Mar 31, 2023
Provisions, contingent liabilities, contingent assets and commitments
A provision is recognised when the Company has a present obligation as a result of past events and it is probable
that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be
made.
Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on
the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimates.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision
due to the passage of time is recognized as a finance cost.
Contingent liability is disclosed in the case of:
- a present obligation arising from past events, when it is not probable that an outflow of resources will be
required to settle the obligation;
- a present obligation arising from past events, when no reliable estimate is possible;
- a possible obligation arising from past events, when the probability of outflow of resources is remote.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each Balance Sheet date.
Onerous contracts
A provision for onerous contracts is measured at the present value of the lower of expected costs of terminating the
contract and the expected cost of continuing with the contract. Before a provision is established, the Company
recognizes impairment on the assets with the contract.
Q. Exceptional items
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities
of the Company is such that its disclosure improves the understanding of the performance of the Company, such
income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the
standalone financial statements.
R. Earnings per share
Basic earnings per share are computed by dividing the profit after tax by the weighted average number of equity
shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax as
adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the
dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic
earnings per share and the weighted average number of equity shares which could have been issued on the
conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their
conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued
at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been
actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are
determined independently for each period presented.
S. Government grants
Government grants are not recognised until there is reasonable assurance that the Company will comply with the
conditions attaching to it, and that the grant will be received. Government grants are recognised in the Statement
of Profit and Loss on a systematic basis over the periods in which the Company recognises as expenses the related
costs for which the grants are intended to compensate. Government grants relating to tangible fixed assets are
treated as deferred income and released to the Statement of Profit and loss over the expected useful lives of the
assets concerned.
T. Dividend
The Company recognises a liability to pay dividend to equity holders of the Company when the distribution is
authorised. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders.
A corresponding amount is recognised directly in equity.
U. Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakh as per the
requirement of Schedule III, unless otherwise stated.
V. Events after reporting date
Where events occurring after the Balance Sheet date provide evidence of conditions that existed at the end of the
reporting period, the impact of such events is adjusted within the financial statements. Otherwise, events after the
Balance Sheet date of material size or nature are only disclosed.
1.3 Key accounting estimates and Judgments
The preparation of the Company''s financial statements requires the management to make judgements, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the
accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods.
Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Critical accounting estimates and assumptions:
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below:
Income taxes
The Company''s tax jurisdiction is India. Significant judgements are involved in estimating budgeted profits for the
purpose of paying advance tax, determining the provision for income taxes, including amount expected to be
paid/recovered for uncertain tax positions.
Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Company. The charge in
respect of periodic depreciation / amortization is derived after determining an estimate of an asset''s expected
useful lives and the expected residual value at the end of its life. The useful lives and residual values of company''s
assets are determined by the management at the time the asset is acquired and reviewed at each financial year end.
The lives are based on historical experience with similar assets as well as anticipation of future events, which may
impact their life, such as changes in technical or commercial obsolescence arising from changes or improvements
in production or from a change in market demand of the product or service output of the asset.
Defined benefit plans
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation
are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may
differ from actual developments in the future. These include the determination of the discount rate, future salary
increases, mortality rates and attrition rate. Due to the complexities involved in the valuation and its long-term
nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are
reviewed at each reporting date.
Fair value measurement of financial instruments
When the fair values of financials assets and financial liabilities recorded in the Balance Sheet cannot be measured
based on quoted prices in active markets, their fair value is measured using valuation techniques which involve
various judgements and assumptions.
Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected loss
rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment
calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the
end of each reporting period.
Provisions
The timing of recognition and quantification of the liability (including litigations) requires the application of
judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions
and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
1.4 Recent accounting pronouncements which are not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under
Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31,2023, MCA amended the
Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable from April 1,2023, as below:
(i) Ind AS 1 - Disclosure of material accounting policies:
The amendments related to shifting of disclosure of erstwhile "significant accounting policies" to "material
accounting policies" in the notes to the financial statements requiring Companies to reframe their accounting
policies to make them more "entity specific. This amendment aligns with the "material" concept already required
under International Financial Reporting Standards (IFRS). The Company does not expect this amendment to have
any significant impact in standalone financial statements.
(ii) Ind AS 8 - Definition of accounting estimates:
The amendments will help entities to distinguish between accounting policies and accounting estimates. The
definition of a "change in accounting estimates" has been replaced with a definition of "accounting estimates."
Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to
measurement uncertainty." Entities develop accounting estimates if accounting policies require items in financial
statements to be measured in a way that involves measurement uncertainty. The Company does not expect this
amendment to have any significant impact in standalone financial statements.
(iii) Ind AS 12 - Income Taxes
The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12. At the
date of transition to Ind ASs, a first-time adopter shall recognize a deferred tax asset to the extent that it is probable
that taxable profit will be available against which the deductible temporary difference can be utilized. Similarly, a
deferred tax liability for all deductible and taxable temporary differences associated with:
a) right-of-use assets and lease liabilities
b) decommissioning, restoration and similar liabilities and the corresponding amounts recognized as part of the
cost of the related asset.
Therefore, if a Company has not yet recognised deferred tax on right-of-use assets and lease liabilities or has
recognised deferred tax on net basis, the same need to recognize on gross basis based on the carrying amount of
right-of-use assets and lease liabilities.
(iv) Ind AS 103 - Common control Business Combination
The amendments modify the disclosure requirement for business combination under common control in the first
financial statement following the business combination. It requires to disclose the date on which the transferee
obtains control of the transferor is required to be disclosed.
Mar 31, 2022
Contingent liabilities and commitments (to the extent not provided for) |
'' In Lakh |
|
Particulars |
As at |
As at |
March 31, 2022 |
March 31, 2021 |
|
Contingent liabilities : Claims against the company not acknowledged as debts: - Income tax demands against which the company is in appeals (including |
12,705 |
14,952 |
interest upto date of order) (net of rectification orders) - Others (excluding interest) |
62 |
74 |
Capital commitments: The estimated amount of capital contracts remaining to be executed and not |
12,322 |
4,385 |
provided for (net of advances) |
In addition to the matters as specified in contingent liabilities above, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business the impact of which is unascertainable. The Company''s management does not expect that the legal actions, when ultimately concluded and determined, will have adverse effect on the company''s financial statements.
Other commitments:
The Company has commitments to pay for the services related to (i) maintenance of core network equipment and (ii) technology support and managed services based on long-term agreements, the cancellation of which may entail monetary compensation.
Segment reporting
IND AS 108 establishes standards for the way that companies report information about operating segments and related disclosures about products and services, and geographical areas. Based on the risks and returns identified, organizational structure and the internal financial reporting system, the business segment is the primary segment for the company and accordingly "business of facilitating trading in commodities and incidental activities thereto" is considered as the only primary reportable business segment. Further, since the company renders services only in the domestic market in India and there is no geographical segment.
Employee benefit plans:
1.a. Post employment defined benefit plans :
The company makes annual contributions to the employee''s group gratuity assurance scheme administered by the Life Insurance Corporation of India (''LIC''), a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to fifteen days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs on completion of five years of service.
Employee stock option plan (ESOP):
During the year ended March 31, 2009, the shareholders of the company approved the ''Employee Stock Options Plan 2008 (''ESOP - 2008''). Under the said scheme, 1,625,000 equity shares of '' 10 each have been allotted to ESOP trust who will administer the ESOP scheme on behalf of the company. Out of which ESOP trust has granted (a) 1,313,250 number of options convertible into 1,313,250 equity shares of '' 10 each to eligible employees on July 02, 2008 and August 23, 2008 in aggregate; (b) 331,750 (including the lapsed options available for reissuance) numbers of options convertible into 331,750 equity shares of '' 10 each to eligible employees on October 24, 2011; (c) 10,000 numbers of options convertible into 10,000 equity shares of '' 10 each to an eligible employee on October 03, 2012;(d) 25,300 numbers of options convertible into 25,300 equity shares of '' 10 each to eligible employees on April 19, 2013 ; (e) 10,000 numbers of options convertible into 10,000 equity shares of '' 10 each to an eligible employee on February 19, 2014 and (f) 172,600 numbers of options convertible into 172,600 equity shares of '' 10 each to eligible employees on November 11,2014.
Financial instruments
a. Financial instruments by category
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
(c) Financial risk management
1. Financial risk factors
The company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The company''s financial risk management is an integral part of how to plan and execute its business strategies. The company''s financial risk management policy is set by the company''s management.
2. Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables.
3. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Since the company has no borrowings, exposure to risk of change in market interest rate is nil.
4. Foreign currency risk
The company periodically transacts internationally and few of the transactions are conducted in different currencies. As the volume of the transactions are few, the company has not entered in foreign exchange forward exchange contracts.
6. Derivative financial instruments
The company has not entered into any forward exchange contract being derivative instruments.
7. Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. To manage this, the company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to '' 1,383 lakh and '' 1,186 lakh as at March 31, 2022 and March 31,2021 respectively and unbilled revenue amounting to '' 4,079 lakh and '' 2,566 lakh as at March 31,2022 and March 31,2021 respectively.
Where receivables have been written off, the company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.
The company measures the expected credit loss of trade receivables from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.
Liquidity risk:
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the company''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.
Capital risk management (a) Risk management
The company aim to manages its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the company is based on management''s judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. The company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.
11. Regulatory risk
The company requires a number of regulatory approvals, licenses, registrations and permissions to operate our business For example, the company have licenses from SEBI in relation to, among others, introducing derivatives contracts on various commodities The company''s operations are subject to continued review and the governing regulations changes. The company''s regulatory team constantly monitors the compliance with these rules and regulations. The company''s regulatory team keeps a track regarding the amendments in SEBI circulars/regulations pertaining to the functioning of the company.
I. Corporate social responsibility
"As per Section 135 of the companies Act 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.
The CSR activities of the company are generally carried out through charitable organisations, where funds are allocated by the Company. These organisations carry out the CSR activities as specified in the schedule VII of the companies Act, 2013 on behalf of the company.
In accordance with the guidance note issued by the Institute of Chartered Accountants of India on "Accounting for credit available in respect of MAT under the Income Tax Act, 1961", the company can recognize MAT credit as an asset only when and to the extent there is convincing evidence that the company will be liable to pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recongnised as an asset, the said assets is created by way of a credit to the statement of profit and loss. The company reviews the same at each balance sheet date and write down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that company will pay normal income-tax during the specified period. Accordingly, the Company had recognized MAT credit entitlement of '' 2,065 Lakh in Financial year 18-19 and in current year FY 2021-22''990 lakh has been utilised and short MAT credit utilisation relating to previous year of '' 436 lakh has been recognized.
During the past years, Hon''ble Supreme Court has stayed assessment proceedings on the request of the company for AY 2010-11, AY 2011-12 and AY 2014-15 and the Hon''ble High Court Mumbai had earlier admitted the matter for AY 2012-13 and AY 2013-14. Further during the previous year, on the basis of special audit report, assessing officer has passed assessment order u/s 143 (3) r.w.s. 142 (2A) and 144C (3) of the Income Tax Act, 1961 for AY 2015-16 determining demand of '' 644 lakh ( including interest of '' 242 lakh). Company is contesting the above demands in addition to demands raised in previous years for AY 2010-11 '' 5,160 lakh (including interest '' 2,731 lakh), for AY 2014-15''3,331 lakh including interest '' 1,314 lakh) and for AY 2013-14''2,774 lakh (including interest '' 868 lakh). In the opionion the legal counsel the company has strong case on merit, accordingly management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the company''s financial position and results of operation. Accordingly no provision has been made as on March 31,2022 and the above amounts are shown under contingent liabilities.
The Company had entered into an agreement in August 2018 with a software vendor to develop a trading system for the spot market. As per the milestones, payments were made to the said software vendor from time to time. The Company has incurred amount of '' 2,043 lakh on the said project and was shown as intangible asset under development. On account of non- fulfilment of the scope of the Project within the timelines and disputes arising between the parties, the Board has constituted an empowered Committee to evaluate the financial and technical aspects of the said System developed by the said vendors. The dispute was referred to Singapore International Arbitration Centre ("SIAC"). The Company and the software vendor, have reached an amicable out of court resolution which was confirmed by SIAC. Accordingly, the Company has settled the dues and obtained the delivered codes and specification documents of the platform. Based on the Standing Committee on Technology recommendation, a Technical Committee there after evaluated the Codes afresh and concluded in its technical report that the Codes cannot be used directly for any specific use case of the Exchange. Accordingly the Management has discontinued further development of this intangible asset under development and consequently the entire expenditure of '' 2,043 lakh has been impaired.
The management has assessed the potential impact of COVID-19 on the Company. Based on current assessment, the management is of the view that impact of COVID-19 on the operations of the Company and the carrying value of its assets and liabilities is minimal.
The company along with NSE, India INX, NSDL and CDSL have formed a consortium in the form of a Company incorporated under the Companies Act, 2013. On June 04, 2021, India International Bullion Holding IFSC Limited (IIBH) has been incorporated in India. The company has subscribed to 13,50,00,000 equity shares of IIBH of face value '' 1 at par amounting to '' 1350 lakh. The company''s holding in IIBH remain at 20% of the paid up capital of IIBH till March 3, 2022 and accordingly considered as an associate till March 3,2022. After March 3, 2022, Exchange''s holding fell below 20% of paid up capital of IIBH and stood at 14.43%.
As on March 31,2022 Exchange''s holding was at 14.43% of paid up capital of IIBH.
The Board of Directors of the company at its meeting held on February 04, 2021 has decided to award the contract of implementation of commodity derivatives platform to Tata Consultancy Services Ltd (TCS). The said contract is under process.
The Code on Social Security, 2020 (Code) relating to employee benefits during employment and post- employment benefits has received Presidential assent on in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code comes into effect has not been notified. The company will assess the impact of the Code when it comes into effect and will record any related impact in the period of the Code becomes effective.
Previous year figures have been regrouped/reclassified wherever necessary to conform to current year figures.
The Financial Statements were approved by the Audit Committee and Board of Directors on May 16, 2022.
Mar 31, 2018
Notes:
(i) I n addition to the cash component of Base Minimum Capital, the amount of bank guarantees/fixed deposits receipts (Non cash component) forming part of SGF as at March 31, 2018 aggregate Rs, 5,493 lakh (as at March 31, 2017 Rs, 5,560 lakh).
(ii) As at March 31, 2018 and March 31, 2017, SGF does not include Base Minimum Capital of Non-SEBI registered members.
(iii) In accordance with the regulatory guidelines, the Company has conducted stress test at the end of the current financial year to determine adequacy of the Settlement Guarantee Fund (SGF). The SGF being adequate, no fresh contributions from the profits have been made during the current financial year.
33. SEGMENT REPORTING
IND AS 108 establishes standards for the way that companies report information about operating segments and related disclosures about products and services, and geographical areas. Based on the risks and returns identified, organizational structure and the internal financial reporting system, the business segment is the primary segment for the Company and accordingly "business of facilitating trading in commodities and incidental activities thereto" is considered as the only Primary Reportable business segment. Further, since the Company renders services only in the domestic market in India and there is no geographical segment.
The operating lease arrangements, are renewable on a periodic basis and for most of the leases extend upto a maximum of ten years from their respective dates of inception and relates to rented premises. Some of these lease agreements have price escalation clauses. The operating leases referred above include leases relating to Investor Services Fund.
