Notes to Accounts of Poonawalla Fincorp Ltd.

r) Provisions and contingencies related to
claims, litigation, etc.

A provision is recognized if, as a result of a past
event, the Company has a present obligation
(legal or constructive) that can be estimated
reliably, and it is probable that an outflow of
economic benefits will be required to settle
the obligation. Provisions are measured at the

present value of management''s best estimate
of the expenditure required to settle the present
obligation at the end of the reporting period.
Provisions, contingent liabilities and contingent
assets are reviewed at each balance sheet date.

I) Onerous contracts

A contract is considered as onerous when the
expected economic benefits to be derived by
the Company from the contract are lower than
the unavoidable cost of meeting its obligations
under the contract. The provision for an onerous
contract is measured at the lower of the expected
cost of terminating the contract and the expected
net cost of continuing with the contract. Before a
provision is established, the Company recognizes
any impairment loss on the assets associated
with that contract.

II) Contingencies related to claims, litigation, etc.

Provision in respect of loss contingencies relating
to claims, litigation, assessment, fines, penalties,
etc. are recognized when it is probable that a
liability has been incurred, and the amount can
be estimated reliably. Provisions are reviewed
at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer
probable that the outflow of resources would be
required to settle the obligation, the provision
is reversed.

s) Contingent liabilities and contingent
assets

A contingent liability exists when there is a
possible but not probable obligation, or a present
obligation that may, but probably will not, require
an outflow of resources, or a present obligation
whose amount cannot be estimated reliably.
Contingent liabilities do not warrant provisions,
but are disclosed unless the possibility of outflow
of resources is remote.

Contingent assets are disclosed in the standalone
financial statements where an inflow of economic
benefits is probable.

t) Cash and cash equivalents

For the purpose of presentation in the statement
of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial

institutions, other short-term, highly liquid
investments with original maturities of three
months or less that are readily convertible to
known amounts of cash and which are subject
to an insignificant risk of changes in value, and
bank overdrafts.

u) Statement of cash flows

Cash flows are reported using the indirect
method, whereby net profit before tax is
adjusted for the effects of transactions of non¬
cash future, any deferrals or accruals of past
or future operating cash receipts or payments
and item of expenses associated with investing
or financing cash flows. The cash flows from
operating, investing and financing activities of
the Company are segregated.

v) Operating segments

Operating segments are reported in a manner
consistent with the internal reporting provided to
the Chief Operating Decision Maker (CODM) of the
Company. The CODM is responsible for allocating
resources and assessing performance of the
operating segments of the Company. Refer note
52 for details on segment information presented.

w) Earnings per equity share

Basic earnings per equity share has been
computed by dividing net income attributable to
ordinary equity holders by the weighted average
number of shares outstanding during the year.
Partly paid-up equity share, if any, is included as
fully paid equivalent according to the fraction
paid up.

Diluted earnings per equity share has been
computed using the weighted average number
of shares and dilutive potential shares, except
where the result would be anti-dilutive.

x) Dividend

Interim dividend declared to equity shareholders,
if any, is recognized as liability in the period
in which the said dividend is declared by the
Board of Directors. Final dividend declared, if
any, is recognized in the period in which the
said dividend is approved by the Shareholders.
Dividend payable is recognized directly in
other equity.

y) Subsequent events

The Company evaluates all transactions and
events that occur after the balance sheet date but
before the standalone financial statements are
issued. Based upon the evaluation, the Company
did not identify any recognized or non-recognized
subsequent events that would have required
adjustment or disclosure in the standalone
financial statements, except as disclosed.

z) Recent pronouncements

The Ministry of corporate Affairs ("MCA") notified
amendments on 7 May 2025 and 13 August
2025 under the Companies (Indian Accounting
Standards) Amendment Rules, 2025 and the
Companies (Indian Accounting Standards)
Second Amendment Rules, 2025, respectively,
which is effective from annual reporting periods
beginning on or after 1 April 2025.

(a) Amendment to Ind AS 7 and Ind AS 107 -
Supplier Finance Arrangement:

The amendments to Ind AS 7 ''Statement of Cash
Flows'' and Ind AS 107 ''Financial Instruments:
Disclosures'' clarify the characteristics of supplier
finance arrangements and require additional
disclosures for such arrangements. The disclosure
requirements in the amendments are intended
to assist users of standalone financial statements
in understanding the effects of supplier finance
arrangements on an entity''s liabilities, cash flows
and exposure to liquidity risk. The Company has
reviewed the new pronouncements and based
on its evaluation has determined that it does
not have any significant impact in its standalone
financial statements.

(b) Amendment to Ind AS 1 - Classification of
Liabilities as Current or Non-current and Non¬
current liabilities with covenants:

The amendment specifies the requirements for
classifying liabilities as current or non-current in
the balance sheet, and clarifies the following:

i) An entity''s right to defer settlement of a
liability for at least twelve months after the
reporting period must have substance and
must exist at the end of the reporting period.
The classification of liability as current or
non-current is unaffected by the likelihood
that the entity will exercise its right to
defer settlement.

ii) If an entity''s right to defer settlement of
a liability is subject to covenants, such
covenants affect whether that right exists
at the end of the reporting period only if the
entity is required to comply with the covenant
on or before the end of the reporting period.

iii) In case of a liability that can be settled, at the
option of the counterparty, by the transfer
of the entity''s own equity instruments,
such settlement terms do not affect the
classification of the liability as current or
non-current only if the option is classified as
an equity instrument.

The Company has reviewed the new
pronouncements and based on its
evaluation has determined that it does not
have any significant impact in its standalone
financial statements.

(c) Amendment to Ind AS 12 - Pillar-Two Tax
Reforms

The Company is not within the scope of the OECD
Pillar Two Model Rules, as Pillar Two legislation
has not yet been enacted in any of the jurisdiction
in which the Company operates.

(d) Amendment to Ind AS 21-Lack of
exchangeability

The Amendments introduces requirement
to assess when a currency is exchangeable
into another currency and when it is not. The
amendment requires an entity to estimate the
spot exchange rate when it concludes that
a currency is not exchangeable into another
currency. These amendments had no effect
on the standalone financial statements of
the Company.

The new disclosures introduced in the standard,
the entities are required to provide in their
standalone financial statements for annual
reporting periods beginning on or after 1 April
2025. No disclosures are required in interim
periods ending on or before 31 March 2026.

New standards and amendments notified but
not effective

(i) Amendment to Ind AS 1 - Classification of
Liabilities as Current or Non-current and
Non-current liabilities with covenants:

The amendment includes specific
provisions that will take effect for reporting
periods beginning on or after 1 April 2026,
retrospectively, as outlined below:

a) Breach of material covenant for long¬
term loan arrangement on or before
end of reporting period with effect that
liability becomes payable on demand
as on reporting date, then it shall be
classified as current liability, if lender
agreed after reporting period and
before approval of standalone financial
statements to not demand payment as
a consequence of breach.

b) Classify as non-current liability, if lender
agreed by end of reporting period to
provide grace period ending at least 12
months after reporting period within
which entity can rectify the breach
provided lender does not demand
immediate repayment.

c) Disclose information about the timing
of settlement to understand the
impact of the liability on the standalone
financial statements.

The Company has reviewed the new
pronouncements and based on its
evaluation has determined that it does
not have any significant impact in its
standalone financial statements.

(d) Details of cash credit facilities and working capital demand loans

The cash credit facilities are repayable on demand and carry interest rates ranging from 7.90% to 8.40%
(31 March 2025: from 8.00% to 9.50% p.a). Working capital demand loans are repayable on demand and
carry interest rates ranging from 6.85% to 7.55% (31 March 2025: from 7.24% to 9.00% p.a.). As per the
prevalent practice, cash credit facilities and working capital demand loans are renewed on a year to year
basis and therefore, are revolving in nature.

#Commercial papers are repayable within 12 months and issued at a discount rate of 6.85 % p.a. - 7.67% p.a. (31 March 2025:
7.42 % p.a. - 8.78% p.a.)

##Loan taken by PFL EWT has a maturity of 4 years (until March 2028) and borrowed at a SBI 3 month Marginal cost of funding
rate (MCLR) plus 80 basis point.

@Refer Note 45 related party disclosure for detailed disclosure.

(e) The Company has used the borrowings from banks and financial institutions for the purpose for which it
was taken as at the balance sheet date.

(b) Terms/rights attached to equity shares:

The Company has only one class of equity shares having a par value of I 2 each. Each holder of equity share
is entitled to one vote per share.

The dividend recommended by the Board of Directors and approved by the Shareholders in the Annual
General meeting is paid in Indian rupees.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining
assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion
to the number of equity shares held by the shareholders.

During the year ended 31 March 2026, the Company has issued and allotted 33,148,102 fully paid-up
equity shares of the Company, having face value of I 2 each, at an issue price of I 452.51 per equity share
including premium of I 450.51 per equity share, aggregating to I 1,499.98 crores through Preferential
Issue, on private placement basis to Rising Sun Holdings Private Limited, promotor of the Company under
Chapter V of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)
(ICDR) Regulations, 2018, Listing Regulations, the Act and the Rules made thereunder, and other
applicable laws.

During the year, the Company has allotted 1,655,156 equity shares of face value of I 2 each to the eligible
employees of the Company under various Employee Stock Option Plans pursuant to the SEBI (Share
Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB & SE Regulations”), as amended
from time to time. Refer note no 44 for disclosures related to share based payments.

Refer note 56 on subsequent events.

(c) Shares allotted as fully paid-up without payment being received in cash/by way of bonus
shares:

The Company has not issued bonus shares or shares for consideration other than cash during the five year
period immediately preceding the reporting date.

(d) Shares bought back

The Company has not bought back any of its securities during the five year period immediately preceding
the reporting date.

Nature and purpose of reserves:

Capital reserve

Capital reserve has been created to set aside gains of capital nature from amalgamation and merger. It is
utilised in accordance with the provisions of the Companies Act, 2013.

Securities premium

Securities premium represents premium received on issue of shares. This amount can be utilised in accordance
with the provisions of the Companies Act, 2013.

Statutory reserve (created pursuant to Section 45-IC of the Reserve Bank of India Act, 1934)

Statutory reserve represents the reserve fund created under section 45-IC of the Reserve Bank of India Act,
1934. The Company is required to transfer a sum not less than twenty percent of its net profit every year as
disclosed in the statement of profit and loss. The statutory reserve can be utilized for the purposes as may be
specified by the Reserve Bank of India from time to time.

Capital redemption reserve

Capital redemption reserve is created to keep the capital intact when preference shares are redeemed or
equity shares are bought back. It is utilised in accordance with the provisions of the Companies Act, 2013.

Share option outstanding reserve

The Company instituted the Employee Stock Option Plan (ESOP) 2021 in 2021, Employee Stock Option Plan
(ESOP) 2024 in 2024 and Employee Stock Option Plan (ESOP) 2024 - Scheme II in 2024 which were approved
by the Board of Directors and the shareholders of the Company. The share option outstanding reserve is used
to recognise the grant date fair value of option issued under aforesaid plans.

Treasury shares

The reserve for shares of the Company held by the PFL EWT. The Company has issued employees stock option
scheme for its employees. The equity shares of the Company have been purchased and held by PFL EWT. PFL
EWT to transfer these shares in the name of employees at the time of exercise of option by employees.

Trust reserve

This represents net of expenditure over income of PFL EWT Trust.

Retained earnings

Retained earnings represents total of all profits retained since Company''s inception. Retained earnings are
credited with current year profits, reduced by losses, if any, dividend payouts, transfers to general reserve
or any such other appropriations to specific reserves. It also includes impact of remeasurement of defined
benefit plans.

Financial instruments through other comprehensive income

(a) On debt investments: This comprises changes in the fair value of debt instruments recognised in other
comprehensive income. The company transfers amounts from such component of equity to retained
earnings when the relevant debt instruments are derecognised.

(b) On cash flow hedge reserve: It represents the cumulative gains/(losses) arising on revaluation of the
derivative instruments designated as cash flow hedges through OCI.

**Details of corporate social responsibility expenditure ("CSR")

A CSR committee has been formed by the Company as per the Companies Act, 2013. CSR expenses have been
incurred through out the year on the activities as specified in Schedule VII of the said Act. The focus area of
CSR initiatives undertaken by the Company are education, health and environment. The Company incurs CSR
expenses directly.

ii. Defined benefit plan

Gratuity

The Company has a defined benefit gratuity plan in India, governed by the "New Labour Codes". This
plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the
rate of fifteen days wages for every completed year of service or part thereof in excess of six months,
based on the rate of wages last drawn by the employee concerned. The scheme is fully funded with Life
Insurance Corporation of India (LIC) & Kotak Mahindra Life Insurance Company Limited. This defined
benefit plan exposes the Company to actuarial risks, such as regulatory risk, credit risk, liquidity risk, etc.
as defined below.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation
for gratuity were carried out as at 31 March 2026. The present value of the defined benefit obligations and
the related current service cost and past service cost, are measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the
gratuity plan and the amounts recognised in the Company''s financial statements as at balance sheet date:

The Government of India has consolidated multiple existing labour legislations into a unified framework
comprising four labour codes collectively referred to as the "New Labour Codes". The Company has
assessed the implications of the New Labour Codes and have taken an estimated increase in provision
of I 6.42 crores in the quarter ended 31 December 2025 and recognised the same in the employee
benefits expenses during the year ended 31 March 2026.

The Government is in the process of notifying related Central/State rules to the New Labour Codes
and impact of these will be evaluated and accounted for, as needed, in accordance with applicable
accounting standards in the period in which they are notified.

On an annual basis, the Company performs an asset-liability matching exercise and contributes the
net incremental actuarial liability to the plan manager (insurer) to effectively manage the associated
liability risk.

As at 31 March 2026, the weighted-average duration of the defined benefit obligation was 7.30 years
(31 March 2025: 7.36 years).

G. Description of risk exposures

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As
such, Company is exposed to various risks as follows -

Investment Risk: For funded plans that rely on insurers for managing the assets, the value of assets
certified by the insurer may not be the fair value of instruments backing the liability. In such cases,
the present value of the assets is independent of the future discount rate. This can result in wide
fluctuations in the net liability or the funded status if there are significant changes in the discount rate
during the inter-valuation period.

Market Risk (Interest Rate): Market risk is a collective term for risks that are related to the changes
and fluctuations of the financial markets. The discount rate reflects the time value of money. An
increase in discount rate leads to decrease in defined benefit obligation of the plan benefits & vice
versa. This assumption depends on the yields on the corporate/government bonds and hence the
valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Longevity Risk: The impact of longevity risk will depend on whether the benefits are paid before
retirement age or after. Typically for the benefits paid on or before the retirement age, the longevity
risk is not very material.

Future Salary Increase Risk: Actual salary increase that are higher than the assumed salary
escalation, will result in increase to the obligation at a rate that is higher than expected.

Demographic Risk: If actual withdrawal rates are higher than assumed withdrawal rates, the benefits
will be paid earlier than expected. Similarly if the actual withdrawal rates are lower than assumed, the
benefits will be paid later than expected. The impact of this will depend on the demography of the
company and the financial assumptions.

Regulatory Risk: Any changes to the current regulations by the Government, will increase (in most
cases) or decrease the obligation which is not anticipated. Sometimes, the increase is many fold which
will impact the financials quite significantly.

iii. Other long-term benefits

The Company provides compensated absences benefits to the employees of the Company which can be
carried forward to future years. Amount recognised in the statement of profit and loss for compensated
absences is as under:

42 LEASES

As a lessee, the Company classified property leases as operating leases under Ind AS 116.

A. Lease in the capacity of Lessee

a) Nature: Leases considered here are taken for official use.

b) Other disclosures

Following table summarizes other disclosures including the note references for the expense, asset
and liability heads under which certain expenses, assets and liability items are grouped in the
financial statements

44 SHARE-BASED PAYMENTSA Description of share-based payment arrangements

The Company instituted Employee Stock Option Plan (ESOP) 2021 in 2021, Employee Stock Option Plan
(ESOP) 2024 in 2024 and Employee Stock Option Plan (ESOP) 2024 - Scheme II in 2024 which were
approved by the Board of Directors and the shareholders of the Company.

ESOP, 2021

The Company instituted the Employee Stock Option Plan - 2021 ("ESOP 2021”), administered by the
Nomination and Remuneration Committee. The ESOP 2021 was originally approved by the Board of
Directors on 19 June 2021 and our Shareholders on 24 July 2021. Under ESOP 2021, the maximum
aggregate number of stock options that could be allotted was limited to 15,000,000 stock options, with
each option representing one Equity Share of I 2/- each of the Company.

The Nomination and Remuneration Committee at its meeting held on 1 June 2024 approved the
termination of ESOP 2021 and cancelled ungranted stock options under the scheme. The stock options
that have been granted under ESOP 2021 to eligible employees of our Company, and remain outstanding,
shall remain operational until such options are exercised/lapsed. During the year, the Nomination and
Remuneration Committee of the Company has allotted 1,648,458 options under ESOP 2021 to the
eligible employees of the Company.

