Mar 31, 2019
1. SIGNIFICANT ACCOUNTING POLICIES
1.1 Basis for preparation of financial statements
i. The financial statements have been prepared and presented under historical cost convention on accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India (âIndian GAAPâ) in compliance with the provisions of the Companies Act, 2013, Accounting Standards specified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and the applicable directions issued by Reserve Bank of India for Non-Banking Financial Companies. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year, except wherever stated.
ii. All assets and liabilities have been classified as current and non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013. Based on the nature of financial services provided and their realization in cash and cash equivalents, the Company has assessed its operating cycle as 12 months for the purpose of classification of its assets and liabilities into current and non-current as per the requirements of Schedule III of the Companies Act, 2013.
1.2 Use of Estimates
The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the Balance Sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the managementâs evaluation of the relevant facts and circumstances as on the date of financial statements. Although these estimates are based upon managementâs best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured:
- Income from Financial Services
i. Interest Income in respect of hypothecation loans are recognised on accrual basis with reference to contractual terms, applying the Internal Rate of Return method. Overdue charges on belated hypothecation loan installments are accounted as and when received by the company.
ii. Interest on loans and advances, including Loan Buyout and Other business loans, is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for belated payments are accounted as and when received.
iii. Income in respect of Non-performing assets is recognized as and when received as per The Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
iv. Interest Income on SLR Investments / Bank Deposits including collateral deposits is recognized on accrual basis.
v. Income from securitisation transactions, being interest spread under par structure of securitisation loan receivables, is recognized as income on realisation of dues in cash from Special purpose vehicle.
vi. Income on retained interest in the assigned asset , if any, is accounted on accrual basis.
vii. Income from financing activities and services is recognized on accrual basis.
- Income from Investments
Dividend on investments is recognized as income, when right to receive payment is established by the date of Balance Sheet. The profit/loss on Capital Market Operations is recognized at the time of actual sale/redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Master Directions issued by the Reserve Bank of India for NonBanking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments.
- Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including Interest and other finance charges accrued and due, as reduced by amounts received and loans securitised.
ii. Advance instalments received against Hypothecation loans are shown as Current Liabilities.
iii. Repossessed assets are valued at lower of book value and estimated realisable value.
- Securitisation transactions: -
i. Securitised receivables are de-recognized in the Balance Sheet when they are sold i.e. if they fully meet the true sale criteria as per the Master Direction issued by the Reserve Bank of India.
ii. Companyâs contractual rights to receive the share of the future interest (i.e. interest spread) in respect of the transferred asset from the SPV is capitalized at the present value as Interest Only (I/O) Strip(Interest Strip Retained on Securitisation of Receivables) with the corresponding liability created for Unrealized Gains on Loan Transfer Transactions.
1.5 Tangible Assets (Property, Plant and Equipment)
Property, Plant and Equipment are stated at historical cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs, if capitalization criteria are met, and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebate are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of property,plant & equipment is added to its book value, only if it increases the future benefit of the existing asset beyond its previously assessed standard of performance. All other expenses on existing Property, Plant and Equipment, including day-to-day repairs and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
Gains or losses arising from de-recognition of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is de-recognized.
1.6 Intangible Assets
Intangible assets are recorded at the cost incurred for developing such assets and are carried at cost less accumulated amortization and impairment, if any.
Intangible assets under development not put for use as at the date of balance sheet,are classified as asset under development.
1.7 Depreciation / Amortization of Tangible and Intangible assets.
i. Depreciation on assets held for own use of the Company is provided on written down value method as per the useful years of life of the assets and in the manner prescribed under Schedule II of the Companies Act, 2013 and in accordance with revised Accounting Standard-10 âProperty, Plant and Equipmentâ.
ii. Intangible assets are amortized over a period of three years.
1.8 Impairment of Tangible and Intangible Assets
i. The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. An assetâs recoverable amount is the higher of an assetâs net selling price and its value in use.
ii. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the assetâs recoverable amount. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value, after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation, if there was no impairment.
1.9 Leases
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on straight line basis over the lease term.
1.10 Investments
i. Investment in Government Securities
a. Non - Current Investments are stated at cost and provision for diminution in value, other than temporary, is considered wherever necessary.
b. Current Investments are valued at lower of cost and market value / net asset value.
ii. Investments - Others
a. Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as Current Investments. All other investments are classified as Non-Current Investments.
On initial recognition, all investments are measured at cost. The cost comprises of purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Non-Current Investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of investments, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.
1.11 Income Tax
Tax expense comprises of Current and Deferred Tax. Current Income Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and the reversal of timing differences of the earlier years.
Deferred Tax Liabilities are recognized for all taxable timing differences. Deferred Tax Assets are recognized for deductible timing differences only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.
The carrying amount of Deferred Tax Assets are reviewed at each reporting date. The company writes down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which Deferred Tax Asset can be realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set off current tax asset against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxation authority.
1.12 Retirement and Other Employee Benefits
i. Defined Contribution Plan
(i) Provident Fund
The contributions to the provident fund are charged to the Statement of Profit and Loss for the year when the contributions are due in accordance with the fund rules. The Company has no obligation, other than the contribution payable to the provident fund.
(ii) Employees State Insurance
The Company also contributes to Employees State Insurance Corporation on behalf of its employees.
ii. Defined Benefit Plan
a. Gratuity (Funded)
Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/premium paid/ payable is determined on actuarial valuation done by an independent valuer. Actuarial gain and loss for defined benefit plan is recognized in full in the period in which they occur in the Statement of Profit and Loss.
b. Accumulated Compensated Absences
The company provides for liability of accumulated compensated absences for eligible employees on the basis of an independent actuarial valuation carried out at the end of the year, using the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss for the period in which they occur.
1.13 Segment Reporting
The Companyâs business activity primarily falls within a single reportable business segment which constitutes Financing Activities (Advancing of hypothecation loans, term loans, buying loan portfolio of other NBFCs/ Micro Finance Companies and loan against demand promissory notes etc.). Hence additional disclosures are not required under Accounting Standard -17 âSegment Reportingâ.
The Company operates only in India; hence there is no other significant geographical segment that requires the disclosure.
1.14 Related Party Disclosures
Disclosures are made as per the requirements of the Accounting Standard- 18 âRelated Party Disclosuresâ.
1.15 Earnings per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.For the purpose of calculating the diluted earnings per share, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
1.16 Material Events
Material Events occurring after the Balance Sheet date are taken into cognizance.
1.17 Provisions other than that for Non-Performing Assets
A provision is recognized when the Company has a present legal or constructive obligation as a result of past event, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made for the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
1.18 Contingent Liabilities
A Contingent Liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A Contingent Liability also arises, in extremely rare cases, where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a Contingent Liability, but discloses its existence, if it exists, in the financial statements.
1.19 Classification and Provisioning of receivables from Financing Activity
i. As per the guidelines given in the Master Directions issued by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / Writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments, the company makes adequate provisions against Receivables from financing activities in the following manner;
a. Standard Assets:
Provision against Standard Assets is made at the rate prescribed by The Master Direction -Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
b. Non-Performing assets : Sub-standard, Doubtful and loss assets:
Provision as required under The Master Direction - Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 is made. Further additional provision over and above the minimum levels specified is made as considered appropriate by the management.
ii. Loss on Sale of Repossessed Assets represents shortfall in realization of outstanding loan receivable balances on disposal of the underlying hypothecated assets and includes provisions created in the earlier years in respect of such loan balances.
Mar 31, 2018
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH, 2018
CORPORATE INFORMATION
Muthoot Capital Services Limited (âthe Companyâ) is a public company domiciled in India,governed by the Companies Act 2013 and is a Systemically Important Deposit Accepting Non-Banking Financial Company (âNBFCâ) registered with Reserve Bank of India. The shares of the Company are listed on the Bombay Stock Exchange and the National Stock Exchange. During the year, the Company was primarily engaged in the business of financing for purchase of automobiles, mainly two wheelers against hypothecation of the vehicles and granting of personal/business loans etc.
1. SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis for preparation of financial statements
i. The financial statements have been prepared and presented under historical cost convention on accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India (âIndian GAAPâ) in compliance with the provisions of the Companies Act, 2013, Accounting Standards specified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and the applicable directions issued by Reserve Bank of India for Non-Banking Financial Companies. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year, except wherever stated.
ii. All assets and liabilities have been classified as current and non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013. Based on the nature of financial services provided and their realization in cash and cash equivalents, the Company has reassessed its operating cycle as 12 months (from 36 months adopted earlier) for the purpose of classification of its assets and liabilities into current and non-current as per the requirements of Schedule III of the Companies Act, 2013 with appropriate modifications to reflect such change in classification during the current and corresponding previous year.