37. RELATED PARTY INFORMATION
Names of related parties and nature of relationship:
Nature of relationship Name of Related Party
Subsidiary Company Multi Commodity Exchange Clearing Corporation Limited (MCX CCL)
Shareholders'' Directors3 Mr. Amit Goela (w.e.f. 04.02.2016)
Mrs. Madhu Vadera Jayakumar (w.e.f. 04.02.2016)
Mrs. Padma Raghunathan4 (w.e.f. 04.02.2016)
Mr. Hemang Raja (w.e.f. 30.06.2016)
Mr. Chengalath Jayaram (w.e.f. 25.11.2016)
* Sitting fees are paid directly to the nominee institutions Independent Directors Mr. Saurabh Chandra (w.e.f. 03.07.2016)
Mr. Arun Bhargava (w.e.f. 19.11.2016)
Mr. Arun Kumar Nanda (w.e.f. 19.05.2015)
Dr. Govinda Marapalli Rao (w.e.f. 29.09.2015)**
Mr. Prithvi Haldea (w.e.f. 25.10.2016)
Mr. Subrata Kumar Mitra (w.e.f. 19.05.2015)
Mr. Shankar Aggarwal (w.e.f. 01.10.2017)
Ms. Pravin Tripathi (upto 12.08.2017)
Key Managerial Personnel (KMP) Mr. Mrugank Paranjape, MD & CEO (w.e.f. 09.05.2016)
Mr. Narendra Kumar Ahlawat, Chief Regulatory Officer (upto 31.03.2018) Mr. Rahi Racharla, Chief Information Officer, Technology (w.e.f 27.12.2016) Mr. Sanjay Wadhwa, Chief Financial Officer (w.e.f. 27.02.2017)
Mr. Ashwin Patel, Company Secretary (w.e.f. 01.07.2017)
Mr. Ajay Puri, Company Secretary (up to 30.06.2017)
Mr. Parveen Kumar Singhal, (President & Whole Time Director): upto 13.10.2017)
Others
Relatives of KMPs or company in which KMP Adya IT Services Private Limited
is interested and where transaction exists
Employee Welfare Trust MCX ESOP Trust
SEBI mandated IPF Trust Multi Commodity Exchange Investor (Client) Protection Fund (IPF)*
# Pursuant to SEBI circular no. CIR/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017, MCX IPF Trust has ceased to be a related party w.e.f. July 01, 2017. Accordingly for FY 2017-18, transactions up to June 30, 2017 are considered as related party. Closing balance includes transactions from July 01, 2017 to March 31, 2018.
* Excludes gratuity and long term compensated absences which are actuarially valued at Company level and where separate amounts are not identifiable.
Notes :
1. There are no amounts written off or written back during the year in respect of debts due from or to related parties.
2. KMPs as on the respective dates are considered.
38. EMPLOYEE BENEFIT PLANS:
a. Post employment defined benefit plans:
The Company makes annual contributions to the Employee''s Group Gratuity Assurance Scheme administered by the Life Insurance Corporation of India (''LIC''), a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to fifteen days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs on completion of five years of service.
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Company''s financial statements as at March 31, 2018 and March 31, 2017.
* 0 represents '' (0.28) lakhs $ 0 represents '' 0.03 lakhs
Additional Details:
Methodology adopted for Valuation is Projected Unit Credit Method.
Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not proved to be true on different count. This only signifies the change in the liability if the difference between assumed and the actual is not following the parameters of the sensitivity analysis.
Since investment is with insurance company, Assets are considered to be secured.
Assumptions regarding future mortality experience are set in accordance with the Indian Assured Lives Mortality (2006-08).
Expected rate of return on plan assets is based on expectation of the average long term rate of return expected to prevail over the estimated term of the obligation on the type of the investments assumed to be held by LIC, since the fund is managed by LIC.
The estimates of future salary increases, considered in actuarial valuation, takes into account of inflation, seniority, promotions and other relevant factors, such as supply and demand in the employment market.
The Company expects to contribute Rs, 62 lakhs to the plan assets during financial year 2018-19.
Actuarial Gains/Losses are recognized in the period of occurrence under Other Comprehensive Income (OCI). All above reported figures of OCI are gross of taxation.
b. Defined Contribution Plans:
Amounts recognized as expenses towards contributions to Provident and Family Pension Fund, Employee State Insurance Corporation and other funds by the Company are Rs, 214 Lakh (Previous Year Rs, 178 Lakh) Refer Note No. 26.
39. EMPLOYEE STOCK OPTION PLAN (ESOP):
During the year ended 31 March 2009, the shareholders of the Company approved the ''Employee Stock Options Plan 2008 (''ESOP - 2008''). Under the said scheme, 1,625,000 Equity Shares of '' 10 each have been allotted to ESOP Trust who will administer the ESOP Scheme on behalf of the Company. Out of which ESOP Trust has granted (a) 1,313,250 number of options convertible into 1,313,250 equity shares of Rs, 10 each to eligible employees on 2 July 2008 and 23 August 2008 in aggregate; (b) 331,750 (including the lapsed options available for reissuance) numbers of options convertible into 331,750 equity shares of Rs, 10 each to eligible employees on 24 October 2011; (c) 10,000 numbers of options convertible into 10,000 equity shares of Rs, 10 each to an eligible employee on 3 October 2012; (d) 25,300 numbers of options convertible into 25,300 equity shares of Rs, 10 each to eligible employees on 19 April 2013; (e) 10,000 numbers of options convertible into 10,000 equity shares of Rs, 10 each to an eligible employee on 19 February 2014 and (f) 172,600 numbers of options convertible into 172,600 equity shares of Rs, 10 each to eligible employees on November 11, 2014.
Each option entitles the holder to exercise the right to apply and seek allotment of one equity share of Rs, 10 each. Exercise period for each option granted on 2 July 2008 and 23 August 2008 is three years from the date of their respective vesting. Exercise period for each option granted on 24 October 2011, 3 October 2012, 19 April 2013 and 19 February 2014 and
11 November 2014 is one year from the date of their respective vesting.
Lapsed options available for reissuance are 53,654 (As at March 31, 2017: 45,582) shares.
The following table summarizes information about options exercised and granted during the year and about options outstanding and their remaining contractual life as at March 31, 2018:
For options granted on 2 July 2008 and 23 August 2008 under ESOP 2008 Scheme; the intrinsic value of each option is Nil. The estimated fair value of each option is Rs, 15.64 and Rs, 16.62 for options granted on 2 July 2008 and 23 August 2008 respectively. The weighted average fair values have been determined using the Binomial Option Pricing Model considering the following parameters:
Each option granted represents a right to the option grantee but not an obligation to apply for 1 fully paid up Equity Share of Rs, 10 each of the Company at duly adjusted exercise price after consolidation of share and bonus issue i.e. Rs, 144 pursuant to the corporate action during the year ended 31 March 2011.
For options granted on 24 October 2011, 3 October 2012, 19 April 2013, 19 February 2014 and 11 November 2014 under ESOP 2008 Schemes; the intrinsic value of each option is Nil. The estimated fair value of each option is Rs, 324.99, Rs, 342.64, Rs, 202.34, Rs, 181.47 and Rs, 363.18 for options granted on 24 October 2011, 3 October 2012, 19 April 2013, 19 February 2014 and 11 November 2014 respectively. The weighted average fair values have been determined using the Black Schole Formula considering the following parameters:
40. FINANCIAL INSTRUMENTS:
Financial instruments by category
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
Note: Investment in equity instrument & warrants are not held for trading. The company has chosen to measure these at FVTOCI irrevocably as the management believes that presently fair value gains and losses relating to these investments in Profit and Loss may not be indicative of the performance of the company.
The fair value of mutual funds is based on quoted price. The fair value of tax free bonds is based on quoted prices and market observable inputs.
The fair value of warrants & equity securities is based on the valuation provided by the certified values.
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as at March 31, 2018:
* The carrying amount of financial asset measured at FVTOCI in the financial statements are a reasonable approximation of their fair values since the company does not anticiapate that the carrying amounts would be significantly different from the values that would eventually be received or settled.
FINANCIAL RISK MANAGEMENT Financial risk factors
The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The Company''s financial risk management is an integral part of how to plan and execute its business strategies. The Company''s financial risk management policy is set by the company''s management.
Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Since the company has no borrowings, exposure to risk of change in market insterest rate is nil.
Foreign currency risk
The company periodically transacts internationally and few of the transactions are conducted in different currencies. As the volume of the transactions are few, the company has not entered in foreign exchange forward exchange contracts.
Derivative financial instruments
The company has not entered into any forward exchange contract being derivative instruments.
Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs, 631 lakhs and Rs, 281 lakhs as at March 31, 2018 and March 31, 2017 respectively and unbilled revenue amounting to Rs, 2248 lakhs and Rs, 1,997 lakhs as at March 31, 2018 and March 31, 2017 respectively.
Where receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.
The Company measures the expected credit loss of trade receivables from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.
Investment in mutual fund & bonds is with financial institutions with high credit rating assigned by the international credit rating agencies.
Liquidity risk:
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.
Capital Risk Management (a) Risk Management
The Company aim to manages its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management''s judgment of the appropriate balance of key elements in order to meet its strategic and day-to-day needs.
The Company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.
Regulatory Risk
The Company requires a number of regulatory approvals, licenses, registrations and permissions to operate our business For example, the Company have licenses from SEBI in relation to, among others, introducing derivatives contracts on various commoditities The Company''s operations are subject to continued review and the governing regulations changes. The Company''s regulatory team constantly monitors the compliance with these rules and regulations. There have been several changes to the form and manner in which deemed recognized stock exchanges must make contributions to a Settlement Guarantee Fund. Should SEBI in the future vary the required contribution amounts to the Settlement Guarantee Fund, the Company may have to contribute more of funds to the Settlement Guarantee Fund which could materially and adversely affect the Company''s financial ability. The Company''s regulatory team keeps a track regarding the amendments in SEBI circulars/regulations pertaining to such settlement guarantee fund.
Clearing and Settlement Risk
Parties to a settlement may default on their obligations for reason beyond the control of the Company. Company guarantees the settlement of trade executed on the Company''s platform and maintains a settlement guarantee fund to support its guarantee obligations .SEBI introduced the guidelines on stress testing, Settlement Guarantee Fund ("SGF") to ensure that Company is compliant with International benchmarks and regulations.
1. Corporate Social Responsibility
As per Section 135 of the Companies Act 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.
2. Event occurring after balance sheet date
The Board of Directors has recommended Equity dividend of Rs, 17/- per share (Previous year Rs, 15/-) for the financial year 2017-18 (Refer Note 40).
3. During the year, the Company received Income Tax Notices u/s 147 for reassessment of its Income for AY 2010-11 to AY 2013-14 and u/s 142 (2A) for conducting Special Audit for AY 2010-11 to AY 2014-15. The Company has obtained Interim Relief from the Hon Bombay High Court against the Notices of the Income Dept. u/s 147 and for AY 2012-13 and AY2013-14. The Interim Relief will also apply for Notices received u/s 142 (2A) for AY 2012-13 and AY 2013-14. Further the Company has received a Stay from the Hon Bombay High Court against Income Tax Notices u/s 142 (2A) for AY 2014-15. The Company is also in the process of filing Special Leave Petition before the Hon Supreme Court for Notice u/s 147 and 142(2A) for AY 2010-11 and AY 2011-12.
4. The Financial Statements were approved by the Audit Committee & Board of Directors on April 28, 2018.
Mar 31, 2017
Notes :
(i) In addition to the cash component of Base Minimum Capital, the amount of bank guarantees/fixed deposits receipts (Non cash component) forming part of SGF as at 31 March, 2017 aggregate Rs,5,560.07 lakhs (as at 31 March, 2016 Rs,7,382.86 lakhs & at 31 March, 2015 Rs,8,159.83 lakhs).
(ii) As at March 31, 2017, SGF does not include Base Minimum Capital of Non-SEBI registered members. SGF Includes Base Minimum Capital (Cash component) of 606 members aggregating to Rs,2,662.80 lakhs who have not applied for registration with SEBI as at March 31, 2016 and Base Minimum Capital (Non cash component) comprising of bank guarantees/fixed deposits receipts as at 31 March, 2016 aggregate Rs,1,682.31 lakhs.
(iii) In accordance with the regulatory guidelines, the Company has conducted stress test at the end of the current financial year to determine adequacy of the Settlement Guarantee Fund (SGF). The SGF being adequate, no fresh contributions from the profits have been made during the current financial year.
I n addition to the matters as specified in contingent liabilities above, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business the impact of which is unascertainable. The Company''s management does not reasonably expect that the legal actions, when ultimately concluded and determined, will have adverse effect on the Company''s financial statements.
Other Commitments:
The Company has commitments to pay for the services related to (i) maintenance of core network equipment and
(ii) technology support and managed services based on long-term agreements, the cancellation of which may entail monetary compensation.
1. SEGMENT REPORTING
Based on the risks and returns identified, organizational structure and the internal financial reporting system, the business segment is the primary segment for the Company and accordingly "business of facilitating trading in commodities and incidental activities thereto" is considered as the only Primary Reportable business segment as per Ind AS 108, "Operating Segments". Further, since the Company renders services only in the domestic market in India and there is no geographical segment.
2. RELATED PARTY INFORMATION Names of related parties and nature of relationship: Nature of relationship name of Related Party
Subsidiary Companies Multi Commodity Exchange Clearing Corporation Limited (MCX CCL)
SME Exchange of India Limited (SME) (Refer note no 43)
associate Company Metropolitan Clearing Corporation of India Limited (formerly known as
MCX-SX Clearing Corporation Limited) (up to 01.07.2015)
Shareholders'' directors Mr. Amit Goela (w.e.f. 04.02.2016)
Mrs. Madhu Vadera Jayakumar (w.e.f. 04.02.2016)
Mrs. Padma Raghunathan* (w.e.f. 04.02.2016)
Mr. Hemang Raja (w.e.f. 30.06.2016)
Mr. Chengalath Jayaram (w.e.f. 25.11.2016)
Mr. M. A. K. Prabhu* (up to 19.09.2016)
Mr. Ajai Kumar (up to 19.09.2016)
Mr. R. Amalorpavanathan* (up to 29.09.2015)
* Sitting fees are paid directly to the nominee institutions Independent directors Mr. Pravin Tripathi (w.e.f. 12.08.2014)
Mr. Arun Kumar Nanda (w.e.f. 19.05.2015)
Mr. Subrata Kumar Mitra (w.e.f. 19.05.2015)
Dr. Govinda Marapalli Rao (w.e.f. 29.09.2015)**
Mr. Saurabh Chandra (w.e.f. 03.07.2016)
Mr. Prithvi Haldea (w.e.f. 25.10.2016)
Mr. Arun Bhargava (w.e.f. 19.11.2016)
Mr. G. Anantharaman (up to 18.10.2016)
Mr. Satyananda Mishra (up to 18.11.2016)
Key managerial Personnel (KMP) Mr. Mrugank Paranjape, MD & CEO (w.e.f. 09.05.2016)
Mr. Parveen Kumar Singhal, President and Whole Time Director (up to 31.03.2016 : Joint Managing Director)
Mr. Ajay Puri, Company Secretary
Mr. Sanjay Wadhwa, Chief Financial Officer (w.e.f. 27.02.2017)
Mr. Rahi Racharla, Chief Information Officer, Technology Mr. Narendra Kumar Ahlawat, Chief Regulatory Officer Mr. V. Krishnan, Chief Regulatory Officer (up to 31.10.2016)
Mr. Sandeep Kumar Sarawgi, Chief Financial Officer (up to 08.08.2016) others
Relatives of KMPs or company in which KMP (i) PHD Chamber of Commerce and Industry is interested and where transaction exists (ii) Adya IT Services Private Limited
Controlled employee Welfare trust MCX ESOP Trust
SEBi mandated IPF trust Multi Commodity Exchange Investor (Client) Protection Fund (IPF)
** Dr. Govinda Marapalli Rao was appointed as an additional director from 08.08.2015 and his designation was changed on 29.09.2015.
