&E, intangible asset and investment property

The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets during the current or previous year.

Registration of charges or satisfaction with Registrar of Companies

There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period.

47. The Board of Directors of the Company had approved the Scheme of Arrangement for the demerger of the undertakings of JM Financial Services Limited (“JMFSL”) to the Company, comprising of Private Wealth and Portfolio Management Services including its investment in JM Financial Institutional Securities Limited, (a wholly owned subsidiary of JMFSL). The said Scheme was later partly modified on August 02, 2022, to include the merger of JM Financial Capital Limited (“JMFCL”), a wholly owned subsidiary of JMFSL, into it. Consequent to the filing of the joint application with the National Company Law Tribunal (the “NCLT”), Mumbai Bench, the NCLT on December 05, 2022, pronounced the order thereby dispensing with the convening of the meetings of shareholders and creditors of the Company, JMFSL and JMFCL. Additionally, pursuant to the said Order, notices have been issued by the Company, JMFSL and JMFCL to their relevant regulatory authorities to submit their representations, if any. The Company along with JMFSL and JMFCL had also filed a joint petition with the NCLT on December 29, 2022, seeking approval for sanction of the Scheme. Further, the Petition was admitted vide order dated February 01,2023 and final hearing was scheduled on March 24, 2023. The said order was pronounced on March 24, 2023, a copy of which is uploaded on NCLT portal on April 19, 2023. Certified True Copy of the final order was received on April 20, 2023. Appointed Date mentioned in the Scheme is April 1,2023 and the Scheme shall come into effect upon filing of e-form INC-28 with Registrar of Companies.

48. The Financial Statements are approved by the Board of Directors at its meeting held on May 09, 2023.

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Mar 31, 2022

Balances with banks in deposit accounts earns interest at fixed rate based on daily bank deposit rates for a period ranging from one day to 365 days.

Balances with banks in earmarked account pertains to unclaimed dividend ''1.65 crore (Previous year ''1.96 crore) and bank fixed deposits '' 3.14 crore (Previous year '' 3.01 crore).

No trade or other receivable are due from directors or other officers of the company either severally or jointly with any other person, nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

There are no loans due by directors or other officers of the Company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any director is a partner or a director or a member.

19.2 Terms and rights attached to equity shares:

The Company has only one class of equity shares. The shareholders are entitled to one vote per share, dividend, as and when declared by the Board of directors and shareholders and residual assets, if any, after payment of all liabilities, in the event of liquidation of the Company.

19.5 During the year ended March 31, 2021, the Company issued and allotted 11,00,00,000 equity shares of the face value of '' 1/- each to the eligible qualified institutional buyers at the issue price of '' 70/- per equity share aggregating '' 770 Crore through Qualified Institutional Placement (QIP) in accordance with Chapter VI of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 as amended and Section 42 of the Companies Act, 2013 and other applicable provisions of the Companies Act, as Amended and the rules made thereunder.

20.1 Share application money pending allotment represents equity shares to be issued pursuant to Employee Stock Option Scheme.

20.2 Capital reserve and capital redemption reserves represents reserves created pursuant to the business combination up to year end.

20.3 Securities premium reserve represents premium received on equity shares issued, which can be utilised only in accordance with the provisions of the Companies Act, 2013 for specified purposes.

20.4 General reserve is created from time to time by transferring profits from retained earnings and can be utilised for purposes such as dividend payout, bonus issue, etc.

20.5 Statutory reserve is the reserve created by transferring the sum not less than 20% of its net profit after tax in terms of Section 45-IC of The Reserve Bank of India Act, 1934.

20.6 Stock option outstanding relates to the stock options granted by the Company to employees under an Employee Stock options Plan (refer note 31)

20.7 Retained earnings represents profits that the company earned till date, less any transfers to General Reserve, Statutory Reserves, Dividends and other distributions paid to the shareholders.

31 Employee Stock Option Scheme (ESOS)

The Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options to the eligible employees and/or directors (“the Employees”) of the Company and/or its subsidiaries. The Stock Options are granted at an exercise price, which is either equal to the fair market price or at a premium, or at a discount to market price as may be determined by the Nomination and Remuneration Committee of the Board of the Company.

There was no grant of stock options during the financial year 2021-22. During the previous financial year 2020-21, the Nomination and Remuneration Committee had granted 18,56,913 options under Series 13 at an exercise price of '' 1/- per option to the Employees, that will vest in a graded manner and which can be exercised within a specified period.

The Company follows fair value based method of accounting for determining compensation cost for its stock-based compensation scheme. The fair value of each stock options granted during the current year and previous year is mentioned in the table below. The fair value has been calculated by applying Black and Scholes model as valued by an independent valuer.

[i] Additionally, an aggregate amount of '' 1.13 Crore (Previous year '' 4.51 Crore) being the difference between the exercise price and fair value of options has been reimbursed by the subsidiary companies with which the Employees are/were employed/ associated.

[ii] As no options were outstanding in respect of Series 1 to Series 7 as on March 31,2022, the details of options granted has not been included above.

[iii] Esop cost recognised in Statement of Profit and Loss '' 1.93 Crore (Previous year '' 4.79 Crore)

Salary risks:

The gratuity benefits under the plan are related to the employee’s last drawn salary. Consequently, any unusual rise in future salary of the employee raises the quantum of benefit payable by the company, which results in a higher liability for the company and is therefore a plan risk for the company.

The Company does not face significant liquidity risk with regards to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

36 Employee Benefits

Defined contribution plans

The Company operates defined contribution plan (Provident fund) for all qualifying employees of the Company. The employees of the Company are members of a retirement contribution plan operated by the government. The Company is required to contribute a specified percentage of payroll cost to the retirement contribution scheme to fund the benefits. The only obligation of the Company with respect to the plan is to make the specified contributions.

The current service cost and the net interest expense for the year are included in the ‘Employee benefit expense’ line item in the Statement of Profit and Loss.

The Company’s contribution to Provident Fund & other funds aggregating '' 2.96 crore (Previous year '' 2.38 crore) has been recognised in the Statement of Profit and Loss under the head Employee Benefits Expense.

Defined benefit obligation

The Company’s liabilities under the Payment of Gratuity Act,1972 are determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method.

The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. The actuarial risks associated are:

Interest rate risk:

The risk of government security yields falling due to which the corresponding discount rate used for valuing liabilities falls. Such a fall in discount rate will result in a larger value placed on the future benefit cash flows whilst computing the liability and thereby requiring higher accounting provisioning.

Longevity risks:

Longevity risks arises when the quantum of benefits payable under the plan is based on how long the employee lives post cessation of service with the company. The gratuity plan provides the benefit in a lump sum form and since the benefit is not payable as an annuity for the rest of the lives of the employees, there is no longevity risks.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

There is no change in the method of valuation for the prior periods in preparing the sensitivity analysis. For change in assumptions refer to note (a) above.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation asset recognised in the balance sheet.

The weighted average duration of the defined benefit obligation is 7.91 years (previous year 8.20 years)

f) The new Code on Social Security, 2020 has been enacted, which could impact the contributions by the Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the rules are yet to be framed. The Company will complete its evaluation and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.

39 Financial Instruments

a) Capital Management

For the purpose of the Company’s capital management, capital includes issued capital and other equity reserves attributable to the equity shareholders of the Company. The primary objective of the company, when managing capital, is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure, so as to maximize shareholders’ value. As at March 31,2022, the Company has only one class of equity shares and has low debt. Consequent to such capital structure, there are no externally imposed capital requirements. In order to maintain or achieve an optimal capital structure, the Company allocates its capital for distribution as dividend or reinvestments into business based on its long term financial plans.

Level 1: Fair Value measurements are based on quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of equity are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV.

Level 2: These includes instruments which does not have an active market hence the fair value is determined using observable market data such as latest declared NAV/ recent market deals.

d) Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk;

- Liquidity risk; and

- Market risk (including currency risk and interest rate risk)

Risk management framework

Risk management forms an integral part of the business. As a financial institution, the Company is exposed to several risks including market risk, credit risk and liquidity risk. The Company has established a risk management and audit framework to identify, assess, monitor and manage these risks. This framework is driven by the Board through the Audit Committee, Risk Management Committee and the Asset Liability Management Committee. Risk Management Committee inter alia is responsible for identifying, reviewing, monitoring and taking measures for risk profile and for risk measurement system of the Company.

i) Credit risk

Credit Risk refers to risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investments, other balances with banks, loans and other receivables.

The Company has adopted a Policy of dealing with counter parties that have sufficiently high credit rating. The Company’s exposure and credit ratings of its counter parties are continuously monitored.

Credit risk arising from trade receivables are reviewed periodically and based on past experience and history. Management is confident of recovering all the dues. Credit risk arises from Investments and other balances with banks is limited and there is no collateral held against these became the counter parties are bank and recognised financial institutions with high credit ratings assigned by the credit rating agencies.

Impact on observable and unobservable inputs:

Impact of illiquidity, volatility and Covid-19 pandemic have been considered on the observable and unobservable inputs used for the purpose of valuation.