1.2 Use of Estimates
The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the Balance Sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the managementâs evaluation of the relevant facts and circumstances as on the date of financial statements. Although these estimates are based upon managementâs best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured:
- Income from Financial Services
i. Interest Income in respect of hypothecation loans are recognized on accrual basis with reference to contractual terms, applying the Internal Rate of Return method. Overdue charges on belated hypothecation loan installments are accounted as and when received by the company.
ii. Interest on loans and advances, including Loan Buyout and Other business loans, is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for belated payments are accounted as and when received.
iii. Income in respect of Non-performing assets is recognized as and when received as per The Master Direction â Non Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
iv. Interest Income on SLR Investments/ Bank Deposits including collateral deposits is recognized on accrual basis.
v. Income from securitization transactions, being interest spread under par structure of securitization loan receivables, is recognized as income on realization of dues in cash from Special purpose vehicle.
vi. Income on retained interest in the assigned asset , if any, is accounted on accrual basis.
vii. Income from financing activities and services is recognized on accrual basis.
- Income from Investments
Dividend on investments is recognized as income, when right to receive payment is established by the date of Balance Sheet. The profit/loss on Capital Market Operations is recognized at the time of actual sale/redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Master Directions issued by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments.
- Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including Interest and other finance charges accrued and due, as reduced by amounts received and loans securitized.
ii. Advance installments received against Hypothecation loans are shown as Current Liabilities.
iii. Repossessed assets are valued at lower of book value and estimated realizable value.
- Securitization transactions: -
i. Securitized receivables are de-recognized in the Balance Sheet when they are sold i.e. if they fully meet the true sale criteria as per the Master Direction issued by the Reserve Bank of India.
ii. Companyâs contractual rights to receive the share of the future interest (i.e. interest spread) in respect of the transferred asset from the SPV is capitalized at the present value as Interest Only (I/O) Strip(Interest Strip Retained on Securitization of Receivables) with the corresponding liability created for Unrealized Gains on Loan Transfer Transactions.
1.5 Tangible Assets (Property, Plant and Equipment)
Property, Plant and Equipment are stated at historical cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs, if capitalization criteria are met, and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebate are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to its book value, only if it increases the future benefit of the existing asset beyond its previously assessed standard of performance. All other expenses on existing Property, Plant and Equipment, including day-to-day repairs and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
Gains or losses arising from de-recognition of Property, Plant and Equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is de-recognized.
1.6 Intangible Assets
Intangible assets are recorded at the cost incurred for developing such assets and are carried at cost less accumulated amortization and impairment, if any.
1.7 Depreciation / Amortization of Tangible and Intangible assets.
i. Depreciation on assets held for own use of the Company is provided on written down value method as per the useful years of life of the assets and in the manner prescribed under Schedule II of the Companies Act, 2013 and in accordance with revised Accounting Standard-10 âProperty, Plant and Equipmentâ.
ii. Intangible assets are amortized over a period of three years.
1.8 Impairment of Tangible and Intangible Assets
i. The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. An assetâs recoverable amount is the higher of an assetâs net selling price and its value in use.
ii. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the assetâs recoverable amount. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value, after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation, if there was no impairment.
1.9 Leases
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on straight line basis over the lease term.
1.10 Investments
i. Investment in Government Securities
a. Non - Current Investments are stated at cost and provision for diminution in value, other than temporary, is considered wherever necessary.
b. Current Investments are valued at lower of cost and market value / net asset value.
ii. Investments - Others
a. Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as Current Investments. All other investments are classified as Non-Current Investments.
On initial recognition, all investments are measured at cost. The cost comprises of purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Non-Current Investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of investments, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.
1.11 Income Tax
Tax expense comprises of Current and Deferred Tax. Current Income Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and the reversal of timing differences of the earlier years.
Deferred Tax Liabilities are recognized for all taxable timing differences. Deferred Tax Assets are recognized for deductible timing differences only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.
The carrying amount of Deferred Tax Assets are reviewed at each reporting date. The company writes down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which Deferred Tax Asset can be realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set off current tax asset against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxation authority.
1.12 Retirement and Other Employee Benefits
i. Defined Contribution Plan
(i) Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The contributions to the provident fund are charged to the Statement of Profit and Loss for the year when the contributions are due in accordance with the fund rules. The Company has no obligation, other than the contribution payable to the provident fund.
(ii) Employees State Insurance
The Company also contributes to Employees State Insurance Corporation on behalf of its employees.
ii. Defined Benefit Plan - Gratuity
Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/premium paid/ payable is determined on actuarial valuation done by an independent valuer. Actuarial gain and loss for defined benefit plan is recognized in full in the period in which they occur in the Statement of Profit and Loss.
1.13 Segment Reporting
The Companyâs business activity primarily falls within a single reportable business segment which constitutes Financing Activities (Advancing of hypothecation loans, term loans, buying loan portfolio of other NBFCs/ Micro Finance Companies and loan against demand promissory notes etc.). Hence additional disclosures are not required under Accounting Standard -17 âSegment Reportingâ.
The Company operates only in India; hence there is no other significant geographical segment that requires the disclosure.
1.14 Related Party Disclosures
Disclosures are made as per the requirements of the Accounting Standard- 18 âRelated Party Disclosuresâ.
1.15 Earnings per Share
The Company reports basic earnings per share in accordance with Accounting Standard-20 âEarnings per Shareâ. Basic earnings per share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year.
1.16 Material Events
Material Events occurring after the Balance Sheet date are taken into cognizance.
1.17 Provisions other than that for Non-Performing Assets
A provision is recognized when the Company has a present legal or constructive obligation as a result of past event, for which it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made for the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
1.18 Contingent Liabilities
A Contingent Liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A Contingent Liability also arises, in extremely rare cases, where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a Contingent Liability, but discloses its existence, if it exists, in the financial statements.
1.19 Classification and Provisioning of receivables from Financing Activity
i. As per the guidelines given in the Master Directions issued by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / Writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments, the company makes adequate provisions against Receivables from financing activities in the following manner;
a. Standard Assets:
Provision against Standard Assets is made at the rate prescribed by The Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
b. Non-Performing assets : Sub-standard, Doubtful and loss assets:
Provision as required under The Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 is made. Further incremental provision over and above the minimum levels specified is made as considered appropriate by the management.
ii. Loss on Sale of Repossessed Assets represents shortfall in realization of outstanding loan receivable balances on disposal of the underlying hypothecated assets and includes provisions created in the earlier years in respect of such loan balances.
The Company has only one class of shares referred to as equity shares having a par value of Rs, 10. Each holder of equity share is entitled to one vote per share.
In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.
During the year ,the Company (on 14th June 2017) allotted 12 47 258 equity shares of Rs,10/- each as bonus shares in proportion of one equity share for every ten equity shares held. Also, on 13th November 2017 ,the company has made allotment of 27 27 700 equity shares to Qualified Institutional Buyers at an issue price of Rs,605/- per equity share including a premium of Rs,595/- per share.
As per the records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.
Terms of Repayment of Bank Loans:
Security and Rate of Interest of Term Loans from Banks
The term loans from banks are secured by creating a first charge by way of hypothecation of entire current assets including hypothecation loans and all other loan and other current assets of the company.
Rate of interest varies from 9.40% to 10.30% as on the Balance Sheet date.
These loans are repayable in equal monthly/ quarterly installments spread over 10 months to 33 months.
2.3.2 Debentures:
The Company has issued Redeemable Non-Convertible Debentures on Private Placement basis in various series. The debentures issued under each series have a repayment period depending on the scheme it falls under. The debentures are repayable within a period of 1 to 6 years, depending on the schemes. The schemes range from Monthly, Annual and Maturity Interest payment. The rate of interest of the Unmatured debentures is 10.92% per annum and the rate of interest of matured debentures ranges from 9.5% to 14.19% per annum.
The issued debentures are secured by a pari-passu First charge with the banks against the loans, including cash credit, demand loans and term loans, taken from them, on all movable assets, book debts and receivables created by undertaking the business of Hypothecation Loan and all other types of Loans, both present and future, created by the company.
2.3.3 Subordinated Term Loans/Debts (Sub Debts):
A. Northern Arc Capital Limited (Formerly known as IFMR Capital Finance Private Limited) -
The Company has taken two Subordinated Unsecured Term Loans from IFMR Capital Finance Private Limited of Rs, 15 00 00 thousand each on 29th June, 2016 and 30th March, 2017 respectively, with interest rates being 12.5% and
11.95%. The loans will be repaid only on maturity i.e. after 66 months from the date of availing the loan.
B. The Company has also accepted subordinated debts from public under three schemes, namely Monthly, Annual and Maturity interest payment with interest rates ranging from 9.06% to 13.4%. The maturity period of the loan ranges from 60 months to 96 months. The subordinated debts issued under each scheme will be repaid only on maturity.
The Unsecured Term loans / Subordinated Debts of the Company qualify as Tier II Capital under Master Directions â Non Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 issued by Reserve Bank of India.