ESOP - 2024

Our Company instituted the Employee Stock Option Plan - 2024 ("ESOP 2024 - PFL Trust”), administered
by the Nomination and Remuneration Committee, to acquire, purchase, hold and deal in the Equity
Shares by way of secondary acquisition through the PFL Employee Welfare Trust. The ESOP 2024
- PFL Trust was approved by the Board of Directors on 18 January 2024 and our Shareholders on
20 February 2024. Approval of the Board of Directors was also provided to the Company on 18 January
2024 to grant loans and to provide guarantee or security in connection with a loan granted or to be
granted to the PFL Employee Welfare Trust, not exceeding five per cent of the aggregate of the paid up
share capital and free reserves of our Company, for the purpose of effecting the ESOP 2024 - PFL Trust.

Under ESOP 2024 - PFL Trust, the maximum aggregate number of stock options that could be granted
and Equity Shares to be accordingly transferred was limited to 15,000,000 Equity Shares. On exercise
of stock options granted to eligible employees under ESOP 2024 - PFL Trust, corresponding Equity
Shares were to be transferred from the PFL Employee Welfare Trust to the relevant eligible employees.

However, the Board of Directors at their meeting held on 1 June 2024 approved the cancellation of ESOP
2024 - PFL Trust and the dissolution of the PFL Employees Welfare Trust, subject to requisite approvals
and compliances under applicable law. The Board also noted that no stock options were granted by our
Company to any employee under ESOP 2024 - PFL Trust.

ESOP - 2024 Scheme II

Our Company instituted the Employee Stock Option Plan - 2024 - Scheme II ("ESOP 2024”), administered
by the Nomination and Remuneration Committee. The ESOP 2024 was originally approved by the Board
of Directors on 8 April 2024 and our Shareholders on 13 May 2024. Under ESOP 2024, the maximum
aggregate number of stock options that could be allotted was limited to 20,000,000 stock options, with
each option representing one Equity Share of the Company. These options were granted in the absolute
discretion of the Nomination and Remuneration Committee on the basis of factors such as eligible
employee''s performance appraisal, seniority, period of service, and present and potential contribution to
the growth of the Company.

The ESOP 2024 was amended through a special resolution passed by our Shareholders by way of postal
ballot on 16 June 2025, to increase the maximum aggregate number of stock options that could be
allotted under this scheme to 32,500,000 stock options, with each option representing one Equity Share
of I 2/- each of the Company. The options generally will vest in a graded manner and are exercisable within
3 years from the date of vesting (refer note C below for details of modification).

During the year, the Nomination and Remuneration Committee of the Company has granted 2,015,000
options under ESOP - 2024 Scheme II to the eligible employees of the Company (each options entitles the
option holder to 1 equity share of I 2/- each). During the year 94,000 options were lapsed and added in the
pool. During the year, the Nomination and Remuneration Committee of the Company has allotted 6,698
options under ESOP 2024 Scheme II to the eligible employees of the Company.

B Measurement of Fair values

The fair value of employee share options has been measured using Black-Scholes model. The weighted
average fair value of each option of Poonawalla Fincorp Limited was I 102.80 (31 March 2025: I 105.40).

The fair value of the options and the inputs used in the measurement of the grant-date fair values of the
equity-settled share based payment plans are as follows:

Expected volatility has been based on an evaluation of the historical volatility of the Company''s share
price, particularly over the historical period commensurate with the expected term. The expected term of
the instruments has been based on historical experience and general option holder behavior.

C Modification of ESOP plan

During the previous year ended 31 March 2025, Nomination and Remuneration Committee of the
Company had approved modification of vesting schedule for ESOP 2021, in line with ESOP 2024 Scheme
II. Under ESOP 2021, the revised vesting schedule provided for the vesting of the total options granted
over a 3 year period from earlier vesting schedule of over 4 year period. Accordingly, the Company had
accounted the modification in line with Ind AS 102 - ''Share Based Payments''. As a result of modification,
there was no incremental fair value for the options modified. The impact on statement of profit and loss
of this modification was I 23.06 crores.

B. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial
instruments that are:

(a) recognised and measured at fair value and

(b) measured at amortised cost / other and for which fair values are disclosed in the standalone
financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the Company
has classified its financial instruments into the three levels prescribed under the accounting standard. An
explanation of each level follows underneath the table.

Financial instruments valued at carrying value

The respective carrying values of certain on-balance sheet financial instruments approximate their fair value.
These financial instruments include cash in hand, balances with other banks, receivables, payables and certain
other financial assets and liabilities, with maturities less than a year from the balance sheet date. Carrying
values were assumed to approximate fair values for these financial instruments as they are short-term in
nature and their recorded amounts approximate fair values or are receivable or payable on demand.

C. Valuation framework

The Company measures fair values using the following fair value hierarchy, which reflects the significance of
the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: The fair value of financial instruments that are not traded in active markets is determined using
valuation techniques which maximize the use of observable market data either directly or indirectly, such as
quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial
instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are
observable the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based in observable market data, the instruments is
included in level 3. That is, Level 3 inputs incorporate market participants'' assumptions about risk and the
risk premium required by market participants in order to bear that risk. The Company develops Level 3 inputs
based on the best information available in the circumstances.

In the normal course of doing its business the company is exposed to certain inherent financial risks in the
form of credit risk, market risk, operational risk, liquidity risk, interest rate risk, compliance risk, reputational
risk, etc.

i Risk management framework

The Company''s board of directors has overall responsibility for the establishment and oversight of the
Company''s risk management framework. The board of directors has established the Risk Management
Committee, which is responsible for developing and monitoring the Company''s risk management policies.
The committee reports regularly to the Board of Directors on its activities.

Risk management involves identifying, measuring, monitoring and managing risks on a regular basis.
The objective of risk management is to increase shareholders'' value and achieve a return on equity that
is commensurate with the risks assumed. To achieve this objective, the Company employs leading risk
management practices and recruits skilled and experienced people.

The Company''s risk management policies are established to identify and analyze the risks faced by the
Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and the
Company''s activities.

ii Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument
fails to meet its contractual obligations and arises principally from the Company''s asset on finance.

The carrying amounts of financial assets represent the maximum credit risk exposure.

a) Credit risk management

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the factors that may influence the credit risk of its customer base,
including the default risk associated with the industry. A financial asset is ‘credit-impaired'' when one or more
events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:

- A breach of contract such as a default or past due event

- When a borrower becomes more than 90 days past due in its contractual payments

The Risk Management Committee has established credit policies for various lending products under which
each new customer is analyzed individually for credit worthiness before the Company''s standard payment and
delivery terms and conditions are offered. The Company''s review includes background verification, financial
statements, income tax returns, GST details, credit bureau information, industry information, etc (as applicable).

b) Probability of default (PD)

Analysis of historical data regarding days past due (DPD) or delinquency of loans is the primary input into
the determination of the term structure of PD for exposures. The Company collects performance and default
information about its credit risk exposures analysed by type of product or borrower as well as by DPD. The
Company employs statistical methods to analyse the data collected and generate estimates of the PD
of exposures.

In case of newly launched products, where the Company does not have sufficient historical data to estimate
PD, it uses industry level aggregate data obtained from credit bureaus, or third-party data providers or
performance of an existing product which closely resembles the new product. In cases where investments
are made in instruments that, in substance, constitute financing activities and are classified under loans , the
applicable staging norms, PD and LGD rates shall align with those prescribed for corporate / NBFC loans. In
case of products having maturity less than 12 months, a tenure adjustment is undertaken on annualised PD
rates to address shorter tenure of the product.

Expected loss has been calculated as an unbiased and probability-weighted amount for multiple scenarios.
The probability of default has been calculated for 3 scenarios: upside (16% probability), downside (16%) and
base (68%). These weightages have been decided on best practices and judgement.

c) Definition of default

The Company considers a financial instrument defaulted, and therefore Stage 3 (credit-impaired), for ECL
calculations in all cases when the borrower becomes more than 90 DPD from its contractual payments or
has been classified as NPA as per regulatory classification. The Company considers probability of default upon
initial recognition of asset and whether there has been any significant increase in credit risk (SICR) on an
ongoing basis throughout each reporting period. To assess whether there is SICR, the Company compares
the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial
recognition. Following indicators are incorporated:

- DPD analysis as on each reporting date, and

- significant increase in credit risk on other financial instruments of same borrower

d) Exposure at default (EAD)

The exposure at default (EAD) for ECL computation represents the principal outstanding, installment overdue,
accrued interest, future interest post discounting as key components and some other adjustments of the
financial instruments subject to the impairment calculation;

To calculate the ECL for a Stage 1 loan, the Company assesses the possible default events within 12 months
for the calculation of the 12 month ECL. For Stage 2 and Stage 3 financial assets, the exposure at default is
considered for events over the lifetime of the instruments.

e) Loss given default (LGD)

Loss given default (LGD) represents estimated financial loss the Company is likely to suffer in respect of default
account and it is used to calculate provision requirement on EAD along with PD. The Company uses collection
details on previously defaulted cases for calculating LGD including estimated direct cost of collection from
default cases. Appropriate discounting rates are applied to calculate present value of future estimated collection
net of direct collection cost. LGD thus calculated is used for all stages, i.e. Stage 1, Stage 2 and Stage 3.

For newly launched products, where historical collection data is not available or is insufficient, the Company
either uses the collection performance of an existing product which closely resembles the new product or

industry level aggregate data obtained from credit bureaus / third-party data providers, appropriate product
specific LGD estimation method, or reports published by recognised institution, or regulatory guidance
available if any.

In case of certain loan products having an inherent unsecured component (e.g. loans where Loan-to-Value
is greater than 100%), the LGD rate is derived through a combination of respective secured and unsecured
LGD rates. Loss Given Default (LGD) for Stage 2 and Stage 3 for wholesale exposures (NBFC, Corporate and
SCF portfolio) is determined on a case-by-case basis, on the basis of resolution / collection / curing strategy
adopted for each borrower.

f) Discounting

ECL is computed by estimating timing of expected credit shortfalls associated with defaults and discounting
them using effective interest rate.

g) Significant increase in credit risk

The Company continuously monitors all assets subject to ECL. In order to determine whether an instrument or
a portfolio of instruments is subject to 12 months ECL or lifetime ECL, the Company assesses whether there
has been a significant increase in credit risk since initial recognition. The Company also applies other qualitative
factors for triggering a significant increase in credit risk for an asset, such as restructuring. Regardless of
the change in credit profile, if the contractual payments are more than 30 days past due, the credit risk is
deemed to have increased significantly since initial recognition. Similarly, if external credit rating of a corporate
borrower is downgraded to non-investment grade from investment grade, this will trigger review to determine
the significant increase of credit risk from the initial recognition.

The Company has applied a three-stage approach to measure expected credit losses (ECL) on loans and other
credit exposures accounted for at amortised cost and FVOCI. Loss rates are calculated using a ‘roll rate'' method
based on the probability of a receivable progressing through successive stages of delinquency to write-off.
Assets migrate through following three stages based on the changes in credit quality since initial recognition:

(a) Stage 1: 12- months ECL: For exposures where there is no significant increase in credit risk since initial
recognition and that are not credit-impaired upon origination, the portion of the lifetime ECL associated
with the probability of default events occurring within the next 12 months is recognized.

(b) Stage 2: Lifetime ECL, not credit-impaired: For credit exposures where there has been a significant
increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL is recognized.

(c) Stage 3: Lifetime ECL, credit-impaired: Financial assets are assessed as credit impaired upon occurrence
of one or more events that have a detrimental impact on the estimated future cash flows of that asset.
For financial assets that have become credit-impaired, a lifetime ECL is recognized and interest revenue is
recognized on net basis.

h) Expected Credit Loss on Loans

The Company assesses whether the credit risk on a financial asset has increased significantly on collective
basis. For the purpose of collective evaluation of impairment, financial assets are grouped on the basis of
shared credit risk characteristics, taking into account instrument type, product type, collateral type, and other
relevant factors.

The Company considers defaulted assets as those which are contractually 90 days past due, other than those
assets where there is empirical evidence to the contrary. Financial assets which are contractually more than 30
days and upto 90 days past due are classified under Stage 2 - life time ECL, not credit impaired, barring those
where there is empirical evidence to the contrary. An asset migrates down the ECL stage based on the change
in the risk of a default occurring since initial recognition. If in a subsequent period, credit quality improves and
reverses any previously assessed significant increase in credit risk since origination, then the loan loss provision
stage reverses to 12-months ECL from lifetime ECL.

The Company measures the amount of ECL on a financial instrument in a way that reflects an unbiased and
probability-weighted amount. The Company considers its historical loss experience and adjusts the same
for current observable data. The key inputs into the measurement of ECL are the probability of default, loss
given default and exposure at default. These parameters are derived from the Company''s internally developed
models and other historical data and where the Company does not have sufficient historical data, it uses
regulatory guidance available, if any or benchmark rates obtained from external sources like research agencies,
credit bureaus, or publicly available information. In addition, the Company uses reasonable and supportable
information on future economic conditions including macroeconomic factors. Since incorporating these
forward looking information increases the judgment as to how the changes in these macroeconomic factor
will affect ECL, the methodology and assumptions are reviewed regularly.

In case of any portfolio or a segment thereof showing abnormal delinquency behaviour, the ECL approach is
reviewed and adjusted to reflect adequate provisioning in line with the risk profile. The Company also provides
for expected credit loss on undrawn loan commitments wherever applicable.

Forward looking information

In its ECL models, the Company relies on a broad range of forward looking information as macro economic
inputs. As required by Ind AS 109, Macro Economic (ME) overlays are required to be factored in ECL models
and accordingly, Company has used Consumer Price Index (CPI) as the relevant ME variable. Overtime,
new ME variables may emerge to have a better correlation and may replace ME being used now. In case of
improvement in PD rates after application of macroeconomic (ME) factors, the same are conservatively kept
at pre-application level for such products where PD rates are derived basis external benchmark or publicly
available industry reports or default transition studies or credit bureau data, etc

Policy on write off of loan assets

Financial assets are fully provided for or written off (either partially or in full) when there is no reasonable
expectation of recovering a financial asset in its entirety or a portion thereof. However, financial assets that are
written off could still be subject to enforcement activities under the Company recovery procedures, taking into
account legal advice where appropriate. Any recoveries made are recognized in statement of profit and loss on
actual realization from customer.

The following table provides information about the exposure to credit risk and expected credit loss for assets
on finance.

Expected credit loss on trade and other receivables

Trade/other receivables primarily includes receivables against support services, operating lease and sale of
power. The Company follows ‘simplified approach'' for recognition of impairment loss allowance on trade/other
receivables that do not contain a significant financing component. The application of simplified approach
does not require to track changes in credit risk. It recognises impairment loss allowance based on lifetime
ECLs at each reporting date, right from its initial recognition. It holds the trade/other receivables with the
objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost,
less loss allowance.

Cash and cash equivalents and bank balance other than cash and cash equivalents

The Company holds cash and cash equivalents and bank balance other than cash and cash equivalents of I
293.68 crores at 31 March 2026 (31 March 2025: I 32.29 crores). The cash and cash equivalents are held with
bank and financial institution counterparties with sound credit ratings.

An analysis of changes in gross carrying amount and corresponding ECL allowances is as follows:

(i) Movements in the gross carrying amount in respect of loans, i.e. asset on finance

iii Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to
managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when
they are due, under both normal and stressed conditions in a timely manner, without incurring unacceptable
losses or risking damage to the Company''s reputation. The Company uses activity-based costing to cost its
products and services, which assists it in monitoring cash flow requirements and optimising its cash return
on investments.

The Company has obtained fund and non-fund based working capital lines from various banks and financial
institutions. Further, the Company has access to funds from debt markets through commercial paper, non¬
convertible debentures and other debt instruments including term loans & external commercial borrowings.
Cash Credit/WCDL limits are renewed on annual basis and are therefore revolving in nature.

Exposure to liquidity risk

The following are the remaining gross and undiscounted contractual maturities of financial liabilities (including
interest portion) at the reporting date.

The Company has USD denominated liability (external commercial borrowings) at floating rate of interest
causing volatility in the cash flow arising on principal and interest repayment.

Management aims to hedge the volatility with appropriate derivative instruments. Accordingly, the Company
has entered into cross currency swaps with tenor and maturity matching with the underlying cashflow.

Exposure to interest rate risk

The interest rate profile of the Company''s interest-bearing financial instruments is as follows:

iv. Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity
prices, which will affect the Company''s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return. All such transactions are carried out within the guidelines set by
the Risk Management Committee. Generally, borrowings are denominated in currencies that match the cash
flows generated by the underlying operations of the Company - primarily I. In cases where the borrowings are
denominated in foreign currency, the Company uses derivatives to manage market risks.

a) Interest rate risk

Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any
movement in the reference rates could have an impact on the Company''s cash flows as well as costs.

The Company is subject to variable interest rates on some of its interest bearing financial assets/liabilities. The
Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and funding
requirements for its day to day operations like short-term loans.

The model assumes that interest rate changes are instantaneous parallel shifts in the yield curve. Although some
assets and liabilities may have similar maturities or periods to re-pricing, these may not react correspondingly
to changes in market interest rates. Also, the interest rates on some types of assets and liabilities may fluctuate
with changes in market interest rates, while interest rates on other types of assets may change with a lag.