During the financial year 2019-20, the Company had changed the classification of certain investments in equity instruments and venture capital fund units from level 2 to level 3. The investment in venture capital units were reclassified to level 2 from level 3 in the financial year 2020-21. However, level 3 classification is continued for such investment in equity instruments during the financial year 2021-22. Further, necessary adjustments have been made to the timing of cash flows and values of collaterals to be realized for the purpose of determination of the fair values of financial assets carried at FVTPL.

(ii) Financial instruments measured at amortised cost:

The carrying amount of financial assets and liabilities measured at amortised cost are reasonable approximation of their fair values. Since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

The key elements in calculation of ECL are as follows:

PD - The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio. The PD has been determined based on comparative external ratings.

EAD - The Exposure at Default is an estimate of the exposure at a reporting date. It shall include outstanding loan amount, accrued interest and expected drawdowns on non-discretionary loan commitments.

LGD - The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD. The LGD is determined based on valuation of collaterals and other relevant factors.

ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity may be affected due to severe liquidity crunch in the market or due to market disruptions where the Company is unable to access public funds. The Company’s exposure to liquidity risk arises primarily from mismatch of maturities of financial assets and liabilities.

However the Company believes that it has a strong financial position and business is adequately capitalized, have good credit rating and appropriate credit lines available to address liquidity risks.

The Company attempts to minimize this risk through a mix of strategies such as short-term funding. The Company also monitors liquidity risk through adequate bank sanction limits at the beginning of each fiscal. Monitoring liquidity risk involves categorizing all assets and liabilities into different maturity profiles and evaluating them for any mismatches in any particular maturities, particularly in the short-term.

iii) Market risk

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and equity price risk as explained below:

a) Foreign currency risk:

The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. The Company is exposed to currency risk significantly on account of its trade payables and trade receivables denominated in foreign currency. The functional currency of the Company is Indian Rupee. The Company wherever required hedges its foreign currency risk by using Derivative Instruments (Forward Contracts).

b) Equity Price Risk:

Equity price risk is related to the change in market reference price of the instruments in quoted and unquoted securities. The fair value of some of the Company’s investments exposes to company to equity price risks. In general, these securities are not held for trading purposes.

Equity Price Sensitivity analysis:

The fair value of equity instruments other than investment in subsidiaries and associates as at March 31, 2022, and March 31, 2021 was '' 0.41 Crore and ''0.20 Crore respectively. A 5% change in price of equity instruments held as at March 31, 2022 and March 31, 2021 would result in

45. The Board of Directors of the Company has recommended a final dividend of '' 1.15 per equity share of the face value of ''1/- each for the year ended March 31, 2022 (Previous Year: '' 0.50 per equity share). The said dividend will be paid, if approved by the shareholders at the Thirty Seventh Annual General Meeting.

46. Additional Disclosures:

Wilful Defaulter

The Company has not been declared wilful defaulter by any bank or financial institutions or government or any government authority.

Relationship with struck off Companies

The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

Details of benami property held

No proceedings have been initiated on or are pending against the Company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and Rules made thereunder.

Compliance with number of layers of companies

The Company has complied with the requirements of the number of layers prescribed under clause (87) of section 2 of the Companies Act, 2013 read with Companies (Restriction on number of Layers) Rules, 2017.

Compliance with approved scheme(s) of arrangements

The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

Utilisation of Borrowed funds and Share premium

(A) During the year, the Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries); or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(B) During the year, the Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries); or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

Undisclosed Income

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961, that has not been recorded in the books of account.

Details of crypto currency or virtual currency

The Company has not traded or invested in crypto currency or virtual currency during the current or previous year. Valuation of PP&E, intangible asset and investment property

The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets during the current or previous year.

Registration of charges or satisfaction with Registrar of Companies

There are no charges or satisfaction which are yet to be registered with the Registrar of Companies beyond the statutory period

47. In assessing the fair value of financial instruments, recoverability of its receivables, investments and providing for loss allowance as per Expected Credit Loss, the Company has considered internal and external information up to the date of approval of these financial statements. Based on current indicators of future economic conditions, the Company expects to recover the carrying amount of its assets. The extent to which the COVID-19 pandemic will impact future results, which are highly uncertain, including, among other things, any new information concerning the severity of the COVID-19 pandemic and any action to contain its spread or mitigate its impact whether government-mandated or elected by the Company. Given the uncertainty over the potential macro economic condition, the impact of the pandemic may be different from the ones estimated as at the date of approval of these financial statements. The Company will continue to closely monitor any material changes to future economic conditions, which will be given effect to in the respective future periods.

48. The Financial Statements are approved by the Board of Directors at its meeting held on May 24, 2022.

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Mar 31, 2019

1 Corporate Information

JM Financial Limited (“the Company”) was incorporated as a Private Limited Company under the name of J.M. Share and Stock Brokers Private Limited on January 30, 1986 under the Companies Act, 1956. Subsequently, the Company became a deemed Public Limited Company upon its promoter, J. M. Financial & Investment Consultancy Services Private Limited becoming a deemed Public Limited Company on June 15, 1988, by virtue of the Companies (Amendment) Act, 1988 read with the Companies Act, 1956. On September 15, 2004, the name of the Company was changed to JM Financial Limited.

Core Investment Company registered under Reserve Bank of India (RBI) ceased with effect from January 18, 2018.

The Company is engaged in the holding company activities, advisors in equity and debt capital markets, management of capital markets transactions, mergers & acquisitions, advisory, private equity syndication, corporate finance advisory business and administration & management of private equity funds.

2.1 Balances with banks in deposit accounts earns interest at fixed rate based on daily bank deposit rates for a period ranging from one day to 365 days.

2.2 Balances with banks in earmarked account pertains to unclaimed dividend and bank fixed deposits.

3.1 No trade or other receivable are due from directors or other officers of the company either severally or jointly with any other person, nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

3.2 Trade receivables are generally on credit terms of 30 days and generally no interest is charged on overdue balances.

4.1 Vendor has a lien over the assets taken on lease.

The Company has availed the deemed cost exemption in relation to the property, plant and equipment on the date of transition and hence the net block carrying amount has been considered as the gross block carrying amount on that date. Refer below for the gross block value and the accumulated depreciation on April 01, 2017 under the previous GAAP.

5.1 The maximum amount of commercial paper outstanding at any time during the year was Rs. 53,000 Lakh (for FY 2017-18, Rs. 98,900 Lakh and for FY 2016-17 Rs. 94,890 Lakh).

5.2 Commercial paper has interest ranging from 7.60% to 9.50% p.a (for FY 2017-18 - 6.65% to 7.50% p.a and for FY 2016-17- 6.55% to 9.35%) and are repayable within a period upto 365 days from the date of disbursement.

5.3 Debt Securities are issued in India.

6.1 Borrowings are made within India

6.2 Finance lease obligations are secured by way of hypothecation of vehicles.

7.1 Terms and rights attached to equity shares:

The Company has only one class of equity shares. The shareholders are entitled to one vote per share, dividend, as and when declared by the Board of directors and shareholders and residual assets, if any, after payment of all liabilities, in the event of liquidation of the Company.

8.1 Issue of equity shares to Qualified Institutional Buyers:

During the previous year 2017-18, the Company issued and allotted 4,01,22,706 equity shares of the face value of Rs.1/- each to the eligible qualified institutional buyers at the issue price of Rs. 162/- per equity share aggregating Rs. 64,998.79 Lakh through Qualified Institutional Placement (QIP) in accordance with Chapter VIII of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended and Section 42 of the Companies Act, 2013 and the rules made thereunder from time to time.

9.1 Share application money pending allotment represents equity shares to be issued pursuant to Employee Stock Option Scheme.

9.2 Capital reserve and capital redemption reserves represents reserves created pursuant to the business combination up to year end.

9.3 Securities Premium reserve represents premium received on equity shares issued, which can be utilised only in accordance with the provisions of the Companies Act, 2013 for specified purposes.

9.4 General reserve is created from time to time by transferring profits from retained earnings and can be utilised for purposes such as dividend payout, bonus issue, etc.

9.5 Statutory reserve is the reserve created by transferring the sum not less than 20% of its net profit after tax in terms of Section 45-IC of The Reserve Bank of India Act, 1934.

9.6 Stock options outstanding account relates to the stock options granted by the Company to employees under an Employee Stock options Plan (refer note 34).

9.7 Retained earnings represents profits that the company earned till date, less any transfers to General Reserve, Statutory Reserves, Dividends and other distributions paid to the shareholders.

10. Note on Amalgamation of JM Financial Institutional Securities Limited (Investment Banking Division) and JM Financial Investment Managers Limited (Alternative Asset Management)

(a) During the previous year, pursuant to the scheme of Amalgamation which became effective from January 18, 2018, the entire business and whole of the undertaking (Investment Banking Division) of erstwhile JM Financial Institutional Securities Limited, post demerger of Institutional Equity Division, and JM Financial Investment Managers Limited were amalgamated with JM Financial Limited. The amalgamation is in the nature of common control business combination as per Ind AS -103 - Business Combination and accordingly, the assets, liabilities and reserves of the both transferor companies as at April 01, 2017 have been taken at the book value, as per list enumerated below:

(b) As per the Scheme of Amalgamation, 2,80,00,000 Equity Shares of Rs. 10/- each of JM Financial Institutional Securities Limited and 18,00,000 Equity Shares of Rs.10/- each of JM Financial Investment Managers Limited held by the Company stands cancelled.