2.3.4 Public Deposits:
The Company has accepted Public Deposits under three schemes, namely Monthly, Annual and Maturity interest payment. The deposits issued under each scheme will be repaid only on maturity, unless claimed by the depositor earlier and, if permissible, to be repaid as per the regulations issued in this regard by the Reserve Bank of India. The rate of interest on these deposits ranges from 7.0 % to 12.5% per annum. The repayment period ranges from 12 months to 60 months
2.5.1 Loans from Banks - Working Capital Demand Loans and Cash Credits Guaranteed Loans
The Working Capital Demand Loans, Cash Credits and Term Loans obtained from Banks have been personally guaranteed by the Promoter Directors of the Company, namely, Mr. Thomas John Muthoot, Mr. Thomas George Muthoot and Mr. Thomas Muthoot.
Security and Rate of Interest of Working Capital Demand Loans and Cash Credits from Banks
The Cash Credits and Working Capital Demand Loan facilities have been obtained from the banks by creating First Charge by way of hypothecation of the entire current assets, including business loans, hypothecation loans and all other loan receivables, ranking pari-passu with other banks and Debenture Holders.
Interest on these loans varies between 8.5% to 11.35% per annum as on the Balance Sheet date.
These loans are repayable within a period upto 12 months from the date of sanction.
2.5.2. Loans and Advances from Related Parties
The Company has entered into transactions with Promoter Directors of the Company. The Company pays interest @ 12% p.a in respect of interest bearing loans(Balance outstanding as at 31st March, 2018 was Rs, 3 05 00 thousand (Rs, 10 91 00 thousand)). The total balance outstanding (interest and non-interest bearing loan) as at 31st March 2018 is Rs, 5 78 06 thousand (Rs,13 64 06 thousand)
2.5.3. Inter Corporate Deposits
The Company has taken an Inter Corporate Deposit from Adtech Systems Ltd. This is repayable after a period of 3 months with an effective rate of interest of 9% per annum. The balance Outstanding as on 31st March, 2018: Rs, 1 49 95 thousand (Rs, 1 52 61 thousand).
2.5.4.Commercial Paper
The Company has made three Commercial Paper issuances during the year. One commercial paper was redeemed during the year itself. Total value of issuance during the year is Rs, 225 00 00 thousand. The balance of Discounted Value Outstanding as at 31st March, 2018: Rs, 145 23 09 thousand (Nil).
Trade Payables includes amounts payable to related parties amounting to Rs, 2 47 26 thousand (Rs, 2 13 20 thousand)
2.6.1 Amount Payable to Micro, Small And Medium Enterprises
There are no Micro, Small and Medium Enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 to whom the Company owes dues on account of Principal amount together with interest and accordingly no additional disclosures have been made.
The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
2.10.1 Investment in PMS represents the following-
(a) 7 750 (7 075) shares of ''2/- each in Manappuram Finance Ltd -''7 64 thousand (''7 06 thousand)
(b) 10 526 (5 456) shares of ''10/- each in Muthoot Finance Ltd-''48 57 thousand (''19 30 thousand)
(c ) Balance with PMS ''4 thousand(''23 59 thousand)
2.10.2 Aggregrate amount of quoted investment is ''14 81 15 (''14 51 30) and market value is ''15 60 91 (''15 83 68), aggregate amount of unquoted investment is ''3 05 04 (''23 59). Aggregate provision for diminution in value of investment is Nil.
2.10.3 In accordance with the guidelines given in the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 issued by Reserve Bank of India the Company has created floating charge on the statutory liquid assets comprising of Investment in Government Securities of face value of Rs,14 88 00 thousand (Cost- Rs,14 24 94 thousand) and bank deposits of Rs,4 81 25 thousand in favor of trustees representing the deposit holders of the Company.
Mar 31, 2017
CORPORATE INFORMATION
Muthoot Capital Services Limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Muthoot Capital Services Limited was incorporated on February 18, 1994 as a public limited company. Its shares are listed on the Bombay Stock Exchange and the National Stock Exchange. The Company is registered as an A category Deposit taking Non Banking Financial Company (NBFC) with Reserve Bank of India. During the year, the Company was primarily engaged in the business of financing for purchase of automobiles, mainly two wheelers against hypothecation of the respective vehicles, corporate loans and granting of business/personal loans against Security of receivables (Term loans) / demand promissory notes respectively. The Company also engaged itself in the business of buying loan portfolios from other NBFCs financing the two wheelers /small business/micro finance segment. The Company has a reasonably good presence in the non-banking financial sector in rural and semi urban areas.
1. SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis for preparation of financial statements
i. The financial statements for the year ended 31st March, 2017, have been prepared and presented under historical cost convention and on the accrual basis of accounting in accordance with Indian Generally Accepted Accounting Principles ("GAAP") and in compliance with the provisions of the Companies Act, 2013, mandatory and relevant Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) and the directions issued by Reserve Bank of India for Non-Banking Financial Companies from time to time, wherever applicable.
ii. All assets and liabilities have been classified as current and non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013. Based on the nature of financial services provided and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 36 months for the purpose of classification of its assets and liabilities into current and non-current as per the requirements of Schedule III of the Companies Act, 2013.
iii. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
1.2 Use of Estimates
The preparation of the financial statements requires the use of estimates and assumptions that affect the reported amount of assets and liabilities as at the Balance Sheet date, reported amounts of revenues and expenses during the period and disclosure of contingent liabilities as at that date. The estimates and assumptions used in these financial statements are based upon the management''s evaluation of the relevant facts and circumstances as on the date of financial statements. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured:
Income from Financial Services
i. Finance charges in respect of hypothecation loan transactions are accounted by applying the Internal Rate of Return method. Overdue charges on belated hypothecation loan installments are accounted as and when received by the Company.
ii. Interest on loans and advances, including Loan Buyout and Other business loans, is recognized on accrual basis at the contract rate wherever feasible. Overdue charges for belated payments are accounted as and when received.
iii. Income in respect of Non-performing assets is recognized as and when received as per The Master Direction -Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 09th March, 2017.
iv. Interest Income on SLR Investments/ Bank Deposits including collateral deposits is recognized on accrual basis.
v. Income from securitization transaction, being interest spread under par structure of securitization loan receivables, is recognized over the tenure of the ''securities issued by SPV\
Windmill Income
Income from power generation is recognized on supply of power to the grid as per the terms of the arrangement with the buyers of power.
Income from Investments
Dividend on investments is recognized as income, when right to receive payment is established by the date of Balance Sheet. The profit/loss on Capital Market Operations is recognized at the time of actual sale/ redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Master Directions dated 09th March 2017 issued by the Reserve Bank of India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / Writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments.
Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including finance charges accrued and due, as reduced by amounts received and loans securitized.
ii. Advance installments received against Hypothecation loans is shown as Current Liabilities.
iii. Repossessed automobile assets are valued at lower of book value and estimated realizable value.
Securitization transactions
i. Securitized receivables are de-recognized in the Balance Sheet when they are sold i.e. if they fully meet the true sale criteria as per the Master Direction dated 09th March 2017 issued by the Reserve Bank of India.
ii. Company''s contractual rights to receive the share of the future interest (i.e. interest spread) in respect of the transferred asset from the SPV is capitalized at the present value as Interest Only (I/O) Strip(Interest Strip Retained on Securitization of Receivables) with the corresponding liability created for Unrealized Gains on Loan Transfer Transactions.
1.5 Fixed Assets, Depreciation/Amortization and Impairment
Fixed Assets are stated at historical cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, borrowing costs, if capitalization criteria are met, and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebate are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to its book value, only if it increases the future benefit of the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repairs and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is de-recognized.
Depreciation on Tangible Fixed Assets
Depreciation on assets held for own use of the Company is provided on written down value method as per the useful years of life of the assets and in the manner prescribed under Schedule II of the Companies Act, 2013 and in accordance with revised Accounting Standard 10: Property, Plant and Equipment issued by the Ministry of Corporate Affairs on 30th March 2016.
The Company has adopted the following as the useful years of life to provide depreciation on its tangible assets.
Impairment of Tangible and Intangible Fixed Assets
(i) The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. An asset''s recoverable amount is the higher of an asset''s net selling price and its value in use.
(ii) After impairment, depreciation is provided on the revised carrying amount of the asset as per the Useful Life as prescribed in Schedule II of the Companies Act, 2013.
(iii) An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s recoverable amount. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation, if there was no impairment.
1.6 Leases
Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on straight line basis over the lease term.
1.7 Investments
(i) Investments in Government Securities
(a) Non - Current Investments are stated at cost and provision for diminution in value, other than temporary, is considered wherever necessary.
(b) Current Investments are valued at lower of cost and market value/net asset value.
(ii) Investments - Others
(a) Investments, which are readily realizable and intended to be held for not more than three years from the date on which such investments are made, are classified as Current Investments. All other investments are classified as Non-Current Investments.
On initial recognition, all investments are measured at cost. The cost comprises of purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. NonCurrent Investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of investments, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.