The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This
calculation also assumes that the change occurs at the balance sheet date and has been calculated based on
risk exposures outstanding as at that date. The year-end balances are not necessarily representative of the
average debt outstanding during the year. This analysis assumes that all other variables remain constant.

b) Foreign currency risk

The Company is exposed to foreign currency fluctuation risk for its external commercial borrowings i.e
unfavourable movement in the USD INR conversion rate charged by the bank on USD loan repayment and
interest settlement from time to time. The Company has hedged the entire ECB exposure for the full tenure
as per Board approved Risk Management Policy. The Company has entered into cross currency swaps with
strategy which aims to hedge a defined portion of the exposure to USD-INR exchange rate volatility on
borrowings and interest repayable in USD. The Company''s risk management policy is to hedge 100% of its
foreign currency exposure. The Company uses Cross Currency Swaps to hedge its currency risk and applies
a hedge ratio of 1:1. The Asset Liability Committee periodically reviews and monitors risk involved in the
transactions. These contracts are designated as cash flow hedges. The Company determines the existence of
an economic relationship between the hedging instrument and hedged item based on the currency, amount
and timing of their respective cash flows. The Company assesses whether the derivative designated in each
hedging relationship is expected to be and has been effective in offsetting changes in cash flows of the hedged
item. In these hedge relationships, there are no hedge ineffectiveness because it is hedged to extent of 100%
of principal and interest amount of external commercial borrowings.

v Legal and operational risk
Legal risk

Legal risk is the risk relating to losses due to legal or regulatory action that invalidates or otherwise precludes
performance by the end user or its counterparty under the terms of the contract or related netting agreements.

The Company has developed preventive controls and formalised procedures to identify legal risks, so
that potential losses arising from non-adherence to laws and regulations, negative publicity, etc. are
significantly reduced.

As at 31 March 2026, there were legal cases pending against the Company aggregating I 2.39 crores
(31 March 2025: I 2.26 crores). Based on the opinion of the Company''s legal advisors, the management
believes that no substantial liability is likely to arise from these cases.

Operational risk

Operational risk framework is designed to cover all functions and verticals towards identifying the key risks in
the underlying processes.

The framework, at its core, has the following elements:

1. Documented Operational Risk Management Policy and Standard Operating Procedures (SOP)

2. Third party risk management through Outsourcing Risk Policy and SOP

3. Well defined Governance Structure

4. Use of Identification & Monitoring tools and like Risk Control Self- Assessment (RCSA), Key Risk Indicators
(KRIs), Risk Appetite Statements (RAS) and Control testing

5. Standardized reporting templates, reporting structure and frequency

6. Regular workshops and training for enhancing awareness and risk culture

7. Documented BCM Framework

The Company has adopted the globally accepted 3-lines of defense approach to risk management.

First line - Each function/vertical undergoes transaction testing to evaluate internal compliance and thereby
lay down processes for further improvement. Thus, the approach is "bottom-up”, ensuring acceptance of
findings and faster adoption of corrective actions, if any, to ensure mitigation of perceived risks.

Second line - Independent risk management vertical supports the first line in developing risk mitigation
strategies and provides oversight through regular monitoring. All key risks are presented to the Risk
Management Committee on a quarterly basis.

Third line - Internal Audit conducts periodic risk-based audits of all functions and process to provide an
independent assurance to the Audit Committee.

During the year ended 31 March 2026, the Operational Risk (OR) team has helped to identify, assess, monitor
and mitigate risks across the organization. RCSA exercises, Internal Finance Control (‘IFC'') testing and KRI
monitoring have been conducted for key business units / support functions, and action plans have been
developed to plug process gaps. Apart from this quarterly RAS monitoring, Outsourcing Risk management
and Business continuity testing was also undertaken during the Financial year. The OR team helps senior
management monitor risks through quarterly reporting of OR information to the Operational Risk Management
Committee (ORMC) and the RMC.

51 CAPITAL MANAGEMENT

The Company actively manages capital base to cover risks inherent in the business and meet the Capital
Adequacy Requirements (CAR) of the Reserve Bank of India (RBI). The adequacy of the Company''s capital
is monitored using, among other measures, the regulations issued by RBI. The primary objective of the
capital management policy is to ensure that the company complies with regulatory capital requirements and
maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize
shareholder value. The Company manages its capital structure and makes adjustments to it according to
changes in economic conditions and the risk characteristics of its activities. There is no changes in the capital
management process from the previous year.

i. Regulatory capital

The Company''s regulatory capital consists of the sum of the following elements:

- Tier 1 capital, which includes ordinary shar

Nature and purpose of reserves:

Capital reserve

Capital reserve has been created to set aside gains of capital nature from amalgamation and merger. It is utilised in accordance with the provisions of the Companies Act, 2013.

Securities premium

Securities premium represents premium received on issue of shares. This amount can be utilised in accordance with the provisions of the Companies Act, 2013.

Statutory reserve (created pursuant to Section 45-IC of the Reserve Bank of India Act, 1934)

Statutory reserve represents the Reserve Fund created under section 45-IC of the Reserve Bank of India Act, 1934. The Company is required to transfer a sum not less than twenty percent of its net profit every year as disclosed in the statement of profit and loss. The statutory reserve can be utilized for the purposes as may be specified by the Reserve Bank of India from time to time.

Capital redemption reserve

Capital redemption reserve is created to keep the capital intact when preference shares are redeemed or equity shares are bought back. It is utilised in accordance with the provisions of the Companies Act, 2013.

Share option outstanding account

The Company instituted the Employee Stock Option Plan (ESOP) in 2007, Restricted Stock Option Plan 2014 (RSOP) in 2014, Employee Stock Option Plan 2021 in 2021 and Employee Stock Option Plan 2024 Scheme II in 2024 which were approved by the Board of Directors and the shareholders of the Company. The share option outstanding reserve is used to recognise the grant date fair value of option issued under aforesaid plans.

Treasury shares

The reserve for shares of the Company held by the PFL EWT. The Company has issued employees stock option scheme for its employees. The equity shares of the Company have been purchased and held by PFL EWT. PFL EWT to transfer these shares in the name of employees at the time of exercise of option by employees.

Trust Reserve

This represents net of income over expenditure of PFL EWT Trust Retained earnings

Retained earnings represents total of all profits retained since Company’s inception. Retained earnings are credited with current year profits, reduced by losses, if any, dividend payouts, transfers to General reserve or any such other appropriations to specific reserves. It also includes impact of remeasurement of defined benefit plans.

Financial instruments through other comprehensive income

(a) On Debt Investments: This comprises changes in the fair value of debt instruments recognised in other comprehensive income. The company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

(b) On Cash flow hedge reserve: It represents the cumulative gains/(losses) arising on revaluation of the derivative instruments designated as cash flow hedges through OCI.

ii. Defined benefit plan

Gratuity

The Company has a defined benefit gratuity plan in India, governed by the Payment of Gratuity Act, 1972. This plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the rate of fifteen days wages for every completed year of service or part thereof in excess of six months, based on the rate of wages last drawn by the employee concerned. The scheme is fully funded with Life Insurance Corporation of India (LIC) & Kotak Mahindra Life Insurance Company Limited. This defined benefit plan expose the Company to actuarial risks, such as regulatory risk, credit risk, liquidity risk, etc as defined below.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2025. The present value of the defined benefit obligations and the related current service cost and past service cost, are measured using the Projected Unit Credit Method.

(a) During the previous year, the Company had sold its investment in Grihum Housing Finance Limited (“GHFL”)(Formerly known as Poonawalla Housing Finance Limited). Due to aforesaid sale transaction, GHFL ceased to be a subsidiary of the Company from the effective date (July 26, 2023). The resultant gain of H 2,713.65 crores (net of expenses incurred towards the sale of subsidiary) had been classified and presented as an exceptional item in accordance with Ind AS 1 “Presentation of Financial Statements”.

(b) The Company had created a one-time provision of H 1,298.31 crores on discontinued/legacy loan portfolio.

(c) The Company had done one-time additional write-off amounting H 174.95 crores out of discontinued/ legacy loan portfolio.

(d) The Company had sold its “windmills” for consideration H 16 crores resulting in loss of H 9.36 crores.

(e) The Company had done one time settlement of old legal cases pertaining to discontinued and legacy loan portfolio amounting to H 9.83 crores.

A. Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC) and Kotak Mahindra Life Insurance Co. Ltd. (Kotak Life). The funding requirements are based on the gratuity fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section E below.

B. Reconciliation of the net defined benefit (asset) / liability

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset) liability and its components:

G. Description of risk exposures

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow -

Investment Risk: For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Market Risk (Interest Rate): Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Longevity Risk: The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the benefits paid on or before the retirement age, the longevity risk is not very material.

Future Salary Increase Risk: Actual Salary increase that are higher than the assumed salary escalation, will result in increase to the Obligation at a rate that is higher than expected.

Demographic Risk: If actual withdrawal rates are higher than assumed withdrawal rates, the benefits will be paid earlier than expected. Similarly if the actual withdrawal rates are lower than assumed, the benefits will be paid later than expected. The impact of this will depend on the demography of the company and the financials assumptions.

Regulatory Risk: Any changes to the current Regulations by the Government, will increase (in most cases) or decrease the obligation which is not anticipated. Sometimes, the increase is many fold which will impact the financials quite significantly.

45 SHARE-BASED PAYMENTSA Description of share-based payment arrangements

The Company instituted the Employee Stock Option Plan (ESOP) 2007 in 2007, Restricted Stock Option Plan 2014 (RSOP) in 2014, Employee Stock Option Plan (ESOP) 2021 in 2021, Employee Stock Option Plan (ESOP) 2024 in 2024 and Employee Stock Option Plan (ESOP) 2024 - Scheme II in 2024 which were approved by the Board of Directors and the shareholders of the Company.

ESOP, 2007

Under ESOP 2007, the Company provided for the creation and issue of 1,000,000 options, that would eventually convert into equity shares of H 10/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of and at the exercise price determined by the Nomination and Remuneration Committee of the Company. The options generally vest in a graded manner and are exercisable within 3/4 years from the date of vesting. Following the sub-division of one equity share of the face value of H 10/- each into five equity shares of the face value of H 2/- each during the financial year ended March 31, 2011, the number of options increased from 1,000,000 to 5,000,000. The Nomination and Remuneration Committee of the Company has allotted 3,200 options under ESOP 2007 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of H 2/- each ). The scheme is closed as at March 31, 2025.

RSOP, 2014

Under RSOP 2014, the Company provided for the creation and issue of 5,000,000 awards, that would eventually convert into equity shares of H 2/- each in the hands of the Company’s employees. The awards are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the exercise price of the face value of H 2/- each. The awards generally will vest in a graded manner and are exercisable within 3 years from the date of vesting. The shareholders of the Company on July 24, 2021 had amended the RSOP 2014 by increasing existing plan pool from 5,000,000 equity shares having face value of H 2 per equity share to 10,000,000 Equity Shares. The Nomination and Remuneration Committee of the Company had allotted awards under RSOP 2014 to the eligible employees of the Company (each award entitles the award holder to 1 equity share of H 2/-each). The scheme is closed as at March 31, 2024.

ESOP, 2021

The shareholders of the Company on July 24, 2021 had instituted ESOP Plan 2021 wherein the Company provided for the creation and issue of 15,000,000 options, that would eventually convert into equity shares of H 2/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the fair market value. The options generally will vest in a graded manner and are exercisable within 3 years from the date of vesting (refer note C below for details of modification).

During the year 2,008,740 options were lapsed and added in the pool. The Nomination and Remuneration Committee of the Company has allotted 3,460,538 options under ESOP 2021 to the eligible employees of the Company (each award entitles the award holder to 1 equity share of H 2/- each).

During the year, the Nomination and Remuneration Committee of the Company has granted 40,000 options under ESOP 2021 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of H 2/- each). Further, the Nomination and Remuneration Committee of the Company at its meeting held on June 01, 2024 cancelled ungranted stock options under the Employee Stock Option Plan-2021 ("ESOP - 2021”) and that any stock option getting lapsed in future shall also not be reissued.

ESOP - 2024

The shareholders of the Company on February 19, 2024 had instituted ESOP - 2024 through an Employee Welfare Trust. In this regard, the Company had set up Trust named as - PFL Employee Welfare Trust to acquire, purchase, hold and deal in fully paid-up Equity Shares by way of secondary acquisition for the purpose of implementation of the ESOP - 2024. The maximum aggregate number of Options that may be granted and thereby transfer of Shares by the Trust under ESOP - 2024 shall not exceed 15,000,000 Shares. During the year, the Nomination and Remuneration Committee of the Company at its meeting held on June 01, 2024, recommended evaluation for cancellation of ESOP - 2024 through trust route and subsequent dissolution of the PFL Employee Welfare Trust subject to requisite approvals and compliances as per applicable law.

ESOP - 2024 Scheme II

The shareholders of the Company on May 13, 2024 had instituted ESOP - 2024 Scheme II wherein the Company provided for the creation and issue of 20,000,000 options, that would eventually convert into equity shares of H 2/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the fair market value. The options generally will vest in a graded manner and are exercisable within 36 months from the date of vesting.

During the year, the Nomination and Remuneration Committee of the Company has granted 18,052,000 options under ESOP - 2024 Scheme II to the eligible employees of the Company (each options entitles the option holder to 1 equity share of H 2/- each). During the year 8,000 options were lapsed and added in the pool.

B Measurement of Fair values

The fair value of employee share options has been measured using Black-Scholes model. The weighted average fair value of each option of Poonawalla Fincorp Limited was H 105.40 (March 31, 2024: H 134.16).

Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behavior.

C Modification of ESOP plan

During the year ended March 31, 2025, Nomination and Remuneration Committee of the Company has approved modification of vesting schedule for ESOP 2021, in line with ESOP 2024 Scheme II. Under ESOP 2021, the revised vesting schedule provides for the vesting of the total options granted over a 3 year period from earlier vesting schedule of over 4 year period. Accordingly, the Company has accounted the modification in line with Ind AS 102 - ‘Share Based Payments’. As a result of modification, there is no incremental fair value for the options modified. The impact on Statement of profit and loss of this modification is H 23.06 crores.

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases. Future cash outflows in respect of the above, if any, is determinable only on receipt ofjudgement / decisions pending with the relevant authorities.

b) The amount included above represents best possible estimate arrived at on the basis of available information. The Management believes that it has a reasonable case in its defense of the proceedings and accordingly no further provision has been created.

c) The Company has certain litigations pending with various appellate authorities which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements.

Financial instruments valued at carrying value

The respective carrying values of certain on-balance sheet financial instruments approximate their fair value. These financial instruments include cash in hand, balances with other banks, receivables, payables and certain other financial assets and liabilities, with maturities less than a year from the balance sheet date. Carrying values were assumed to approximate fair values for these financial instruments as they are short-term in nature and their recorded amounts approximate fair values or are receivable or payable on demand.

C. Valuation framework

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: The fair value of financial instruments that are not traded in active markets is determined using valuation techniques which maximize the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants’ assumptions about risk and the risk premium required by market participants in order to bear that risk. The Company develops Level 3 inputs based on the best information available in the circumstances.

50 FINANCIAL RISK MANAGEMENT

In the normal course of doing its business the company is exposed to certain inherent financial risks in the form of credit risk, market risk, operational risk, liquidity risk, interest rate risk, compliance risk, reputational risk, etc.

i Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the Board of Directors on its activities.

Risk management involves identifying, measuring, monitoring and managing risks on a regular basis. The objective of risk management is to increase shareholders’ value and achieve a return on equity that is commensurate with the risks assumed. To achieve this objective, the Company employs leading risk management practices and recruits skilled and experienced people.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

ii Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s asset on finance.

The carrying amounts of financial assets represent the maximum credit risk exposure.

a) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• A breach of contract such as a default or past due event.

• When a borrower becomes more than 90 days past due in its contractual payments.

The Risk Management Committee has established credit policies for various lending products under which each new customer is analyzed individually for credit worthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes background verification, financial statements, income tax returns, GST details, credit bureau information, industry information, etc (as applicable).

b) Probability of default (PD)

Analysis of historical data regarding days past due (DPD) or delinquency of loans is the primary input into the determination of the term structure of PD for exposures. The Company collects performance and default information about its credit risk exposures analysed by type of product or borrower as well as by DPD. The Company employs statistical methods to analyse the data collected and generate estimates of the PD of exposures.

In case of newly launched products, where the Company does not have sufficient historical data to estimate PD, it uses industry level aggregate data obtained from credit bureaus, or third-party data providers or performance of an existing product which closely resembles the new product. In case of wholesale lending products where external credit rating is available, PD rates are derived from such external credit rating grades. In case of products having maturity less than 12 months, a tenure adjustment is undertaken on annualised PD rates to address shorter tenure of the product. Expected loss has been calculated as an unbiased and probability-weighted amount for multiple scenarios.

The probability of default has been calculated for 3 scenarios: upside (16% probability), downside (16%) and base (68%). These weightages have been decided on best practices and expert judgement.

c) Definition of default

The Company considers a financial instrument defaulted, and therefore Stage 3 (credit-impaired), for ECL calculations in all cases when the borrower becomes more than 90 DPD from its contractual payments or has been classified as NPA as per regulatory classification. The Company considers probability of default upon initial recognition of asset and whether there has been any significant increase in credit risk (SICR) on an ongoing basis throughout each reporting period. To assess whether there is SICR, the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. Following indicators are incorporated:

• DPD analysis as on each reporting date, and

• significant increase in credit risk on other financial instruments of same borrower

d) Exposure at default (EAD)

The exposure at default (EAD) for ECL computation represents the principal outstanding, installment overdue, accrued interest, future interest post discounting as key components and some other adjustments of the financial instruments subject to the impairment calculation;

To calculate the ECL for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12 month ECL. For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.

e) Loss given default (LGD)

Loss given default (LGD) represents estimated financial loss the Company is likely to suffer in respect of default account and it is used to calculate provision requirement on EAD along with PD. The Company uses collection details on previously defaulted cases for calculating LGD including estimated direct cost of collection from default cases. Appropriate discounting rates are applied to calculate present value of future estimated collection net of direct collection cost. LGD thus calculated is used for all stages, i.e. Stage 1, Stage 2 and Stage 3.