(c) Further, Authorised share capital of the Company has increased from Rs. 10,000.00 lakh comprising 100,00,00,000 equity shares of the face value of Rs.1/- each to Rs. 19,582.00 lakh comprising 152,02,00,000 equity shares of the face value of Rs.1/- each and 4,38,00,000 preference shares of the face value of Rs.10/- each.

(d) Pursuant to the Scheme of Arrangement under the Provisions of Section 230 read with Section 232 of the Companies Act, 2013, as sanctioned by the Hon’ble National Company Law Tribunal, Mumbai Bench, vide its Order dated December 14, 2017 in connection with the demerger of Institutional Equity Division from the erstwhile JM Financial Institutional Securities Limited into JM Financial Institutional Securities Limited (formerly known as JM Financial Securities Limited), the Company has received 70,00,000 preference shares of JM Financial Institutional Securities Limited (formerly known as JM Financial Securities Limited) of Rs.10/- each aggregating to Rs. 700 Lakh.

11. Employee Stock Option Scheme (ESOS)

The Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options to the eligible employees and/or directors (“the Employees”) of the Company and/or its subsidiaries. The Stock Options are granted at an exercise price, which is either equal to the fair market price or at a premium, or at a discount to market price as may be determined by the Nomination and Remuneration Committee of the Board of the Company.

During the financial year 2018-19, the Nomination and Remuneration Committee has granted 18,48,018 options under Series 11 (previous year 23,19,636 options-Series 10) at an exercise price of Rs.1/- per option to the Employees, that will vest in a graded manner and which can be exercised within a specified period.

The Company follows fair value based method of accounting for determining compensation cost for its stock-based compensation scheme. The fair value of each stock options granted during the current year and previous year is mentioned in the table below. The fair value has been calculated by applying Black-Scholes-Merton model as valued by an independent valuer.

Notes: [i] Additionally, an aggregate amount of Rs. 1,164.50 Lakh being the difference between the exercise price and fair value of options has been reimbursed by the subsidiary companies with which the Employees are/were employed/associated.

[ii] As no options were outstanding in respect of Series 1, 2, 3 and 4 as on March 31, 2019, the details of options granted has not been included above.

[iii] Esop cost recognised in Statement of Profit and Loss Rs. 635.18 Lakh (Previous year Rs. 890.19 Lakh)

12. Lease Transactions

a) Operating leases

The Company has taken certain premises on non-cancellable operating lease basis. The tenure of agreements are executed for the period ranging from 36 months to 108 months with a non-cancellable period at the beginning of the agreement range for 36 months to 60 months and having a renewable clause.

b) Finance leases

The Company has acquired vehicles under the finance lease agreement. The tenure of the lease agreements ranges between 36 and 60 months with an option for prepayments/foreclosure.

13. Employee Benefits Defined contribution plans

The Company operates defined contribution plan (Provident fund) for all qualifying employees of the Company. The employees of the Company are members of a retirement contribution plan operated by the government. The Company is required to contribute a specified percentage of payroll cost to the retirement contribution scheme to fund the benefits. The only obligation of the Company with respect to the plan is to make the specified contributions.

The Company’s contribution to Provident Fund aggregating Rs. 232.38 Lakh (Previous year Rs. 224.19 Lakh) has been recognised in the Statement of Profit and Loss under the head Employee Benefits Expense.

Defined benefit obligation

The Company’s liabilities under the Payment of Gratuity Act,1972 are determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method.

The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. The actuarial risks associated are:

Interest Rate Risk:

The risk of government security yields falling due to which the corresponding discount rate used for valuing liabilities falls. Such a fall in discount rate will result in a larger value placed on the future benefit cash flows whilst computing the liability and thereby requiring higher accounting provisioning.

Longevity Risks:

Longevity risks arises when the quantum of benefits payable under the plan is based on how long the employee lives post cessation of service with the company. The gratuity plan provides the benefit in a lump sum form and since the benefit is not payable as an annuity for the rest of the lives of the employees, there is no longevity risks.

Salary Risks:

The gratuity benefits under the plan are related to the employee’s last drawn salary. Consequently, any unusual rise in future salary of the employee raises the quantum of benefit payable by the company, which results in a higher liability for the company and is therefore a plan risk for the company.

The current service cost and the net interest expense for the year are included in the ‘Employee benefit expense’ line item in the Statement of Profit and Loss.

d) Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonable possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis are as follows:

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

There is no change in the method of valuation for the prior periods in preparing the sensitivity analysis. For change in assumptions refer to note (a) above.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation asset recognised in the balance sheet.

The weighted average duration of the defined benefit obligation is 8.16 years (Previous year 7.84 years)

Notes:-

(i) * Subsidiaries include a partnership firm namely Astute Investments.

(ii) There are no provisions for doubtful debts or amount written off or written back during the year/period in respect of debts due from/ due to related parties.

(iii) The remuneration excludes provision for gratuity as the incremental liability has been accounted for the Company as a whole.

(iv) The transactions disclosed above are exclusive of GST and Service tax.

Notes:

1. Under previous GAAP, long term investments were measured at cost less diminution in value which is other than temporary. Under Ind AS, non-current investments (other than investments in Subsidiaries and Associates) are measured at fair value through Profit or Loss. Consequently, the differences, as at the transition date and as at the end of 2017-18, respectively between carrying value as per Previous GAAP and fair value, are reflected in total equity and profit or loss.

2. Considering the amalgamation of the entire business and whole of the undertaking (Investment Banking) of JM Financial Institutional Securities Limited post demerger of Institutional Equity Division and JM Financial Investment Managers Limited with the Company which was effective from January 18, 2018, the financial results have been reinstated as if the business combination had occurred with effect from April 01, 2017. This being a common control combination under Ind AS 103, the same has been accounted for with effect from April 01, 2017.

3. Under previous GAAP, the cost of employee stock options was recognised using the intrinsic value method. However under Ind AS, the cost of employee stock options was recognised based on the fair value of the options as on grant date.

4. Under previous GAAP, long term deposits are carried at their face values, under Ind AS, deposits are required to be measured at their fair value at inception using an appropriate discounting rate and subsequently measured at amortised cost using effective rate of interest method.

5. Under previous GAAP, actuarial gains/losses on defined benefit plan were recognised in the profit and loss account. Under Ind AS, the actuarial gains and losses will be recognised in other comprehensive income as re-measurements.

6. Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. It also includes impact of deferred tax arising on account of transition to Ind AS.

14. Financial Instruments

a) Capital Management

For the purpose of the Company’s capital management, capital includes issued capital and other equity reserves attributable to the equity shareholders of the Company. The primary objective of the company, when managing capital, is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure, so as to maximize shareholders’ value. As at March 31, 2019, the Company has only one class of equity shares and has low debt. Consequent to such capital structure, there are no externally imposed capital requirements. In order to maintain or achieve an optimal capital structure, the Company allocates its capital for distribution as dividend or reinvestments into business based on its long term financial plans.

The Company monitors capital structure on the basis of total debt to equity and maturity profile of overall debt portfolio of the Company.

Notes:

Level 1: Fair Value measurements are based on quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of equity are traded in the stock exchanges is valued using the closing price as at the reporting period. The mutual funds are valued using the closing NAV

Level 2: These includes instruments which does not have an active market hence the fair value is determined using observable market data such as latest declared NAV/ recent market deals.

(ii) Financial instruments measured at amortised cost:

The carrying amount of financial assets and liabilities measured at amortised cost are reasonable approximation of their fair values. Since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

d) Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk;

- Liquidity risk; and

- Market risk (including currency risk and interest rate risk)

Risk management framework

Risk management forms an integral part of the business. As a lending institution, the Company is exposed to several risks including market risk, credit risk and liquidity risk. The Company has established a risk management and audit framework to identify, assess, monitor and manage these risks. This framework is driven by the Board through the Audit Committee, Risk Management Committee and the Asset Liability Management Committee. Risk Management Committee inter alia is responsible for identifying, reviewing, monitoring and taking measures for risk profile and for risk measurement system of the Company.

i) Credit risk

Credit Risk refers to risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises primarily from financial assets such as trade receivables, investments, other balances with banks, loans and other receivables.

The Company has adopted a Policy of dealing with counter parties that have sufficiently high credit rating. The Company’s exposure and credit ratings of its counter parties are continuously monitored.

Credit risk arising from trade receivables are reviewed periodically and based on past experience and history. Management is confident of recovering all the dues. Credit risk arises from Investments and other balances with banks is limited and there is no collateral held against these became the counter parties are bank and recognised financial institutions with high credit ratings assigned by the credit rating agencies.

ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity may be affected due to severe liquidity crunch in the market or due to market disruptions where the Company is unable to access public funds. The Company’s exposure to liquidity risk arises primarily from mismatch of maturities of financial assets and liabilities.

However the Company believes that it has a strong financial position and business is adequately capitalised, have good credit rating and appropriate credit lines available to address liquidity risks.

The Company attempts to minimize this risk through a mix of strategies such as short-term funding. The Company also monitors liquidity risk through adequate bank sanction limits at the beginning of each fiscal. Monitoring liquidity risk involves categorizing all assets and liabilities into different maturity profiles and evaluating them for any mismatches in any particular maturities, particularly in the short-term.

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and equity price risk as explained below:

a) Foreign currency risk:

The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. The Company is exposed to currency risk significantly on account of its trade payables and trade receivables denominated in foreign currency. The functional currency of the Company is Indian Rupee. The Company currently hedges its foreign currency risk by using Derivative Instruments (Forward Contracts).

The carrying amounts of the Company’s foreign currency denominated monitory assets and liabilities at the end of the reporting period are as follows:

Foreign currency sensitivity analysis:

The Group is mainly exposed to USD and GBP. The following table analyses the Company’s Sensitivity to a 5% increase and a 5% decrease in the exchange rates of these currencies against Indian Rupees.

b) Equity Price Risk

Equity price risk is related to the change in market reference price of the instruments in quoted and unquoted securities. The fair value of some of the Company’s investments exposes to company to equity price risks. In general, these securities are not held for trading purposes.

Equity Price Sensitivity analysis:

The fair value of equity instruments other than investment in subsidiaries and associates as at March 31, 2019, March 31, 2018 and April 01, 2017 was Rs.18,690.94 Lakh, Rs. 21,666.87 Lakh and Rs.13,653.59 Lakh respectively. A 5% change in price of equity instruments held as at March 31, 2019, March 31, 2018 and April 01, 2017 would result in:

15. Dividend Payable to Non-Resident Shareholders

The Company has not remitted any amount in foreign currencies on account of dividends during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividends have been made by/on behalf of non-resident shareholders. The particulars of dividends payable to non-resident shareholders (including Foreign Institutional Investors) are as under:

16. Disclosure required in terms of Regulation 34(3) and 53(f) Of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015:

All the above loans and advances have been given for business purposes.

Figures in brackets are for the previous year.

17. The Board of Directors of the Company has recommended a final dividend of Rs. 0.50 per equity share of the face value of Rs.1/- each for the year ended March 31, 2019 (Previous Year Rs. 1.10 per equity share). The said dividend will be paid, if approved by the shareholders at the Thirty Fourth Annual General Meeting.

18. The Financial Statements are approved for issue by the Board of Directors at its meeting held on May 02, 2019.

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Mar 31, 2018

Annexure ''I’ to note 2.39 of notes to the financial statements Disclosure in respect of related parties pursuant to AS 18 on ''Related Party Disclosure’

List of related parties

I) Parties where control exists:

a) Subsidiaries

JM Financial Institutional Securities Limited (Institutional Securities) (Up to December 31, 2017)

JM Financial Investment Managers Limited (Investment Managers) (Up to December 31, 2017)

JM Financial Institutional Securities Limited (IED) (from January 01, 2018)

(formerly known as JM Financial Securities Limited)

JM Financial Services Limited (Financial Services)

JM Financial Properties and Holdings Limited (Properties)

Infinite India Investment Management Limited (Infinite)

JM Financial Commtrade Limited (Commtrade)

CR Retail Malls (India) Limited (CRRM)

JM Financial Capital Limited (Capital)

JM Financial Products Limited (Products)

JM Financial Credit Solutions Limited (Credit Solutions)

JM Financial Home Loans Limited (Home Loans)

JM Financial Asset Management Limited (AMC)

JM Financial Asset Reconstruction Company Limited (ARC)

JM Financial Overseas Holdings Private Limited (Overseas)

JM Financial Singapore Pte Ltd (Singapore)

JM Financial Securities, Inc. (USA)

b) Partnership Firm

Astute Investments (Astute)

II) Parties with whom the Company has entered into transactions during the year:

a) Associates

JM Financial Trustee Company Private Limited (Trustee)

JM Financial Asset Reconstruction Company Limited (ARC) (Upto September 30, 2016)

b) Key management personnel

Mr. Vishal Kampani (VNK)

c) I ndividual exercising control or significant influence by way of voting power in reporting enterprise and relatives of any such person

Mr. Nimesh Kampani (NNK)

Relatives:

Ms. Aruna N Kampani (ARNK)

Mr. Vishal Kampani (VNK)

Ms. Amishi Kampani (AMNK)

d) Relative of key management personnel

Mr. Nimesh Kampani (NNK)

Ms. Aruna N Kampani (ARNK)

Ms. Amishi Kampani (AMNK)

e) Enterprise over which relative(s) of key management personnel is/are able to exercise significant influence

J.M. Financial & Investment Consultancy Services Private Limited (JMFICS)

J.M. Assets Management Private Limited (J.M.Assets)

JM Financial Trustee Company Private Limited (Trustee)

JSB Securities Limited (JSB)

Kampani Consultants Limited (KCL)

Persepolis Investment Company Private Limited (PICPL)

SNK Investments Private Limited (SNK)

Capital Market Publishers India Private Limited (Capital Markets)

Notes:

a. Total liabilities exclude share capital and reserves.

b. Investments exclude investment in subsidiaries under consolidation.

c. Proposed dividend includes dividend distribution tax.

d. Whe Mumbai Bench of the Hon''ble National Company Law Tribunal vide its Order dated December 14, 2017, sanctioned the Scheme of Amalgamation between JM Financial Institutional Securities Limited and JM Financial Investment Managers Limited and JM Financial Limited. The certified copy of the order has been filed with the Registrar of Companies, Mumbai, Maharashtra and the same has become effective from January 18, 2018. The accounting treatment for the amalgamation has been given with effect from the appointed date of January 1, 2018 under the Pooling of Interest method as per Accounting Standard 14 "Accounting for Amalgamation".

e. W M Financial Institutional Securities Limited (formerly known as JM Financial Securities Limited) has been incorporated as a wholly owned subsidiary of JM Financial Services Limited, one of the Company''s subsidiaries.

Note:

1. Significant influence has been determined as per Accounting Standard 23 "Accounting for Investments in Associates in Consolidated Financial Statements" specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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Mar 31, 2017

1.1 CONTINGENT LIABILITY

Contingent liability in respect of income tax and service tax demands for various years disputed in appeal is Rs.1,907.35 Lakh (previous year Rs.1,522.09 Lakh).

CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs.109.01 Lakh (previous year Rs.94.84 Lakh).

1.2 EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Employee Stock Option Scheme (‘the Scheme’) provides for grant of stock options to the eligible employees and/or directors (“the Employees”) of the Company and/or its subsidiaries. The Stock Options are granted at an exercise price, which is either equal to the fair market price, or at a premium, or at a discount to market price as may be determined by the Nomination and Remuneration Committee of the Board of the Company.

During the financial year 2016-17, the Nomination and Remuneration Committee of the Board has granted stock options under Series 9, to the Employees that will vest in a graded manner and which can be exercised within a specified period. The Committee granted 12,55,515 Options (previous year 14,44,440 Options) at an exercise price of Rs.1/- per option to the Employees.

The Company follows intrinsic value based method of accounting for determining compensation cost for its stock-based compensation scheme.

The estimated fair value of each stock option granted during the current year and previous year is mentioned in the table below. The fair value has been calculated by applying Black-Scholes-Merton model as valued by an independent valuer. The model inputs the share price at respective grant dates, exercise price of Rs.1/-, volatility of 51.38% (previous year 55.42%), dividend yield of 3.55% (previous year 2.62%), life of option being 7 years (previous year 7 years), and a risk-free interest rate of 7.80% (previous year 8%).

Details of options granted during the current and previous financial years based on the graded vesting and fair value of the options are as under:

Based on the valuation report applying Black-Scholes-Merton model, the expense arising from stock option scheme on the basis of fair value method of accounting is Rs.NIL (previous year Rs.2.57 Lakh). Accordingly, had the compensation been determined using the fair value method, the Company’s net profit and basic and diluted earnings per share as reported would have been remained the same (Previous year reduced) after giving effect to the stock-based employee compensation amount as under:

1.3 Pursuant to Securities and Exchange Board of India (share based employee benefits) Regulations, 2014, the details of receipt from subsidiaries are as under:

1.4 Under the head “Trade Payables” outstanding amount(s) due to Micro, Small and Medium Enterprises (MSME) as defined under Micro, Small and Medium Enterprises Development Act, 2006 is being disclosed as “Nil”, as the Company has not received any reply from its vendors to the letter written by it to them. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

1.5 EARNINGS PER EQUITY SHARE (EPS)

Earnings per equity share is calculated as under:

1.6 LEASE TRANSACTION

a) Finance lease

The Company has acquired vehicles under the finance lease agreement. The tenure of the lease agreements ranges between 36 and 48 months with an option for prepayments/foreclosure.

b) Operating lease

i) The Company had taken three premises under operating lease, the tenure of the lease agreements ranges between 36 months and 60 months. The same is non-cancellable for an initial period ranging between 24 months and 60 months. The minimum lease rentals outstanding with respect to these assets are as under:

Valuation assumptions:

- The estimates of future salary increases takes into account inflation, seniority, promotion and other relevant factors in the employment market.