1.8 Income Tax
Tax expenses comprises of Current and Deferred Tax. Current Income Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and the reversal of timing differences of the earlier years.
Deferred Tax Liabilities are recognized for all taxable timing differences. Deferred Tax Assets are recognized for deductible timing differences only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.
The carrying amount of Deferred Tax Assets is reviewed at each reporting date. The Company writes down the carrying amount of Deferred Tax Asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which Deferred Tax Asset can be realized. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Deferred Tax Assets and Deferred Tax Liabilities are offset, if a legally enforceable right exists to set off current tax asset against current tax liabilities and the Deferred Tax Assets and Deferred Tax Liabilities relate to the same taxation authority.
1.9 Retirement and Other Employee Benefits
(i) Defined Contribution Plan
(a) Provident Fund
Retirement benefit in the form of provident fund is a defined contribution scheme. The contributions to the provident fund are charged to the Statement of Profit and Loss for the year when the contributions are due in accordance with the fund rules. The Company has no obligation, other than the contribution payable to the provident fund.
(b) Employees State Insurance
The Company also contributes to Employees State Insurance Corporation on behalf of its employees.
(ii) Defined Benefit Plan - Gratuity
Payment of gratuity to employees is covered by the Gratuity Trust Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of India which is a defined benefit scheme. The yearly contribution/ premium paid/payable is determined on actuarial valuation done by an independent valuer. Actuarial gain and loss for defined benefit plan is recognized in full in the period in which they occur in the Statement of Profit and Loss.
1.10 Segment Reporting
The Company''s business activity primarily falls within a single business segment which constitutes Financing Activities (Advancing of hypothecation loans, term loans, buying loan portfolio of other NBFCs/Micro Finance
Companies and loans against demand promissory notes etc.). Hence additional disclosures are not required under Accounting Standard 17 ''Segment Reporting''.
The Company operates only in India, hence there is no other significant geographical segment that requires the disclosure.
1.11 Related Party Disclosures
Disclosures are made as per the requirements of the Accounting Standard 18 "Related Party Disclosures" read with the clarifications issued by ICAI.
1.12 Earnings per Share
The Company reports basic earnings per share in accordance with Accounting Standard 20 "Earnings per Share", issued by the ICAI. Basic earnings per share has been computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the year.
1.13 Cash and Cash Equivalents
(i) Cash and Cash Equivalents in the cash flow statements comprise cash at hand and at bank, remittances in transits and short term investments with an original maturity period of three months or less. Cash at bank excludes fixed deposits having a maturity more than three months held as SLR deposits and other deposits given as collateral security for securitization transactions.
(ii) Cash and Cash Equivalents in the Balance Sheet comprise cash at hand and at bank, remittances in transits and short term investments. Cash at bank includes deposit having a maturity of more than three months held as SLR deposits and other deposits given as collateral security for securitization transactions.
1.14 Material Events
Material Events occurring after the Balance Sheet date are taken into cognizance.
1.15 Expenses on Public Deposits / Debentures / Subordinated Debts/ Securitization
The interest on Public Deposits, Debentures and Subordinated Debt is recognized on accrual basis at the rate applicable to each scheme. The brokerage incurred on Public Deposits and Subordinated Debts are treated as expenditure in the year in which it is incurred. Expenditure on securitization is recognized upfront. The Company has followed the Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 dated August 25, 2016.
1.16 Provisions other than that for Non-Performing Assets
A provision is recognized when the Company has a present legal or constructive obligation as a result of past event, for which it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made for the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
1.17 Contingent Liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises, in extremely rare cases, where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability, but discloses its existence, if it exists, in the financial statements.
1.18 Classification and Provisioning of Assets as per RBI Guidelines
As per the guidelines given in the Master Directions dated 09th March, 2017 issued by the Reserve Bank of
India for Non-Banking Financial Companies in respect of Prudential Norms for Income Recognition, Asset Classification, Accounting Standards, Provisioning / Writing off for bad and doubtful debts, Capital Adequacy and Concentration of credit / investments, the Company makes adequate provisions against Non-Performing Assets in the following manner;
(i) Standard Assets:
Provision against Standard Assets is made at the rate of 0.35% as required by Paragraph 14 of The Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 09th March, 2017.
(ii) Sub-standard, Doubtful and Loss Assets:
Provision as required by Paragraph 13 of The Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 09th March, 2017.
(iii) Loans in the doubtful assets category held for a period of more than two years in respect of Hypothecation advance against two wheelers and three wheelers are written off as considered appropriate by the management.
(iv) Loss assets Loans against security of gold ornaments in the loss asset category are written off as considered appropriate by the management.
Mar 31, 2015
1.1 Basis for preparation of financial statements
i. The financial statements for the year ended 31st March, 2015, have
been prepared under historical cost convention and on the accrual basis
of accounting in accordance with Indian Generally Accepted Accounting
Principles ("GAAP") and in compliance with the provisions of the
Companies Act, 2013, mandatory and relevant Accounting Standards issued
by the Institute of Chartered Accountants of India (ICAI) and the
directions issued by Reserve Bank of India for Non-Banking Financial
Companies from time to time, wherever applicable.
ii. All assets and liabilities have been classified as current and
non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule III of the Companies Act, 2013. Based
on the nature of financial services provided and their realization in
cash and cash equivalents, the Company has ascertained its operating
cycle as 36 months for the purpose of classification of its assets and
liabilities into current and non-current as per the requirements of
Schedule III of the Companies Act, 2013.
iii. The accounting policies have been consistently applied by the
Company and are consistent with those used in the previous year.
1.2 Use of Estimates
The preparation of the financial statements requires the use of
estimates and assumptions that affect the reported amount of assets and
liabilities as at the Balance Sheet date, reported amounts of revenues
and expenses during the period and disclosure of contingent liabilities
as at that date. The estimates and assumptions used in these financial
statements are based upon the management's evaluation of the relevant
facts and circumstances as on the date of financial statements.
Although these estimates are based upon management's best knowledge of
current events and actions, actual results could differ from these
estimates. Any revisions to the accounting estimates are recognized
prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured:
* Income from Financial Services
Finance charges in respect of hypothecation loan transactions are
accounted by applying the Internal Rate of Return method. Overdue
charges on belated hypothecation loan instalments are accounted as and
when received by the Company.
Interest on loans and advances, including Loan Buyout, is recognized on
accrual basis at the contract rate wherever feasible. Overdue charges
for delayed payments are accounted as and when received.
Income in respect of Non-performing assets is recognized as and when
received as per the guidelines given in the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 2007.
Interest income on SLR Investment/ Deposits is recognized on accrual
basis.
* Windmill Income
Income from power generation is recognized on supply of power to the
grid as per the terms of the agreement with Muthoot Bankers.
* Dividend Income
Dividend on investments is recognized as income, when right to receive
payment is established by the date of Balance Sheet. The profit/loss on
Capital Market Operations is recognized at the time of actual
sale/redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Directions issued by the Reserve Bank of
India for Non-Banking Financial Companies in respect of Prudential
Norms for Income Recognition, Asset Classification, Accounting
Standards, Provisioning / Writing off for bad and doubtful debts,
Capital Adequacy and Concentration of credit / investments and also the
Non-Banking Financial Companies acceptance of Public Deposits (Reserve
Bank) Directions 2007.
Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including
finance charges accrued and due, as reduced by amounts received up to
Balance Sheet date.
ii. Repossessed automobile assets are valued at lower of book value
and estimated realizable value.
iii. Interest on hypothecation loans was recognized on accrual basis up
to the current reporting date.
1.5 Tangible Fixed Assets
Fixed Assets are stated at historical cost, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing costs, if capitalization criteria
are met and directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade discount and rebate
are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value, only if it increases the future benefit of the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
Statement of Profit & Loss for the period during which such expenses
are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the Statement of
Profit & Loss when the asset is de-recognized.
1.6 Depreciation on Tangible Fixed Assets
Depreciation on assets held for own use of the Company is provided on
written down value method as per the useful years of life of the assets
and in the manner prescribed under Schedule II of the Companies Act,
2013.
The company has adopted the following as the useful years of life to
provide depreciation on its fixed assets.
Sl No Description of the Assets Useful Years of Life
1 Motor Vehicles
(i) Car 8
(ii) Cycles, Scooters 10
2 Furniture and Fittings 10
3 Office Equipments 5
4 Computer and Accessories
(i) Computers 3
(ii) Networks & Servers 6
5 Windmill generator 22
Carrying Amounts of assets for which useful life is reduced as per the
Schedule II of the Companies Act, 2013 which came into effect from 1st
April, 2014, are depreciated as shown below:
a. The Carrying amount as on 1st April, 2014, is depreciated over
remaining useful life of the asset as per Schedule II of the Companies
Act, 2013
b. If the useful life of asset as on 1st April, 2014, is nil as per
Schedule II of the Companies Act, 2013,the carrying amount as on 1st
April, 2014, is recognized in the opening balance of the Reserves and
Surplus.