3. Employee Benefit Plans:
a. Post employment defined benefit plans:
The Company makes annual contributions to the Employee''s Group Gratuity Assurance Scheme administered by the Life Insurance Corporation of India (''LIC''), a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to fifteen days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs on completion of five years of service.
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Company''s financial statements as at March 31, 2017 and March 31, 2016.
Additional details:
Methodology adopted for Valuation is Projected Unit Credit Method.
Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not proved to be true on different count. This only signifies the change in the liability if the difference between assumed and the actual is not following the parameters of the sensitivity analysis.
Since investment is with insurance company, Assets are considered to be secured.
Assumptions regarding future mortality experience are set in accordance with the Indian Assured Lives Mortality (2006-08).
Expected rate of return on plan assets is based on expectation of the average long term rate of return expected to prevail over the estimated term of the obligation on the type of the investments assumed to be held by LIC, since the fund is managed by LIC.
The estimates of future salary increases, considered in actuarial valuation, takes into account of inflation, seniority, promotions and other relevant factors, such as supply and demand in the employment market.
The Company expects to contribute Rs, 116.40 lakhs to the plan assets during financial year 2017-18.
Actuarial Gains/Losses are recognized in the period of occurrence under Other Comprehensive Income (OCI). All above reported figures of OCI are gross of taxation
4. Employee Stock option PLAN (ESoP):
During the year ended 31 March 2009, the shareholders of the Company approved the ''Employee Stock Options Plan 2008'' (''ESOP - 2008''). Under the said scheme, 1,625,000 Equity Shares of Rs,10 each have been allotted to ESOP Trust who will administer the ESOP Scheme on behalf of the Company. Out of which ESOP Trust has granted (a) 1,313,250 number of options convertible into 1,313,250 equity shares of Rs,10 each to eligible employees on 2 July 2008 and 23 August 2008 in aggregate; (b) 331,750 (including the lapsed options available for reissuance) numbers of options convertible into 331,750 equity shares of Rs,10 each to eligible employees on 24 October 2011; (c) 10,000 numbers of options convertible into 10,000 equity shares of Rs,10 each to an eligible employee on 3 October 2012; (d) 25,300 numbers of options convertible into 25,300 equity shares of Rs,10 each to eligible employees on 19 April 2013; (e) 10,000 numbers of options convertible into 10,000 equity shares of Rs,10 each to an eligible employee on 19 February 2014 and (f) 172,600 numbers of options convertible into 172,600 equity shares of Rs,10 each to eligible employees on November 11, 2014.
For options granted on 24 October 2011, 3 October 2012, 19 April 2013, 19 February 2014 and 11 November 2014 under ESOP 2008 Schemes; the intrinsic value of each option is Nil. The estimated fair value of each option is Rs,324.99, Rs,342.64, Rs,202.34, Rs,181.47 and Rs,363.18 for options granted on 24 October 2011, 3 October 2012, 19 April 2013, 19 February 2014 and 11 November 2014 respectively. The weighted average fair values have been determined using the Black Schole Formula considering the following parameters:
5. FINANCIAL Instruments:
Financial instruments by category
The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
1. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to the short-term maturities of these instruments.
2. Financial instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rates and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables. Accordingly, fair value of such instruments is not materially different from their carrying amounts.
FINANCIAL RISK MANAGEMENT Financial risk factors
The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The Company''s financial risk management is an integral part of how to plan and execute its business strategies. The Company''s financial risk management policy is set by the company''s management.
Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Since the company has no borrowings, exposure to risk of change in market interest rate is nil.
Foreign currency risk
The company periodically transacts internationally and few of the transactions are conducted in different currencies. As the volume of the transactions are few, the company has not entered in foreign exchange forward exchange contracts.
derivative financial instruments
The company has not entered into any forward exchange contract being derivative instruments.
Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs,281.34 lakhs and Rs,419.13 lakhs as at March 31, 2017 and March 31, 2016 respectively and unbilled revenue amounting to Rs,1,997.22 lakhs and Rs,1,838.07 lakhs as at March 31, 2017 and March 31, 2016 respectively.
Where receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.
The Company measures the expected credit loss of trade receivables from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.
Investment in mutual fund & bonds is with financial institutions with high credit rating assigned by the international credit rating agencies.
Liquidity risk:
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company''s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.
Capital Risk Management (a) Risk Management
The Company aims to manage its capital efficiently so as to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The capital structure of the Company is based on management''s judgment of the appropriate balance of key elements in order to meet its strategic and day-to-day needs.
The Company''s policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.
6. corporate social responsibility
As per Section 135 of the Companies Act 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.
7. Pursuant to the Consent Terms between the Company and Metropolitan Stock Exchange of India Ltd. (MSEI) filed with and taken on record by the H''ble Bombay High Court, the Company has since received necessary approval and no objection from SEBI for conversion of warrants of MSEI into its Equity Shares. Accordingly, the Company vide its letter dated September 29, 2016 to MSEI has exercised the conversion right of 26,51,77,600 warrants issued as per the Scheme of Reduction cum Arrangement into 26,51,77,600 Equity shares of ''1 each. The equity shares have since been alloted to the company and have been credited to demat account of the Company on October 3, 2016. Amount of Rs,15,07,40,072 has been received towards balance 15,07,40,072 warrants on October 14, 2016 as per the Consent Terms.
8. disclosure in respect of specified bank notes held and transacted
The Company did not have any holding or dealing in Specified Bank Notes during the period November 8, 2016 to December 31, 2016, as envisaged in notification G.S.R. 308(E) dated March 30, 2017.
9. Exceptional ITEMS
Pursuant to compliance of regulatory inspection, certain penalties pertaining to financial years 2010-11 and 2011-12 amounting to Rs,194 lakhs were transferred to Multi Commodity Exchange Investor (Client) Protection Fund (IPF). Further, similar penalties for earlier years pertaining to financial years 2007-08 to 2009-10 amounting to Rs,369.1 lakhs were transferred to IPF. Accordingly, during the year ended March 31, 2016 a total sum of Rs,563.1 lakhs was transferred to IPF and disclosed as an exceptional item.
10. SME EXCHANGE of INDIA LIMITED (SME)
The Board of Directors of SME Exchange of India Limited (SME) at its meeting held on January 19, 2015 considered that SME had not commenced any operations and with no possibility of commencing in the foreseeable future, agreed to the membersRs, voluntary winding up. The Directors of SME after having made inquiry into the affairs of the Company and on the basis of the Auditors report for the period commencing from April 1, 2014 to January 21, 2015, formed the opinion that the SME is solvent and will be able to pay its debt in full within 36 months from the commencement of winding up. Thereafter, the members of SME at its Second Extra Ordinary General Meeting held on March 18, 2015, accorded their consent for members'' voluntary winding up, pursuant to the provisions of Section 484(1) (b) of the Companies Act, 1956 and also approved the appointment of a Liquidator for the same.
The Liquidator realized all the assets and paid off the liabilities and returned the share capital to the respective shareholders. Thereafter, the liquidator at the final General Meeting of SME held on March 28, 2016, submitted the accounts showing in detail the manner in which the winding up has been conducted and the assets of the SME have been disposed off which was approved by the shareholders of SME. The Company has realized ''3.7 lakhs against its carrying value of ''4.0 lakhs in equity shares. The requisite filing with Registrar of the Companies and the Official Liquidator w.r.t. the final general meeting is being done by the Liquidator and the final order of dissolution is awaited.
11. EVENT occurring AFTER BALANCE SHEET DATE
The Board of Directors has recommended Equity dividend of ''15/- per share (Previous year ''6.5/-) for the financial year 2016-17 (Refer Note 38).
12. The Financial Statements were approved by the Audit Committee & Board of Directors on May 4, 2017.
13. FIRST-TIME Adoption oF IND AS
These are the Company''s first financial statements prepared in accordance with Ind AS. The Company has adopted Indian Accounting Standards (Ind AS) notified by the Ministry of Corporate Affairs with effect from April 1, 2016, with a transition date of April 1, 2015. Ind AS 101 - "First-time Adoption of Indian Accounting Standards" requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements which is for the year ended March 31, 2017 for the company, be applied retrospectively and consistently for all financial years presented. Consequently, in preparing these Ind AS financial statements, the Company has availed certain exemptions and complied with the mandatory exceptions provided in Ind AS 101, as explained below. The resulting difference in the carrying values of the assets and liabilities as at the transition date between the Ind AS and Previous GAAP (I GAAP) have been recognized directly in equity (retained earnings or another appropriate category of equity).
Set out below are the Ind AS 101 optional exemptions applied in the transition from IGAAP to Ind AS.
A. optional Exemptions availed
1. Property, Plant and Equipment
The Company has availed the exemption with regards to fair valuation of Property, Plant and Equipment on the date of transition as defined in Para 7AA of Appendix - D of Ind AS 101 that carrying value of Property, Plant and Equipment as on date of transition has been considered as deemed cost for the purpose of initial measurement under Ind AS.
2. Investment in subsidiaries and associates
The Company has availed the exemption with regards to fair valuation of investments in subsidiaries and associates as per Para 14 & 15 of Appendix - D of Ind AS 101 and carrying value as per previous IGAAP is considered as deemed cost under Ind AS.
3. Share-based payment
I nd AS 102 Share-based Payment has not been applied to equity instruments in share based payment transactions that vested before the transition date (April 01, 2015). The remaining options have been measured at fair value as against intrinsic value previously as measured under IGAAP. The excess of stock compensation expense measured using fair value over the cost recognized under IGAAP using intrinsic value has been adjusted in ''ESOP Compensation Reserve'', with the corresponding impact taken to the retained earnings as on the transition date.
4. Designation of previously recognized financial instruments
Paragraph D19B of Ind AS 101 gives an option to an entity to designate investments in equity instruments at Fair Value Through Other Comprehensive Income (FVTOCI) on the basis of the facts and circumstances at the date of transition to Ind AS. The company has opted to apply this exemption for its investment in equity Investments.
B. Transition to Ind AS - Reconciliations
The following reconciliations provide a quantification of the effect of significant differences arising from the transition from IGAAP to Ind AS as required under Ind AS 101:
I. Reconciliation of Balance sheet as at April 01, 2015 (Transition Date) and March 31, 2016
II. Reconciliation of Statement of Profit and Loss for the year ended March 31, 2016
III. Reconciliation of Total Comprehensive Income for the year ended March 31, 2016
IV. Reconciliation of Equity as at April 01, 2015 and as at March 31, 2016
The following explains the material adjustments made while transition from previous accounting standards to IND AS:
A. Investments
- Investments in tax free bonds and mutual funds are carried at fair value through Profit and loss under Ind AS as compared to being carried at cost under IGAAP.
- Investment in equity instruments are carried at fair value through OCI in Ind AS compared to being carried at cost under IGAAP.
B. NPN / PoP Security Deposits
NPN / POP equipment deposits from the members are measured at amortized cost.
C. Employee Benefits Expenses (Gratuity)
Both under Indian GAAP and Ind AS, the company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, re-measurements are recognized in other comprehensive income.
D. ESoP
Employee compensation expenses relating to share based payment (ESOP) is measured at fair value of the option as per Ind AS 102 as compared to intrinsic value under IGAAP.
E. other comprehensive income
Under IGAAP, the company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled profit or loss as per Indian GAAP to profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.
F. other adjustments
Movement in other comprehensive income includes fair value change on account of Investment in equity instruments of other entities - Dubai Gold and Commodities Exchange (DMCC), Metropolitan Stock Exchange of India Limited, Metropolitan Clearing Corporation of India Limited, Investments in warrants of other company - Metropolitan Stock Exchange of India Limited designated as Fair value through other comprehensive income.
G. Deferred tax
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 Income Taxes'' requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind ''AS 12 Income Taxes'' approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity.
H. Exceptional items reversed by Rs,6,104.53 lakhs is towards aggregate loss, diminution and provision on account of the investments in MSEI for FY 2015-16, the same has been routed through OCI net of tax.
I. Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.
J. Statement of cash flows
The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.
K. Financial assets and financial liabilities have been regrouped/reclassified wherever required to comply with
Mar 31, 2016
1. SEGMENT REPORTING
Based on the risks and returns identified, organizational structure and
the internal financial reporting system, the business segment is the
primary segment for the Company and accordingly "business of
facilitating trading in commodities and incidental activities thereto"
is considered as the only Primary Reportable business segment.
Further, since the Company renders services only in the domestic market
in India and hence there is no geographical segment.
2. There are no amounts due to the suppliers covered under the Micro,
Small and Medium Enterprises Development Act, 2006; this information
takes into account the available data with the Company.
3. STOCK BASED COMPENSATION :
a) During the year ended 31 March 2009, the shareholders of the Company
approved the ''Employee Stock Options Plan 2008 (''ESOP - 2008''). Under
the said scheme, 1,625,000 Equity Shares of Rs. 10 each have been
allotted to ESOP Trust who will administer the ESOP Scheme on behalf of
the Company. Out of which, ESOP Trust has granted (i) 1,313,250 number
of options convertible into 1,313,250 equity shares of Rs. 10 each to
eligible employees on 2 July 2008 and 23 August 2008 in aggregate; (ii)
331,750 (including the lapsed options available for reissuance) numbers
of options convertible into 331,750 equity shares of Rs.10 each to
eligible employees on 24 October 2011; (iii) 10,000 numbers of options
convertible into 10,000 equity shares of Rs.10 each to an eligible
employee on 3 October 2012; (iv) 25,300 numbers of options convertible
into 25,300 equity shares of Rs.10 each to eligible employees on 19
April 2013 ; (v) 10,000 numbers of options convertible into 10,000
equity shares of Rs. 10 each to an eligible employee on 19 February
2014 and (vi) 172,600 numbers of options convertible into 172,600
equity shares of Rs. 10 each to eligible employees on November 11,
2014.
4. Exceptional Items
a) The Company, along with Financial Technologies (India) Limited
(FTIL), an erstwhile anchor investor/promoter of the Company, held
equity shares and warrants in Metropolitan Stock Exchange of India
Limited (MSEI), (formerly MCX-Stock Exchange). As per the applicable
SEBI regulations, MSEI was required to adjust its shareholding pattern
so as to bring it within the limits prescribed by the SEBI regulations
within the time prescribed, i.e. June 19, 2015. Towards this end, the
Company made serious efforts to dispose off the warrants. However,
these efforts were significantly hampered by several factors that
reduced the marketability of MSEI''s warrants, such as consistently
reducing market share and net worth which reduced the value and demand
for MSEI''s shares and warrants. This made it difficult to dispose off
the warrants. Since these factors were outside the Company''s control,
the Company approached SEBI seeking an extension of time to dispose off
the warrants. Also, in view of the merger of the SEBI and the FMC, the
Company also requested SEBI to consider treating the Company on par
with recognized Stock Exchanges so that the Company could hold upto 15%
shareholding/warrants in MSEI. SEBI, however, did not grant the
Company''s request. Despite these factors, the Company continued to make
vigorous efforts to dispose off the warrants. The Company''s efforts,
however, were thwarted by MSEI, who announced a rights issue of equity
shares on May 29, 2015 at par i.e. at Re.1 per share. Since the rights
issue remained open until July 9, 2015, it was virtually impossible to
dispose off all the warrants before June 19, 2015. Apprehending that
MSEI would cancel the warrants and misappropriate the deposit placed by
the Company with MSEI against the warrants, the Company filed a Suit
against MSEI before the Hon''ble Bombay High Court seeking an injunction
against cancellation of the warrants and appropriation of the deposit.