- The above information is certified by the actuary. b) Compensated absences

As per the Company’s policy, a provision of Rs.10.29 Lakh (previous year Rs.16.79 Lakh) has been made towards compensated absences, calculated on the basis of unutilised leave as on the last day of the financial year.

B. Defined contribution plans

Amount recognised as an expense and included in the ‘Contribution to provident & other funds’ Rs.26.31 Lakh (previous year Rs.23.72 Lakh).

1.7 The Company has been classified as a Systemically Important Non-Deposit Taking Core Investment Company (CIC-ND-SI) in accordance with the Certificate of Registration issued by the Reserve Bank of India dated April 11, 2014, under Section 45-IA of the Reserve Bank of India Act, 1934.

1.8 Schedule to the Balance Sheet of a Non-Banking Financial Company as required by RBI as per their Circular RBI/ 2008-09/ 116 DNBS(PD).CC. No. 125/ 03.05.002/ 2008-2009, Guidelines for NBFC-ND-SI as regards capital adequacy, liquidity and disclosure norms (as applicable to Core Investment Company) is given below:

(i) Capital Risk Adequacy Ratio (CRAR):

(ii) Exposures:

A. Exposure to Real Estate Sector

B. Exposures to Capital Market

(iii) Asset Liability Management:

Maturity pattern of certain items of assets and liabilities:

1.9 Schedule to the Balance Sheet (as required in terms of Paragraph 13 of Non Banking Financial (Non - Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, as amended) as applicable to Core Investment Companies:

1.10 There are no restructured advances as on March 31, 2017, Hence disclosure of information as required in terms of sub- Para 9 of Paragraph 20B of Non Banking Financial (Non - Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (as amended vide Notification No. DNBS(PD).No.272/CGM(NSV)-2014 dated January 23, 2014) is not warranted.

1.11 To ensure that Non-Banking Financial Companies (NBFCs) create a financial buffer to protect them from the effect of economic downturns, the Reserve Bank of India (RBI) issued a notification No. DNBS 22 / CGM (US)-2011 dated January 17, 2011 as amended on timely basis, requiring all NBFCs to make a general provision at 0.35 per cent of outstanding standard assets. The Company has created provision for standard assets, and is in compliance with the aforesaid RBI Notification.

1.12 The Company has spent Rs.22 Lakh (previous year Rs.24 Lakh) towards Corporate Social Responsibility as per Section 135 of the Companies Act, 2013 read with Schedule VII thereto.

1.13 Details of Specified Bank Notes (SBN) held and transacted during the period from 8th November, 2016 to 30th December, 2016.

1.14 a) The Company is engaged in making investments in, and/or lending funds to its group companies as a Core Investment Company registered with the Reserve Bank of India, which in the context of AS 17 on “Segment Reporting” is considered as the only segment.

b) The Company does not have any reportable geographical segment.

1.15 Disclosure in respect of related parties is attached as Annexure ‘I’

1.16 Statement of cash flow is attached as Annexure ‘II’

1.17 The Board of Directors of the Company has recommended a final dividend of Rs.0.85 per equity share for the year ended March 31, 2017 (previous year Rs.0.85 per equity share). The said dividend will be paid after the approval of shareholders at the thirty second Annual General Meeting. During the previous year, the Company had made a provision for the dividend recommended by the Board of Directors as per the requirements of pre-revised Accounting Standard 4 - ‘Contingencies and Events Occurring after the Balance sheet date’ (AS 4). However, as per the requirements of revised AS 4, the Company is not required to provide for dividend proposed after the balance sheet date. Consequently, no provision has been made in respect of the aforesaid dividend recommended by the Board of Directors for the year ended March 31, 2017. Had the Company continued with creation of provision for proposed dividend, as at the balance sheet date, its surplus in Statement of Profit and Loss would have been lower by Rs.6,769.13 lakh and Short Term Provision would have been higher by Rs.6,769.13 lakh.

1.18 Figures of the previous year have been regrouped / reclassified / rearranged wherever necessary to correspond with those of the current year’s classification / disclosure.

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Mar 31, 2015

1.1 (A) MONIES RECEIVED AGAINST WARRANTS

During the year, the Company received an aggregate amount of Rs. 3,328.11 lakh as consideration towards the issue and allotment of 2,32,93,878 equity shares of the face value of Rs. 1/- each (being balance 75% of the issue price of Rs. 19.05 per equity share). The said consideration has been received upon the exercise of right by the Warrant holders to convert 2,32,93,878 Warrants held by them into equity shares and the said amount has been fully utilised for the general corporate purpose.

Notes:

i. Redeemable at the option of the issuer at any time but not later than October 24, 2022 being 10 years from the date of allotment.

ii Redeemable at the option of the issuer at any time but not earlier than September 22, 2017 being 3 years from the date of allotment .

iii. Represents initial contribution as a ''Sponsor'' towards setting up of JM Financial Mutual Fund, which cannot be sold/ transferred.

iv. Net asset value of the mutual fund units as on March 31,2015 is Rs. 3.69 Lakh (previous year Rs. 2.56 Lakh).

2.1 CONTINGENT LIABILITY

Contingent liability in respect of income tax demands for various years disputed in appeal is Rs. 1,272.05 Lakh (previous year Rs. 37,964.57 Lakh).

The Income Tax Authorities had ongoing dispute with the Company relating to them treating the long term capital gain on sale of equity shares on termination of joint venture with Morgan Stanley as taxable under the head "Business Income" and not under the head "Capital Gains". The reduction in the contingent liability is due to the Company receiving a favourable ruling from the Commissioner of Income Tax (appeals) in respect of the said matter.

CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 65.42 Lakh (previous year Rs. 70.42 Lakh).

2.2 EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Employee Stock Option Scheme (''the Scheme'') provides for grant of stock options to the eligible employees and/or directors ("the Employees") of the Company and/or its subsidiaries. The Stock Options are granted at an exercise price, which is either equal to the fair market price, or at a premium, or at a discount to market price as may be determined by the Nomination and Remuneration Committee (erstwhile Compensation Committee) of the Board of the Company.

During the year, the Nomination and Remuneration Committee of the Board has granted stock options under Series 7, to the Employees that will vest in a graded manner, which are to be exercised within a specified period. The Committee granted 44,85,267 Options (previous year 36,45,774 Options) at an exercise price of Rs. 1/- per option to the Employees.

The Company follows intrinsic value based method of accounting for determining compensation cost for its stock-based compensation scheme.

The estimated fair value of each stock option granted in Series 7 and 6 is mentioned in the table below. The fair value has been calculated by applying Black-Scholes-Merton model as valued by an independent valuer. The model inputs the share price at respective grant dates, exercise price of Rs. 1/-, volatility of 54.95% to 57.40% (previous year 54.64% to 58.06%), dividend yield of 3.63% (previous year 2.16%), expected term of options in the range of 5 years to 6 years (previous year 4 years to 5 years), and a risk-free interest rate of 8.96% to 9.04% (previous year 7.53% to 7.60%).

2.27 Under the head "Trade Payables" outstanding amount(s) due to Micro, Small and Medium Enterprises (MSME) as defined under Micro, Small and Medium Enterprises Development Act 2006 is being disclosed as "Nil", as the Company has not received any reply from its vendors to the letter written by it to them. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

Valuation assumptions:

- The estimates of future salary increases takes into account inflation, seniority, promotion and other relevant factors in the employment market.

- The above information is certified by the actuary, b) Compensated absences

As per the Company''s policy, a provision of Rs.18.85 Lakh (previous year Rs.11.24 Lakh) has been made towards compensated absences, calculated on the basis of unutilised leave as on the last day of the financial year.

B. Defined contribution plans

Amount recognised as an expense and included in the ''Contribution to provident & other funds'' Rs. 25.46 Lakh (previous year Rs.18.96 Lakh).

2.3 The Company has been granted registration as a Core Investment Company (CIC) by the Reserve Bank of India on April 11, 2014. The Company has been classified as a Systemically Important Non-Deposit Taking Core Investment Company (CIC-ND-SI). The Company is not in the business of asset financing.

2.4 Schedule to the Balance Sheet of a Non-Banking Financial Company as required by RBI as per their Circular RBI/ 2008-09/ 116 DNBS(PD).CC.No.125/ 03.05.002/ 2008-2009, Guidelines for NBFC-ND-SI as regards capital adequacy, liquidity and disclosure norms (as applicable to Core Investment Company) is given below:

2.5 There are no restructured advances as on March 31, 2015, Hence disclosure of information as required in terms of sub- Para 9 of Paragraph 20B of Non Banking Financial (Non - Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 (as amended vide Notification No. DNBS(PD).No.272/CGM(NSV)-2014 dated January 23, 2014) is not warranted.