Impairment of tangible and intangible assets
a) The carrying amounts of assets are reviewed at each Balance Sheet
date to ascertain impairment based on internal / external factors. An
impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. An asset's recoverable amount is the
higher of an asset's net selling price and its value in use.
b) After impairment, depreciation is provided on the revised carrying
amount of the asset as per the Useful Life as prescribed in Schedule II
of the Companies Act 2013.
c) An assessment is made at each reporting date as to whether there is
any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
company estimates the asset's recoverable amount. A previously
recognized impairment loss is increased or reversed depending on
changes in circumstances. However, the carrying value after reversal is
not increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
1.7 Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on straight line basis over the
lease term.
1.8 Investments
a) Investment in Government Securities
Long-Term Investments are stated at cost and provision for diminution
in value, other than temporary, is considered wherever necessary.
Current Investments are valued at lower of cost and market value / net
asset value.
b) Investments - Others
Investments, which are readily realizable and intended to be held for
not more than three years from the date on which such investments are
made, are classified as current investments. All other investments are
classified as Long- Term investments.
On initial recognition, all investments are measured at cost. The cost
comprises of purchase price and directly attributable acquisition
charges such as brokerage, fees and duties. Current investments are
carried in the financial statements at lower of cost and fair value
determined on an individual investment basis. Long term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of the
investments.
On disposal of investments, the difference between its carrying amount
and net disposal proceeds is charged or credited to the Statement of
Profit & Loss.
1.9 Income Tax
Tax expense comprises of Current and Deferred Tax. Current Income Tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and the reversal of timing differences of the earlier years.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is a reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write down is reversed to the extent that it
becomes reasonably certain or virtually certain, as the case may be,
that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax asset against
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the same taxation authority.
1.10 Retirement and Other Employee Benefits
a) Defined Contribution Plan
(i) Provident Fund
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the Statement of Profit & Loss for the year when the
contributions are due in accordance with the fund rules. The Company
has no obligation, other than the contribution payable to the provident
fund.
(ii) Employees State Insurance
The Company also contributes to Employees State Insurance Corporation
on behalf of its employees.
b) Defined Benefit Plan - Gratuity.
Payment of gratuity to employees is covered by the Gratuity Trust
Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of
India which is a defined benefit scheme. The yearly
contribution/premium paid/ payable is determined on actuarial valuation
done by LIC. Actuarial gain and loss for defined benefit plan is
recognized in full in the period in which they occur in the Statement
of Profit & Loss.
1.11 Segment Reporting
The Company's business activity primarily falls within a single
business segment which constitutes Financing Activities (Advancing of
hypothecation loans, buying loan portfolio of other NBFCs/ Micro
Finance company and loan against demand promissory notes etc.). Hence,
there is no additional disclosures required under Accounting Standard
17 'Segment Reporting'.
The Company operates primarily in India; hence there is no other
significant geographical segment that requires the disclosure.
1.12 Related Party Disclosure
Disclosures are made as per the requirements of the Accounting Standard
18 'Related Party' read with the clarifications issued by Institute of
Chartered Accountants of India.
1.13 Earnings per Share
The Company reports basic earning per share in accordance with
Accounting Standared -20 "Earnings per Share", issued by the ICAI.
Basic earnings per share has been computed by dividing net profit after
tax by the weighted average number of equity shares outstanding for the
year.
1.14 Cash and Cash Equivalents
Cash and Cash equivalents in the cash flow statements comprise cash at
hand and at bank, remittances in transits and short-term investments
with an original maturity of three months or less.
1.15 Material Events
Material Event occurring after the Balance Sheet date is taken into
cognizance.
1.16 Provisions other than that for Non-Performing Assets
A provision is recognized when the Company has a present legal and
constructive obligation as a result of past event, it is probable that
an out flow of resources embodying economic benefits will be required
to settle the obligation and reliable estimate can be made of the
amount of the obligation. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the reporting date. These estimates are
reviewed at each reporting date and adjusted to reflect the current
best estimates.
1.17 Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
the company or a present obligation that is not recognized because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognized because it
cannot be measured reliably. The Company does not recognize a
contingent liability but discloses its existence in the financial
statements.
1.18 Classification and provisioning as per RBI Guidelines
As per the guidelines given in the Prudential Norms for Non-Banking
Financial Companies prescribed by the Reserve Bank of India, the
Company makes adequate provisions against Non-Performing Assets in the
following manner;
a. Standard Assets:
Provision against Standard Assets is made at the rate of 0.25% as
required by Paragraph 9A of the Non-Banking Financial Companies
Prudential Norms (Reserve Bank) Directions 2007 read with Notification
No. DNBS.222/CGM (US)-2011 issued by Reserve Bank of India on January
17, 2011.
b. Sub-standard, Doubtful and Loss Assets:
Provision as required by Paragraph 9 of the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions 2007.
c. An additional adhoc provision as considered appropriate by the
management towards provision against non-performing assets.
Mar 31, 2014
CORPORATE INFORMATION
Muthoot Capital Services Limited (the company) is a public company
domiciled in India and incorporated under the provisions of the
Companies Act, 1956. Its shares are listed in the Bombay Stock Exchange
in India. The Company is registered as a Non-Banking Financial Company
(NBFC) with Reserve Bank of India. During the year the Company is
mainly engaged in asset financing activities, especially two wheelers
and three wheelers. The Company has a strong presence in the
Non-banking financial sector in rural and semi-urban areas in South
India. Muthoot Capital Services Limited was incorporated on February
18, 1994 as a public limited company.
1.1 Basis for preparation of financial statements
i. The financial statements for the year ended 31st March, 2014, have
been prepared under historical cost convention and on the accrual basis
of accounting in accordance with Indian Generally Accepted Accounting
Principles ("GAAP") and in compliance with the provisions of the
Companies Act, 2013 (to the extent modified) and the Companies Act,
1956 (to the extent applicable), mandatory and relevant Accounting
Standards issued by the Institute of Chartered Accountants of India
(ICAI) and the directions issued by Reserve Bank of India for Non
Banking Financial Companies from time to time, wherever applicable.
ii. All assets and liabilities have been classified as current and non
current as per the Company''s normal operating cycle and other criteria
set out in the revised Schedule VI of the Companies Act, 1956. Based on
the nature of services and their realization in cash and cash
equivalents, the Company has adopted its operating cycle as 12 months
for the purpose of current and non current classification of its assets
and liabilities.
iii. The accounting policies have been consistently applied by the
Company and are consistent with those used in the previous year.
1.2 Use of Estimates
The preparation of the financial statements requires the use of
estimates and assumptions that affect the reported amount of assets and
liabilities as at the balance sheet date, reported amounts of revenues
and expenses during the period and disclosure of contingent liabilities
as at that date. The estimates and assumptions used in these financial
statements are based upon the management''s evaluation of the relevant
facts and circumstances as on the date of financial statements.
Although these estimates are based upon management''s best knowledge of
current events and actions, actual results could differ from these
estimates. Any revisions to the accounting estimates are recognized
prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured:
- Income from Financial Services
- Finance charges in respect of hypothecation loan transactions are
accounted by applying the Internal Rate of Return method. Overdue
charges on belated hypothecation loan installments are accounted as and
when received by the Company.
- Interest on loans and advances is recognized on accrual basis at the
contract rate wherever feasible. Overdue charges for delayed payments
are accounted as and when received.
- Income in respect of Non performing assets is recognized as and when
received as per the guidelines given in the Non Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 2007.
- Income from Services is recognized on accrual basis as per the terms
of the contract.
- Interest Income on SLR Investment is recognized on accrual basis
Windmill Income
Income from power generation is recognized on supply of power to the
grid as per the terms of the power purchase agreement with Tamil Nadu
State Electricity Board.
Dividend Income
Dividend on investments is recognized as income, when right to receive
payment is established by the date of balance sheet. The profit / loss
on Capital Market Operations is recognized at the time of actual sale /
redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Directions issued by the Reserve Bank of
India for Non-Banking Financial Companies in respect of Prudential
Norms for Income Recognition, Asset Classification, Accounting
Standards, provisioning / writing off for bad and doubtful debts,
Capital Adequacy and Concentration of credit / investments and also the
Non-Banking Finance Companies acceptance of Public Deposits (Reserve
Bank) Directions 2007.
Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including
finance charges accrued and due, as reduced by amounts received up to
balance sheet date.
ii. Repossessed automobile assets are valued at lower of book value
and estimated realizable value.
iii. Interest on hypothecation loans was recognized on accrual basis
up to the current reporting date.
1.5 Tangible Fixed Assets
Fixed Assets are stated at historical cost, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing costs if capitalization criteria
are met and directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade discount and rebate
are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value, only if it increases the future benefit of the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day to day repair and
maintenance expenditure and cost of replacing parts, are charged to the
Statement of Profit & Loss for the period during which such expenses
are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the Statement of
Profit and Loss when the asset is de recognized.