For newly launched products, where historical collection data is not available or is insufficient, the Company either uses the collection performance of an existing product which closely resembles the new product or industry level aggregate data obtained from credit bureaus/third-party data providers, or regulatory guidance available if any. In case of certain loan products having an inherent unsecured component (e.g. loans where Loan-to-Value is greater than 100%), the LGD rate is derived through a combination of respective secured and unsecured LGD rates.

f) Discounting

ECL is computed by estimating timing of expected credit shortfalls associated with defaults and discounting them using effective interest rate.

g) Significant increase in credit risk

The Company continuously monitors all assets subject to ECL. In order to determine whether an instrument or a portfolio of instruments is subject to 12 months ECL or lifetime ECL, the Company assesses whether there has been a significant increase in credit risk since initial recognition. The Company also applies other qualitative factors for triggering a significant increase in credit risk for an asset, such as restructuring. Regardless of the change in credit profile, if the contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition. Similarly, if external credit rating of a corporate borrower is downgraded to non-investment grade from investment grade, the credit risk is deemed to have increased significantly from the initial recognition.

The Company has applied a three-stage approach to measure expected credit losses (ECL) on loans and other credit exposures accounted for at amortised cost and FVOCI. Loss rates are calculated using a ‘roll rate’ method

based on the probability of a receivable progressing through successive stages of delinquency to write-off. Assets migrate through following three stages based on the changes in credit quality since initial recognition:

(a) Stage 1: 12- months ECL: For exposures where there is no significant increase in credit risk since initial recognition and that are not credit-impaired upon origination, the portion of the lifetime ECL associated with the probability of default events occurring within the next 12- months is recognized.

(b) Stage 2: Lifetime ECL, not credit-impaired: For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL is recognized.

(c) Stage 3: Lifetime ECL, credit-impaired: Financial assets are assessed as credit impaired upon occurrence of one or more events that have a detrimental impact on the estimated future cash flows of that asset. For financial assets that have become credit-impaired, a lifetime ECL is recognized and interest revenue is recognized on net basis.

h) Expected Credit Loss on Loans

The Company assesses whether the credit risk on a financial asset has increased significantly on collective basis. For the purpose of collective evaluation of impairment, financial assets are grouped on the basis of shared credit risk characteristics, taking into account instrument type, product type, collateral type, and other relevant factors.

The Company considers defaulted assets as those which are contractually 90 days past due, other than those assets where there is empirical evidence to the contrary. Financial assets which are contractually more than 30 days and upto 90 days past due are classified under Stage 2 - life time ECL, not credit impaired, barring those where there is empirical evidence to the contrary. An asset migrates down the ECL stage based on the change in the risk of a default occurring since initial recognition. If in a subsequent period, credit quality improves and reverses any previously assessed significant increase in credit risk since origination, then the loan loss provision stage reverses to 12-months ECL from lifetime ECL.

The Company measures the amount of ECL on a financial instrument in a way that reflects an unbiased and probability-weighted amount. The Company considers its historical loss experience and adjusts the same for current observable data. The key inputs into the measurement of ECL are the probability of default, loss given default and exposure at default. These parameters are derived from the Company’s internally developed models and other historical data and where the Company does not have sufficient historical data, it uses regulatory guidance available, if any or benchmark rates obtained from external sources like research agencies, credit bureaus, or publicly available information. In addition, the Company uses reasonable and supportable information on future economic conditions including macroeconomic factors. Since incorporating these forward looking information increases the judgment as to how the changes in these macroeconomic factor will affect ECL, the methodology and assumptions are reviewed regularly.

In case of any portfolio or a segment thereof showing abnormal delinquency behaviour, the ECL approach is reviewed and adjusted to reflect adequate provisioning in line with the risk profile. The Company also provides for expected credit loss on undrawn loan commitments wherever applicable.

Forward looking information

In its ECL models, the Company relies on a broad range of forward looking information as macro economic inputs. As required by Ind AS 109, Macro Economic (ME) overlays are required to be factored in ECL models and accordingly, Company has used Consumer Price Index (CPI) as the relevant ME variable. Overtime, new ME variables may emerge to have a better correlation and may replace ME being used now.

Policy on write off of loan assets

Financial assets are fully provided for or written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. However, financial assets that are written off could still be subject to enforcement activities under the Company recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in statement of Profit and loss on actual realization from customer.

The following table provides information about the exposure to credit risk and expected credit loss for assets on finance.

iii Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions in a timely manner, without incurring unacceptable losses or risking damage to the Company’s reputation. The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments.

The Company has obtained fund and non-fund based working capital lines from various banks. Further, the Company has access to funds from debt markets through commercial paper, non-convertible debentures and other debt instruments including term loans & external commercial borrowings. Cash Credit / WCDL limits are renewed on annual basis and are therefore revolving in nature.

iv. Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices, which will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company - primarily H. In cases where the borrowings are denominated in foreign currency, the Company uses derivatives to manage market risks.

a) Interest rate risk

Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on the Company’s cash flows as well as costs.

The Company is subject to variable interest rates on some of its interest bearing financial assets/ liabilities. The Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and funding requirements for its day to day operations like short-term loans.

The Company has USD denominated liability (External commercial borrowings) at floating rate of interest causing volatility in the cash flow arising on principal and interest repayment.

Management aims to hedge the volatility with appropriate derivative instruments. Accordingly, the Company entered has into cross currency swaps with tenor and maturity matching with the underlying cashflow.

The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year-end balances are not necessarily representative of the average debt outstanding during the year. This analysis assumes that all other variables remain constant.

b) Foreign currency risk

The Company is exposed to foreign currency fluctuation risk for its External commercial borrowings i.e unfavourable movement in the USD INR conversion rate charged by the bank on USD loan repayment and interest settlement from time to time. The Company has hedged the entire ECB exposure for the full tenure as per Board approved Risk Management Policy. The Company has entered into cross currency swaps with strategy which aims to hedge a defined portion of the exposure to USD-INR exchange rate volatility on borrowings and interest repayable in USD.The Company’s risk management policy is to hedge 100% of its foreign currency exposure. The Company uses Cross Currency Swaps to hedge its currency risk and applies a hedge ratio of 1 : 1. The Asset Liability Committee periodically reviews and monitors risk involved in the transactions. These contracts are designated as cash flow hedges. The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cash flows of the hedged item. In these hedge relationships, there are no hedge ineffectiveness because it is hedged to extent of 100% of principal and interest amount of external commercial borrowings.

Hedging framework

The Company’s hedging policy only allows for effective hedging relationships to be considered as hedges as per the relevant Ind AS. Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company enters into hedge relationships where the critical terms of the hedging instrument match with the terms of the hedged item, and so a qualitative and quantitative assessment of effectiveness is performed.

Legal and operational risk Legal risk

Legal risk is the risk relating to losses due to legal or regulatory action that invalidates or otherwise precludes performance by the end user or its counterparty under the terms of the contract or related netting agreements. The Company has developed preventive controls and formalised procedures to identify legal risks so that potential losses arising from non-adherence to laws and regulations, negative publicity, etc. are significantly reduced. As at March 31, 2025, there were legal cases pending against the Company aggregating H 2.26 crores (March 31, 2024: H 0.90 crores). Based on the opinion of the Company’s legal advisors, the management believes that no substantial liability is likely to arise from these cases.

Operational risk

Operational risk framework is designed to cover all functions and verticals towards identifying the key risks in the underlying processes.

The framework, at its core, has the following elements:

1. Documented Operational Risk Management Policy and Standard Operating Procedures (SOP).

2. Third party risk management through Outsourcing Risk Policy and SOP.

3. Well defined Governance Structure.

4. Use of Identification & Monitoring tools and like Risk Control Self- Assessment (RCSA), Key Risk Indicators (KRIs), Risk Appetite Statements (RAS) and Control testing.

5. Standardized reporting templates, reporting structure and frequency.

6. Regular workshops and training for enhancing awareness and risk culture.

The Company has adopted the globally accepted 3-lines of defense approach to risk management.

First line - Each function / vertical undergoes transaction testing to evaluate internal compliance and thereby lay down processes for further improvement. Thus, the approach is “bottom-up”, ensuring acceptance of findings and faster adoption of corrective actions, if any, to ensure mitigation of perceived risks.

Second line - Independent risk management vertical supports the first line in developing risk mitigation strategies and provides oversight through regular monitoring. All key risks are presented to the Risk Management Committee on a quarterly basis.

Third line - Internal Audit conducts periodic risk-based audits of all functions and process to provide an independent assurance to the Audit Committee.

During the year ended March 31, 2025, the Operational Risk (OR) team has helped to identify, assess, monitor and mitigate risks across the organization. RCSA exercises, Internal Finance Control (‘IFC’) testing and KRI monitoring have been conducted for key business units / support functions, and action plans have been developed to plug process gaps. Apart from this quarterly RAS monitoring and Outsourcing Risk management was also undertaken during the Financial year. The OR team helps senior management monitor risks through quarterly reporting of OR information to the Operational Risk Management Committee (ORMC) and the RMC.

52 CAPITAL MANAGEMENT

The Company actively manages capital base to cover risks inherent in the business and meets the Capital Adequacy Requirements (CRAR) of the Reserve Bank of India (RBI). The adequacy of the Company’s capital is monitored using, among other measures, the regulations issued by RBI. The primary objectives of the capital management policy is to ensure that the company complies with regulatory capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholder value. The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. There is no changes in the capital management process from the previous year.

i. Regulatory capital

The Company’s regulatory capital consists of the sum of the following elements :

- Tier 1 capital, which includes ordinary share capital, retained earnings,perpetual debt and reserves and deduction for intangible assets,deferred tax asset and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

ii. Capital allocation

The management uses regulatory capital ratios to monitor its capital base. There is no allocation of capital required as Company is operating primarily in a single segment i.e., financing.

53 OPERATING SEGMENTS

The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108. The Executive Committee of the Company has been identified as the Chief Operating Decision Maker (CODM) pursuant to the requirements of Ind AS 108, "Operating Segments.” The Company’s operating segments are established in the manner consistent with the components of the Company that are reviewed regularly by the CODM for the purpose of allocation of resources and evaluation of performance.

55 ADDITIONAL INFORMATION

a) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

b) The quarterly information statement filed by the Company with banks or financial institutions are in agreement with the books of accounts.

c) The Company has not been declared as Wilful defaulter by any banks, financial institution or other lenders

d) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

e) The provision related to number of layers as prescribed under section 2(87) of the Companies Act read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable to Company.

f) The Company have not advanced or given loan or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries except loans or advances given in normal course of business.

g) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries except loans or advances given in normal course of business.

h) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

i) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.

j) The Company used accounting software to maintain its books of account for the year ended March 31, 2025, with audit trail (edit log) features enabled at both application and database levels, in line with the requirements of MCA notification. However, for one of the accounting software, the audit trail logs at the database level were preserved effective June 26, 2024 onwards.

(q) Disclosures as required by the Master Direction - Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016.

During the year ended March 31, 2025, 53 frauds (March 31, 2024: 07 frauds) have been identified by management aggregating to H 1.59 crores (March 31, 2024: H 2.00 crores) by the employees, customers or third party and have been reported to RBI.

(r) Liquidity Coverage Ratio (LCR) disclosures and Public disclosure on liquidity risk

1 Liquidity Coverage Ratio (LCR) disclosures Qualitative disclosure

Liquidity Coverage Ratio (LCR) is a tool for measuring and promoting short term resilience of the Company to potential liquidity disruptions by ensuring maintenance of sufficient unencumbered high quality liquid assets (HQLAs) to survive at severe stress scenario lasting for 30 calendar days. The Reserve Bank of India (RBI) introduced LCR requirement for all deposit-taking NBFCs and non-deposit taking NBFCs with an asset size of H 5,000 crore and above. The ratio comprises of HQLAs as numerator and net cash outflows in next 30 calendar days as denominator.

HQLA computation consist of two parts i.e.

(i) Assets to be included as HQLA without any haircut i.e. cash, government securities, etc. and

(ii) Assets to be considered for HQLA with haircuts (ranging 15% to 50%) which comprises of investments in highly rated non-financial corporate bonds and listed equity investments which are considered at prescribed haircuts.

The average HQLA for the quarter ended March 31, 2025 of H 1,609.08 crores (for the quarter ended March 31, 2024: H 961.63 crores) comprised of H 53.10 crores (previous year: H 137.39 crores) in cash in hand and bank and remaining H 1,555.98 crores (previous year: H 824.23 crores) from Government securities.

In order to determine net cash outflows, the Company considers total expected cash outflow minus total expected cash inflows for the subsequent 30 calendar days. As per regulations, stressed cash flows is computed by assigning a predefined stress percentage to the overall cash inflows and cash outflows. Net cash outflow over next 30 days is computed as stressed outflows less minimum of stressed inflows or 75% of stressed outflow. Accordingly, LCR would be computed by dividing Company’s stock of HQLA by its total net cash outflow.

The LCR requirement has been inducted in a phased manner with Company required to maintain minimum LCR of 50% from December 1, 2020 eventually increasing to 100% by December 1, 2024. The Company has implemented the LCR framework and has consistently maintained LCR well above the regulatory threshold for all the quarters during the current financial year. The Company has maintained an average

56 DISCLOSURES AS REQUIRED UNDER MASTER DIRECTION - RESERVE BANK OF INDIA (NONBANKING FINANCIAL COMPANY - SCALE BASED REGULATION) DIRECTIONS, 2023 AND OTHER RELEVANT RBI NOTIFICATIONS* (CONTD.)

* Amounts included herein are based on current and previous year financials, as per Ind AS.

LCR of 126.33% for the quarter ended March 31, 2025 (for the quarter ended March 31, 2024: 130.62%) as against minimum regulatory requirement of 100 % (March 31, 2024 : 85%). The Company has maintained average HQLAs of H 1,609.08 crores for the quarter ended March 31, 2025 (for the quarter ended March 31, 2024 : H 961.63 crores).

Apart from LCR, the Company also uses various liquidity indicators to measure the liquidity risk in terms of funding stability, concentration risk i.e. concentration by significant counter-parties and concentration by significant instruments / product, stock ratios, etc.

The Company has adopted the liquidity risk framework as required under the RBI regulation. The Board of Directors have delegated responsibility of balance sheet Liquidity Risk Management to the Asset Liability Committee (ALCO). ALCO reviews asset liability management (ALM) and ensures that there are no excessive concentration of either assets or liability side of the balance sheet. Liquidity risk is managed in accordance with the ALM policy. The same is reviewed periodically to incorporate regulatory changes, economic scenario and business requirements of the Company.

6) Institutional set-up for liquidity risk management

Board constituted Asset Liability committee (ALCO) reviews Asset Liability Management (ALM). It also ensures that there are no excessive concentration of either assets or liability side of the balance sheet.

ALM is monitored as a regular process and necessary steps are taken wherever required. Company also maintains sufficient liquidity buffer through credit lines and other means to meet its liability when they are due, under both normal and stressed conditions in a timely manner. Maturity profile of financial assets and financial liabilities is assessed along with borrowing and business and as a part of review of liquidity position.

The Company has obtained fund and non-fund based working capital lines and Term Loans from various banks and financial institutions. Further, the Company has access to funds from debt markets through nonconvertible debentures and other debt instruments. Cash Credit / WCDL limits are renewed on annual basis and are therefore revolving in nature. The Company also manages liquidity by raising funds through Securitisation/ assignment transactions.

Liquidity risk is managed in accordance with ALM policy. Same is reviewed periodically to incorporate regulatory changes, economic scenario and business requirements.

(e) Sales out of amortised cost business model portfolios

As a financing arrangement, the Company has been transferring or selling certain pools of loan receivables secured and unsecured by entering securitization transactions for consideration received in cash and /or Security receipts. These transactions are carried out after complying with RBI guidelines on securitization. Besides using securitization as an alternate financing tool, it is also being used as an effective Balance Sheet management through better liquidity and risk management by transfer of assets. When the assets in the form of loan receivables are sold / transferred to a Special Purpose Vehicle (SPV) /Bank through securitization transaction, then on a consolidated portfolio level, such sale/transfer does not change the Company’s business objective of holding financial assets to collect contractual cash flows. The Company has a Board approved policy on Business Model Assessment in place. Please refer note 2(h) for business model assessment.

(y) There are no such circumstances in which revenue has been postponed pending the resolution of significant uncertainties.

(z) The details related to risk management policy and corporate governance are disclosed under Board’s Report and Management Discussion and Analysis section of the Annual Report.

(aa) Divergence in asset classification and provisioning

No disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI’s supervisory inspection for the year ended March 31, 2023 and for the year ended March 31, 2022

56 DISCLOSURES AS REQUIRED UNDER MASTER DIRECTION - RESERVE BANK OF INDIA (NONBANKING FINANCIAL COMPANY - SCALE BASED REGULATION) DIRECTIONS, 2023 AND OTHER RELEVANT RBI NOTIFICATIONS* (CONTD.)