2.6 To ensure that Non-Banking Financial Companies (NBFC) create a financial buffer to protect them from the effect of economic downturns, the Reserve Bank of India (RBI) issued a notification No. DNBS 22 / CGM (US) dated January 17, 2011, requiring all NBFCs to make a general provision at 0.25 per cent of outstanding standard assets. The Company has created provision for standard assets, and is in compliance with the aforesaid RBI Notification.

2.7 a) As the Company is a Core Investment Company, its ''investments and lending activities'' is considered as the only segment in the contextof AS 17 on "Segment Reporting".

b) The Company does not have any reportable geographical segment.

2.8 Disclosure in respect of related parties is attached as Annexure ''I''

2.9 Statement of cash flow is attached as Annexure ''II''

2.10 Figures of the previous year have been regrouped/reclassified/ rearranged wherever necessary to correspond with those of the current year''s classification /disclosure.

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Mar 31, 2014

1. CONTINGENT LIABILITY

Contingent liability in respect of income tax demands for various years disputed in appeal is Rs. 37,964.57 Lakh (previous year Rs. 311.74 Lakh). During the year, the Company received a notice of demand from the income tax department pursuant to the completion of fresh adjudication by the assessing officer for the assessment year 2008-09. The additional tax liability arising out of the aforesaid notice, net of relevant deferred tax liability is Rs. 37,282.45 Lakh, inclusive of interest of Rs. 15,587.00 Lakh. The demand of additional tax is mainly on account of income tax department treating the long term capital gain on sale of equity shares held in joint venture company with Morgan Stanley as taxable under the head "Business Income" and not under the head "Capital Gains".

The Company has challenged the above assessment order before the appellate authority.

CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 70.42 Lakh (previous year Rs. 65.42 Lakh).

2. EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Employee Stock Option Scheme (''the Scheme'') provides for grant of stock options to the eligible employees and/or directors ("the Employees") of the Company and/or its subsidiaries. The Scheme is in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Stock Options are granted at an exercise price, which is either equal to the fair market price of the underlying equity shares, or at a premium, or at a discount to market price as may be determined by the Compensation Committee of the Board of the Company.

During the financial year, the Compensation Committee of the Board has granted stock options under Series 6, to the Employees that will vest in a graded manner, which are to be exercised within a specified period. The Committee has granted 36,45,774 options (previous year 73,02,669 options) at an exercise price of Rs. 1/- per option to the Employees.

The Company follows intrinsic value based method of accounting for determining compensation cost for its stock-based compensation scheme.

The estimated fair value of each stock option granted in Series 6 and 5 is mentioned in the table below. The fair value has been calculated by applying Black-Scholes-Merton model as valued by an independent valuer. The model inputs were the share price at respective grant dates, exercise price of Rs. 1/-, volatility of 54.64% to 58.06% (previous year 60.04% to 61.90%), dividend yield of 2.16% (previous year 1.48%), expected term of options in the range of 4 years to 5 years (previous year 4 years to 5 years), and a risk-free interest rate of 7.53% to 7.60% (previous year 8.36% to 8.37%).

3. LEASE TRANSACTION

Finance lease

The Company has acquired vehicles under the finance lease agreement. The tenure of the lease agreements ranges between 36 and 48 months with an option for prepayments/foreclosure.

Operating lease

a) The Company had taken premises on cancellable operating lease for a period of not more than 24 months. Lease payment recognised in the statement of profit and loss for the year in respect thereof aggregates to Rs. 142.58 Lakh (Previous year Rs. 38.11 Lakh).

Valuation assumptions:

– The estimates of future salary increases, takes into account inflation, seniority, promotion and other relevant factors in the employment market.

– The above information is certified by the actuary.

b) Compensated absences

As per the Company''s policy, a provision of Rs. 11.24 Lakh (previous year Rs. 10.56 Lakh) has been made towards compensated absences, calculated on the basis of unutilised leave as on the last day of the financial year.

B. Defined contribution plans

Amount recognised as an expense and included in the ''Contribution to provident & other funds'' Rs. 18.96 Lakh (previous year Rs. 17.80 Lakh).

2.31 a) As the Company is a Core Investment Company, its ''investment activities'' is considered as the only segment in the context of AS 17 on "Segment Reporting".

b) The Company does not have any reportable geographical segment.

4. Disclosure in respect of related parties is attached as Annexure ''I''

5. Statement of cash flow is attached as Annexure ''II''

6. Figures of the previous year have been regrouped / reclassified / rearranged wherever necessary to correspond with those of the current year''s classification / disclosure.

DISCLOSURE IN RESPECT OF RELATED PARTIES PURSUANT TO AS 18 ON ''RELATED PARTY DISCLOSURE''

A. List of related parties

I) Parties where control exists: Subsidiaries

JM Financial Institutional Securities Limited (Institutional Securities)

JM Financial Investment Managers Limited (Investment Managers)

JM Financial Services Limited (Financial Services)

JM Financial Commtrade Limited (Commtrade)

JM Financial Insurance Broking Private Limited (Insurance Broking)

JM Financial Products Limited (NBFC)

JM Financial Properties and Holdings Limited (Properties)

JM Financial Asset Management Limited (AMC)

JM Financial Overseas Holdings Private Limited (Overseas)

JM Financial Singapore Pte Ltd(JMFS)

PT JM Financial Securities Indonesia (JMF Indonesia)

JM Financial Securities Inc. (JMF USA)

Infinite India Investment Management Private Limited (Infinite)

CR Retail Malls (India) Limited (CRRM)

FICS Consultancy Services Limited (FICS) (w.e.f. March 28, 2014)

II) Other parties with whom the Company has entered into transactions during the year:

a) Associates

JM Financial Asset Reconstruction Company Private Limited (ARC) JM Financial Trustee Company Private Limited (Trustee)

b) Key management personnel

Mr. Nimesh Kampani (NNK)

c) Relative of key management personnel

Ms. Aruna N Kampani (ARNK) Mr. Vishal Kampani (VNK) Ms. Amishi Kampani (AMNK)

d) Enterprise over which Key management personnel is able to exercise significant influence

J.M. Financial & Investment Consultancy Services Private Limited (JMFICS)

J. M. Assets Management Private Limited (J.M.Assets)

JSB Securities Limited (JSB)

Kampani Consultants Limited (KCL)

Persepolis Investment Company Private Limited (PICPL)

SNK Investments Private Limited (SNK)

FICS Consultancy Services Limited (FICS) (upto March 27, 2014)

Kampani Properties and Holdings Limited (KPHL)

Financial Engineering Solutions Private Limited (FES)

B. Related party relationships have been identified by the management and relied upon by the auditors.

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Mar 31, 2013

1.1 CONTINGENT LIABILITY

Contingent liability in respect of income tax demands for various years disputed in appeal is Rs.311.74 Lakh (previous year Rs.636.23 Lakh).

CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs.65.42 Lakh (previous year Rs.65.42 Lakh).

1.2 EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Employee Stock Option Scheme (''the Scheme'') provides for grant of stock options to the eligible employees and/ or directors ("the Employees") of the Company and/or its subsidiaries. The Scheme is in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Options are granted at an exercise price, which is either equal to the fair market price of the underlying equity shares, or at a premium, or at a discount to market price as may be determined by the Compensation Committee of the Board.

During the financial year, the Compensation Committee of the Board has granted stock options under Series 5, to the Employees that will vest in a graded manner, which are to be exercised within a specified period. The Committee has granted 7,302,669 options at an exercise price of Rs.1/- per option to the Employees.

The details of options are as under:

The Company follows intrinsic value based method of accounting for determining compensation cost for its stock- based compensation scheme.

The estimated fair value of each stock option granted under the Scheme is mentioned in the table below. The fair value has been calculated by applying Black-Scholes-Merton model as valued by an independent valuer. The model inputs were the share price at respective grant dates, exercise price of Rs.1/-, volatility of 60.04% to 61.90% (previous year 60.98% to 62.62%), dividend yield of 1.48% (previous year 1.24%), expected term of options in the range of 4 years to 5 years (previous year 4 years to 5 years), and a risk-free interest rate of 8.36% to 8.37% (previous year 8.04% to 8.05%).

1.3 Under the head "Trade Payables" outstanding amount(s) due to Micro, Small and Medium Enterprises (MSME) as defined under Micro, Small and Medium Enterprises Development Act 2006 is being disclosed as "Nil", as the Company has not received any reply from its vendors to the letter written by it to them. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

1.4 LEASE TRANSACTION

Finance lease

The Company has acquired vehicles under the finance lease agreement. The tenure of the lease agreements ranges between 36 and 60 months with an option to prepayments/foreclosure.

Operating lease

a) The Company had taken premises on cancellable operating lease for a period of not more than 24 months. Lease payment recognised in the statement of profit and loss for the year in respect thereof aggregates Rs.38.11 Lakh (Previous year Rs.99.30 Lakh).