1.6 Depreciation on tangible fixed assets
Depreciation on assets held for own use of the Company is provided on
written down value method at the rates and in the manner prescribed
under schedule XIV of the Companies Act, 1956. All fixed assets
individually costing Rs. 5,000 or less are fully depreciated in the year
of installation.
1.7 Impairment of tangible and intangible assets
a) The carrying amounts of assets are reviewed at each balance sheet
date to ascertain impairment based on internal / external factors. An
impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. An asset''s recoverable amount is the
higher of an asset''s net selling price and its value in use.
b) After impairment, depreciation is provided on the revised carrying
amount of the asset as per the depreciation rate prescribed in Schedule
XIV of the Companies Act, 1956.
c) An assessment is made at each reporting date as to whether there is
any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
company estimates the asset''s recoverable amount. A previously
recognized impairment loss is increased or reversed depending on
changes in circumstances. However, the carrying value after reversal is
not increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
1.8 Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on straight line basis over the
lease term.
1.9 Investments
(a) Investment in Government Securities- Long term Investments are
stated at cost and provision for diminution in value, other than
temporary, is considered wherever necessary.
Current Investments are valued at lower of cost and market value / net
asset value.
(b) Investments - Others
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis. Long
term investments are carried at cost. However, provision for diminution
in value is made to recognize a decline other than temporary in the
value of the investments.
On disposal of investments, the difference between its carrying amount
and net disposal proceeds is charged or credited to the Statement of
Profit and Loss.
1.10 Income Tax
Tax expense comprises of Current and Deferred Tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and the reversal of timing differences of the earlier years.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is a reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax asset against
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the same taxation authority.
1.11 Retirement and Other Employees Benefits
a) Defined Contribution Plan
(i) Provident Fund
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the Statement of Profit and Loss for the year when the
contributions are due in accordance with the fund rules. The Company
has no obligation, other than the contribution payable to the provident
fund.
(ii) Employee State Insurance
The company also contributes to Employees State Insurance Corporation
on behalf of its employees.
b) Defined Benefit Plan - Gratuity.
Payment of gratuity to employees is covered by the Gratuity Trust
Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of
India which is a defined benefit scheme. The yearly contribution /
premium paid / payable is determined on actuarial valuation done by
LIC. Actuarial gain and loss for defined benefit plan is recognized in
full in the period in which they occur in the Statement of Profit and
Loss.
1.12 Segment Reporting
The company''s business activity primarily falls within a single
business segment which constitutes Financing Activities (Advancing of
hypothecation loans and loan against demand promissory notes etc.).
Hence, there are no additional disclosures required under Accounting
Standard 17 ''Segment Reporting''.
The Company operates primarily in India; hence there is no other
significant geographical segment that requires the disclosure.
1.13 Related Party Disclosure
Disclosures are made as per the requirements of the Accounting Standard
18 read with the clarifications issued by Institute of Chartered
Accountants of India.
1.14 Earnings per Share
The Company reports basic earning per share in accordance with AS-20
"Earnings per Share", issued by the ICAI. Basic earnings per share has
been computed by dividing net profit after tax by the weighted average
number of equity shares outstanding for the year.
1.15 Cash and Cash Equivalents
Cash and cash equivalents in the cash flow statements comprise cash at
hand and at bank, remittances in transits and short term investments
with an original maturity of three months or less.
1.16 Provisions other than that for Non Performing Assets
A provision is recognized when the company has a present legal and
constructive obligation as a result of past event, it is probable that
an out flow of resources embodying economic benefits will be required
to settle the obligation and reliable estimate can be made of the
amount of the obligation. Provisions are not discounted to their
present value and are determined based on the best estimate required to
settle the obligation at the reporting date. These estimates are
reviewed at each reporting date and adjusted to reflect the current
best estimates.
1.17 Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
the company or a present obligation that is not recognized because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognized because it
cannot be measured reliably. The company does not recognize a
contingent liability but discloses its existence in the financial
statements.
1.18 Classification and provisioning as per RBI Guidelines
As per the guidelines given in the Prudential Norms for Non Banking
Financial Companies prescribed by the Reserve Bank of India, the
Company makes adequate provisions against Non Performing Assets in the
following manner;
a. Standard Assets:
Provision against Standard Assets is made at the rate of 0.25% as
required by Paragraph 9A of the Non Banking Financial Companies
Prudential Norms (Reserve Bank) Directions 2007 read with Notification
No. DNBS.222/CGM (US)-2011 issued by Reserve Bank India on January 17,
2011.
b. Sub-standard, Doubtful and Loss Assets:
Provision as required by paragraph 9 of the Non Banking Financial
Companies Prudential Norms (Reserve Bank) Directions 2007.
Mar 31, 2013
1.1 Basis for preparation of financial statements
i. The financial statements for the year ended March 31, 2013, have
been prepared under historical cost convention and on the accrual basis
of accounting in accordance with Indian Generally Accepted Accounting
Principles (ÂGAAP") and in compliance with the provisions of
Companies Act, 1956, mandatory and relevant Accounting Standards issued
by the Institute of Chartered Accountants of India (ICAI) and the
directions issued by Reserve Bank of India for Non Banking Financial
Companies from time to time, wherever applicable.
ii. The accounting policies have been consistently applied by the
Company and are consistent with those used in the previous year.
1.2 Use of Estimates
The preparation of the financial statements requires the use of
estimates and assumptions that affect the reported amount of assets and
liabilities as at the balance sheet date, reported amounts of revenues
and expenses during the period and disclosure of contingent liabilities
as at that date. The estimates and assumptions used in these financial
statements are based upon the management''s evaluation of the relevant
facts and circumstances as on the date of financial statements.
Although these estimates are based upon management''s best knowledge of
current events and actions, actual results could differfrom these
estimates. Any revisions to the accounting estimates are recognized
prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flowtothe Company and the revenue can be
reliably measured:
Income from Financial Services
- Finance charges in respect of hypothecation loan transactions are
accounted by applying the Internal Rate of Return method. Overdue
charges on belated hypothecation loan installments are accounted as and
when received by the Company.
- Interest on loans and advances is recognized on accrual basis at
the contract rate wherever feasible. Overdue charges for delayed
payments are accounted as and when received.
- Income in respect of Non-performing assets is recognized as and
when received as per the guidelines given in the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 2007.
- Income from Services is recognized on accrual basis as perthe terms
ofthe contract.
Windmill Income
Income from power generation is recognized on supply of power to the
grid as per the terms of the power purchase agreement with Tamil Nadu
State Electricity Board.
Dividend Income
Dividend on investments is recognized as income when right to receive
payment is established by the date of balance sheet. The profit/loss on
Capital Market Operations is recognized at the time of actual
sale/redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Directions issued by the Reserve Bank of
India for Non Banking Financial Companies in respect of Prudential
Norms for Income Recognition, Asset Classification, Accounting
Standards, provisioning / writing off for bad and doubtful debts,
Capital Adequacy and Concentration of credit/investments and also the
Non Banking Finance Companies acceptance of Public Deposits (Reserve
Bank) Directions 2007.
Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including
finance charges accrued and due, as reduced by amounts received up to
balance sheet date.
ii. Repossessed automobile assets are valued at lower of book value
and estimated realizable value.
iii. Interest on hypothecation loans was recognized on accrual basis
uptothe current reporting date.
1.5 Tangible Fixed Assets
Fixed Assets are stated at historical cost, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing costs if capitalization criteria
are met and directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade discount and rebate
are deducted in arriving atthe purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value, only if it increases the future benefit of the existing
asset beyond its previously assessed standard of performance. All other
expenses on existing fixed assets, including day-to-day repair and
maintenance expenditure and cost of replacing parts, are charged to the
Statement of Profit & Loss forthe period during which such expenses are
incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount ofthe asset and are recognized in the Statement of
Profit & Loss when the asset is de-recognized.
1.6 Depreciation on tangible fixed assets
Depreciation on assets held for own use ofthe Company is provided on
written down value method at the rates prescribed under schedule XIV
ofthe Companies Act, 1956. All fixed assets individually costingRs.
5,000/- orless are fully depreciated in the year of installation.
1.7 Impairment of tangible and intangible assets
a) The carrying amounts of assets are reviewed at each balance sheet
date to ascertain impairment based on internal / external factors. An
impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. An asset''s recoverable amount is the
higher of an asset''s net selling price and its value in use.
b) After impairment, depreciation is provided on the revised carrying
amount of the asset as per the depreciation rate prescribed in Schedule
XIV ofthe Companies Act 1956.
c) An assessment is made at each reporting date as to whether there is
any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
company estimates the asset''s recoverable amount. A previously
recognized impairment loss is increased or reversed depending on
changes in circumstances. However, the carrying value after reversal is
not increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
1.8 Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership ofthe leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on straight line basis overthe
lease term.