The Company also sought refund of the amount of Rs.415.92 million,
being the amount of deposit presently held by MSEI against the
warrants. Vide its interim orders dated July 9, 2015 and July 10, 2015,
the Hon''ble High Court restrained MSEI from cancelling and / or
extinguishing the warrants or any rights relating thereto, and from
dealing in any manner with the remaining deposit of Rs.415.92 million
till further orders. The Hon''ble Court also restrained MSEI from
taking any steps in pursuance of any Board resolution that MSEI may
have passed for cancellation of the warrants. By a further order dated
August 3, 2015, the Hon''ble Court recorded MSEI''s statement that MSEI
would deposit a sum of Rs.200.00 million in Court within a period of
four weeks, on a without prejudice basis, to establish its bona fides.
The matter was heard on October 8, 2015 and the order pronounced on
October 13, 2015. The Hon''ble Court, inter alia, has held that although
the Company may have been deprived of its rights to trade the warrants
for shares or trade the warrants for consideration after June 19, 2015
this does not mean that the extinguishment of the warrants would entail
appropriation of the deposit. The Hon''ble Court has also held that the
money admittedly belongs to the Company and there is no provision in
law or in contract whereby MSEI could appropriate the money towards its
own capital reserves. In view of the above, the Hon''ble Court has
concluded that it would not be desirable to allow MSEI to retain the
deposit pending trial of the Suit. Accordingly, the Hon''ble Court has
made the Company''s Notice of Motion absolute and directed MSEI to
deposit an additional sum of Rs.21,59,17,672/- to the credit of the
suit account, within a period of eight weeks from the date of the
Order. Thus, the total amount deposited by MSEI would be equal to
Rs.415.92 million. This amount is to be invested in a fixed deposit
with a nationalized bank pending hearing of the Suit ("October 13
Order").
On December 9, 2015, MSEI filed Appeal No. (L) 927 of 2015 before a
Division Bench of the Bombay High Court against the October 13 Order.
MSEI also filed Notice of Motion (L) No.3471 of 2015 seeking a stay on
the operation and implementation of the October 13 Order, pending final
hearing and disposal of the Appeal inter alia on the grounds that (a)
the Company was aware that it had to divest its excess shareholding in
the form of Warrants by June 19, 2015; (b) MSEI was required to ensure
compliance of applicable laws and regulations, and thus only cancelled
the warrants as otherwise it apprehended being derecognized by SEBI;
(c) MSEI had established its bona fides by not acting on its Board
Resolution dated June 27, 2015 and also by depositing a sum of
Rs.200.00 million with the Bombay High Court; and (d) Given that the
Company''s warrants have not been cancelled and MSEI has been restrained
from implementing its Board Resolution dated June 27, 2015, MSEI cannot
be additionally called upon to deposit a further Rs.215.92 million in
Court. The matter was listed on 17.02.2016, for hearing on the Notice
of Motion filed in the said appeal. On December 10, 2015, MSEI also
filed Notice of Motion (L) 3486 of 2015 in the Suit before the Single
Judge seeking a vacation of the October 13 Order on the ground that
MSEI has now passed a resolution withdrawing their earlier resolution
of cancellation.
Vide an interim order dated December 11, 2015, the Division Bench
extended the time given to MSEI for deposit of the amount of Rs.215.92
million till the next date of hearing. As the matter is yet to be heard
on merits, this interim order granting further time to MSEI to deposit
the money has been extended from time to time. In March, 2016, the
assignment of the Judges changed and the matter was listed before a
different Bench. However, in view of the fact that the earlier Division
Bench had already heard the matter and was aware of the facts, both
parties made a representation to the Ld. Chief Justice of the Bombay
High Court seeking assignment of the matter to the same Division Bench.
The parties are still awaiting necessary directions from the Ld. Chief
Justice for re-assignment of the matter.
In view of the above, the Company has valued the warrants at its face
value of Re.1 each and brought down the carrying cost by Rs.425.89
million. As the Company was only able to sell 148,277,938 warrants to
various parties/entities at bids below its carrying cost, a loss of
Rs.134.83 million was incurred on the sale of these warrants. Further,
based on the market price determined on a weighted average basis for
the sale of warrants by MCX, the equity shares have been brought to the
lower of cost and this aforesaid market value. This is as per the
Company''s Accounting Policy on current investments and accordingly a
provision of Rs.33.30 million has been made. The aggregate loss,
diminution and provision of Rs.594.02 million on account of the
investments in MSEI are exceptional in nature and were accordingly
disclosed in the financial results for the quarter ended June 30, 2015.
Further provision of Rs.16.43 million has been made in quarter ended
March 31, 2016 towards equity shares investments as per Company''s
Accounting Policy. The aggregate loss, diminution and provision on
account of the investments in MSEI for FY 2015-16 is Rs.610.45 million.
As at March 31, 2016, the Company held 6,65,99,408 equity shares of
MSEI (valued at Rs.57.25 million at the rate of Rs.0.86 per share) and
41,59,17,672 warrants of MSEI (valued at Rs.415.92 million) and
65,00,000 equity shares of Metropolitan Clearing Corporation of India
Limited (MCCIL) (formerly known as MCX-SX Clearing Corporation Limited
(valued at Rs.65.00 million).
b) Pursuant to compliance of regulatory inspection, certain penalties
pertaining to financial years 2010-11 and 2011-12 amounting to Rs.19.40
million were transferred to Multi Commodity Exchange Investor (Client)
Protection Fund (IPF). Further, similar penalties for earlier years
pertaining to financial years 2007-08 to 2009- 10 amounting to Rs.36.91
million transferred to IPF. Accordingly during the year ended March 31,
2016 a total sum of Rs.56.31 million was transferred to IPF and
disclosed as an exceptional item.
5. The Board of Directors of SME Exchange of India Limited (SME) at
its meeting held on January 19, 2015 considered that SME had not
commenced any operations and with no possibility of commencing in the
foreseeable future, agreed to the members'' voluntary winding up. The
Directors of SME after having made inquiry into the affairs of the
Company and on the basis of the Auditors report for the period
commencing from April 1, 2014 to January 21, 2015, formed the opinion
that the SME is solvent and will able to pay its debt in full within 36
months from the commencement of winding up. Thereafter, the members of
SME at its Second Extra Ordinary General Meeting held on March 18,
2015, accorded their consent for members'' voluntary winding up,
pursuant to the provisions of Section 484(1) (b) of the Companies Act,
1956 and also approved the appointment a Liquidator for the same.
The Liquidator realised all the assets and paid off the liabilities and
returned the share capital to the respective shareholders. Thereafter,
the liquidator at the final General Meeting of SME held on March 28,
2016, submitted the accounts showing in detail the manner in which the
winding up has been conducted and the asset of the SME has been
disposed off which was approved by the shareholders of SME. The
Company has realised Rs.0.37 million against its carrying value of
Rs.0.40 million in equity shares. The requisite filing with Registrar
of the Companies and the Official Liquidator w.r.t. the final general
meeting is being done by the Liquidator and the final order of
dissolution is awaited.
6. During the year ended 31 March, 2016, the Company has spent
Rs.29.69 million (previous year Rs.5.33 million) as Corporate Social
Responsibility (CSR) expenditure.
7. With effect from September 28, 2015 Forward Markets Commission was
merged with Securities and Exchange Board of India and accordingly SEBI
regulations are applicable to the Company. As per clause 3 of
Securities and Exchange Board of India (Regulatory Fees on Stock
Exchanges) Regulations, 2006, every recognised stock exchange is
required to pay regulatory fees on its annual turnover at the rate
prescribed from time to time. Accordingly, as per the prevalent rates
the Company has accrued regulatory fees of Rs.21.20 million, which is
disclosed under Note 22 "Other Expenses".
8. During the previous year, pursuant to Companies Act, 2013 (''the
Act'') being effective from 1 April, 2014, the Company has revised
depreciation rates on certain fixed assets as per the useful life
specified in ''Part C'' of Schedule II of the Act. In respect of assets
whose useful life is already exhausted as on 1 April, 2014,
depreciation of Rs. 87.55 million (net of tax impact of Rs. 29.76
million) has been adjusted in the Retained Earnings, in accordance with
the requirements of Schedule II of the Act.
Consequent to the applicability of the Companies Act, 2013 with effect
from 1 April, 2014 depreciation for the year ended 31 March, 2015
charged to the Statement of Profit and loss was higher by Rs.28.55
million for the assets, whose useful life continues beyond 1 April,
2014.
9. In accordance with the directions of the Forward Markets
Commission (FMC), a Special Audit of the Company was carried out for
the period since inception of the Company to 30 September, 2013. The
terms of reference, inter alia, included identification of related
parties (as defined by FMC in the terms of reference and a working
definition arrived at for the purpose of the review), review of
non-trading transactions between the Company and significant related
parties, and review of transactions of expenses incurred (individually)
above Rs. 2.50 million. As per the Report, the working definition of
related parties is not as may be defined under any provisions of any
prevailing laws or guidance from any professional bodies in India.
The Final Report of the Special Audit was received on 21 April, 2014
and was placed before the Board of the Company on 26 April, 2014. The
Management of the Company after making a detailed analysis of the
observations in the Report, and after ascertaining the facts in each
case has taken appropriate action including legal and filing of
recovery suits as it deemed fit. As a part of this action, Rs.112.07
million (Rs.35.10 million included under Other income - note 19 under
the head "Miscellaneous Income" and Rs.76.97million included under
Other expenses - note 22 under the head "Provision for doubtful
advances" was recovered during the previous year ended 31 March, 2015.
10. Forward Markets Commission (FMC) had issued revised norms
regarding Shareholding, Ownership, Net worth, Fit & Proper criteria,
etc. on 6 May, 2014. Pursuant to this order, in addition to other
entities, Kotak Mahindra Bank Ltd acquired 15% equity stake in the
Company from Financial Technologies (India) Limited (FTIL, erstwhile
Promoter of the Company) during the year. Accordingly, FTIL is no
longer a related party w.e.f. 29 August, 2014.
41. The previous year figures have been reclassified / regrouped to
conform to this year''s classification.
Mar 31, 2015
1. Contingent liabilities and commitments (to the extent not Provided
FOR)
a) contingent liabilities:
Rs,in million
Particulars as at as at
31 march 2015 31 march 2014
(i) Claims against the Company
not acknowledged as debts:
- Income tax demands against
which the Company is in appeals 51.18 42.56
(including interest)
- Others (excluding interest) 7.59 6.35
(ii) Bank guarantee given 36.50 36.50
b) In addition to the matters as specified in (a) above, the Company is
subject to legal proceedings and claims, which have arisen in the
ordinary course of business. The Company''s management does not
reasonably expect that the legal actions, when ultimately concluded and
determined, will have adverse effect on the Company''s financial
statements.
c) commitments:
(i) capital commitments:
The estimated amount of capital contracts remaining to be executed and
not provided for (net of advances) is Rs. 64.16 million (as at 31 March
2014: Rs. 2.47 million).
(ii) Other commitments:
The Company has commitments to pay for the services related to (i)
maintenance of core network equipment and (ii) technology support and
managed services based on long-term agreements, the cancellation of
which may entail monetary compensation.
2. Segment Reporting
Based on the risks and returns identified, organizational structure and
the internal financial reporting system, the business segment is the
primary segment for the Company and accordingly "business of
facilitating trading in commodities and incidental activities thereto"
is considered as the only Primary Reportable business segment.
Further, since the Company renders services mainly in the domestic
market in India there is no geographical segment.
3. Related Party information:
a) names of related parties and nature of relationship:
(i) company having significant influence over the company:
Financial Technologies (India) Limited (FTIL) (up to 29 August, 2014)
[Refer Note 36(i)] (ii) Subsidiary companies:
a) Multi Commodity Exchange Clearing Corporation Limited (MCXCCL).
b) SME Exchange of India Limited (SME) (Refer Note 38)
(iii) associate company:
MCX SX Clearing Corporation Limited (MCX-SX CCL)
(iv) Shareholders'' Directors
a) Ajai Kumar
b) R.Amalorpavanathan*
c) M. A. K. Prabhu*
d) B. V. Chaubal* (up to December 31,2014)
e) K. N. Reghunathan* ( upto August 19, 2014)
f) P Paramasivam* ( upto August 11, 2014)
g) P. Satish ( upto July 4, 2014)
h) Rajiv Abhyankar (upto June 26, 2014)
(v) Key managerial Personnel (KmP):
a) Parveen Kumar Singhal - Joint Managing Director
b) Sandeep Kumar Sarawgi - Chief Financial Offer
c) Ajay Puri - Company Secretary and Chief Compliance Offer
d) Manoj Vaish - Managing Director & CEO (up to 10 May,2014)
e) Shreekant Javalgekar - Managing Director & CEO (up to 22 October,
2013)
(v) Others:
(A) Relatives of KMPs or company in which KMP is interested and where
transaction exists: Adya IT Services Private Limited
(B) Controlled Employee Welfare Trust : MCX ESOP Trust
(C) Multi Commodity Exchange Investor (Client) Protection Fund (IPF) *
Sitting fees are paid directly to the nominee institutions
4. Pursuant to Companies Act, 2013 (''the Act'') being effective from 1
April, 2014, the Company has revised depreciation rates on certain fixed
assets as per the useful life specified in ''Part C'' of Schedule II of
the Act. In respect of assets whose useful life is already exhausted as
on 1 April, 2014, depreciation of Rs. 87.55 million (net of tax impact of
Rs. 29.76 million) has been adjusted in the Retained Earnings, in
accordance with the requirements of Schedule II of the Act.
Consequent to the applicability of the Companies Act, 2013 with effect
from 1 April, 2014 depreciation for the year ended 31 March, 2015
charged to the Statement of Profit and loss is higher by Rs. 28.55 million
for the assets, whose useful life continues beyond 1 April, 2014
5. In accordance with the directions of the Forward Markets
Commission (FMC), a Special Audit of the Company was carried out for
the period since inception of the Company to 30 September, 2013. The
terms of reference, inter alia, included identification of related
parties (as defend by FMC in the terms of reference and a working
definition arrived at for the purpose of the review), review of
non-trading transactions between the Company and significant related
parties, and review of transactions of expenses incurred (individually)
above Rs. 25 Lakhs. As per the Report, the working definition of related
parties is not as may be defend under any provisions of any prevailing
laws or guidance from any professional bodies in India.
The Final Report of the Special Audit was received on 21 April, 2014
and was placed before the Board of the Company on 26 April, 2014. The
Management of the Company after making a detailed analysis of the
observations in the Report, and after ascertaining the facts in each
case has taken appropriate action including legal and fling of recovery
suits as it deemed ft. As a part of this action, Rs. 112.07 million (Rs.
35.10 million included under Other income  note 19 under the head
"Miscellaneous Income" and Rs. 76.97million included under Other expenses
 note 22 under the head "provision for doubtful advances" was
recovered during the year ended 31 March, 2015.