* Amounts included herein are based on current and previous year financials, as per Ind AS.

as per the requirement of the circular no. RBI/2022-23/26 DOR.ACC.REC.No.20/21.04.018/2022-23 dated April 19, 2022.

(ab) Draw Down from Reserves

There was no draw down from reserves during the year ended March 31, 2025 and March 31, 2024.

(ac) Net Profit and loss for the period, prior period items and changes in accounting policies There are no prior period items which are impacting Company’s current year profit and loss.

(ad) The Company has consolidated financial statements of its subsidiary (Grihum Housing Finance Limited (Formerly known as Poonawalla Housing Finance Limited) ceased to be subsidiary on July 26, 2023) and its joint venture.

(ae) Figures of previous year have been regrouped / reclassified, wherever necessary, to make them comparable with current year.

The Board of Directors and Shareholders of the Company in their respective meetings had approved sale of its shareholding in joint venture Jaguar Advisory Services Private Limited (‘JASPL’) held on November 2, 2021 and December 13, 2021. The Board has reaffirmed plan to sell it’s shareholding in JASPL in its meeting held on April 29, 2024. The sale is subject to requisite regulatory approvals. Accordingly, in line with the requirements of Ind AS 105 "Non-current assets Held for Sale”, such investment has been classified as assets held for sale.

The Company has sold its investment in Grihum Housing Finance Limited (‘GHFL’) (Formerly known as Poonawalla Housing Finance Limited) on July 26, 2023 (effective date) with the requisite regulatory approvals pursuant to execution of a definitive share purchase agreement with Perseus SG Pte. Ltd., an entity affiliated to TPG Global LLC on December 14, 2022, approval of Board of Directors in their meeting held on December 14, 2022, approval of shareholders on January 22, 2023 and approval of RBI vide its letter dated May 30, 2023.

(a) Nature of security

Debentures issued under private placement are secured by first pari passu charge on the loan receivables of the Company except;

(i) 500 units alloted in April, 2017 issued are secured by mortgage of Company’s immovable property situated at Rajarhat, Kolkata in the state of West Bengal and are also secured against designated Loans assets;

(ii) 3,500 units allotted in December, 2019 are only secured by hypothecated loan assets.

Debentures issued under public issue are secured by mortgage of Company’s immovable property situated at Luz Church Road, Mylapore, Chennai and are also secured against designated loan assets. The total asset cover is hundred percent or above of the principal amount of the said debentures.

(a) Nature of security

i) Term Loans, Cash Credit facilities and Working Capital Demand Loans are secured by way of first pari passu charge on the loan receivables of the company under Security Trustee Arrangement.

ii) Loans against securitisation represents amounts received in respect of securitisation transactions (net of repayments and investment therein) as these transactions do not meet the derecognition criteria specified under Ind AS 109 - Financial Instruments.

(c) Details of cash credit facilities and working capital demand loans

The cash credit facilities are repayable on demand and carry interest rates ranging from 8.15% to 9.10% (March 31, 2023: from 7.40% p.a. to 8.50 % p.a). Working capital demand loans are repayable on demand and carry interest rates ranging from 7.23 % to 8.60 % (March 31, 2023: from 6.86 % p.a. to 8.05 % p.a.). As per the prevalent practice, cash credit facilities and working capital demand loans are renewed on a year to year basis and therefore, are revolving in nature.

(d) The Company has used the borrowings from banks and financial institutions for the specific purpose for which it was taken as at the balance sheet date.

(b) Terms / rights attached to equity shares :

The Company has only one class of equity shares having a par value of ^ 2/- each. Each holder of equity share is entitled to one vote per share.

The dividend recommended by the Board of Directors and are subject to approval by the Shareholders in the Annual General meeting is paid in Indian rupees.

Nature and purpose of reserves :

Capital redemption reserve

Capital redemption reserve is created to keep the capital intact when preference shares are redeemed or equity shares are bought back. It is utilised in accordance with the provisions of the Companies Act, 2013.

Share option outstanding account

The Company instituted the Employee Stock Option Plan (ESOP) in 2007, Restricted Stock Option Plan 2014 (RSOP) in 2014 and Employee Stock Option Plan 2021 in 2021 which were approved by the Board of Directors and the shareholders of the Company. The share option outstanding reserve is used to recognise the grant date fair value of option issued under aforesaid plans.

Treasury shares

The reserve for shares of the Company held by the PFL EWT. Company has issued employees stock option scheme for its employees. The equity shares of the Company have been purchased and held by PFL EWT. PFL EWT to transfer these shares in the name of employees at the time of exercise of option by employees.

Trust Reserve

This represents net of income over expenditure of PFL EWT.

Statutory reserve (created pursuant to Section 45-IC of the Reserve Bank of India Act, 1934)

Statutory reserve represents the Reserve Fund created under section 45-IC of the Reserve Bank of India Act, 1934. The Company is required to transfer a sum not less than twenty percent of its net profit every year as disclosed in the statement of profit and loss. The statutory reserve can be utilized for the purposes as may be specified by the Reserve Bank of India from time to time.

Securities premium

Securities premium represents premium received on issue of shares. This amount can be utilised in accordance with the provisions of the Companies Act, 2013.

Capital reserve

Capital reserve has been created to set aside gains of capital nature from amalgamation and merger. It is utilised in accordance with the provisions of the Companies Act, 2013.

Financial instruments through other comprehensive income

This comprises changes in the fair value of debt instruments recognised in other comprehensive income. The company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

Retained earnings

Retained earnings represents total of all profits retained since Company’s inception. Retained earnings are credited with current year profits, reduced by losses, if any, dividend payouts, transfers to General reserve or any such other appropriations to specific reserves. It also includes impact of remeasurement of defined benefit plans.

** Details of corporate social responsibility expenditure (‘CSR’)

A CSR committee has been formed by the Company as per the Companies Act, 2013. CSR expenses have been incurred through out the year on the activities as specified in Schedule VII of the said Act. The focus area of CSR initiatives undertaken by the Company are education, health and environment. The Company incurs CSR expenses directly.

During the current year, the Company has sold its investment in Grihum Housing Finance Limited (‘GHFL’) (Formerly known as Poonawalla Housing Finance Limited). Due to aforesaid sale transaction, GHFL ceased to be a subsidiary of the Company from the effective date (July 26, 2023). The resultant gain of ^ 2,713.65 crores (net of expenses incurred towards the sale of subsidiary) has been classified and presented as an exceptional item in accordance with Ind AS 1 "Presentation of Financial Statements”.

The Company sold its tangible asset "windmills” for consideration of ^ 16 crores resulting in loss of ^ 9.36 crores.

The Company had created a one-time provision of ^ 1,298.31 crores on discontinued/legacy loan portfolio.

The Company did one-time additional write-off amounting ^ 174.95 crores out of discontinued/legacy loan portfolio.

The Company did one time settlement of old legal cases pertaining to discontinued and legacy loan portfolio amounting to ^ 9.83 crores.

During the previous year , the Company had sold its shareholding in its Joint Venture (JV) namely Magma HDI General Insurance Company Limited (Magma HDI) based on requisite regulatory approvals received on May 27, 2022. Accordingly, the resultant gain of ^ 252.21 crores was classified and presented as an exceptional item in line with Ind AS 1 "Presentation of Financial Statements”. The Company had created an exceptional

ii. Defined benefit plan Gratuity

The Company has a defined benefit gratuity plan in India, governed by the Payment of Gratuity Act, 1972. This plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the rate of fifteen days wages for every completed year of service or part thereof in excess of six months, based on the rate of wages last drawn by the employee concerned. The scheme is fully funded with Life Insurance Corporation of India (LIC) & Kotak Mahindra Life Insurance Company Limited . This defined benefit plan expose the Company to actuarial risks, such as regulatory risk, credit risk, liquidity risk, etc as defined below.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2024. The present value of the defined benefit obligations and the related current service cost and past service cost, are measured using the Projected Unit Credit Method.

A. Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC) and Kotak Mahindra Life Insurance Co. Ltd. (Kotak Life). The funding requirements are based on the gratuity fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section E below.

E. Sensitivity analysis of significant assumptions

The following table present a sensitivity analysis to one of the relevant actuarial assumption, holding other assumptions constant, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumptions that were reasonably possible at the reporting date.

As at March 31, 2024, the weighted-average duration of the defined benefit obligation was 7.35 years (March 31, 2023: 7.56 years ).

G. Description of risk exposures

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow -

Investment Risk: For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Market Risk (Interest Rate): Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Longevity Risk: The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the benefits paid on or before the retirement age, the longevity risk is not very material.

Future Salary Increase Risk: Actual Salary increase that are higher than the assumed salary escalation, will result in increase to the obligation at a rate that is higher than expected.

Attrition/Withdrawal Risk: If actual withdrawal rates are higher than assumed withdrawal rates, the benefits will be paid earlier than expected. Similarly if the actual withdrawal rates are lower than assumed, the benefits will be paid later than expected. The impact of this will depend on the demography of the company and the financials assumptions.

Regulatory Risk: Any changes to the current Regulations by the Government, will increase (in most cases) or decrease the obligation which is not anticipated. Sometimes, the increase is many fold which will impact the financials quite significantly.

45 SHARE-BASED PAYMENTSA Description of share-based payment arrangements

The company instituted the Employee Stock Option Plan (ESOP) in 2007, Restricted Stock Option Plan 2014 (RSOP) in 2014, Employee Stock Option Plan (ESOP) in 2021 and Employee Stock Option Plan (ESOP) in 2024 which were approved by the Board of Directors and the shareholders of the Company.

ESOP, 2007

Under ESOP 2007, the Company provided for the creation and issue of 1,000,000 options, that would eventually convert into equity shares of ^ 10/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of and at the exercise price determined by the Nomination and Remuneration Committee of the Company. The options generally vest in a graded manner and are exercisable within 3/4 years from the date of vesting. Following the sub-division of one equity share of the face value of ^ 10/- each into five equity shares of the face value of ^ 2/- each during the financial year ended March 31, 2011, the number of options increased from 1,000,000 to 5,000,000.

During the year, 8,800 options were lapsed/forfeited. The Nomination and Remuneration Committee of the Company has allotted 45,560 options under ESOP 2007 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of ^ 2/- each ).

RSOP, 2014

Under RSOP 2014, the Company provided for the creation and issue of 5,000,000 awards, that would eventually convert into equity shares of ^ 2/- each in the hands of the Company’s employees. The awards are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the exercise price of the face value of ^ 2/- each. The awards generally will vest in a graded manner and are exercisable within 3 years from the date of vesting. The shareholders of the Company on July 24, 2021 had amended the RSOP 2014 by increasing existing plan pool from 5,000,000 equity shares having face value of ^ 2 per equity share to 10,000,000 Equity Shares.

During the year, 38,496 awards were lapsed/forfeited and added in the pool. The Nomination and Remuneration Committee of the Company has allotted 5,194,665 awards under RSOP 2014 to the eligible employees of the Company (each award entitles the award holder to 1 equity share of ^ 2/- each ).

ESOP, 2021

The shareholders of the Company on July 24, 2021 had instituted ESOP Plan 2021 wherein the Company provided for the creation and issue of 15,000,000 options, that would eventually convert into equity shares of ^ 2/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the fair market value. The options generally will vest in a graded manner and are exercisable within 36 months from the date of vesting.

During the year 3,064,998 options were lapsed/forfeited and added in the pool. The Nomination and Remuneration Committee of the Company has allotted 1,362,845 options under ESOP 2021 to the eligible employees of the Company (each award entitles the award holder to 1 equity share of ^ 2/- each ).

During the year, the Nomination and Remuneration Committee of the Company has granted 3,542,500 options under ESOP 2021 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of ^ 2/- each ).

ESOP - 2024

The shareholders of the Company on February 19, 2024 had instituted ESOP -2024 through an Employee Welfare Trust. In this regard, the Company had set up Trust named as - PFL Employee Welfare Trust to acquire, purchase, hold and deal in fully paid-up Equity Shares by way of secondary acquisition for the purpose of implementation of the ESOP-2024. The maximum aggregate number of Options that may be granted and thereby transfer of Shares by the Trust under ESOP -2024 shall not exceed 15,000,000 Shares. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company. The options generally will vest in a graded manner and are exercisable within 36 months from the date of vesting.

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases. Future cash outflows in respect of the above, if any, is determinable only on receipt ofjudgement / decisions pending with the relevant authorities.

b) The amount included above represents best possible estimate arrived at on the basis of available information. The Management believes that it has a reasonable case in its defense of the proceedings and accordingly no further provision has been created.

c) The Company has certain litigations pending with income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements.

e) The Company has a process whereby periodically all long term contracts are assessed for material foreseeable losses. As at year end, the Company does not have any long term contracts (including derivative contracts) for which there were material foreseeable losses.

48 TRANSFERS OF FINANCIAL ASSETS

In the ordinary course of business, the Company enters into transactions that result in the transfer of financial assets. In accordance with the accounting policy set out in Note 2, the transferred financial assets continue to be recognised or derecognised as per the conditions specified in Ind AS 109 - Financial Instruments.

The Company transfers financial assets that are not derecognised in their entirety are primarily through securitisation transactions, in which loans to customers are transferred to securitisation special purpose vehicles.

Transferred financial assets that are not derecognised in their entirety Securitisation

Certain loans to customers are sold by the Company to securitisation special purpose vehicles, which in turn issue Pass Through Certificates (‘PTC’) to investors collateralised by the purchased assets. In securitisation transactions entered, the Company transfers loans to an unconsolidated securitisation vehicle, however it retains credit risk (principally by providing credit enhancement). The Company retains substantial risks and rewards of such loan transferred and accordingly, does not derecognise the loans transferred in its entirety and recognises an associated liability for the consideration received.

The following table sets out the carrying amounts and fair values of all financial assets transferred that are not derecognised in their entirety and associated liabilities.

Financial instruments valued at carrying value

The respective carrying values of certain on-balance sheet financial instruments approximate their fair value. These financial instruments include cash in hand, balances with other banks, receivables, trade payables and certain other financial assets and liabilities, with maturities less than a year from the balance sheet date. Carrying values were assumed to approximate fair values for these financial instruments as they are shortterm in nature and their recorded amounts approximate fair values or are receivable or payable on demand.

C. Valuation framework

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: The fair value of financial instruments that are not traded in active markets is determined using valuation techniques which maximize the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants’ assumptions about risk and the risk premium required by market participants in order to bear that risk. The Company develops Level 3 inputs based on the best information available in the circumstances.

50 FINANCIAL RISK MANAGEMENT

The Company assumes credit risk, market risk, operational risk, liquidity risk, interest rate risk, compliance risk, and reputational risk in the normal course of its business. This exposes the Company to a substantial level of inherent financial risk.

i Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the Board of Directors on its activities.

Risk management involves identifying, measuring, monitoring and managing risks on a regular basis. The objective of risk management is to increase shareholders'' value and achieve a return on equity that is commensurate with the risks assumed. To achieve this objective, the Company employs leading risk management practices and recruits skilled and experienced people.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

ii Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s asset on finance.

The carrying amounts of financial assets represent the maximum credit risk exposure.

a) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• A breach of contract such as a default or past due event

• When a borrower becomes more than 90 days past due in its contractual payments

The Risk Management Committee has established credit policies for various lending products under which each new customer is analyzed individually for credit worthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes background verification, financial statements, income tax returns, GST details, credit bureau information, industry information, etc (as applicable).

b) Probability of default (PD)

Analysis of historical data regarding days past due (DPD) or delinquency of loans is the primary input into the determination of the term structure of PD for exposures. The Company collects performance and default information about its credit risk exposures analysed by type of product or borrower as well as by DPD. The Company employs statistical methods to analyse the data collected and generate estimates of the PD of exposures.

In case of newly launched products, where the Company does not have sufficient historical data to estimate PD, it uses industry level aggregate data obtained from credit bureaus, or third-party data providers or performance of an existing product which closely resembles the new product.

Expected loss has been calculated as an unbiased and probability-weighted amount for multiple scenarios. The probability of default has been calculated for 3 scenarios: upside (16% probability), downside (16%) and base (68%). These weightages have been decided on best practices and expert judgement.

c) Definition of default

The Company considers a financial instrument defaulted, and therefore Stage 3 (credit-impaired), for ECL calculations in all cases when the borrower becomes 90 DPD from its contractual payments or has been classified as NPA as per regulatory classification. The Company considers probability of default upon initial recognition of asset and whether there has been any significant increase in credit risk (SICR) on an ongoing basis throughout each reporting period. To assess whether there is SICR the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. Following indicators are incorporated:

- DPD analysis as on each reporting date

- significant increase in credit risk on other financial instruments of same borrower

d) Exposure at default (EAD)

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation;

To calculate the ECL for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12 month ECL. For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.

e) Loss given default (LGD)

Loss given default (LGD) represents estimated financial loss the Company is likely to suffer in respect of default account and it is used to calculate provision requirement on EAD along with PD. The Company uses collection details on previously defaulted cases for calculating LGD including estimated direct cost of collection from default cases. Appropriate discounting rates are applied to calculate present value of future estimated collection net of direct collection cost. LGD thus calculated is used for all stages, i.e. Stage 1, Stage 2 and Stage 3.