Valuation assumptions:

- The estimates of future salary increases, takes into account inflation, seniority, promotion and other relevant factors in the employment market.

- The above information is certified by the actuary.

b) Compensated absences

As per Company''s policy, provision of Rs.10.56 Lakh (previous year Rs.25.02 Lakh) has been made towards compensated absences, calculated on the basis of unutilised leave as on the last day of the financial year.

B. Defined contribution plans

Amount recognised as an expense and included in the ''Contribution to provident fund & other funds'' Rs.17.80 Lakh (previous year Rs.35.91 Lakh).

1.5 a) As the Company is a Core Investment Company, its ''investment activities'' is considered as the only segment in the context of AS 17 on "Segment Reporting".

b) The Company does not have any reportable geographical segment.

1.6 Disclosure in respect of related parties is attached as per Annexure ''I''

1.7 Statement of cash flow is attached as per Annexure ''II''

1.8 Figures of the previous year have been regrouped / reclassified / rearranged wherever necessary to correspond with those of the current year''s classification / disclosure.

A. List of related parties

I) Parties where control exists:

Subsidiaries

JM Financial Institutional Securities Private Limited (Institutional Securities)

JM Financial Investment Managers Limited (Investment Managers)

JM Financial Services Limited (Financial Services)

JM Financial Commtrade Limited (Commtrade)

JM Financial Insurance Broking Private Limited (Insurance Broking)

JM Financial Products Limited (NBFC)

JM Financial Properties and Holdings Limited (Properties)

(formerly known as JM Financial GILTS Limited)

JM Financial Asset Management Private Limited (AMC)

JM Financial Overseas Holdings Private Limited (Overseas)

JM Financial International Private Limited (JMFI)

JM Financial Singapore Pte Ltd (JMFS)

PT JM Financial Securities Indonesia (w.e.f. August 15, 2012)

JM Financial Securities, Inc. (w.e.f. November 16, 2012)

Infinite India Investment Management Private Limited (Infinite)

CR Retail Malls (India) Limited (CRRM)

II) Other parties with whom the Company has entered into transaction during the year:

a) Associates

JM Financial Asset Reconstruction Company Private Limited (ARC)

JM Financial Trustee Company Private Limited (Trustee)

b) Key management personnel

Mr. Nimesh Kampani (NNK)

c) Relative of key management personnel

Ms. Aruna N Kampani (ARNK)

Mr. Vishal Kampani (VNK)

Ms. Amishi Kampani (AMNK)

d) Enterprise over which Key management personnel is able to exercise significant influence

J.M. Financial & Investment Consultancy Services Private Limited (JMFICS)

J. M. Assets Management Private Limited (J.M.Assets)

JSB Securities Limited (JSB)

Kampani Consultants Limited (KCL)

Persepolis Investment Company Private Limited (PICPL)

SNK Investments Private Limited (SNK)

FICS Consultancy Services Limited (FICS)

Kampani Properties and Holdings Limited (KPHL)

Financial Engineering Solutions Private Limited (FES)

---

Mar 31, 2012

1. Notes to financial statements

Note a:

The Company has only one class of shares referred to as equity shares having a face value of Rs 1/-. Each holder of equity share is entitled to one vote per share.

Notes:

i. Being renamed as JM Financial Institutional Securities Private Limited.

ii. Redeemable at the option of the issuer at any time but not later than 10 years from the date of allotment (i.e. January 11, 2012).

iii. Represents initial contribution as a 'Sponsor' towards setting up of JM Financial Mutual Fund, which cannot be sold/ transferred.

iv. Net asset value of the mutual fund units as on March 31, 2012 is Rs2.14 Lakh (previous year Rs2.42 Lakh) against book value of Rs1.49 Lakh (previous year Rs1.49 Lakh).

2.1 Contingent Liability

Contingent liability in respect of income tax demands for various years disputed in appeal is Rs636.23 Lakh (previous year Rs29,453.34 Lakh). During the previous year, the additional tax liability, net of relevant deferred tax liability, arrived at Rs29,093.22 Lakh, was mainly due to the treatment of long term capital gains on sale of equity shares on termination of joint venture with Morgan Stanley as "Business Income" and not "Capital Gains" along with other ground, pursuant to the assessment of Assessment Year 2008-09. The same has been set aside and restored to the Assessing Officer for fresh adjudication by the Income Tax Appellate Tribunal, Mumbai.

Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs65.42 Lakh (previous year Rs65.42 Lakh).

2.2 Employee stock option scheme

The Employee Stock Option Scheme ('the Scheme') provides for grant of stock options to the eligible employees and/or directors ("the Employees") of the Company and/or its subsidiaries. The Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Options are granted at an exercise price, which is either equal to the fair market price of the underlying equity shares, at a premium, or at a discount to market price as may be determined by the Compensation Committee of the Board.

During the financial year, the Compensation Committee of the Board has granted stock options under Series 4, to the Employees that vests in a graded manner, which are to be exercised within a specified period. The Company has granted 7,500,000 options at an exercise price of Rs1/- per option to the employees.

The Company follows intrinsic value based method of accounting for determining compensation cost for its stock-based compensation scheme.

The estimated fair value of each stock option granted under the Scheme is mentioned in the table below. The fair value has been calculated by applying Black-Scholes-Merton model as valued by an independent valuer. The model inputs were the share price at respective grant date, exercise price of Rs1/-, volatility of 60.98% to 62.62%, dividend yield of 1.24%, expected term of options in the range of 4 years to 5 years, and a risk-free interest rate of 8.04% to 8.05%.

2.3 Under the head "Trade Payables" outstanding amount(s) due to Micro, Small and Medium Enterprises (MSME) as defined under Micro, Small and Medium Enterprises Development Act 2006 is being disclosed as "Nil", as the Company has not received any reply from its vendors to the letter written by it to them. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

2.4 Lease transaction Finance lease

The Company has acquired vehicles under the finance lease agreement. The tenure of the lease agreements ranges between 36 and 60 months with an option to prepayments/foreclosure.

Operating lease

a) The Company had taken two premises under operating lease for the period of 22 months and 42 months respectively. The same were non-cancellable for an initial period of 11 month and 24 months respectively. However, both the operating lease were terminated during the previous year. The amount debited to the statement of profit & loss with respect to the same was Rs8.00 Lakh.

b) The Company had taken certain assets (premises and furniture & fixtures) on cancellable operating lease for a period of not more than 24 months. Lease payment recognized in the statement of profit & loss for the year in respect thereof aggregates to Rs99.30 Lakh (Previous year Rs102.01 Lakh).

Valuation assumptions:

- The estimates of future salary increases, takes into account inflation, seniority, promotion and other relevant factors in the employment market.

- The above information is as certified by the actuary.

b) Compensated absences

As per the Company's policy, provision of Rs25.02 Lakh (previous year Rs20.88 Lakh) has been made towards compensated absences, calculated on the basis of unutilized leave as on the last day of the financial year

B. Defined contribution plans

Amount recognized as an expense and included in the Contribution to provident fund & other fundsRs39.16 Lakh (previous year Rs47.65 Lakh).

2.5 The Company had made an application to the Central Government for waiver of the excess remuneration of Rs65.15 Lakh paid to the Managing Director for the financial year 2010-11 on June 10, 2011. The Central Government, vide its letter dated April 11, 2012, has rejected the application made by the Company on the ground that the Company has paid the remuneration in excess of the remuneration approved by the Government vide its letter dated July 14, 2011. The Company has represented the matter vide its letter dated April 27, 2012 explaining in detail therein the rationale for the Central Government to reconsider its decision of rejection and accord its approval for the waiver of the excess amount thus paid. The Company is awaiting the response from the Central Government.

2.6 a) As the Company is a Core Investment Company, its 'investment activities' is considered as the only segment in the context of AS 17 on "Segment Reporting'.

b) The Company does not have any reportable geographical segment.

2.7 Disclosure in respect of related parties is attached as Annexure 'I'

2.8 Statement of cash flow is attached as Annexure 'II'

2.9 Miscellaneous income includes Rs Nil (Previous year Rs11.55 Lakh), being the net reversal of provision for diminution in the value of investments.

2.10 The financial statements are prepared in accordance with Revised Schedule VI to the Act. Figures of the previous year have been regrouped / reclassified / rearranged wherever necessary to correspond with those of the current year's classification / disclosure.