6. (i) Forward Markets Commission (FMC) had issued revised norms
regarding Shareholding, Ownership, Net worth, Fit &Proper criteria, etc.
on 6 May, 2014. Pursuant to this order, in addition to other entities,
Kotak Mahindra Bank Ltd acquired 15% equity stake in the Company from
Financial Technologies (India) Limited (FTIL, erstwhile Promoter of the Company) during the year. Accordingly, FTIL is no longer a related party
w.e.f 29 August, 2014.
(ii) The Board of Directors had constituted a Negotiation Committee to
discuss the contracts with entities related to the erstwhile promoter
group, in particular, Financial Technologies (India) Limited (FTIL).
Consequent to the negotiations, effective 1 July, 2014 the Company
entered into Master Amendment to Principal Agreements with FTIL.
(iii) Consequent to the Master Amendment to the Principal Agreements
with FTIL and divestment by FTIL of its entire stake in the Company,
the Company has complied with the FMC Order dated 17 December, 2013 and
the revised norms regarding shareholding, ownership, net worth, Fit &
Proper Criteria, etc. of the Nationwide
Multi Commodity Exchanges (NMCE) dated 6 May, 2014. Accordingly, FMC
vide its letter, dated 29 September, 2014 granted its approval for
Continuous Contract Launch Calendar for the futures contracts expiring
in the year 2015 and onwards.
7. (i) During the year, the Company converted 2,10,46,514 warrants of
Metropolitan Stock Exchange of India Limited (MSXI) [(formerly known as
''MCX Stock Exchange Limited (MCX-SX)] into equity shares. During the year
the Company also sold 3,05,39,982 number of warrants. Accordingly, as at 31 March, 2015 the Company has investments in 482,11,514 (as at 31 March,
2014: 27,165,000) equity shares and 58,25, 83,504 (as at 31 March, 2014:
634,170,000) warrants of MSXI and investments in 6,500,000 equity
shares of MCX-SX Clearing Corporation Limited (MCX-SX CCL). The
warrants are valid till 19 June, 2015 and each warrant entitles the
Company to subscribe to one equity shares of MSXI at any time after six
months from the date of issue of warrants. The warrants are freely
transferable by endorsements and delivery. The warrants do not carry
any dividend or voting rights.
(ii) Pursuant to SEBI Order dated 19 March, 2014, the Company has been
directed by SEBI to divest its holding in both MSXI and MCX-SX CCL. The
Company through various correspondence and vide its recent letters
dated 30 April, 2015 and 4 May, 2015 has once again represented to SEBI
that FTIL and the Company no longer act in concert, especially in view
of the developments during the year, the Company may be permitted to
hold up to 15% of the paid up capital of MSXI and be granted extension
of time till 31 December, 2015 to hold its warrants.
(iii) In accordance with Accounting Standard 13 on "Accounting for
Investments" and the Company''s accounting policy, current investments
are to be carried at the lower of cost and fair value in the Balance
Sheet. Based on the latest available financial statements of these
companies, the Management of the Company is of the view that the
aggregate carrying amount of investments of Rs. 1,313.90 million which is
equivalent to the cost of their acquisition represents the fair value
of these investments as at 31 March, 2015.
8. (i) The Board of Directors of SME Exchange of India Limited (SME)
in its meeting held on January 19, 2015 considered that SME had not
commenced any operations and with no possibility of commencing in the
foreseeable future, agreed to the members'' voluntary winding up and
decided that the cut-off date for the financial statements shall be
January 21, 2015. Further, the members of SME at its Second Extra
Ordinary General Meeting, held on March 30, 2015, accorded their
consent for its winding up pursuant to the provisions of Section 484(1)
(b), of the Companies Act, 1956. The Directors of SME after having made
inquiry into the affairs of the Company and on the basis of the Auditors
report for the period commencing from April 1, 2014 to January 21,
2015, and Declaration of Solvency, formed the opinion that the Company
is solvent and will able to pay its debt in full within 36 months from
the commencement of winding up.
(ii) In accordance with Accounting Standard 13 on "Accounting for
Investments" and the Company''s accounting policy long-term investments
are stated at cost less provision for diminution. Provision for
diminution in the value of long-term investments is made only if such a
decline is other than temporary in the opinion of the management
investments are to be carried at the lower of cost and fair value in
the balance sheet. Accordingly, provision for diminution of Rs. 0.11
million has been made for the Company''s investment in SME.
9. During the year, the Company has spent Rs. 5.33 million as Corporate
Social Responsibility (CSR) expenditure.
10. The previous year figures have been reclassified / regrouped to
conform to this year''s classifcation.
Mar 31, 2014
1. General Information
Multi Commodity Exchange of India Limited (the ''Company'') is an
electronic commodity futures exchange. The Company is a demutualised
Exchange and has permanent recognition from the Government of India to
facilitate nationwide online trading, clearing and settlement
operations of commodities futures transactions.
2. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE ExTENT NOT PROVIDED
FOR)
a. Contingent liabilities:
(Rs. in millions)
Particulars As at As at
31 March 2014 31 March 2013
1) Claims against the Company not acknowledged as debts:
- Income tax demands against which the
Company is in appeal 42.56 30.34
(including interest thereon)
- Others 6.35 2.41
2) Bank guarantee given 36.50 36.50
b. Commitments:
i. Capital Commitments:
The estimated amount of capital contracts remaining to be executed and
not provided for (net of advances) is Rs. 2.47 millions (As at 31 March
2013: Rs. 5.26 millions).
ii. Other Commitments:
As at 31 March, 2014, the Company has commitments to pay for the
services related to (i) installations and maintenance of core network
equipment and (ii) technology support and managed services based on
long-term non-cancellable agreements, the cancellation of which could
entail significant monetary compensation. Further, as stated in Note 35,
the compensation will be subject to the outcome of agreements /
conclusions by the Negotiations Committee, the financial implications,
if any, in this regard cannot at present be ascertained.
3. SEGMENT REPORTING
Based on the risks and returns identified, organisational structure and
the internal financial reporting system, the business segment is the
primary segment for the Company and accordingly "business of
facilitating trading in commodities and incidental activities thereto"
is considered as the only Primary Reportable business segment.
Further, since the Company renders services mainly in the domestic
market in India there is no geographical segment.
4. RELATED PARTY INFORMATION:
a. Names of related parties and nature of relationship:
(i) Company having significant infuence over the Company:
Financial Technologies (India) Limited (FTIL) (Refer Note 36)
(ii) Subsidiary Companies:
a) Multi Commodity Exchange Clearing Corporation Limited (MCXCCL).
b) SME Exchange of India Limited (SME).
(iii) Associate Company:
MCX SX Clearing Corporation Limited (MCX-SX CCL).
(iv) Key Managerial Personnel (KMP):
a) Manoj Vaish - Managing Director and CEO (w.e.f. 1 February 2014)*
b) Shreekant Javalgekar - Managing Director and CEO (up to 22 October
2013)
c) Lambertus Rutten - Managing Director and CEO (upto 30 June 2012) *
upto 10 May 2014
(v) Others:
(A) Entities over which KMP are able to exercise significant infuence
and where transaction exists (enterprises that have a member of key
management in common with the reporting enterprise):
Boursa Africa Limited (up to 30 June 2012)
(B) Controlled Employee Welfare Trust MCX ESOP Trust
(C) Multi Commodity Exchange Investor (Client) Protection Fund
(IPF)(Refer Note below)
Note
As per the FMC Circular dated 13 January 2014, IPF Trust has been shown
as a related party from the financial year 2013-14 onwards.
Notes forming part of the financial statements
Notes:
(i) There are no amounts written of or written back during the year in
respect of debts due from or to related parties.
(ii) Previous year''s figures are given in brackets.
(iii) **The Compensation Committee at its meeting held on October 29,
2013, considering FMCs Directive vide letter no. 4/2/2013/(MCX)-MD-1
dated 17th October, 2013, decided that the stock options granted to Mr.
Javalgekar which have not vested and option vested but not exercised be
cancelled.
5. EMPLOYEE BENEFIT PLANS :
Defined contribution plans: Amounts recognised as expenses towards
contributions to provident fund, employee state insurance corporation
and other funds by the Company are Rs. 10.68 millions (Previous Year Rs.
9.85 millions).
6. There are no amounts due to the suppliers covered under the Micro,
Small and Medium Enterprises Development Act, 2006; this information
takes into account only those suppliers who have responded to the
enquiries made by the Company for this purpose. This has been relied
upon by the auditors.
7. STOCK BASED COMPENSATION :
a) During the year ended 31 March 2009, the shareholders of the Company
approved the ''Employee Stock Options Plan 2008 (''ESOP - 2008''). Under
the said scheme, 1,625,000 Equity Shares of Rs. 10 each (post
consolidation and bonus) have been allotted to ESOP Trust who will
administer the ESOP Scheme on behalf of the Company.
Out of which ESOP Trust has granted (a) 1,313,250 (post consolidation
of shares and bonus issue) number of options convertible into 1,313,250
equity shares of Rs. 10 each to eligible employees on 2 July 2008 and 23
August 2008 in aggregate; (b) 331,750 (including the lapsed options
available for reissuance) numbers of options convertible into 331,750
equity shares of Rs. 10 each to eligible employees on 24 October 2011;
(c) 10,000 numbers of options convertible into 10,000 equity shares of
Rs. 10 each to an eligible employee on 3 October 2012;(d) 25,300 numbers
of options convertible into 25,300 equity shares of Rs. 10 each to
eligible employees on 19 April 2013 and (e) 10,000 numbers of options
convertible into 10,000 equity shares of Rs. 10 each to an eligible
employee on 19 February 2014.
Each option entitles the holder to exercise the right to apply and seek
allotment of one equity share of Rs. 10 each. Exercise period for each
option granted on 2 July 2008 and 23 August 2008 is three years from
the date of their respective vesting. Exercise period for each option
granted on 24 October 2011, 3 October 2012, 19 April 2013 and 19
February 2014 is one year from the date of their respective vesting.
e) For options granted on 24 October 2011, 3 October 2012, 19 April
2013 and 19 February 2014 under ESOP 2008 Schemes; the intrinsic value
of each option is Rs. Nil. The estimated fair value of each option is Rs.
324.99, Rs. 342.64, Rs. 202.34 and Rs. 181.47 for options granted on 24
October 2011, 3 October 2012, 19 April 2013 and 19 February 2014
respectively. The weighted average fair values have been determined
using the Black Schole Formula considering the following parameters :
8. The Company has not entered into any forward exchange contract
being derivative instruments.
The year end foreign currency exposures that have not been hedged by a
derivative instrument or otherwise are given below:
35. In accordance with the directions of the Forward Markets Commission
(FMC), a Special Audit of the Company was carried out for the period
since inception of the Company to 30 September, 2013. The terms of
reference, inter alia, included identifcation of related parties (as
Defined by FMC in the terms of reference and a working defnition arrived
at for the purpose of the review), review of non-trading transactions
between the Company and significant related parties, and review of
transactions of expenses incurred (individually) above Rs. 25 Lakhs. As
per the Report, the working defnition of related parties is not as may
be Defined under any provisions of any prevailing laws or guidance from
any professional bodies in India.
The Final Report of the Special Audit was received on 21 April 2014 and
was placed before the Board of the Company on 26 April 2014. The
Management of the Company is making a detailed analysis of the
observations in the Report, and after ascertaining the facts in each
case is in the process of taking legal and other action, as
appropriate. The Board of Directors has constituted a Negotiations
Committee to discuss the contracts with entities related to the
erstwhile promoter group, in particular, Financial Technologies (India)
Limited. Pending the completion of the detailed analysis of the Report,
ongoing internal enquiry and agreements / conclusions by the
Negotiations Committee, the financial implications, if any, in this
regard cannot at present be ascertained and, accordingly, no
adjustments have been made in the financial statements.
The Company has currently identified amounts aggregating Rs. 119.70
millions incurred during 2013-14 where Corresponding services may not
have been received. Accordingly, such expenses have been reversed and a
provision for doubtful recoverable has been made in the books for an
equivalent amount. While this does not have any impact on the net profit
before tax for the year, the corresponding efect on provision for tax
has been accounted for, resulting in a lower profit after tax for the
year by Rs. 39.90 millions.
9. (i) As at March 31, 2014, Financial Technologies (India) Limited
(FTIL) holds 26% of the equity shareholding in the Company. The FMC
vide its Order dated December 17, 2013 has, inter alia, held that FTIL
is not a ''ft and proper person'' to continue to be a shareholder of 2%
or more of the paid-up equity capital of MCX as prescribed under the
Guidelines issued by the Government of India for capital structure of
commodity exchanges post five years of operations.
(ii) Further, FMC issued revised norms regarding Shareholding,
Ownership, Net worth, Fit and Proper Criteria, etc. on May 6, 2014
which inter-alia state that ''In the event of any person ceasing to be a
''fit and proper person'' or being declared so by the Commission, such
person shall forthwith divest his shareholding. Pending divestment of
shares, the voting rights of such person shall stand extinguished and
any corporate benefit in lieu of such holding shall be kept in
abeyance/withheld by Exchange. The Exchange shall take necessary steps
as it may deem ft so as to ensure that the shareholding of such person
is divested forthwith. The Company vide letter dated 12 May 2014
intimated FTIL that voting rights stand extinguished and any corporate
benefit in lieu of such holding shall be kept in abeyance/withheld. MCX
has initiated necessary steps to amend its Articles of Association to
comply with the new Guidelines.
(iii) The Securities and Exchange Board of India (SEBI) vide its Order
dated March 19, 2014 has also held that FTIL is not a ''ft and proper
person'', to acquire or hold any equity shares or any instrument that
provides for entitlement for equity shares or rights over equity shares
at any future date in a recognized Stock Exchange or Clearing
Corporation, either directly or indirectly.
(iv) The FMC vide its letter dated May 8, 2014 observed inter alia,
that as the Exchange (i.e. the Company) had not taken tangible and
concrete measures to implement the directives of the FMC regarding
their December 17, 2013 Order with respect to divestment of
shareholding by FTIL in the Company and the fndings of the Special
Audit and Oversight Committee of the Board of Directors and decided
that till such time the directives are implemented, no new contracts
will be approved for trading as well as the contract launch calendar
for 2015 will be kept in abeyance. However, the approved contracts as
per the contract launch calendar for 2014 shall be available for
trading.
The ability of the Company to continue as a going concern beyond
calendar year 2014, is therefore predicated on its compliance with the
aforesaid FMC Order dated 17 December, 2013. The Company is taking
steps for implementing the FMC directives and is confdent of being
fully compliant before the end of the calendar year.
9. As at 31 March 2014 the Company has investments in 27,165,000
equity shares and 634,170,000 warrants of MCX Stock Exchange Limited
(MCX-SX) and investments in 6,500,000 equity shares of MCX-SX Clearing
Corporation Limited (MCX-SX CCL). Pursuant to the SEBI Order dated 19th
March, 2014, the Company has been directed by SEBI to divest its
holding in both MCX-SX and MCX-SX CCL. The Company vide its letter
dated April 4, 2014 has represented to SEBI that FTIL and the Company
no longer act in concert and therefore the Company should not be
required to divest its holding in MCX-SX and MCX-SX CCL.
However, in view of the aforesaid directive of SEBI, investments in
warrants of MCX-SX and equity shares of MCX- SX CCL have been
reclassified from non-current investments to current investments at
their carrying values. In accordance with Accounting Standard 13 on
Accounting for Investments and the Company''s accounting policy, current
investments are to be carried at the lower of cost and fair value in
the balance sheet. Based on the latest available audited financial
statements of these companies, the Management of the Company is of the
view that the aggregate carrying amount of Rs. 1,375.71 millions
represents the fair value of these investments as on the balance sheet
date.