For newly launched products, where historical collection data is not available or insufficient, the Company either uses the collection performance of an existing product which closely resembles the new product or industry level aggregate data obtained from credit bureaus/third-party data providers, or regulatory guidance available if any.

f) Discounting

ECL is computed by estimating timing of expected credit shortfalls associated with defaults and discounting them using effective interest rate.

g) Significant increase in credit risk

The Company continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is subject to 12 months ECL or lifetime ECL, the Company assesses whether there has been a significant increase in credit risk since initial recognition. The Company also applies other qualitative factors for triggering a significant increase in credit risk for an asset, such as restructuring. Regardless of the

change in credit profile, if the contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.

The Company has applied a three-stage approach to measure expected credit losses (ECL) on loans and other credit exposures accounted for at amortised cost and FVOCI. Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Assets migrate through following three stages based on the changes in credit quality since initial recognition:

(a) Stage 1: 12-months ECL: For exposures where there is no significant increase in credit risk since initial recognition and that are not credit-impaired upon origination, the portion of the lifetime ECL associated with the probability of default events occurring within the next 12- months is recognized.

(b) Stage 2: Lifetime ECL, not credit-impaired: For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL is recognized.

(c) Stage 3: Lifetime ECL, credit-impaired: Financial assets are assessed as credit impaired upon occurrence of one or more events that have a detrimental impact on the estimated future cash flows of that asset. For financial assets that have become credit-impaired, a lifetime ECL is recognized and interest revenue is recognized on net basis.

h) Expected Credit Loss on Loans

The Company assesses whether the credit risk on a financial asset has increased significantly on collective basis. For the purpose of collective evaluation of impairment, financial assets are grouped on the basis of shared credit risk characteristics, taking into account instrument type, product type, collateral type, and other relevant factors.

The Company considers defaulted assets as those which are contractually 90 days past due, other than those assets where there is empirical evidence to the contrary. Financial assets which are contractually more than 30 days and upto 90 days past due are classified under Stage 2 - life time ECL, not credit impaired, barring those where there is empirical evidence to the contrary. An asset migrates down the ECL stage based on the change in the risk of a default occurring since initial recognition. If in a subsequent period, credit quality improves and reverses any previously assessed significant increase in credit risk since origination, then the loan loss provision stage reverses to 12-months ECL from lifetime ECL.

The Company measures the amount of ECL on a financial instrument in a way that reflects an unbiased and probability-weighted amount. The Company considers its historical loss experience and adjusts the same for current observable data. The key inputs into the measurement of ECL are the probability of default, loss given default and exposure at default. These parameters are derived from the Company’s internally developed models and other historical data. In addition, the Company uses reasonable and supportable information on future economic conditions including macroeconomic factors. Since incorporating these forward looking information increases the judgment as to how the changes in these macroeconomic factor will affect ECL, the methodology and assumptions are reviewed regularly.

Forward looking information

In its ECL models, the Company relies on a broad range of forward looking information as macro economic inputs. As required by Ind AS 109, Macro Economic (ME) overlays are required to be factored in ECL Models and accordingly, Company has used Consumer Price Index as the relevant ME variable. Overtime, new ME variables may emerge to have a better correlation and may replace ME being used now.

Policy on write off of loan assets

Financial assets are fully provided for or written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. However, financial assets that are written off could still be subject to enforcement activities under the Company recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in statement of profit or loss on actual realization from customer.

iii Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions in a timely manner, without incurring unacceptable losses or risking damage to the Company''s reputation. The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments.

The Company has obtained fund and non-fund based working capital lines from various banks. Further, the Company has access to funds from debt markets through commercial paper, non-convertible debentures and other debt instruments including term loans. Cash Credit / WCDL limits are renewed on annual basis and are therefore revolving in nature.

Exposure to liquidity risk

The following are the remaining gross and undiscounted contractual maturities of financial liabilities (including interest portion) at the reporting date.

The model assumes that interest rate changes are instantaneous parallel shifts in the yield curve. Although some assets and liabilities may have similar maturities or periods to re-pricing, these may not react correspondingly to changes in market interest rates. Also, the interest rates on some types of assets and liabilities may fluctuate with changes in market interest rates, while interest rates on other types of assets may change with a lag.

The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The year-end balances are not necessarily representative of the average debt outstanding during the year. This analysis assumes that all other variables remain constant.

Legal and operational risk Legal risk

Legal risk is the risk relating to losses due to legal or regulatory action that invalidates or otherwise precludes performance by the end user or its counterparty under the terms of the contract or related netting agreements.

The Company has developed preventive controls and formalised procedures to identify legal risks so that potential losses arising from non-adherence to laws and regulations, negative publicity, etc. are significantly reduced.

As at March 31, 2024, there were legal cases pending against the Company aggregating ^ 0.90 crores (March 31, 2023: ^ 2.78 crores). Based on the opinion of the Company’s legal advisors, the management believes that no substantial liability is likely to arise from these cases.

Operational risk

Operational risk framework is designed to cover all functions and verticals towards identifying the key risks in the underlying processes.

The framework, at its core, has the following elements:

1. Documented Operational Risk Management Policy and Standard Operating Procedures (SOP)

2. Third party risk management through Outsourcing Risk Policy and SOP

3. Well defined Governance Structure

4. Use of Identification & Monitoring tools and like Risk Control Self- Assessment (RCSA), Key Risk Indicators (KRIs), Risk Appetite Statements (RAS) and Control testing

5. Standardized reporting templates, reporting structure and frequency

6. Regular workshops and training for enhancing awareness and risk culture

The Company has adopted the globally accepted 3-lines of defense approach to risk management.

First line - Each function / vertical undergoes transaction testing to evaluate internal compliance and thereby lay down processes for further improvement. Thus, the approach is “bottom-up”, ensuring acceptance of findings and faster adoption of corrective actions, if any, to ensure mitigation of perceived risks.

Second line - Independent risk management vertical supports the first line in developing risk mitigation strategies and provides oversight through regular monitoring. All key risks are presented to the Risk Management Committee on a quarterly basis.

Third line - Internal Audit conducts periodic risk-based audits of all functions and process to provide an independent assurance to the Audit Committee.

During the year ended March 31, 2024, the Operational Risk (‘OR’) team has helped to identify, assess, monitor and mitigate risks across the organization. RCSA exercises, Internal Finance Control (‘IFC’) testing and KRI monitoring have been conducted for key business units / support functions, and action plans have been developed to plug process gaps. Apart from this quarterly RAS monitoring and Outsourcing Risk management was also undertaken during the FY. The OR team helps senior management monitor risks through quarterly reporting of OR information to the Operational Risk Management Committee (‘ORMC’) and the RMC.

53 OPERATING SEGMENTS

The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108. The Executive Committee of the Company has been identified as the Chief Operating Decision Maker (CODM) pursuant to the requirements of Ind AS 108, "Operating Segments.” The Company''s operating segments are established in the manner consistent with the components of the Company that are reviewed regularly by the CODM for the purpose of allocation of resources and evaluation of performance. The Company does not have operations outside India and hence there is no external revenue or assets which require disclosure.

The company does not derives revenue, from any single customer, 10% or more of company''s total revenue.

52 CAPITAL MANAGEMENT

The Company actively manages capital base to cover risks inherent in the business and meets the Capital Adequacy Requirements (CRAR) of the Reserve Bank of India (RBI). The adequacy of the Company’s capital is monitored using, among other measures, the regulations issued by RBI. The Company has complied in full with all its externally imposed capital requirements over the reported period. The primary objectives of the Company’s capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholder value. The funding requirements are met through equity, nonconvertible debentures and other long-term/ short-term borrowings. The Company’s policy is aimed at appropriate combination of short-term and long term borrowings. The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

i. Regulatory capital

The Company’s regulatory capital consists of the sum of the following elements :

- Tier 1 capital, which includes ordinary share capital, retained earnings,perpetual debt and reserves and deduction for intangible assets,deferred tax asset and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

ii. Capital allocation

Management uses regulatory capital ratios to monitor its capital base. There is no allocation of capital required as Company is operating primarily in a single segment i.e., financing.

The Company’s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors.

55 ADDITIONAL INFORMATION

a) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

b) The quarterly information statement filed by the Company with banks or financial institutions are in agreement with the books of accounts.

c) The Company has not been declared as Wilful defaulter by any banks, financial institution or other lenders.

d) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

e) The provision related to number of layers as prescribed under section 2(87) of the Companies Act read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable to Company.

f) The Company have not advanced or given loan or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries except loans or advances given in normal course of business.

g) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever

by or on behalf of the Funding Party (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries except loans or advances given in normal course of business.

h) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

i) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.

j) Relationship with Struck off Companies :

In respect of the disclosure required vide notification dated March 24, 2021 issued by Ministry of Corporate Affairs, the Company has taken steps to identify transactions with the struck-off companies and considering the nature of business which is primarily lending to individuals and other small players, there are no such outstanding balances which may be required to be reported.

k) The Ministry of Corporate Affairs (MCA) has prescribed a new requirement for companies under the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 inserted by the Companies (Accounts) Amendment Rules 2021 requiring companies, which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

The Company has enabled the audit trail (edit logs) facility of the accounting software used for maintenance of all accounting records during the year ended March 31, 2024 except for cases mentioned as below:

In case of accounting software Finmechannics implemented from June 01, 2023 maintained for borrowing records of the Company, audit trails are available through front end and every action performed by user is being tracked. No Database level activity is being executed but as additional measure Company has enabled database audit trail post March 20, 2024.

In case of accounting software CCA maintained for loan records the Company, the audit trail (edit logs) are enabled at database level to capture the changes by user at action level, action name and object change and not at query details level.

In case of accounting software Finnone maintained for loan records the Company, audit of service organisation for the year ended March 31, 2024 is under process and hence Service Organisation Control Type 2 report not yet available with the Company.

l) Figures of previous year have been regrouped / reclassified, wherever necessary, to make them comparable with current year and the impact of such regrouping / reclassification are not material to standalone financial statements.

56 DISCLOSURES AS REQUIRED UNDER MASTER DIRECTION - RESERVE BANK OF INDIA (NONBANKING FINANCIAL COMPANY - SCALE BASED REGULATION) DIRECTIONS, 2023 AND OTHER RELEVANT RBI NOTIFICATIONS* (CONTD.)

* Amounts included herein are based on current and previous year financials, as per Ind AS.

(q) Disclosures as required by the Master Direction - Monitoring of Frauds in NBFCs (Reserve Bank) Directions, 2016.

During the year ended March 31, 2024, 07 frauds (March 31, 2023: 10 frauds) has been identified by management aggregating to ^ 2.00 crores (March 31, 2023: ^ 1.00 crore) by the employees, customers or third party and have been reported to RBI.

(r) Liquidity Coverage Ratio (LCR) disclosures and Public disclosure on liquidity risk

1 Liquidity Coverage Ratio (LCR) disclosures Qualitative disclosure

Liquidity Coverage Ratio (LCR) is a tool for measuring and promoting short term resilience of the Company to potential liquidity disruptions by ensuring maintenance of sufficient unencumbered high quality liquid assets (HQLAs) to survive at severe stress scenario lasting for 30 calendar days. Reserve Bank of India (RBI) introduced the LCR requirement for all deposit-taking NBFCs and non-deposit taking NBFCs with an asset size of ^ 5,000 crores and above. The ratio comprises of HQLAs as numerator and net cash outflows in next 30 calendar days as denominator.

HQLA computation consist of two parts i.e.

(i) Assets to be included as HQLA without any haircut i.e. cash, government securities, etc. and

(ii) Assets to be considered for HQLA with haircuts (ranging 15% to 50%) which comprises of investments in highly rated non-financial corporate bonds and listed equity investments which are considered at prescribed haircuts.

In order to determine net cash outflows, the Company considers total expected cash outflow minus total expected cash inflows for the subsequent 30 calendar days. As per regulations, stressed cash flows is computed by assigning a predefined stress percentage to the overall cash inflows and cash outflows. Net cash outflow over next 30 days is computed as stressed outflows less minimum of stressed inflows or 75% of stressed outflow. Accordingly, LCR would be computed by dividing Company’s stock of HQLA by its total net cash outflow.

The LCR requirement has been inducted in a phased manner with Company required to maintain minimum LCR of 50% from December 1, 2020 eventually increasing to 100% by December 1, 2024. The Company has implemented the LCR framework and has consistently maintained LCR well above the regulatory threshold for all the quarters during the current financial year. The Company has maintained an average LCR of 130.62 % for the quarter ended March 31, 2024 (for the quarter ended March 31, 2023 : 153.24 %) as against minimum regulatory requirement of 85% (March 31, 2023 : 70%). The Company has maintained average HQLAs of ^ 961.63 crores for the quarter ended March 31, 2024 (for the quarter ended March 31, 2023 : ^ 469.75 crores).

Apart from LCR, Company also uses various liquidity indicators to measure the liquidity risk in terms of funding stability, concentration risk i.e. concentration by significant counter-parties and concentration by significant instruments / product, stock ratios etc.

The Company has adopted the liquidity risk framework as required under RBI regulation. The Board of Directors have delegated responsibility of balance sheet Liquidity Risk Management to the Asset Liability Committee (ALCO). ALCO reviews asset liability management (ALM) and ensures that there are no excessive concentration of either assets or liability side of the balance sheet. Liquidity risk is managed in accordance with ALM policy. The same is reviewed periodically to incorporate regulatory changes, economic scenario and business requirements of the Company.

6) Institutional set-up for liquidity risk management

Board constituted Asset Liability committee (ALCO) reviews Asset Liability Management (ALM). It also ensures that there are no excessive concentration of either assets or liability side of the balance sheet.

ALM is monitored as a regular process and necessary steps are taken wherever required. Company also maintains sufficient liquidity buffer through credit lines and other means to meet its liability when they are due, under both normal and stressed conditions in a timely manner. Maturity profile of financial assets and financial liabilities is assessed along with borrowing and business and as a part of review of liquidity position.

The Company has obtained fund and non-fund based working capital lines and Term Loans from various banks and financial institutions. Further, the Company has access to funds from debt markets through nonconvertible debentures and other debt instruments. Cash Credit / WCDL limits are renewed on annual basis and

(x) There are no such circumstances in which revenue has been postponed pending the resolution of significant uncertainties.

(y) Divergence in asset classification and provisioning

No disclo

(a) Nature of security

Debentures issued under private placement are secured by mortgage of Company’s immovable property situated at Rajarhat, Kolkata in the state of West Bengal (except for 3,500 units allotted from December, 2019 onwards which are only secured by hypothecated loan assets) and are also secured against designated Loans assets. The total asset cover is hundred percent or above of the principal amount of the said debentures. Debentures issued under public issue are secured by mortgage of Company’s immovable property situated at Luz Church Road, Mylapore, Chennai and are also secured against designated loan assets. The total asset cover is hundred percent or above of the principal amount of the said debentures.

(b) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of ^2/- each. Each holder of equity share is entitled to one vote per share.

The dividend recommended by the Board of Directors and approved by the Shareholders in the Annual General meeting is paid in Indian rupees.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

During the year, the Company has allotted equity shares of face value of ^2 each to the eligible employees of the Company under Employee Stock Option Plan 2007/ Restricted Stock Option Plan 2014/ Employee Stock Option Plan 2021 pursuant to the ESOP Guidelines, as amended from time to time. Refer note no 45 for disclosures related to share-based payments.

The Board of Directors at their meeting considered and recommended an equity dividend of 100% i.e. ^2/-per equity share of ^2/- each for the financial year 2022-23, including equity shares allotted post March 31, 2023 up to the record date, subject to approval of the shareholders. The estimated payout will be ^153.59 Crore in respect of shares allotted till date.

(c) Shares allotted as fully paid-up without payment being received in cash/by way of bonus shares

The Company has not issued bonus shares or shares for consideration other than cash during the five year period immediately preceding the reporting date.

Nature and purpose of reserves:

Capital redemption reserve

Capital redemption reserve is created to keep the capital intact when preference shares are redeemed or equity shares are bought back. It is utilised in accordance with the provisions of the Companies Act, 2013.

Share option outstanding account

The Company instituted the Magma Employee Stock Option Plan (MESOP) in 2007, Magma Restricted Stock Option Plan 2014 (MRSOP) in 2014 and Employee Stock Option Plan 2021 in 2021 which were approved by the Board of Directors and the shareholders of the Company. The share option outstanding reserve is used to recognise the grant date fair value of option issued under aforesaid plans.

28. Other equity* (Contd.)

Statutory reserve (created pursuant to Section 45-IC of the Reserve Bank of India Act, 1934)

Statutory reserve represents the Reserve Fund created under Section 45-IC of the Reserve Bank of India Act, 1934. The Company is required to transfer a sum not less than twenty percent of its net profit every year as disclosed in the statement of profit and loss. The statutory reserve can be utilised for the purposes as may be specified by the Reserve Bank of India from time to time.

Securities premium

Securities premium represents premium received on issue of shares. This amount can be utilised in accordance with the provisions of the Companies Act, 2013.

Capital reserve

Capital reserve has been created to set aside gains of capital nature from amalgamation and merger. It is utilised in accordance with the provisions of the Companies Act, 2013.

Financial instruments through other comprehensive income

This comprises changes in the fair value of debt instruments recognised in other comprehensive income. The Company transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

Retained earnings

Retained earnings represents total of all profits retained since Company''s inception. Retained earnings are credited with current year profits, reduced by losses, if any, dividend payouts, transfers to General reserve or any such other appropriations to specific reserves. It also includes impact of remeasurement of defined benefit plans.