A. List of related parties

I) Parties where control exists:

Subsidiaries

JM Financial Consultants Private Limited (IBD)

JM Financial Institutional Securities Private Limited (IED)

JM Financial Investment Managers Limited (Investment Managers)

JM Financial Ventures Limited (SSF)

JM Financial Services Private Limited (Financial Services)

JM Financial Commtrade Limited (Commtrade)

JM Financial Insurance Broking Private Limited (Insurance Broking)

JM Financial Products Limited (NBFC)

JM Financial Securities Private Limited (FID)

JM Financial GILTS Limited (GILTS)

JM Financial Asset Management Private Limited (AMC)

JM Financial Overseas Holdings Private Limited (Overseas)

JM Financial International Private Limited (JMFI) (from October 6, 2011)

JM Financial Singapore Pte. Ltd. (JMFS) (from October 14, 2011)

Infinite India Investment Management Private Limited (Infinite)

Oracle Enterprises Private Limited (Oracle)

Latitude Mercantile Private Limited (Latitude) (from January 10, 2012)

Ardour Trading Private Limited (Ardour) (from January 27, 2012)

Saptarishi Sales & Trading Private Limited (Saptarishi) (from January 27, 2012)

Persepolis Investments Limited (PIL) (up to August 4, 2011)

Persepolis PIPE Investments Limited (PPIL) (up to August 4, 2011)

Partnership Firm

Stellar Investments (Stellar)

II) Other parties with whom the Company has entered into transactions during the year:

a) Associates

JM Financial Asset Reconstruction Company Private Limited (ARC)

JM Financial Trustee Company Private Limited (Trustee)

Financial Engineering Solutions Private Limited (FES) (up to June 29, 2011)

b) Key management personnel

Mr. Nimesh Kampani (NNK)

c) Relative of key management personnel

Mr. Ashith Kampani (ASNK)

d) Enterprise over which Key management personnel is able to exercise significant influence

J.M. Financial & Investment Consultancy Services Private Limited (JMFICS)

J. M. Assets Management Private Limited (J.M. Assets)

JSB Securities Limited (JSB)

Kampani Consultants Limited (KCL)

Persepolis Investment Company Private Limited (PICPL)

SNK Investments Private Limited (SNK)

FICS Consultancy Services Limited (FICS)

Kampani Properties and Holdings Limited (KPHL)

Financial Engineering Solutions Private Limited (FES) (from June 30, 2011)

B. I) No amounts in respect of related parties have been written off/back during the year.

II) During the year, the amount provided for diminution in the value of investments in respect of one of the related parties is Rs Nil (Previous year Rs60.00 Lakh). As on the balance sheet date, the provision in respect thereof is Rs Nil (previous year Rs210.00 Lakh).

III) Related party relationships have been identified by the management and relied upon by the auditors.

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Mar 31, 2011

1. A. Contingent liability

Contingent liability in respect of income tax demand disputed in appeal is Rs. 2,945,333,514/- (previous year Rs. 36,011,675/-). During the year, the Company received a notice of demand from the income tax department pursuant to completion of scrutiny assessment for the Assessment Year 2008-09. The additional tax liability arising out of the aforesaid notice, net of relevant deferred tax liability is Rs. 2,909,321,839/-, inclusive of interest of Rs. 783,418,889/-. The demand of additional tax is mainly on account of income tax department treating the gain on sale of equity shares on termination of joint venture with Morgan Stanley as taxable under the head "Business Income" and not "Capital Gains".

The Company has challenged the assessment order before the appellate authority.

B. Capital commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 6,542,192/- (previous year Rs. 6,808,521/-).

2. Employee stock option scheme (ESOS)

The Employee Stock Option Scheme ("the Scheme") provides for grant of stock options to the eligible employees and/or directors ("the Employees") of the Company and/or its subsidiaries. The Scheme is in accordance with the Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Options are granted at an exercise price, which is either equal to the fair market price of the underlying equity shares or at a premium, as may be determined by the Compensation Committee of the Board.

The Scheme provides for grant of options to the Employees that vests in a graded manner, which are to be exercised within a specified period. During the financial year 2010-11, the Company has granted 3,750,000 options at an exercise price of Rs. 54.80 per option.

The Company has used intrinsic value based method of accounting for determining compensation cost for its stock-based compensation scheme. Since the exercise price is higher than fair market price, the compensation cost for the year ended March 31, 2011 is Nil (previous year Nil).

The estimated fair value of each stock option granted in the Scheme is mentioned in the table below. This was calculated by applying Black-Scholes-Merton model as valued by an independent valuer. The model inputs were the share price at respective grant date, exercise price of Rs. 54.80, volatility of 61.52% to 64.30%, dividend yield of 0.96%, expected term of options in the range of 5 years to 6 years, and a risk-free interest rate of 7.48% to 7.74%.

3. Share capital

The issued, subscribed and paid-up capital, inter alia, includes an amount in respect of 287,500 shares (previous year 287,500 shares) held in abeyance under Section 206A of the Act.

5. Under the head "Current Liabilities & Provisions" outstanding amount(s) due to Micro, Small and Medium Enterprises (MSME) as defined under Micro, Small and Medium Enterprises Development Act 2006 is being disclosed as "Nil", as the Company has not received any reply from its Vendors to the letters written by the Company. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

8. Lease Transaction

Finance lease

The Company has acquired vehicles under the finance lease agreements. The tenure of lease agreements ranges between 36 and 60 months with an option to prepayments/foreclosure.

Operating lease

b) The Company had taken certain assets (premises and furniture & fixtures) on cancellable operating lease for a period ranging not more than 24 months. Lease payment recognised in the profit & loss account for the year in respect thereof aggregate to Rs. 10,200,577/- (previous year Rs. 7,176,167/-)

Valuation assumptions

- The estimates of future salary increases, takes into account inflation, seniority, promotion and other relevant factors in the employment market.

- The above information is certified by the actuary.

b) Compensated absences

As per Companys policy, provision of Rs. 2,088,309/- (previous year Rs. 4,378,437/-) has been made towards compensated absences, calculated on the basis of unutilised leave as on the last day of the financial year.

B. Defined contribution plans

Amount recognised as an expense and included in the "Contribution to provident fund & other funds" Rs. 4,764,500/- (previous year Rs. 4,278,315/-).

15. a) As the Company is a Core Investment Company, its ‘investment activities is considered as the only segment in context of AS 17 on ‘Segment Reporting.

b) Geographical segment is also not applicable to the Company.

16. Disclosure in respect of related parties is attached as per Annexure ‘I.

17. Statement of cash flow is attached as per Annexure ‘II.

18. Interest expense includes Rs. 221,177/- (previous year Rs. 383,546/-) towards interest on fixed loan and Rs. 28,605/- (previous year Rs. 5,995/-) towards interest other than fixed loan.

19. During the year, the Company earned dividend of Rs.14,377,808/- (previous year Rs. 378,030,000/-) from trade investments and dividend of Rs. 3,728,086/- (previous year Rs. 1,631,612/-) from other investments.

20. Group support fees are net of Group support charges of Nil (previous year Rs. 68,285,588/-).

21. Other income includes Rs. 1,155,000/- (previous year Rs. 11,000,000/-) being net reversal of provision for diminution in the value of investments.

22. Other additional disclosures require under paras 3, 4C and 4D of Part II of Schedule VI to the Act are not applicable to the Company.

23. Previous years figures have been re-grouped and re-arranged wherever necessary.

A. List of related parties

I) Parties where control exists

a) Subsidiaries

JM Financial Consultants Private Limited (IBD)

JM Financial Institutional Securities Private Limited (IED)

JM Financial Investment Managers Limited (Investment Managers)

JM Financial Ventures Limited (SSF)

JM Financial Services Private Limited (Financial Services)

JM Financial Commtrade Limited (Commtrade)

JM Financial Insurance Broking Private Limited (Insurance Broking)

JM Financial Products Limited (NBFC)

JM Financial Securities Private Limited (FID)

JM Financial GILTS Limited (GILTS)

JM Financial Asset Management Private Limited (AMC)

JM Financial Overseas Holdings Private Limited (Overseas)

JM Financial Holdings (Mauritius) Limited (JMFM) (upto June 30, 2010)

JMF-BR Investments Holdings (Mauritius) Limited (JMFBR)

Oracle Enterprises Private Limited (Oracle)

Persepolis Investments Limited (PIL)

Persepolis PIPE Investments Limited (PPIL)

Infinite India Investment Management Private Limited (Infinite)

b) Partnership Firm

Stellar Investments (Stellar)

II) Other parties with whom the Company has entered into transactions during the year

a) Associates

JM Financial Asset Reconstruction Company Private Limited (ARC)

JM Financial Trustee Company Private Limited (Trustee)

Financial Engineering Solutions Private Limited (FES)

b) Key management personnel

Mr. Nimesh N Kampani (NNK)

c) Relative of key management personnel

Mr. Ashith N Kampani (ASNK)

d) Enterprise over which Key management personnel is able to exercise significant influence

J.M. Financial & Investment Consultancy Services Private Limited (JMFICS)

J.M. Assets Management Private Limited (J.M.Assets)

JSB Securities Limited (JSB)

Kampani Consultants Limited (KCL)

Persepolis Investment Company Private Limited (PICPL)

SNK Investments Private Limited (SNK)

FICS Consultancy Services Limited (FICS)

Kampani Properties and Holdings Limited (KPHL)

B. I) No amounts in respect of related parties have been written off/back during the year.

II) During the year, the amount provided for diminution in the value of investments in respect of one of the related parties is Rs. 6,000,000/- (previous year Nil) As on the balance sheet date, the provision in respect thereof is Rs. 21,000,000/- (previous year Rs.15,000,000/-).

III) Related party relationships have been identified by the management and relied upon by the auditors.