10. The Management undertook a review of the estimated useful lives of
office Equipment which were depreciated in accordance with the rates as
specified in Schedule XIV of the Companies Act, 1956 which represent
useful life of approx. 21 years. Post the review, the revised estimated
useful life has been worked out to be ranging from 12 - 180 months.
This change in estimate has been given efect to prospectively in the
financial statements for the year ended 31st March, 2014. Accordingly,
the revised unamortized value as at 1st January, 2014 is being
amortized over the revised remaining useful life. This change has the
efect of increasing the depreciation charge for the year by Rs. 45.91
millions.
11. The previous year figures have also been reclassified / regrouped to
conform to this year''s classification.
Mar 31, 2013
1. GENERAL INFORMATION
Multi Commodity Exchange of India Limited (the ''Company'') is a
state-of-the-art electronic commodity futures exchange.The Company is a
demutualised Exchange and has permanent recognition from the Government
of India to facilitate nationwide online trading, clearing and
settlement operations of commodities futures transactions.
2. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED
FOR)
a. Contingent Liabilities:
in Rs. million
As at As at
Particulars March 31,2013 March 31,2012
1. Claims against the Company not
acknowledged as debts:
- Income tax demands against which the
Company is in appeal (including
interest thereon) 30.34 16.95
- Others 2.41 6.75
2. Bank guarantee given 36.50 36.50
b. Commitments:
1. Capital Commitments:
The estimated amount of capital contracts remaining to be executed and
not provided for (net of advances) is Rs.5.26millions (As at March
31,2012:Rs.5.27 millions).
2. Other Commitments:
At March 31, 2013, the Company has commitments to pay for the services
related to (i) installation and maintenance of core network equipment;
and (ii) technology support and managed service based on long- term
non-cancellable agreements. The cancellation of which will entail same
monetary compensation as agreements will continue to remain valid.
3. SEGMENTREPORTING
Based on the risks and returns identified, organisational structure and
the internal financial reporting system, the
businesssegmentistheprimarysegmentforthe Company and accordingly
"business of facilitating trading in commodities and incidental
activities thereto"is considered as the only Primary Reportable
business segment. Further, since the Company renders services mainly in
the domestic market in India there is no geographical segment.
4. OPERATING LEASE
The Company has entered into operating lease agreements as lessee for
various premises arranging from 18 to 60 months. The lease rentals
recognised as an expense in the statement of profit and loss during the
yearand the future minimum lease payments under non-cancellable
operating leases are as follows:
5. RELATED PARTY INFORMATION
a. Names of related parties and nature of relationship:
i Company having significant influence over the Company:
Financial Technologies (India) Limited
ii. Subsidiary Companies:
a. Multi Commodity Exchange Clearing Corporation Limited (MCXCCL).
b. SME Exchange of India Limited (SME).
iii. AssociateCompany:
MCX-SX Clearing Corporation Limited (MCX-SXCCL).
iv. Key Managerial Personnel (KMP):
a. Lambertus Rutten - Managing Director and CEO (uptoJune 30,2012)
b. ShreekantJavalgekar - Managing Director and CEO (w.e.fJuly 1,2012)
v. Others:
A. Entities over which KMP are able to exercise significant influence
and where transaction exists (enterprises that have a member of key
management in common with the reporting enterprise):
a. Boursa Africa Limited (uptoJune 30,2012)
b. Bahrain Financial Exchange (BFX) (upto June 30,2012)
B. Controlled Employee Welfare Trust MCX ESOP Trust
6. EMPLOYEE BENEFIT PLANS
Defined contribution plans: Amounts recognised as expenses towards
contributions to provident fund, employee state insurance corporation
and otherfunds by the Companyare Rs.9.85 millions (Previous Year
Rs.10.33 millions).
Post employment defined benefit plans
Gratuity Plan: The Company makes annual contributions to the Employee''s
Group Gratuity Assurance Scheme administered by the Life Insurance
Corporation of India (''LIC''), a funded defined benefit plan for
qualifying employees. The scheme provides for lump sum payment to
vested employees at retirement, death while in employment or on
termination of employment of an amount equivalent to fifteen days
salary payable for each completed year of service or part thereof in
excess of six months. Vesting occurs on completion of five years of
service.
7. The Company holds 27,165,000 Equity Shares of XM- each in MCX
Stock Exchange Limited (MCX-SX). As per the approval received from SEBI
to MCX-SX, the Company''s equity holding alongwith Financial
Technologies (India) Limited (FTIL) shall not exceed 5% of the total
paid up equity capital of MCX-SX. Considering the time available to
adhere to the direction of SEBI as communicated by MCX-SX, the Company
has classified such investments under Current Investments at this point
of time till both the entities together reduce the percentage of
holding to 5% in MCX- SX. The Company intends to hold the remaining
shares of MCX-SX after bringing down the shareholding in MCX-SX to 5%
put together with FTIL, on a long term basis and accordingly the said
Investments will be reclassified under Non- Current Investments.
8. STOCK BASED COMPENSATION
a. During the yearended March 31,2009,the shareholders ofthe Company
approved the''Employee StockOptions Plan 2008 (''ESOP-2008''). Under the
said scheme, 1,625,000 Equity Shares of Rs.10 each (post consolidation
and bonus) have been allotted to ESOPTrust who will administer the ESOP
Scheme on behalf of the Company.
Out of which ESOPTrust has granted (a) 1,313,250 (post consolidation of
shares and bonus issue) number of options convertible into 1,313,250
equityshares of Rs.10each to eligible employees on July 2,2008 and
August 23,2008 in aggregate; (b) 331,750 (including the lapsed options
available for reissuance) numbers of options convertible into 331,750
equity shares of Rs.10 each to eligible employees on October 24, 2011;
and (c) 10,000 numbers of options convertible into 10,000 equity shares
of Rs.10 each to an eligible employee on October 3,2012.
9. During the year ended March 31,2012, the Company has completed its
Initial Public Offer (IPO) consisting of Offer for Sale of 6,427,378
equity shares at a offer price of Rs.1,032 per share. As per
arrangement with Selling Stakeholders, all the IPO expenses paid by the
Company were recoverable from the Selling Stakeholders. Accordingly, an
IPO expense of Rs.29.86 millions has been shown as other current assets
(Note 17). This include an amount of Rs.4.42 millions paid to the
previous auditors for prospectus related reports/certificate relating
to IPO.
10. The Company does not treat member''s margins and income thereon as
part of SGF as contemplated under the FMC guidelines of SGF issued in
2006 and therefore credits the said income (amount unascertained) to
statement of profit and loss. Representations have been made to FMCand
a response is awaited.
11. The Forward Markets Commission (FMC) has vide letter no.
2/1/2008-MKT-ll dated February 16,2012, clarified that all penalties
(net off administrative expenses) effective from April 2006 should be
transferred to IPF by March 31,2012. Accordingly, such penalties for
the period April 1, 2006 to March 31, 2011 amounting to Rs.142.28
million which was earlier credited to statement of profit and loss has
during the previous year been credited to IPF A/c by debiting to
statement of profit and loss as an exceptional item. Further all
penalties (net off administrative expense) for the period April 1,2011
to March 31,2013 has been also transferred to Multi Commodity Exchange
Investor (Client) Protection Fund''(''theTrust'') which was formed as per
the revised guidelines of FMC on March 28,2012.
12. There are no amounts due to the suppliers covered under the Micro,
Small and Medium Enterprises Development Act, 2006; this information
takes into account only those suppliers who have responded to the
enquiries made by the Company for this purpose.This has been relied
upon by the auditors.
13. The previous year figures have also been reclassified/regrouped to
conform to this year''s classification.
Mar 31, 2012
1 General Information
Multi Commodity Exchange of India Limited (the 'Company') is a
state-of-the-art electronic commodity futures exchange.The Company is a
demutualised Exchange and has permanent recognition from the Government
of India to facilitate nationwide online trading, clearing and
settlement operations of commodities futures transactions.
23 The estimated amount of capital contracts remaining to be executed
and not provided for (net of advances) is Rs.5.27 million as at 31 March
2012 (previous year: Rs.2.71 million).
in Rs. million
as at as at
Particulars 31 March 2012 31 March 2011
2 Contingent Liability
Contingent liabilities are in respect of:
(a) Other than Forward Market Commission (FMC) prescribed penalties
recovered from members credited to income, pending response from FMC on
representation made by the Company on FMC's Investor
Protection Fund (IPF) Guidelines
(Refer Note 38). - 142.28
(b) Claims against the Company not
acknowledged as debts. 6.75 3.47
(c) Bank guarantee given. 36.50 -
(d) Income tax demands against which
the Company is in appeal
(Including Interest thereon). 16.95 21.39
3 Segment Reporting
PrimarySegment
The Company considers business segment (business of facilitating
trading in commodities and incidental activities thereto) as its
primary segment considering the risks and rewards of the services
offered, nature of services, management structure and system of
financialreporting.Therefore, the Company has only one reportable
business segment, the results of which are disclosed in the f inancial
statements.
Secondary Segment
Since business operations of the Company are concentrated in India,the
Company is considered to operate only in domestic segment and therefore
there is no reportable geographical segment.
4 Related party information:
The disclosures regarding related parties as required by Accounting
Standard ('AS') 18 "Related Party disclosures" issued by the Companies
(Accounting Standards) Rules, 2006 ('the Rules') are as under:
a. Names of related parties and nature of relationship:
(i) Company having significant influence over the Company:
a) Financial Technologies (India) Limited
(ii) Subsidiaries Companies:
a) Multi Commodity Exchange Clearing Corporation Limited (MCXCCL)
b) SME Exchange of India Limited (SME) [w.e.f. 14 September 2010]
(iii) Associate Companies:
a) MCX SX Clearing Corporation Limited (MCXSXCCL).
(iv) Jointly Controlled Entity (upto 25 June 2010):
a) Safal National Exchange of India Limited (SAFAL) - A joint venture
company in which the Company holds 30% share capital.
(v) Key Managerial Personnel (KMP):
a) Lambertus Rutten à Managing Director and CEO
(vi) Others:
(A) Entities over which KMP are able to exercise significant influence
and where transaction exists (enterprises that have a member of key
management in common with the reporting enterprise)
a) Bourse Africa Limited.
b) Bahrain Financial Exchange (BFX).
(B) Controlled Employee Welfare Trust a) MCX ESOP Trust
5 MCX-SX capital reduction and issue of warrants to MCX:
Consequent to capital reduction andissue of warrants to MCX against its
holding of equity shares of face valueof 617,135,000 in MCX-SX, in
compliance with a Court sanctioned scheme in March,2010,the
Company,based on counsel's opinion continues with its stand of no tax
liability arising consequent to the same and there fore no taxliability
has been determined or recognized in the financial statements.
The Company has investments aggregating Rs.1,310.71 million in equity
shares and warrants of MCX Stock exchange Limited (MCX-SX). During the
current year, MCX-SX has started generating revenue on all the trade
executed on the trading platform of the exchange. Hence, the
investments in MCX-SXare,in the opinion of the management,considered to
be good and valuable.
6 Stock based compensation:
a) During the year ended March 31, 2009, the shareholders of the
Company approved the 'Employee Stock Options Plan 2008 ('ESOP Ã 2008').
Under the said scheme, 2,600,000 (1,625,000 Equity Shares of Rs.10 each
post consolidation and bonus) number of shares have been allotted to
ESOP Trust who will administer the ESOP Scheme on behalf of the
Company.
Out of which ESOP Trust has granted (a) 2,101,200 (1,313,250 equity
shares of Rs.10 each post consolidation and bonus) numbers of options
convertible into 2,101,200 equity shares of Rs.5 each toeligible
employees on02 July2008 and 23 August 2008 in aggregate; and (b)
331,750 (including the lapsed options available for reissuance) numbers
of options convertible into 331,750 equity shares of Rs.10 each to
eligible employees on 24 October 2011.
7 During the year ended 31 March 2012, the Company has completed its
Initial Public Offer (IPO) consisting of Offer for Sale of 6,427,378
equity shares at a offer price of Rs.1,032 per share. As per arrangement
with Selling Stakeholders, all the IPO expenses paid by the Company
were recoverable from the Selling Stakeholders. Accordingly, an IPO
expense of Rs.29.86 million has been shown as Short- terms loans and
advances (Note 16). This include an amount of Rs.4.42 million paid to the
auditors for prospectus related reports/ certificate relatingto IPO.
8 The Company does not treat member's margins and income thereon as
part of SGF as contemplated under the FMC guidelines of SGF issued in
2006 and therefore credits the said income (amount unascertained) to
statement of profit and loss. Representations have been made to FM
Canda response is awaited.
9 During the year ended 31 March 2012, the Company received revised
guidelines for Investor Protection Fund ('IPF') from the Forward
Markets Commission ('FMC') (constituted under Forward Contracts
(Regulation) Act, 1952), directing the National Commodity Exchanges
(the'Exchanges')tocreateaIPFTrustby31March 2012toadminister'Investor
ProtectionFund'.The Exchanges,inthe interim,are required to keep all
the penalties (net of recoveries towards administrative expenses)
collected by the Company, in a separate bank account till IPF
trustisset up.
With regardtoother than FMC's prescribed penalties, the Company had
representedtoFMC that the same should notbeapart ofIPF and was
crediting such penalties to Statement of profit and loss. FMC has vide
letter no. 2/1/2008-MKT-II dated 16 February 2012, clarified that such
penalties (net off administrative expenses) effective from April 2006
should be transferred to IPF by 31 March 2012. Accordingly, such
penalties for the period 01 April 2006 to 31 March 2011 amounting to
Rs.142.28 million which was earlier credited to statement of profit and
loss has this year been credited to IPF A/c by debiting to statement of
profit and loss as an exceptional item. Further such penalties (net off
administrative expense) recognized in the statement of profit and loss
for the period 01 April 2011 to 31 December 2011 amounting to Rs. 38.85
million have been reversed, and transferred to IPF. Effective 1 January
2012, such penalties (net off administrative expense) are directly
transferred to IPF.
Pursuant to the revised guidelines, the Company has 'Multi Commodity
Exchange Investor (Client) Protection Fund' ('the Trust') on 28 March
2012. As at 31 March 2012 the balance transferable to the Trust was
Rs.327.40 million. As at 31 March 2012, the Company has earmarked fixed
deposit of Rs.317.96 million with the banks against IPF. Subsequent to
year end, the Company has earmarked further bank deposit aggregating
Rs.9.44 million against IPF. The said earmarked deposits will be
transferred to theTrust, once the bank account of the trustisopened.
10 Disclosure under Micro,Small and Medium Enterprises Development
Act,2006
Under the Micro, Small and Medium Enterprises Development Act, 2006,
(MSMED) which came into force from 2 October 2006, certain disclosures
are required to be made relating to Micro, Smalland Mediumenterprises.
On the basis of the informationand recordsavailable with the management
and confirmation sought from suppliers on registration with specified
authority under MSMED, principal amount, interest accrued and remaining
unpaid and interest paid during the year to such enterprise is NIL.
11 The financial statements for the year ended 31 March 2011 had been
prepared as per the then applicable, pre-revised Schedule VI to the
Companies Act, 1956. Consequent to the notification of Revised Schedule
VI under the Companies Act, 1956, the financial statements for the year
ended31March 2012 are preparedasper Revised ScheduleVI. Accordingly,
the previous year figures have also been reclassified / regrouped to
conform to this year's classification.