During the year, the Company has sold its shareholding in its Joint Venture (JV) namely Magma HDI General Insurance Company Limited (Magma HDI) based on requisite regulatory approvals received on May 27, 2022. Accordingly, the resultant gain of ^252.21 Crore has been classified and presented as an exceptional item in line with Ind AS 1 "Presentation of Financial Statements". The Company had created a one-time provision of ^223.75 Crore in respect of existing assets-based finance portfolio on account of further anticipated slippages in future due to discontinuance of further loans in this segment. Further, intangible assets having book value of ^7.25 Crore which have been replaced with a new system, were written off. The above items are presented as exceptional items on a net basis.

42. Employee benefits

The Company operates the following post-employment plans -

ii. Defined benefit plan

Gratuity

The Company has a defined benefit gratuity plan in India, governed by the Payment of Gratuity Act, 1972. This plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the rate of fifteen days wages for every completed year of service or part thereof in excess of six months, based on the rate of wages last drawn by the employee concerned. The scheme is fully funded with Life Insurance Corporation of India (LIC). This defined benefit plan expose the Company to actuarial risks, such as regulatory risk, credit risk, liquidity risk, etc as defined below.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2023. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

A. Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC). The funding requirements are based on the gratuity fund’s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section E below.

Expected contributions to gratuity plan for the year ending March 31, 2024 is ^1.42 Crore.

B. Reconciliation of the net defined benefit (asset) / liability

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset) liability and its components:

E. Sensitivity analysis of significant assumptions

The following table present a sensitivity analysis to one of the relevant actuarial assumption, holding other assumptions constant, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumptions that were reasonably possible at the reporting date.

As at March 31, 2023, the weighted-average duration of the defined benefit obligation was 7.56 years (March 31, 2022: 15.72 years ).

G. Description of risk exposures

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow -

Investment Risk: For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.

Market Risk (Interest Rate): Market risk is a collective term for risks that are related to the changes and fluctuations of the financial markets. The discount rate reflects the time value of money. An increase in discount rate leads to decrease in Defined Benefit Obligation of the plan benefits & vice versa. This assumption depends on the yields on the corporate/government bonds and hence the valuation of liability is exposed to fluctuations in the yields as at the valuation date.

Longevity Risk: The impact of longevity risk will depend on whether the benefits are paid before retirement age or after. Typically for the benefits paid on or before the retirement age, the longevity risk is not very material.

Future Salary Increase Risk: Actual Salary increase that are higher than the assumed salary escalation, will result in increase to the obligation at a rate that is higher than expected.

Demographic Risk: If actual withdrawal rates are higher than assumed withdrawal rates, the benefits will be paid earlier than expected. Similarly if the actual withdrawal rates are lower than assumed, the benefits will be paid later than expected. The impact of this will depend on the demography of the Company and the financials assumptions.

Regulatory Risk: Any changes to the current Regulations by the Government, will increase (in most cases) or decrease the obligation which is not anticipated. Sometimes, the increase is many fold which will impact the financials quite significantly.

43. Leases

The Company has adopted Ind AS 116 effective April 1, 2019, using the modified retrospective method. The Company has applied the Accounting Standard to its leases with the cumulative impact recognised on the date of initial application i.e. April 1, 2019. This has resulted in recognising a right-of-use asset and a corresponding lease liability.

A. Description of share-based payment arrangements

The Company instituted the Employee Stock Option Plan (ESOP) in 2007 and Restricted Stock Option Plan 2014 (RSOP) in 2014 and Employee Stock Option Plan (ESOP) in 2021 which were approved by the Board of Directors and the shareholders of the Company.

ESOP, 2007

Under ESOP 2007, the Company provided for the creation and issue of 1,000,000 options, that would eventually convert into equity shares of ^10/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of and at the exercise price determined by the Nomination and Remuneration Committee of the Company. The options generally vest in a graded manner and are exercisable within 3/4 years from the date of vesting. Following the sub-division of one equity share of the face value of ^10/- each into five equity shares of the face value of ^2/- each during the financial year ended March 31, 2011, the number of options increased from 1,000,000 to 5,000,000.

During the year, 25,569 options were lapsed. The Nomination and Remuneration Committee of the Company has allotted 235,568 options under ESOP 2007 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of ^2/- each ).

RSOP, 2014

Under RSOP 2014, the Company provided for the creation and issue of 5,000,000 awards, that would eventually convert into equity shares of ^2/- each in the hands of the Company’s employees. The awards are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the exercise price of the face value of ^2/- each. The awards generally will vest in a graded manner and are exercisable within 3 years from the date of vesting. The shareholders of the Company on July 24, 2021 had amended the RSOP 2014 by increasing existing plan pool from 5,000,000 equity shares having face value of ^2 per equity share to 10,000,000 Equity Shares.

During the year, 46,078 awards were lapsed and added in the pool. The Nomination and Remuneration Committee of the Company has allotted 2,669,485 awards under RSOP 2014 to the eligible employees of the Company (each award entitles the award holder to 1 equity share of ^2/- each).

ESOP, 2021

The shareholders of the Company on July 24, 2021 had instituted ESOP Plan 2021 wherein the Company provided for the creation and issue of 15,000,000 options, that would eventually convert into equity shares of ^2/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Company and at the fair market value. The options generally will vest in a graded manner and are exercisable within 36 months from the date of vesting.

During the year 2,291,475 options were lapsed and added in the pool. The Nomination and Remuneration Committee of the Company has allotted 119,000 options under ESOP 2021 to the eligible employees of the Company (each award entitles the award holder to 1 equity share of ^2/- each). During the year, the Nomination and Remuneration Committee of the Company has granted 7,463,650 awards options under ESOP 2021 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of ^2/- each ).

B. Measurement of Fair values

The fair value of employee share options has been measured using Black-Scholes model. The weighted average fair value of each option of Poonawalla Fincorp Limited (Formerly Magma Fincorp Limited) was ^161.39 (March 31, 2022: ^145.82).

Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behaviour.

The options outstanding at March 31, 2023 have an exercise price in the range of ^2 to ^39.45 (March 31, 2022: ^2 to ^39.45) and a weighted average remaining contractual life of 0.09 years (March 31, 2022: 0.7 years).

The weighted average share price at the date of exercise for share options exercised in 2022-23 was ^274.93 (2021-22: ^145.37).

The options outstanding at March 31, 2023 have an exercise price in the range of ^2 to ^38.21 (March 31, 2022: ^2 to ^38.21) and a weighted average remaining contractual life of 1.85 years (March 31, 2022: 1.87 years). The weighted average share price at the date of exercise for share options exercised in 2022-23 was ^288.08 (2021-22: ^266.10).

The options outstanding at March 31, 2023 have an exercise price in the range of ^164.42 to ^307.89 (March 31, 2022: ^164.42 to ^256.03 ) and a weighted average remaining contractual life of 3.05 years (March 31, 2022: 2.7 years ).

The weighted average share price at the date of exercise for share options exercised in 2022-23 was ^300.67 (2021-22: Nil ).

47. Contingent liabilitiesContingent liabilities and commitments (to the extent not provided for)

a) Contingent liabilities

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases. Future cash outflows in respect of the above, if any, is determinable only on receipt ofjudgement / decisions pending with the relevant authorities.

b) Commitments

c) The amount included above represents best possible estimate arrived at on the basis of available information. The Management believes that it has a reasonable case in its defense of the proceedings and accordingly no further provision has been created.

d) The Company has a process whereby periodically all long-term contracts are assessed for material foreseeable losses. As at year end, the Company does not have any long-term contracts (including derivative contracts) for which there were material foreseeable losses.

48. Transfers of financial assets

In the ordinary course of business, the Company enters into transactions that result in the transfer of financial assets. In accordance with the accounting policy set out in Note 2, the transferred financial assets continue to be recognised or derecognised as per the conditions specified in Ind AS.

The Company transfers financial assets that are not derecognised in their entirety are primarily through securitisation transactions, in which loans to customers are transferred to securitisation special purpose vehicles.

Transferred financial assets that are not derecognised in their entirety

Securitisation

Certain loans to customers are sold by the Company to securitisation special purpose vehicles, which in turn issue Pass Through Certificates (''PTC'') to investors collateralised by the purchased assets. In securitisation transactions entered, the Company transfers loans to an unconsolidated securitisation vehicle, however it retains credit risk (principally by providing credit enhancement). The Company retains substantial risks and rewards of such loan transferred and accordingly, does not derecognise the loans transferred in its entirety and recognises an associated liability for the consideration received.

49. Financial instruments - fair value and risk management (Contd.)B. Fair value hierarchy

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are:

(a) recognised and measured at fair value and

(b) measured at amortised cost/other and for which fair values are disclosed in the financial statements.

C. Valuation framework

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: The fair value of financial instruments that are not traded in active markets is determined using valuation techniques which maximise the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants’ assumptions about risk and the risk premium required by market participants in order to bear that risk. The Company develops Level 3 inputs based on the best information available in the circumstances.

50. Financial risk management

The Company assumes credit risk, market risk, operational risk, liquidity risk, compliance risk, and reputational risk in the normal course of its business. This exposes the Company to a substantial level of inherent financial risk.

i. Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the Board of Directors on its activities.

Risk management involves identifying, measuring, monitoring and managing of risks on a regular basis. The objective of risk management is to increase shareholders'' value and achieve a return on equity that is commensurate with the risks assumed. To achieve this objective, the Company employs leading risk management practices and recruits skilled and experienced people.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

ii. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s asset on finance.

The carrying amounts of financial assets represent the maximum credit risk exposure.

a) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• a breach of contract such as a default or past due event;

• when a borrower becomes more than 90 days past due in its contractual payments;

The Risk Management Committee has established credit policies for various lending products under which each new customer is analysed individually for credit worthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes background verification, financial statements, income tax returns, GST details, credit bureau information, industry information, etc (as applicable).

b) Probability of default (PD)

Analysis of historical data regarding days past due (DPD) or delinquency of loans is the primary input into the determination of the term structure of PD for exposures. The Company collects performance and default information about its credit risk exposures analysed by type of product or borrower as well as by DPD. The Company employs statistical methods to analyse the data collected and generate estimates of the PD of exposures.

In case of newly launched products, where the Company does not have sufficient historical data to estimate PD, it uses industry level aggregate data obtained from credit bureaus, or third-party data providers or performance of an existing product which closely resembles the new product.

Expected loss has been calculated as an unbiased and probability-weighted amount for multiple scenarios. The probability of default has been calculated for 3 scenarios: upside (16% probability), downside (16%) and base (68%). These weightages have been decided on best practices and expert judgement. Weight of downside has been decreased from 32% to 16% and that of upside increased from 0% to 16% due to resumption of normalcy post Covid 19. The same is reviewed from time to time.

c) Definition of default

The Company considers a financial instrument defaulted, and therefore Stage 3 (credit-impaired), for ECL calculations in all cases when the borrower becomes more than 90 Days Past Due from its contractual payments or has been classified as NPA as per regulatory classification. The Company considers probability of default upon initial recognition of asset and whether there has been any significant increase in credit risk (SICR) on an ongoing basis throughout each reporting period. To assess whether there is SICR the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. Following indicators are incorporated:

- DPD analysis as on each reporting date

- significant increase in credit risk on other financial instruments of same borrower

d) Exposure at default (EAD)

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation;

To calculate the ECL for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12 month ECL. For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.

e) Loss given default (LGD)

Loss given default (LGD) represents estimated financial loss the Company is likely to suffer in respect of default account and it is used to calculate provision requirement on EAD along with PD. The Company uses

collection details on previously defaulted cases for calculating LGD including estimated direct cost of collection from default cases. Appropriate discounting rates are applied to calculate present value of future estimated collection net of direct collection cost. LGD thus calculated is used for all stages, i.e. Stage 1, Stage 2 and Stage 3. For newly launched products, where historical collection data is not available or insufficient, the Company either uses the collection performance of an existing product which closely resembles the new product or industry level aggregate data obtained from credit bureaus/third-party data providers, or regulatory guidance available if any.

f) Discounting

ECL is computed by estimating timing of expected credit shortfalls associated with defaults and discounting them using effective interest rate.

g) Significant increase in credit risk

The Company continuously monitors all assets subject to ECL In order to determine whether an instrument or a portfolio of instruments is subject to 12 months ECL or lifetime ECL, the Company assesses whether there has been a significant increase in credit risk since initial recognition. The Company also applies other qualitative factors for triggering a significant increase in credit risk for an asset, such as restructuring. Regardless of the change in credit profile, if the contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.

The Company has applied a three-stage approach to measure expected credit losses (ECL) on loans and other credit exposures accounted for at amortised cost and FVOCI. Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Assets migrate through following three stages based on the changes in credit quality since initial recognition:

(a) Stage 1: 12- months ECL: For exposures where there is no significant increase in credit risk since initial recognition and that are not credit-impaired upon origination, the portion of the lifetime ECL associated with the probability of default events occurring within the next 12- months is recognised.

(b) Stage 2: Lifetime ECL, not credit-impaired: For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL is recognised.

(c) Stage 3: Lifetime ECL, credit-impaired: Financial assets are assessed as credit impaired upon occurrence of one or more events that have a detrimental impact on the estimated future cash flows of that asset. For financial assets that have become credit-impaired, a lifetime ECL is recognised and interest revenue is recognised on net basis.

h) Expected Credit Loss on Loans

The Company assesses whether the credit risk on a financial asset has increased significantly on collective basis. For the purpose of collective evaluation of impairment, financial assets are grouped on the basis of shared credit risk characteristics, taking into account instrument type, product type, collateral type, and other relevant factors.

The Company considers defaulted assets as those which are contractually more than 90 days past due, other than those assets where there is empirical evidence to the contrary. Financial assets which are contractually more than 30 days and up to 90 days past due are classified under Stage 2 - life time ECL, not credit impaired, barring those where there is empirical evidence to the contrary. An asset migrates down the ECL stage based on the change in the risk of a default occurring since initial recognition. If in a subsequent period, credit quality improves and reverses any previously assessed significant increase in credit risk since origination, then the loan loss provision stage reverses to 12-months ECL from lifetime ECL.

The Company measures the amount of ECL on a financial instrument in a way that reflects an unbiased and probability-weighted amount. The Company considers its historical loss experience and adjusts the same for current observable data. The key inputs into the measurement of ECL are the probability of default, loss given default and exposure at default. These parameters are derived from the Company’s internally developed models and other historical data. In addition, the Company uses reasonable and supportable information on future economic conditions including macroeconomic factors. Since incorporating these forward-looking information increases the judgement as to how the changes in these macroeconomic factor will affect ECL, the methodology and assumptions are reviewed regularly.

Forward-looking information

In its ECL models, the Company relies on a broad range of forward-looking information as macro economic inputs. As required by Ind AS 109, Macro Economic (ME) overlays are required to be factored in ECL Models and accordingly, Company has used Consumer Price Index as the relevant ME variable. Overtime, new ME variables may emerge to have a better correlation and may replace ME being used now.

Policy on write-off of loan assets

Financial assets are fully provided for or written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. However, financial assets that are written off could still be subject to enforcement activities under the Company recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in statement of profit or loss on actual realisation from customer.

The following table provides information about the exposure to credit risk and expected credit loss for assets on finance.

Expected credit loss on trade receivables and other financial assets

Trade receivables primarily includes receivables against sale of power, support services and operating lease. These receivables are of short-term nature and there has been no impairment allowance on the same. Credit risk on excess interest spread receivable is low as it primarily falls in Stage 1. Other financial asset are measured at FVTPL and hence the credit risk is already factored in the fair value.

Cash and cash equivalents and bank balance other than cash and cash equivalents

The Company holds cash and cash equivalents and bank balance of ^657.43 Crore as at March 31, 2023 (March 31, 2022: ^573.16 Crore). The cash and cash equivalents are held with bank and financial institution counterparties with sound credit ratings.

The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan covenants. Upon renegotiation, such accounts are classified as Stage 2 or Stage 3 depending upon nature and status of account at the time of renegotiation. Such accounts are upgraded only upon observation of satisfactory repayments of one year from the date of renegotiation.

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions in a timely manner, without incurring unacceptable losses or risking damage to the Company''s reputation. The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments.

The Company has obtained fund and non-fund based working capital lines from various banks. Further, the Company has access to funds from debt markets through commercial paper, non-convertible debentures and other debt instruments including term loans. Cash Credit / WCDL limits are renewed on annual basis and are therefore revolving in nature.

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices, which will affect the Company''s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company - primarily ^. In cases where the borrowings is denominated in foreign currency, the Company uses derivatives to manage market risks.

Interest rate risk

Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on the Company’s cash flows as well as costs.

The Company is subject to variable interest rates on some of its interest bearing financial assets/ liabilities. The Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like short-term loans.

The model assumes that interest rate changes are instantaneous parallel shifts in the yield curve. Although some assets and liabilities may have similar maturities or periods to re-pricing, these may not react correspondingly to changes in market interest rates. Also, the interest rates on some types of assets and liabilities may fluctuate with changes in market interest rates, while interest rates on other types of assets may change with a lag.

The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period-end balances are not necessarily representative of the average debt outstanding during the period. This analysis assumes that all other variables remain constant.

Legal and operational risk Legal risk

Legal risk is the risk relating to losses due to legal or regulatory action that invalidates or otherwise precludes performance by the end user or its counterparty under the terms of the contract or related netting agreements.