1.9 Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as longterm investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis. Long
term investments are carried at cost. However, provision for diminution
in value is made to recognize a decline otherthan temporary in the
value ofthe investments.
On disposal of investments, the difference between its carrying amount
and net disposal proceeds is charged or credited to the Statement of
Profit & Loss.
1.10 Income Tax
Tax expense comprises of Current and Deferred Tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating duringthe current year
and the reversal of timing differences ofthe earlier years.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is a reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax asset against
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the same taxation authority.
1.11 Retirement and other employee Benefits
a) Defined Contribution plan
(i) Provident Fund
Retirement benefit in the form of Provident fund is a defined
contribution scheme. The contributions to the Provident fund are
charged to the Statement of Profit & Loss for the year when the
contributions are due in accordance with the fund rules. The company
has no obligation, otherthan the contribution payable to the provident
fund.
(ii) Employee State Insurance
The company also contributes to Employees State Insurance Corporation
on behalf of its employees.
b) Defined Benefit plan-Gratuity.
Payment of gratuity to employees is covered by the Gratuity Trust
Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of
India which is a defined benefit scheme. The yearly
contribution/premium paid/payable is determined on actuarial valuation
done by LIC. Actuarial gain and loss for defined benefit plan is
recognized in full in the period in which they occur in the Statement
of Profit & Loss.
1.12 Segment Reporting
The company''s business activity primarily falls within a single
business segment which constitutes Financing Activities (Advancing of
hypothecation loans, loan against demand promissory notes etc.). Hence,
there are no additional disclosures required under Accounting Standard
17 ''Segment Reporting1.
The Company operates primarily in India; hence there is no other
significant geographical segment that requires the disclosure.
1.13 Related Party Disclosure
Disclosures are made as perthe requirements ofthe Accounting Standard
18 read with the clarifications issued by I nstitute of Chartered Accou
ntants of I nd ia.
1.14 Earnings per Share
The Company reports basic earning per share in accordance with AS-20
"Earnings per Share", issued by the ICAI. Basic earning per share has
been computed by dividing net profit after tax by the weighted average
numberof equity shares outstandingfortheyear.
1.15 Cash and Cash Equivalents
Cash and cash equivalents in the cash flow statements comprise cash at
hand and at bank, remittances in transits and shortterm investments
with an original maturity of three months or less.
1.16 Provisions otherthan that for non performing assets
A provision is recognized when the company has a present legal and
constructive obligation as a result of past event, it is probable that
an outflow of resources embodying economic benefits will be required to
settle the obligation and reliable estimate can be made of the amount
ofthe obligation. Provisions are not discounted to their present value
and are determined based on the best estimate required to settle the
obligation at the reporting date. These estimates are reviewed at each
reporting date and adjusted to reflect the current best estimates.
1.17 Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
the company or a present obligation that is not recognized because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognized because it
cannot be measured reliably. The company does not recognize a
contingent liability but discloses its existence in the financial
statements.
1.18 Classification and provisioning as per RBI Guidelines
As per the guidelines given in the Prudential Norms for Non Banking
Financial Companies prescribed by the Reserve Bank of India, the
Company makes adequate provisions against Non Performing Assets in the
following manner;
a. Standard Assets:
Provision against Standard Assets is made atthe rate of 0.25% as
required by Paragraph 9Aofthe Non Banking Financial Companies
Prudential Norms (Reserve Bank) Directions 2007 read with Notification
No. DNBS.222/CGM(US)-20I I issued by Reserve Bankof India on January
17,201 I.
b. Sub-standard. Doubtful and Loss Assets:
Provision as required by paragraph 9 of the Non Banking Financial
Companies Prudential Norms (Reserve Bank) Directions 2007.
Mar 31, 2012
1.1 Basis for preparation of financial statement
i. The financial statements for the year ended March 31, 2012, have
been prepared under historical cost convention in accordance with
Indian Generally Accepted Accounting Principles ("GAAP") and in
compliance with the provisions of Companies Act, 1956, mandatory and
relevant Accounting Standards issued by the Institute of Chartered
Accountants of India (ICAI) and the directions issued by Reserve Bank
of India for Non Banking Financial Companies from time to time,
wherever applicable.
ii. The accounting policies have been consistently applied by the
Company and are consistent with those used in the previous year, except
for the change in accounting policy explained below:
a. Presentation and disclosure of financial statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act, 1956, has become applicable to the company,
for preparation and presentation of its financial statements. The
adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of the financial
statements. However it has significant impact on presentation and
disclosures made in the financial statements. The company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
b. Interest on hypothecation loans was recognized on accrual basis up
to the current reporting date as against for the completed months up to
the previous year. This resulted in an increase of operating revenue by
Rs. 412.39 Lakhs for the year ended March 31, 2012.
1.2 Use of Estimates
The preparation of the financial statements requires the use of
estimates and assumptions that affect the reported amount of assets and
liabilities as at the balance sheet date, reported amounts of revenues
and expenses during the period and disclosure of contingent liabilities
as at that date. The estimates and assumptions used in these financial
statements are based upon the management's evaluation of the relevant
facts and circumstances as of the date of financial statements.
Although these estimates are based upon management's best knowledge of
current events and actions, actual results could differ from these
estimates. Any revisions to the accounting estimates are recognised
prospectively in the current and future years.
1.3 Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured:
Income from Financial Services
- Finance charges in respect of hypothecation loan transactions are
accounted by applying the Internal Rate of Return method. Overdue
charges on belated hypothecation loan installments are accounted as and
when received by the Company.
- Interest on loans and advances is recognized on accrual basis at the
contract rate wherever feasible. Overdue charges for delayed payments
are accounted as and when received.
- Income in respect of Non-performing assets is recognized as and when
received as per the guidelines given in the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 2007.
- Income from Services is recognized on accrual basis as per the terms
of the contract.
Windmill Income
Income from power generation is recognized on supply of power to the
grid as per the terms of the power purchase agreement with Tamil Nadu
Electricity Board.
Dividend Income
Dividend on investments is recognized as income when right to receive
payment is established by the date of balance sheet. The profit/loss on
Capital Market Operations is recognised at the time of actual
sale/redemption of investments.
1.4 Receivables from Financing Activities
The Company has followed the Directions issued by the Reserve Bank of
India for Non Banking Financial Companies in respect of Prudential
Norms for Income Recognition, Asset Classification, Accounting
Standards, provisioning / writing off for bad and doubtful debts,
Capital Adequacy and Concentration of credit / investments and also the
Non Banking Finance Companies acceptance of Public Deposits (Reserve
Bank) Directions 2007
Hypothecation Loans
i. Hypothecation loans are stated at the amounts advanced including
finance charges accrued and due, as reduced by amounts received up to
balance sheet date.
ii. Repossessed automobile assets are valued at lower of book value
and estimated realizable value.
iii. Interest on hypothecation loans was recognized on accrual basis
up to the current reporting date
1.5 Tangible fixed assets
Fixed Assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Trade discount and rebate if any due or received are
deducted in arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefit from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit & loss for the period during which
such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit & loss when the asset is de-recognized.
1.6 Depreciation on tangible fixed assets
Depreciation on assets held for own use of the Company is provided on
written down value method at the rates prescribed under schedule XIV of
the Companies Act, 1956. All fixed assets individually costing Rs.
5,000/- or less are fully depreciated in the year of installation. The
company has used the following rates to provide depreciation on its
fixed assets.
1.7 Impairment of tangible and intangible assets
a) The carrying amounts of assets are reviewed at each balance sheet
date to ascertain impairment based on internal / external factors. An
impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. An asset's recoverable amount is the
higher of an asset's net selling price and its value in use.
b) After impairment, depreciation is provided on the revised carrying
amount of the asset as per the depreciation rate prescribed in Schedule
XIV of the Companies Act 1956.
c) An assessment is made at each reporting date as to whether there is
any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the
company estimates the asset's recoverable amount. A previously
recognized impairment loss is increased or reversed depending on
changes in circumstances. However, the carrying value after reversal is
not increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
1.8 Leases
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on straight line basis over the
lease term.
1.9 Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis. Long
term investments are carried at cost. However, provision for diminution
in value is made to recognize a decline other than temporary in the
value of the investments.
On disposal of investments, the difference between its carrying amount
and net disposal proceeds is charged or credited to the statement of
profit & loss.
1.10 Income Tax
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantially enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and the reversal of timing differences of the earlier years.
Deferred tax is measured using the tax rates and the tax laws enacted
or substantially enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is a reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized.
The carrying amounts of deferred tax assets are reviewed at each
reporting date. The company writes down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax asset against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxation authority.
1.11 Retirement and other employee Benefits
a) Defined Contribution plan- Provident Fund.
Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit & loss for the year when the
contributions are due. The company has no obligation, other than the
contribution payable to the provident fund.
b) Defined Benefit plan à Gratuity.
Payment of gratuity to employees is covered by the Gratuity Trust
Scheme based on the Group Gratuity Cum Assurance Scheme of the LIC of
India which is a defined benefit scheme. The yearly
contribution/premium paid/payable is determined on actuarial valuation
done by LIC. Actuarial gain and loss for defined benefit plan is
recognized in full in the period in which they occur in the statement
of profit & loss.
1.12 Segment Reporting
The company's business activity primarily falls within a single
business segment which constitutes Financing Activities (Advancing of
hypothecation loans, gold loan, loan against demand promissory notes
etc.), hence, there are no additional disclosures required under
Accounting Standard 17 'Segment Reporting'. The Company operates only
in India; hence there is no other significant geographical segment that
requires the disclosure.
1.13 Related Party Disclosure
Disclosures are made as per the requirements of the Accounting Standard
18 read with the clarifications issued by Institute of Chartered
Accountants of India.
1.14 Earnings per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events such as bonus element in a right issue that have
changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
1.15 Cash and Cash Equivalents
Cash and cash equivalents in the cash flow statements comprise cash at
hand and at bank, remittances in transits and short term investments
with an original maturity of three months or less.
1.16 Right Issue Expenses
Issue expenses incurred in respect of right issue of the Company has
been fully charged to the statement of Profit and Loss.
1.17 Provisions other than that for non performing assets
A provision is recognized when the company has a present obligation as
a result of past event, and it is probable that an out flow of
resources embodying economic benefits will be required to settle the
obligation and reliable estimate can be made of the amount of the
obligation. Provisions are not discounted to their present value and
are determined based on the best estimate required to settle the
obligation at the reporting date. These estimates are reviewed at each
reporting date and adjusted to reflect the current best estimates.
1.18 Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or non
occurrence of one or more uncertain future events beyond the control of
the company or a present obligation that is not recognized because it
is not probable that an outflow of resources will be required to settle
the obligation. A contingent liability also arises in extremely rare
cases where there is a liability that cannot be recognized because it
cannot be measured reliably. The company does not recognize a
contingent liability but discloses its existence in the financial
statements.
1.19 Classification and provisioning as per RBI Guidelines
i. As per the guidelines given in the Prudential Norms for Non Banking
Financial Companies prescribed by the Reserve Bank of India, the
Company makes adequate provisions against Non Performing Assets in the
following manner.
a. Standard Assets:
Provision against Standard Assets is made at the rate of 0.25% as
required by Paragraph 9A of the Non Banking Financial Companies
Prudential Norms (Reserve Bank) Directions 2007 read with Notification
No. DNBS.222/ CGM (US)-2011 issued by Reserve Bank of India on January
17, 2011.
b. Sub-standard, Doubtful and Loss Assets
Provision as required by paragraph 9 of the Non Banking Financial
Companies Prudential Norms (Reserve Bank) Directions 2007.
Mar 31, 2010
1.1. Basis for preparation of financial statements.
The financial statements for the year 2009-10, have been prepared under
historical cost convention, in compliance with Indian Generally
Accepted Accounting Principles ( GAAP ) with mandatory and relevant
Accounting Standards issued by the Institute of Chartered Accountants
of India (ICAI) and in compliance with the provisions of Companies Act,
1956 and the directions issued by Reserve Bank of India for Non Banking
Financial Companies from time to time wherever applicable.
The preparation of the financial statements requires the use of
estimates and assumptions that affect the reported amount of assets and
liabilities as at the Balance sheet date, reported amounts of revenues
and expenses during the year. The estimates and assumptions used in
these financial statements are based upon the managements evaluation
of the relevant facts and circumstances as on the date of financial
statements.
1.2. Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured
a. Finance charges in respect of Hire Purchase/Hypothecation loan
transactions are accounted by applying the Internal Rate of Return
method. Over due charges on belated Hire Purchase/Hypothecation loan
installments are accounted as and when received by the Company.
b. Interest on loans and advances is recognized on accrual basis at
the contract rate wherever feasible. Overdue charges for delayed
payments are accounted as and when received.
c. Interest on investments is accounted on accrual basis. Dividend is
recognized as income when right to receive payment is established by
the date of balance sheet. The Profit/Loss on the sale of investments
is dealt with at the time of actual sale/redemption.
d. Income in respect of Non-performing assets is recognized as and
when received as per the guidelines given in the Non-Banking Financial
Companies (Reserve Bank) Directions, 2007.
e. Income from Services is recognized on accrual basis.
1.3. Treatment of expenses:
a. It is the Companys policy to provide for all expenses on accrual
basis, unless otherwise stated.
b. As per the guidelines given in the Prudential Norms for Non-Banking
Financial Companies prescribed by the Reserve Bank of India, the
Company makes adequate provisions against Non-Performing Assets in the
following manner.
(i) Sub-standard Assets:
Provision as required by paragraph 9 of the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions 2007.
(ii) Doubtful/Loss Assets:
Provision as required by paragraph 9 of the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions 2007. The Company
has written off an amount equivalent to the amount required to be
provided as per Non-Banking Financial Companies Prudential Norms
(Reserve Bank) Directions, 2007 if the provision required to be made is
100%.
1.4. The Company has followed the Directions prescribed by the Reserve
Bank of India for Non-Banking Financial Companies in respect of
Prudential Norms for Income Recognition, Asset Classification,
Accounting Standards, provisioning/writing off for bad and doubtful
debts, Capital Adequacy and Concentration of credit / investments and
Non Banking Finance Companies acceptance of Public Deposits (Reserve
Bank) Directions 2007
1.5.Fixed assets:
Fixed assets are carried at historical cost less accumulated
depreciation.
1.6.Depreciation:
Depreciation on assets held for own use of the Company is provided on
written down value method at the rates prescribed under schedule XIV of
the Companies Act, 1956. Assets costing Rs. 5,000/- or less acquired
during the year are fully depreciated.
1.7. Investments:
The investments made by the Company, are valued as per the Accounting
Standard-13 issued by The Institute of Chartered Accountants of India.
Current investments are valued at lower of cost or market value.
1.8.Stock on hire:
1) Stock under hire purchase of assets is stated at the full agreement
value less un- matured finance and other charges in respect of
installments not fallen due.
2) Stock of repossessed assets is valued at realizable market price or
hire purchase installments receivable whichever is less.
1.9.Income Tax:-
Provision for taxation is made in accordance with the Accounting
Standard-22 on Accounting for Taxes on Income issued by ICAI. Current
tax is determined as the amount of tax payable in respect of taxable
income for the year. Deferred tax assets and liabilities are measured
using tax rates and tax laws that have been enacted or substantively
enacted at the Balance Sheet date. Deferred tax assets and deferred tax
liabilities are recognized for the future tax consequences attributable
to differences in the financial statements between carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and deferred tax liabilities are recognized subject
to managements judgment.
1.10.Employee Benefits
a) Short Term Employee Benefits
Short Term Employee Benefits for services rendered by employees are
recognized during the period when the services are rendered.
b) Post Employment Benefits
(i) Defined Contribution plan- Provident Fund.
Contributions to provident fund made in accordance with the EPF rules
are accounted on actual cost to the company.
(ii) Defined Benefit plan - Gratuity
Payment of gratuity to employees is covered by the Gratuity Trust
Scheme based on the Group Gratuity Cum Assurance scheme of the LIC of
India which is a defined benefit scheme. The yearly
contribution/premium paid/payable to be determined on actuarial
principle by LIC will be charged to the Profit & Loss Account.
1.11. Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
to ascertain impairment based on internal / external factors. An
impairment loss is recognized wherever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount is the greater
of the net selling price of the assets and their value in use.
1.12. Segment Reporting: -
The companys operations are classified into two reportable business
segments, viz. Financing Activities (Advancing of Gold Loan, Hire
Purchase and Hypothecation Loans, etc.) and Insurance Services (as a
corporate agent of HDFC Standard Life Insurance and data sharing partner
of Birla SunLife Insurance) and the segment information is reported
accordingly. Unallocated items include income and expenses which are
not allocated to any business segment.
1.13.Related Party Disclosure: -
Disclosures are made as per the requirements of the Accounting Standard
18 read with the clarifications issued by Institute of Chartered
Accountants of India.
1.14.Earnings per Share: -
The Company reports basic earning per share in accordance with AS-20
"Earnings per Share", issued by the ICAI. Basic earning per share has
been computed by dividing net profit after tax by the weighted average
number of equity shares outstanding for the year.
1.15.Provisions
Provisions are recognized when the Company has present legal or
constructive obligations, as a result of past events, for which it is
probable that an outflow of economic benefits will be required to
settle the obligation and a reliable estimate can be made for the
amount of the obligation.
1.16.Contingent Liabilities
Contingent Liabilities are not provided for, and are disclosed by way
of notes.