Mar 31, 2011
1 (a) MCX Stock Exchange Limited is a recognized stock exchange under
Section 4 of the Securities Contracts Regulation Act, 1956. The company
suffered a loss of Rs. 57.80 crore for the year and cumulative losses as
on March 31, 2011 are Rs. 143.88 crore. The CompanyRs.s income mainly
consists of interest on fixed deposits and investments. The Company is
not able to charge transaction fees in respect of currency futures
trading in its Currency Derivatives Segment (CD Segment), in view of
predatory zero pricing by its main competitor, National Stock Exchange
of India Ltd (NSE). Further, the CompanyRs.s application seeking
regulatory approvals to commence operations in other segments and
products was rejected by an order dated September 23, 2010 passed by
Securities and Exchange Board of India (SEBI).
The Company continues to have positive networth and the present
networth is in excess of the regulatory minimum requirement laid down
by Reserve Bank of India (RBI) and SEBI which is Rs. 100 crore. The
Company has challenged the abovementioned order dated September 23,
2010 of SEBI before the HonRs.ble High Court of Bombay by way of a writ
petition and the matter is pending for admission. The Company has been
advised that it has all reasons to succeed in the matter. Further, the
Company had approached the Com petition Commission of India (CCI) for
relief against anticompetitive practices of a main competitor. The CCI
had by an order dated May 25, 2011 found the competitor in
contravention of several clauses of Section 4 of the Competition Act,
2002. CCI passed a further order dated June 23, 2011 under Section 27
of the Competition Act, 2002 inter alia directing NSE to cease and
desist from unfair pricing, exclusionary conduct and unfairly using its
dominant position in other market/s to protect the relevant CD market
with immediate effect. The CCI also directed NSE to modify its zero
price policy and ensuring levy of appropriate transaction costs within
60 days. It is therefore expected that the predatory practices of NSE
would come to an end in the near future, and that conditions of free
and fair competition would be restored in the stock exchange services
market. The Company would then be able to charge transaction fees and
also open up its other operational revenue streams. This would result
in consequential improvement in the revenue earning model of the
Company, which would improve the CompanyRs.s financial performance and
net worth position significantly. In view of the said orders of CCI,
the Company also has a right to seek compensation for losses and
damages suffered by it due to the unfair and anticompetitive practices
of NSE under section 53N of the Competition Act, 2002. In light
thereof, the Company proposes to recover the losses suffered by it so
far on account of such practices, which will further boost its
financial position and networth. In view of the above, the financial
statements have been prepared on a going concern basis and no provision
has been considered necessary for impairment of fixed assets and
capital work in progress.
(b) The Company has unutilized service tax credit of Rs. 14.98 crore as at
March 31, 2011 (previous year Rs. 9.52 crore). As mentioned in note 1
(a) above the Company expects improved revenue earnings in the future
years and hence is of the view that the unutilized service tax credit
will be fully utilized and the same is considered as good for recovery.
2 Loan to ESOP Trust
The CompanyRs.s ESOP is administered through an ESOP Trust, which
subscribes to shares of the Company and holds them until issuance
thereof based on vesting and exercise of options by employees. At the
time of formation of the trust the Company has provided an interest
free loan amounting to Rs. 6,000,000 to the Trust to subscribe to
5,433,000 shares issued at Rs. 1 per share and were allotted on November
20, 2009.
3 Stock based compensation
The Company with the authorization of its shareholders, framed the Rs.MCX
Stock Exchange Employees Stock Option Scheme, 2009, which contemplated
issue of ESOPs through the Trust route. Accordingly, Rs.MCX Stock
Exchange ESOP TrustRs. was formed on November 13, 2009, as a trust.
As per the Guidance Note on Accounting for Employee Share Based
payments issued by the Institute of Chartered Accountants of India, the
amount of loan equivalent to the face value of securities subscribed
[Rs.5,433,000] has been deducted from share capital account and the
balance part of the loan representing the amount of [Rs. 567,000] has
been added to Advances recoverable in cash or in kind or for value to
be received.
The balance of such loan as at March 31, 2011 is Rs. 6,000,000. The
repayment of the loan is primarily dependent upon the exercise of
options by the employees, the price at which fresh or reissued options
are granted and dividend income earned thereon till exercise of
options. The Company believes that the options would be exercised by
the employees and the Trust would be able to repay the loan based on
the price received by the Trust there against. On that basis, the loan,
to the Trust is considered as good of recovery.
Under the Scheme, the Compensation Committee of the Company shall
decide, the options to be granted, the vesting schedule of the options
to be granted and other incidental and consequential matters. The Trust
shall be obliged to act on the instructions of the Compensation
Committee.
Each option entitles the holder to exercise the right to apply and seek
allotment of one equity share of Rs. 1 each. Exercise period for each
option is as stated above from the date of vesting.
The particulars of number of options granted and lapsed under the
Scheme are tabulated below:
The intrinsic value per option under the Scheme is NIL. The estimated
fair value per option for ESOP 2009 is Rs. 1.15 of which premium amount
is Rs. 0.15 per option for options granted on November 27, 2009. The fair
values have been determined using the Black-Scholes Model considering
the following parameters:
The loss after tax of the Company for the year would have been higher
by Rs. 83,585 (Previous Year Rs. 35,157) had the Company accounted the
employee share-based payment using the fair value method. There is no
material impact on the earnings per share.
4 Non-refundable interest free deposit (warrants):
A total of 1,196,630,000 warrants were allotted to certain shareholders
under the Scheme of Capital Reduction cum Arrangement implemented from
March 19, 2010 post sanction of the HonRs.ble High Court of Bombay under
Sections 100-104 and 391-393 of the Companies Act, 1956. Under the
Scheme, an amount of Rs. 1 was required to be maintained against each
warrant as non-refundable interest free deposit. Accordingly, the Com
pany holds an amount of Rs. 1,196,630,000 as interest free non-
refundable deposit. Each warrant holder can exercise in one or more
installments, its option to subscribe to the fully paid up equity
shares of the Company of the face value ofRs. 1 each subject to
conditions. The exercise of warrants would always be subject to the
Securities Contracts (Regulation) (Manner of Increasing and maintaining
Public Shareholding in Recognised Stock Exchange) Regulation, 2006 and
other conditions. Upon exercise of the option, the proportionate
non-refundable interest free deposit will be adjusted against the
moneys receivable in respect of the equity shares so issued. The Equity
Shares arising out of the exercise of Warrants will rank pari passu
with the existing equity shares in all respects. The warrants do not
carry any voting rights.
5 Managerial remuneration
Managerial remuneration has been paid to MD and CEO-Currency Derivative
Segment (Whole- time Director) as below:
*Excludes gratuity and long term compensated absences which are
actuarially valued and where separate amounts are not identifiable.
During the months of April and May, 2010 the Company paid an amount of
Rs. 4.85 lakhs to the Managing Director which was in excess of the
remuneration approved by the Central Government. An application made by
the Company for waiver of recovery of the said amount was rejected by
the Central Government due to non-submission of a Board resolution. The
Company now intends to make a fresh application with the Board
resolution in this regard. The Company has in the meantime debited the
said amount to the account of the Managing Director and disclosed under
the head Rs.Loans and AdvancesRs. in Schedule 10 to the Balance Sheet which
has since been recovered. For the period from June, 2010 to March, 2011
the Company has, on an application made by it, received a letter from
the Central Government stating that approval is no longer necessary for
unlisted companies in view of amendments to Schedule XIII of the
Companies Act, 1956.
6 Employee Benefits
The disclosures as per Accounting Standard - 15 (AS-15) "Employee
Benefits" are given below:
Defined Contribution Plan:
Provident Fund - The Company makes
contribution towards provident fund as a specified percentage of the
payroll cost to Regional Provident Fund Commissioner managed by the
EmployeesRs. Provident Fund Organization, India. There are no other
obligations other than the contribution payable to said fund.
Defined benefit plan:
Gratuity: The gratuity is payable to all members at the rate of 15 days
salary for each year of service.
The most recent actuarial valuation of the present value of the defined
benefit obligation for gratuity was carried out as at March 31, 2011 by
an actuary. The present value of the defined benefit obligations and
the related current service cost and past service cost, were measured
using the Projected Unit Credit Method.
The following table sets out the status of the gratuity plan and the
amounts recognized in the CompanyRs.s financial statements as at March
31, 2011.
7 Segment reporting
Primary segment
The Company considers business segment (business of facilitating
trading in currency and incidental activities thereto) as its primary
segment considering the risks and rewards of the services offered,
nature of services, management structure and system of financial
reporting. In the opinion of the management, the Company has only one
reportable business segment, in accordance with requirements of AS-17
"Segment Reporting", the results of which are disclosed in the
financial statements.
Secondary segment
The Company operates only in India and has no geographical segment. On
that basis, no secondary segment information is furnished
8 Related party information
a) Names of related parties and nature of relationship:
The disclosures regarding related parties as required by Accounting
Standard (Rs.ASRs.) 18 "Related Party disclosures" issued by the Companies
(Accounting Standards) Rules, 2006 (Rs.the RulesRs.) are as under:
I. Subsidiary
- MCX-SX Clearing Corporation Limited (MCX-SX Clear)
II. Key Management Personnel (KMP)
- Mr. Joseph Massey (MD & CEO)
- Mr. U. Venkataraman (CEO of Currency derivative segment and Whole
time director)
III. Company whose control exists
- Multi Commodity Exchange of India Limited (MCX), Holding company
(upto May 20, 2009)
IV. Companies having significant influence over the Company
- Financial Technologies (India) Limited (FTIL), (upto March 18, 2010)
- Multi Commodity Exchange of India Limited (MCX), (upto March 18,
2010)
V. Others
- MCX-SX ESOP Trust
Notes:
(i) Related party relationship is as identified by the Company and
relied upon by the auditors.
(ii) There are no amounts written off or written back in the year in
respect of debts due from or to related parties.
(iii) Figures in bracket represent previous yearRs.s amounts.
(iv)The transactions with the related parties are disclosed only till
the relation exists
9 Operating lease
The Company has entered into operating lease agreements for its office
premises.
a) The minimum lease rentals on operating leases recognized in the
Profit & Loss Account and the future minimum lease payments under
operating leases are as follows:
b) Total future minimum sub-lease payments expected to be received
under subleases is Rs.13,55,130 (Previous Year Rs. 46,07,442)
c) Lease payments recognised in Profit & Loss Account is Rs. 68,075,491
(Previous year Rs. 50,123,142)
d) Sub-lease payment received and recognised in Profit & Loss Account
is Rs. 3,252,312 (Previous Year Rs. 3,252,312)
The effects of conversion of warrants into equity shares and the shares
allotted to the ESOP trust pursuant to the employee share based payment
plan are anti-dilutive and accordingly not considered for the
computation of diluted earnings per share.
In the absence of virtual certainty that surplus taxable income will be
available against which the Deferred Tax Asset can be realized, the
same has not been recognized in the books of account in line with AS-22
dealing with "Accounting for Taxes on Income"
10 Dues to Micro, Small and Medium Enterprises
As per Section 22 of the Micro, Small and Medium Enterprises
Development Act, 2006 the amounts due to the Micro, Small and Medium
Enterprises on the basis of the information available with the Company
regarding the status of suppliers are as under:
11 Investor Protection Fund
Investor Protection Fund of Rs. 2,500,000 was established by the Company
based on the Rs.Comprehensive guidelines for Investor Protection Fund at
Stock ExchangesRs. dated October 28, 2004 issued by SEBI and in
accordance with SEBI approval letter dated September 18, 2008.
The Office of Charity Commissioner had on March 17, 2010, granted
registration to the MCX Stock Exchange Investor Protection Fund
Currency Derivatives Segment Trust under the provisions of the Bombay
Public Trust Act, 1950. On June 22, 2010 the Company has transferred
the entire amount to the Trust.
12 Investor Service Fund
Investor Service Fund of Rs. 1,000,000 was established by the Company in
accordance with SEBI approval letter dated September 18, 2008. The fund
is maintained to provide services to investors which include
maintenance of investor grievance cell, education and awareness about
securities market, price dissemination and other services that are in
the interest of the investor. The balance amounting to Rs. 1,188,410 as
at March 31, 2011 represents the initial amount of Rs. 1,000,000 and
interest earned thereon.
13 The previous year's figures have been reworked, regrouped,
rearranged and reclassified wherever necessary. Amounts and other
disclosures for the preceding year are included as integral part of the
current year financial statements and are to be read in relation to the
amounts and other disclosures relating to the current year.
14 Disclosures under Part II of Schedule VI to the Companies Act, 1956,
have been made to the extent applicable to the Company.
Mar 31, 2010
1. The Cash Flow statement has been prepared under the "Indirect
Method" as set out in Accounting Standard (AS 3) "Cash Flow Statement"
issued by the Companies (Accounting Standard) Rules, 2006
2. Cash and Cash Equivalents included in the cash flow statement
comprises of :-
3. Fixed Deposits with bank are deposits with the maturity period of
more than three months, hence classified and grouped in investing
activity and not included in cash and cash equivalents.
1 Background
MCX Stock Exchange Limited ('the Company') was incorporated on 14
August 2008 and obtained certificate of commencement of business on 19
August 2008. Pursuant to receipt of Securities Exchange Board of India
('SEBI') approval dated 18 September 2008, the Company launched
operations on 7 October 2008 as an exchange facilitating trading in
currency futures.
*Excludes gratuity and long term compensated absences which are
actuarially valued and where separate amounts are not identifiable.
Above remuneration was paid to Mr. U.Venkatraman (CEO of Currency
derivative segment and Whole time director) and Mr. Joseph Massey (MD &
CEO with effect from 1 June 2009).
As the remuneration payable to them was not falling within the limits
prescribed under section 198, 269 & 309 read with Part II of Schedule
XIII of the Companies Act, an application was made to Central
Government seeking approval for payment of remuneration to them.
Central Government vide their letter dated 17 December 2009 and letter
dated 26 March 2010, approved the appointment and remuneration of
Mr.U.Venkatraman (CEO of Currency derivative segment and Whole time
director) and Mr. Joseph Massey (MD & CEO) respectively.
2.1 Deferred tax assets
The Company had not recognized deferred tax assets as there is no
virtually certainty of realization of such assets and reversal of the
same.
2.2 Segment reporting
Primary segment
The Company considers business segment (business of facilitating
trading in currency and incidental activities thereto) as its primary
segment considering the risks and rewards of the services offered,
nature of services, management structure and system of financial
reporting. In the opinion of the management, the Company has only one
reportable business segment, the results of which are disclosed in the
financial statements.
Secondary segment
The Company operates only in India and has no geographical segment. On
that basis, no secondary segment information is furnished
2.3 Operating lease
The Company has entered into operating lease agreements for its office
premises. a) The minimum lease rentals on non-cancellable operation
leases recognized in the Profit and loss account and the future minimum
lease payments under non cancellable operating leases are as follows
2.4 Related party information
a) Names of related parties and nature of relationship:
The disclosures regarding related parties as required by Accounting
Standard ('AS') 18 ÃRelated Party disclosuresà issued by the Companies
(Accounting Standards) Rules, 2006 ('the Rules') are as under:
(i) Company whose control exists
- Multi Commodity Exchange of India Limited (MCX), Holding company
(upto 20 May 2009)
(ii) Companies having significant influence over the Company
- Financial Technologies (India) Limited (FTIL), (upto 18 March 2010)
- Multi Commodity Exchange of India Limited (MCX), (from 21 May 2009 to
18 March 2010)
(iii) Subsidiary
- MCX-SX Clearing Corporation Limited (MCX-SX Clear)
(iv) Fellow Subsidiary
- MCX Clearing Corporation Limited (MCX- Clear) (upto 20 May 2009)
(v) Key Management Personnel (KMP)
- Mr. U. Venkatraman (CEO of Currency derivative segment and Whole time
director)
- Mr. Joseph Massey (MD & CEO with effect from 1 June 2009)
(vi) Others
- MCX-SX ESOP Trust
Notes:
(i) Related party relationship is as identified by the Company and
relied upon by the auditors.
(ii) There are no amounts written off or written back in the year in
respect of debts due from or to related parties.
(iii) Previous year's figures are given in brackets.
2.5 Dues to Micro, Small and Medium Enterprises
Under the Micro, Small and Medium Enterprises Development Act, 2006,
(MSMED) which came into force from 2 October 2006, certain disclosures
are required to be made relating to Micro, Small and Medium
enterprises. On the basis of the information and records available with
the management and confirmation sought from suppliers on registration
with specified authority under MSMED, principal amount, interest
accrued and remaining unpaid and interest paid during the year to such
enterprise is NIL.
2.6 Transfer of following assets / liabilities to MCX SX Clearing
Corporation Limited
a) Settlement Guarantee Fund
The Settlement Guarantee Fund of Rs. 25,000,000 was established by the
Company based on the 'Guidelines for Settlement Guarantee Fund at Stock
Exchanges' dated
9 June 1997 issued by SEBI and in accordance with SEBI approval letter
dated 18 September 2008. The amount was set aside by the Company in a
bank fixed deposit of an equivalent amount. The fund balance which was
maintained in the form of fixed deposits was transferable to MCX SX
Clearing Corporation Limited ('MCX-SX Clear') on 16 February 2009, date
of launch of operations of MCX-SX Clear.
Accordingly, the settlement guarantee fund balance maintained in the
fixed deposits and interest accrued thereon was transferred to MCX-SX
Clear on 2 April 2009.
b) Member's security deposit
The Company collected security deposits for clearing activities from
its members and invested these deposits in liquid funds. On 16 February
2009, MCX-SX Clear started its operations; as a result these
investments became due for transfer on that date.
Member's security deposits amounting to Rs.170,000,000 and the income
earned on the related investments upto the date of transfer amounting
to Rs.1,820,812 was transferred during the year.
c) Security deposit from settlement bankers
Security deposit from settlement banker aggregating to Rs. 10,000,000
was transferrable to MCX-SX Clear as at 31 March 2010. The same has
been transferred on 14 July 2010.
2.7 Investor Protection Fund
Investor Protection Fund of Rs. 2,500,000 was established by the
Company based on the 'Comprehensive guidelines for Investor Protection
Fund at Stock Exchanges' dated 28 October 2004 issued by SEBI and in
accordance with SEBI approval letter dated 18 September 2008.
The Office of Charity Commissioner had on 17 March 2010, granted
registration to the MCX Stock Exchange Investor Protection Fund
Currency Derivatives Segment Trust under the provisions of the Bombay
Public Trust Act, 1950. The moneys in the IPF are maintained in a
separate account with State Bank of India ('SBI'), standing in the
Company's name, held on behalf of the Trust and was transferred to the
Trust on 22 June 2010.
2.8 Investor Service Fund
Investor Service Fund of Rs. 1,000,000 was established by the Company
in accordance with SEBI approval letter dated 18 September 2008. The
fund is maintained to provide services to investors which include
maintenance of investor grievance cell, education and awareness about
securities market, price dissemination and other services that are in
the interest of the investor.
2.9 Scheme of reduction cum arrangement:
During the year, the Company implemented a Scheme of Reduction cum
Arrangement (Ãthe schemeÃ) with the unanimous approval of its
shareholders and the sanction of the Hon'ble High Court of Bombay under
sections 100-104 and 391-393 of the Companies Act, 1956. The Scheme was
sanctioned by the Hon'ble High Court by an order dated March 12, 2010,
which was registered by the Registrar of Companies, Maharashtra, Mumbai
on March 19, 2010.
The Scheme was formulated and implemented in order to ensure compliance
with the Securities Contracts (Regulation) (Manner of Increasing and
Maintaining Public Shareholding in Recognised Stock Exchanges)
Regulations, 2006 (ÃMIMPS RegulationsÃ) as stipulated by SEBI.
Pursuant to the reduction under the sanctioned scheme, 1,196,630,000
equity shares of Re. 1 each held by certain shareholders were reduced
and cancelled on 19 March, 2010 to achieve the aforesaid objective. A
consideration of Re.1 per share aggregating Rs. 1,196,630,000 (being
the paid up value thereof per share) was payable on reduction by the
company to the reducing shareholders. In terms of the scheme, the said
consideration of Re. 1 per share payable to the shareholders whose
shares were cancelled and adjusted against the non refundable interest
free deposit to be paid by the said shareholders towards the warrants
which were subscribed by them under the scheme. Thus, the paid up
equity share capital of the Company was reduced from Rs. 1,739,933,000
divided into an equal number of equity shares of Re. 1 each to Rs.
543,303,000 divided into an equal number of equity shares of Re. 1
each.
Pursuant to the arrangement, 1,196,630,000 warrants were subscribed to
by the said shareholders by paying a non refundable interest free
deposit of Re. 1 per warrant. The amount of Re. 1 per reduced and
cancelled share as aforesaid was adjusted against the non refundable
interest free deposit receivable by the Company from the said
shareholders and required to be maintained in respect of the said
warrants. Each warrant holder can exercise in one or more installments,
its option to subscribe to the fully paid up equity shares of the
Company of the face value of Re. 1 each subject to conditions. Upon
exercise of the option, the proportionate non refundable interest free
deposit will be adjusted against the moneys receivable in respect of
the equity shares so issued.
In terms of the scheme, the exercise of warrants would always be
subject to the MIMPS Regulations and other conditions. The warrants do
not carry any voting or dividend rights.
2.10 Stock based compensation:
The Company with the authorization of its shareholders, framed the 'MCX
Stock Exchange Employees Stock Option Scheme, 2009', which contemplated
issue of ESOPs through the Trust route. Accordingly, 'MCX Stock
Exchange ESOP Trust' was formed on November 13, 2009, as a trust.
Under the Scheme, the Compensation Committee of the Company shall
decide, the options to be granted, the vesting schedule of the options
to be granted and other incidental and consequential matters. The Trust
shall be obliged to act on the instructions of the Compensation
Committee.
2.11 Stock based compensation (Continued)
An allotment of 5,433,000 equity shares of Re. 1 each was made by the
Company to the Trust on November 20, 2009. On November 27, 2009 a total
of 1,125,000 stock options have been granted under the Scheme. None of
the options have vested so far. Details of the Options granted by the
ESOP Trust is as under:
Each option entitles the holder to exercise the right to apply and seek
allotment of one equity share of Re. 1 each. Exercise period for each
option is as stated above from date of vesting.
The intrinsic value per option under the Scheme is NIL. The estimated
fair value per option for ESOP 2009 is Rs. 1.15 of which premium amount
is Re. 0.15 per option for options granted on November 27, 2009. The
fair values have been determined using the Black-Scholes Model
considering the following parameters:-
The loss after tax of the Company for the year would have been higher
by Rs. 35,157,, had the Company accounted the employee share-based
payment using the fair value method. There is no material impact on the
earnings per share.
2.12 Loan to ESOP Trust:
The Company's ESOP is administered through an ESOP Trust, which
subscribes to shares of the Company and holds them until issuance
thereof based on vesting and exercise of options by employees. At the
time of formation of the trust the Company has provided an interest
free loan amounting to Rs 6,000,000 to the Trust to subscribe to
5,433,000 shares issued at Re 1 per share. As per the Guidance Note on
Accounting for Employee Share Based payments issued by the Institute of
Chartered Accountants of India, the amount of loan equivalent to the
face value of securities subscribed [Rs 5,433,000] has been deducted
from share capital account and the balance part of the loan
representing the amount of [Rs 577,000] has been added to cash and bank
balance.
The balance of such loan as at 31 March 2010 is Rs. 6,000,000. The
repayment of the loan is primarily dependent upon the exercise of
options by the employees, the price at which fresh or reissued options
are granted and dividend income earned thereon till exercise of
options. The Company believes that the options would be exercised by
the employees and the Trust would be able to repay the loan based on
the price received by the Trust there against. On that basis, the loan,
to the Trust is considered as good of recovery.
2.13 Disclosures under Part II of Schedule VI to the Companies Act,
1956
Disclosures under Part II of Schedule VI to the Act, have been made to
the extent applicable to the Company.
2.14 Prior year comparatives
Previous year's figures have been regrouped / rearranged wherever
necessary to conform to current year's presentation.
Mar 31, 2009
1 Background
MCX Stock Exchange Limited ('the Company') was incorporated on 14
August 2008 and obtained certificate of commencement of business on 19
August 2008. Pursuant to receipt of SEBI approval dated 18 September
2008, the Company launched operations on 7 October 2008 as an exchange
facilitating trading in currency futures.
The principal shareholders of the Company as at 31 March 2009 are Multi
Commodity Exchange of India Limited (holding 51% stake) ('the Holding
Company') and Financial Technologies India Limited (holding 49% stake).
2.1 Segment reporting
a. The Company considers business segment (business of facilitating
trading in currency and incidental activities thereto) as its primary
segment considering the risks and rewards of the services offered,
nature of services, management structure and system of financial
reporting. In the opinion of the management, the Company has only one
reportable business segment, the results of which are disclosed in the
financial statements.
b. During the period ended 31 March 2009, the Company had no
reportable geographical segment and on that basis, no secondary segment
information is furnished.
2.2 Operating lease
The Company has taken the office premise on lease for a tenure of 36
months. The lease is cancellable on prior notice from either of the
parties. The total lease payments recognized in the profit and loss
account amount to Rs. 17,016,804. The lease agreement does n't
stipulate increase in rent in a staggered manner over the lease tenure.
There are no provisions relating to contingent rent.
Further, the company has sub-let part of the premises to its subsidiary
and has recovered Rs. 454,937 which is classified as 'Other income'
under Schedule 11.
2.3 Related party information
a) Names of related parties and nature of relationship:
(i) Company where control exists
- Multi Commodity Exchange of India Limited (MCX), Holding company
(ii) Company having significant influence
- Financial Technologies (India) Limited (FTIL)
(iii) Subsidiary
- MCX-SX Clearing Corporation Limited (MCX-SX Clear)
(iv) Fellow Subsidiary
- MCX Clearing Corporation Limited (MCX- Clear)
(v) Key Management Personnel (KMP)
- Mr. U. Venkatraman (CEO of Currency derivative segment from 13
November 2008 till 16 February 2009; Whole time director effective 16
February 2009)
* Includes Rs. 166,227,195 towards Members Security Deposit and Rs.
25,339,041 towards Settlement Guarantee Fund transferable to MCX-SX
Clearing Corporation Limited (Refer Note 13.11 of Schedule 13).
**Represents amount held in trust by the director (Refer note 13.7(b)
of Schedule 13)
Discount rate:
The discount rate is based on the prevailing market yields of Indian
Government securities as at the balance sheet date for the estimated
term of the obligations.
Salary escalation rate:
The estimates of future salary increases considered takes into account
the inflation, seniority, promotion and other relevant factors.
2.4 Dues to Micro, Small and Medium Enterprises
On the basis of the information and records available with the
management, there are no dues to Micro, Small and Medium Enterprises,
who are registered with the competent authorities.
a. Information relating to managerial remuneration does not include
provision for gratuity and leave encashment, which is provided on an
overall basis.
b. Mr. U. Venkataraman was appointed as Whole-time Director of the
Company w.e.f. 16 February 2009. The appointment and remuneration were
approved in the Remuneration Committee of the Board held on 24 January
2009 and were subsequently approved by the shareholders in the Extra
Ordinary General Meeting held on 31 March 2009. Subsequently, the
Company has made an application to the Central Government for the
approval of his remuneration, which is awaited.
Pending receipt of his approval as above, the amount of remuneration
paid to him for the period 16 February 2009 to 31 March 2009 of Rs.
881,741 has been carried forward under 'Advances recoverable in cash or
kind' as the same is held in trust u/s 309 of the Companies Act, 1956.
2.5 Preliminary and Pre-operative Expenditure
The Company was incorporated on 14 August 2008 and launched operations
on 7 October 2008. Expenses incurred prior to commencement of
operations have been accounted as preliminary and pre-operative
expenses and consist of the following:
2.6 Transfer pricing
The Company has developed a system of maintaining of information and
documents as required by the transfer pricing legislation under section
92-92F of the Income Tax Act, 1961. Management is of the opinion that
its international transactions are at arm's length so that the
aforesaid legislation will not have any impact on the financial
statements, particularly on the amount of tax expense and that of
provision for taxation.
2.7 Transfer of certain assets / liabilities to MCX-SX Clearing
Corporation Limited ('the subsidiary')
a) Settlement Guarantee Fund
The Settlement Guarantee Fund of Rs. 25,000,000 was established by the
Company based on the 'Guidelines for Settlement Guarantee Fund at Stock
Exchanges' dated 9 June 1997 issued by SEBI and in accordance with SEBI
approval letter dated 18 September 2008. The amount was set aside by
the Company in a bank fixed deposit of an equivalent amount. The fund
balance and the related deposit were transferable to the subsidiary on
16 February 2009, date of launch of operations of the subsidiary.
Accordingly, the settlement guarantee fund balance of Rs. 25,000,000,
the related fixed deposit of equivalent amount and the interest accrued
on the deposit for the period 16 February 2009 till 31 March 2009 of
Rs. 339,041 have been reflected as transferable to MCX-SX Clearing
Corporation Limited as at 31 March 2009.
b) Member's security deposit
The Company collected security deposits for clearing activities from
members which were transferable to its subsidiary as on 16 February
2009, date of launch of operations of the subsidiary. The amounts
collected were invested in liquid funds.
Accordingly, the member's security deposit amounting to Rs. 166,227,195
and the income earned on the related investments for the period 16
February 2009 till 31 March 2009 of Rs. 1,227,195 have been reflected
as transferable to MCX-SX Clearing Corporation Limited as at 31 March
2009.
2.8 Investor Protection Fund
Investor Protection Fund of Rs. 2,500,000 was established by the
Company based on the 'Comprehensive guidelines for Investor Protection
Fund at Stock Exchanges' dated 28 October 2004 issued by SEBI and in
accordance with SEBI approval letter dated 18 September 2008. The
Company is in the process of forming an ÃMCX Stock Exchange Investor
Protection Fund - Currency Derivatives Segment Trustà and registering
it under the provisions of the Bombay Public Trusts Act, 1950. Pending
the same, the funds contributed and collected towards the Investor
Protection Fund have been kept in a separate bank account maintained
with the State Bank of India.
2.9 Investor Service Fund
Investor Service Fund of Rs. 1,000,000 was established by the Company
in accordance with SEBI approval letter dated 18 September 2008. The
fund is maintained to provide services to investors which include
maintenance of investor grievance cell, education and awareness about
securities market, price dissemination and other services that are in
the interest of the investor.
2.10 Disclosures under Part II of Schedule VI to the Companies Act,
1956
Disclosures under Part II of Schedule VI to the Companies Act, 1956,
have been made to the extent applicable to the Company.
2.11 Prior year comparatives
Prior year comparatives are not presented as 31 March 2009 is the first
financial year end after incorporation.