The Company has developed preventive controls and formalised procedures to identify legal risks so that potential losses arising from non-adherence to laws and regulations, negative publicity, etc. are significantly reduced.

As at March 31, 2023, there were legal cases pending against the Company aggregating ^2.78 Crore (March 31, 2022: ^1.84 Crore). Based on the opinion of the Company''s legal advisors, the management believes that no substantial liability is likely to arise from these cases.

Operational risk

Operational risk framework is designed to cover all functions and verticals towards identifying the key risks in the underlying processes.

The framework, at its core, has the following elements:

1. Documented Operational Risk Management Policy

2. Well defined Governance Structure

3. Use of Identification & Monitoring tools and Risk Control Self- Assessment (RCSA), Key Risk Indicators (KRIs)

4. Standardised reporting templates, reporting structure and frequency

5. Regular workshops and training for enhancing awareness and risk culture

The Company has adopted the globally accepted 3-lines of defense approach to risk management.

First line - Each function/vertical undergoes transaction testing to evaluate internal compliance and thereby lay down processes for further improvement. Thus, the approach is “bottom-up”, ensuring acceptance of findings and faster adoption of corrective actions, if any, to ensure mitigation of perceived risks.

Second line - Independent risk management vertical supports the first line in developing risk mitigation strategies and provides oversight through regular monitoring. All key risks are presented to the Risk Management Committee on a quarterly basis.

50. Financial risk management (Contd.)

Third line - Internal Audit conducts periodic risk-based audits of all functions and process to provide an independent assurance to the Audit Committee.

In FY23, the Operational Risk (OR) team has helped to identify, assess, monitor and mitigate risks across the organisation. RCSA exercises, Internal Finance Control (‘IFC’) testing and KRI monitoring have been conducted for key business units/support functions, and action plans have been developed to plug process gaps. Branch review process has been rolled out during the year to check process adherence at branches, identify gaps and ensure suitable mitigation plan is put in place to enhance overall control environment. The OR team helps senior management monitor risks through quarterly reporting of OR information to the Operational Risk Management Committee (ORMC) and the RMC.

52. Capital management

The Company actively manages capital base to cover risks inherent in the business and meets the Capital Adequacy Requirements (CRAR) of the Reserve Bank of India (RBI). The adequacy of the Company’s capital is monitored using, among other measures, the regulations issued by RBI. The Company has complied in full with all its externally imposed capital requirements over the reported period. The primary objectives of the Company’s capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value. The funding requirements are met through equity, non-convertible debentures and other long-term/ short-term borrowings. The Company’s policy is aimed at appropriate combination of short-term and long-term borrowings. The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

i. Regulatory capital

The Company''s regulatory capital consists of the sum of the following elements :

- Tier 1 capital, which includes ordinary share capital, retained earnings,perpetual debt and reserves and deduction for intangible assets,deferred tax asset and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

ii. Capital allocation

Management uses regulatory capital ratios to monitor its capital base. There is no allocation of capital required as Company is operating primarily in a single segment i.e. financing.

The Company’s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors.

53. Operating segments

The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108. The Executive Committee of the Company has been identified as the Chief Operating Decision Maker (CODM) pursuant to the requirements of Ind AS 108, "Operating Segments.” The Company''s operating segments are established in the manner consistent with the components of the Company that are reviewed regularly by the CODM for the purpose of allocation of resources and evaluation of performance. The Company does not have operations outside India and hence there is no external revenue or assets which require disclosure.

The Company does not derives revenue, from any single customer, 10% or more of company''s total revenue.

55. Additional Information

a) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

b) The quarterly information statement filed by the Company with banks or financial institutions are in agreement with the books of account.

c) The Company has not been declared as Wilful defaulter by any Banks, Financial institution or Other lenders

d) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

e) The provision related to number of layers as prescribed under Section 2(87) of the Companies Act read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable to Company.

f) The Company have not advanced or given loan or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries except loans or advances given in normal course of business.

g) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries except loans or advances given in normal course of business.

h) The Company does not have any such transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

i) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year.

j) Relationship with Struck off Companies:

In respect of the disclosure required vide notification dated March 24, 2021 issued by Ministry of Corporate Affairs, the Company has taken steps to identify transactions with the struck-off companies and considering the nature of business which is primarily lending to individuals and other small players, there are no such transactions which may be required to be reported.

56. Balance Sheet Disclosures as required under Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and other RBI notification*56. Balance Sheet Disclosures as required under Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and other RBI notification* (Contd.)

* Amounts included herein are based on current and previous year financials, as per Ind AS.

(d) Disclosures relating to Securitisation* (Contd.)

# The above figures are being reported based on certificate issued by the auditors of the SPV.

a Securitisation (PTC) transaction do not meet the derecognition criteria under Ind AS and are recognised as ''on balance sheet exposures''. Accordingly income and discounting charges are included in revenue from operations and finance cost respectively. Amounts stated above are for the purpose of disclosure.

56. Balance Sheet Disclosures as required under Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and other RBI notification* (Contd.)

* Amounts included herein are based on current and previous year financials, as per Ind AS.

(d) Disclosures relating to Securitisation* (Contd.)4 Details of Assignment transactions (sale) undertaken by NBFCs

The Company has not undertaken any assignment transactions (sale) during the financial year ended March 31, 2023 and March 31, 2022.

5 Details of non-performing financial assets purchased / sold

a) Details of non-performing financial assets purchased:

The Company has not purchased any non-performing financial assets during the financial year ended March 31, 2023 and March 31, 2022.

56. Balance Sheet Disclosures as required under Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 and other RBI notification* (Contd.)

* Amounts included herein are based on current and previous year financials, as per Ind AS.

(n) Overseas Assets and off- balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

1. Overseas Assets

The Company does not have any overseas assets as at March 31, 2023 and March 31, 2022.

2. Off- Balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

The Company does not have any exposure to off balance sheet SPVs sponsored as at March 31, 2023 and March 31, 2022

(p) Disclosures relating to fraud in terms of the notification issued by Reserve Bank of India

During the year ended March 31, 2023, 10 frauds (March 31, 2022: 16 frauds) has been identified by management aggregating to ^1.00 Crore by the employees, customers or third party and have been reported to RBI.

(q) Liquidity Coverage Ratio (LCR) disclosures and Public disclosure on liquidity risk

1 Liquidity Coverage Ratio (LCR) disclosures Qualitative disclosure

Liquidity Coverage Ratio (LCR) is a tool for measuring and promoting short-term resilience of the Company to potential liquidity disruptions by ensuring maintenance of sufficient unencumbered high quality liquid assets (HQLAs) to survive at severe stress scenario lasting for 30 calendar days. Reserve Bank of India (RBI) introduced the LCR requirement for all deposit-taking NBFCs and non-deposit taking NBFCs with an asset size of ^5,000 Crore and above. The ratio comprises of HQLAs as numerator and net cash outflows in next 30 calendar days as denominator.

HQLA computation consist of two parts i.e.

(i) Assets to be included as HQLA without any haircut i.e. cash, government securities, etc. and

(ii) Assets to be considered for HQLA with haircuts (ranging 15% to 50%) which comprises of investments in highly rated non-financial corporate bonds and listed equity investments which are considered at prescribed haircuts.

In order to determine net cash outflows, the Company considers total expected cash outflow minus total expected cash inflows for the subsequent 30 calendar days. As per regulations, stressed cash flows is computed by assigning a predefined stress percentage to the overall cash inflows and cash outflows. Net cash outflow over next 30 days is computed as stressed outflows less minimum of stressed inflows or 75% of stressed outflow. Accordingly, LCR would be computed by dividing Company''s stock of HQLA by its total net cash outflow.

The LCR requirement has been inducted in a phased manner with Company required to maintain minimum LCR of 50% from December 1, 2020 eventually increasing to 100% by December 1, 2024. The Company has implemented the LCR framework and has consistently maintained LCR well above the regulatory threshold for all the quarters during the current financial year. The Company has maintained an average LCR of 153.24 % for the quarter ended March 31, 2023 (for the quarter ended March 31, 2022 : 296.16%) as against minimum regulatory requirement of 70 % (March 31, 2022 : 60%). The Company has maintained average HQLAs of ^469.75 Crore for the quarter ended March 31, 2023 (for the quarter ended March 31, 2022 : ^306.46 Crore).

(q) Liquidity Coverage Ratio (LCR) disclosures and Public disclosure on liquidity risk (Contd.)

Apart from LCR, Company also uses various liquidity indicators to measure the liquidity risk in terms of funding stability, concentration risk i.e. concentration by significant counter-parties and concentration by significant instruments/product, stock ratios etc.

The Company has adopted the liquidity risk framework as required under RBI regulation. The Board of Directors have delegated responsibility of balance sheet Liquidity Risk Management to the Asset Liability Committee (ALCO). ALCO reviews asset liability mismatches (ALM) and ensures that there are no excessive concentration of either assets or liability side of the balance sheet. Liquidity risk is managed in accordance with ALM policy. The same is reviewed periodically to incorporate regulatory changes, economic scenario and business requirements of the Company.

Other short-term liabilities include all contractual obligation payable within a period of 1 year excluding commercial paper

Institutional set-up for liquidity risk management

Board constituted Asset Liability committee (ALCO) reviews asset liability mismatches (ALM). It also ensures that there are no excessive concentration of either assets or liability side of the balance sheet.

ALM is monitored as a regular process and necessary steps are taken wherever required. Company also maintains sufficient liquidity buffer through credit lines and other means to meet its liability when they are due, under both normal and stressed conditions in a timely manner. Maturity profile of financial assets and financial liabilities is assessed along with borrowing and business and as a part of review of liquidity position.

The Company has obtained fund and non-fund based working capital lines and Term Loans from various banks and financial institutions. Further, the Company has access to funds from debt markets through nonconvertible debentures and other debt instruments. Cash Credit/WCDL limits are renewed on annual basis and are therefore revolving in nature. The Company also manages liquidity by raising funds through Securitisation/ assignment transactions.

Liquidity risk is managed in accordance with ALM policy. Same is reviewed periodically to incorporate regulatory changes, economic scenario and business requirements.

Stage 3 assets includes restructured loan where assets are considered as credit impaired whereas for the limited purpose of regulatory disclosures based on dispensation given by RBI, the same has been considered as standard assets. The restructured assets have been provided for accordingly under Ind AS.

Similarly, Stage 2 assets includes restructured loan where assets are considered as significant increase in credit risk whereas for the limited purpose of regulatory disclosures based on general RBI guidelines on restructuring the same has been considered as sub - standard assets. The restructured assets have been provided for accordingly under Ind AS, subject to minimum provisioning requirement as per RBI guidelines.

Further, Stage 1 and Stage 2 assets includes loans where assets are considered as sub-standard for limited purpose of regulatory disclosures as per RBI notification no. RBI/2021-2022/125 DOR.STR.REC.68/21.04.048/2021-22 dated 12 Nov 2021. The assets have been provided for as per Ind AS requirement.

(v) There are no such circumstances in which revenue has been postponed pending the resolution of significant uncertainties.

(w) Net profit or loss for the period, prior period items and changes in accounting policies There are no prior period items which are impacting Company''s current year profit and loss.

(x) The Company has consolidated financial statement of its all the underlying subsidiaries.

Nature of security

Debentures issued under private placement are secured by mortgage of Company''s immovable property situated at Rajarhat, Kolkata in the state of West Bengal (except for 5,250 units alloted from December 2019 onwards which are only secured by hypothecated loan assets) and are also secured against designated Loans assets. The total asset cover is hundred percent or above of the principal amount of the said debentures.

Debentures issued under public issue are secured by mortgage of Company''s immovable property situated at Luz Church Road, Mylapore, Chennai and are also secured against designated loan assets. The total asset cover is hundred percent or above of the principal amount of the said debentures.

Covenant breach

The impact of disruptions caused by COVID-19, additional provisions towards potential credit losses and other reasons have resulted in breach of some of the covenants related to borrowings such as interest coverage ratio, profitability, NPA ratios etc.

The Company has been regular in servicing of its borrowings and has represented to the lenders for waiver and amendment with respect to non-compliance of these covenants, wherever applicable. In most of the cases, the consequence of breach is either an increase in interest rate or review of the terms of collateral. In very few cases, there is provision for a right to recall of the facilities. The Company is confident of getting the waivers, given similar waivers having been received in past, considering Company''s long track record with the lenders. Further, the Company believes its contingency refinance/ funding plan, current capital adequacy and additional capital raise of H345,600 lacs done on May 6, 2021 would enable the Company to tide over any impact of covenant breaches.

Nature of security

a) Term loans are secured by way of hypothecation of designated loan assets and future rentals receivable therefrom (except for Term Loan of H12,500 lacs availed on 30 July 2020 which is secured by way of extension of charge on security on working capital limit).

b) Loans from PTC investors represents amounts received in respect of securitisation transactions (net of repayments and investment therein) as these transactions do not meet the derecogniton criteria specified under IND AS. These are secured by way of hypothecation of designated loan assets receivables.

c) Cash Credit facilities and Working Capital Demand Loans from Banks are secured by way of hypothecation of the Company''s loan assets, tangible movable assets, plant and machinery, equipment etc. and future rental income therefrom and other current assets (expressly excluding those equipment, plant, machinery, spare parts, tangible movable assets, loan assets etc. and future rental income therefrom which have been or will be purchased / financed out of any other facility from Financial Institutions, Banks or any other financial organisation). These are collaterally secured by way of equitable mortgage over immovable property at Santnagar, New Delhi.

Details of cash credit facilities and working capital demand loans

The cash credit facilities are repayable on demand and carry interest rates ranging from 8.30 % p.a. to 11.80 % p.a. (31 March 2020: from 8.70%

p.a. to 11.80% p.a.). Working capital demand loans are repayable on demand and carry interest rates ranging from 6.90% p.a. to 8.80% p.a. (31

March 2020: from 7.90% p.a. to 9.90% p.a.). As per the prevalent practice, cash credit facilities and working capital demand loans are renewed

on a year to year basis and therefore, are revolving in nature. There is no unhedged foreign currency exposure as on 31 March 2021.

The Company has not defaulted in repayment of principal and interest.

Covenant breach

The impact of disruptions caused by COVID-19, additional provisions towards potential credit losses and other reasons have resulted in breach of some of the covenants related to borrowings such as interest coverage ratio, profitability, NPA ratios etc.

The Company has been regular in servicing of its borrowings and has represented to the lenders for waiver and amendment with respect to non-compliance of these covenants, wherever applicable. In most of the cases, the consequence of breach is either an increase in interest rate or review of the terms of collateral. In very few cases, there is provision for a right to recall of the facilities. The Company is confident of getting the waivers, given similar waivers having been received in past, considering Company''s long track record with the lenders. Further, the Company believes its contingency refinance/ funding plan, current capital adequacy and additional capital raise of H345,600 Lacs done on May 6, 2021 would enable the Company to tide over any impact of covenant breaches.

Equity shares:

The Company has only one class of equity shares having a par value of H2/- each. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend on equity shares in Indian H.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution to preference shareholders. The distribution will be in proportion to the number of equity shares held by the equity shareholders.

During the year, the Company has allotted on 17 June 2020, 7 August 2020, 6 November 2020 and 4 February 2021 4,800 equity shares, 4,800 equity shares, 66,600 equity shares and 25,200 equity shares respectively of the face value of H2/- each to the eligible employees of the Company under Employee Stock Option Plan pursuant to SEBI (ESOS and ESPS) Guidelines, 1999, and with corresponding provision of SEBI (Share Based Employee Benefits) Regulations 2014, as amended from time to time.

During the previous year, the Company has allotted on 14 May 2019, 3 August 2019, 07 November 2019 and 30 January 2020 18,000 equity shares, 18,000 equity shares, 72,600 equity shares and 82,476 equity shares respectively of the face value of H2/- each to the eligible employees of the Company under Employee Stock Option Plan pursuant to SEBI (ESOS and ESPS) Guidelines, 1999, and with corresponding provision of SEBI (Share Based Employee Benefits) Regulations 2014, as amended from time to time.

Note 25: Equity (contd.)

After the end of the year, on 6 May, 2021, the Company has allotted 493,714,286 equity shares of face value of H2/- each to Rising Sun Holdings Private Limited (RSHPL), Mr. Sanjay Chamria and Mr. Mayank Poddar on preferential basis , aggregating to H345,600 lacs, including premium of H68/- per share under Chapter V of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended and the Companies Act, 2013 read with relevant rules thereunder and other applicable provisions. Consequent to the said allotment, the total paid-up equity share capital of the Company stands increased to 763,330,998 equity shares of H2/- each aggregating to H15,266.62 lacs. The equity shares issued and allotted as aforesaid rank pari passu with the existing equity shares of the Company in all respect. Pursuant to the said allotment and completion of the open offer, RSHPL is the largest shareholder of the Company and shall exercise control over the Company. RSHPL is classified as a ''Promoter'' of the Company in accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 as amended from time to time. Consequently, going forward Magma Fincorp Limited would be a subsidiary of RSHPL and Magma Housing Finance Limited shall become a step down subsidiary of RSHPL.

On 31 May 2021, the Nomination and Remuneration Committee has allotted 1,009,649 equity shares of the face value of H2/- each to the eligible employees of the Company under Employee Stock Option Plan pursuant to SEBI (ESOS and ESPS) Guidelines, 1999, and with corresponding provision of SEBI (Share Based Employee Benefits) Regulations 2014, as amended from time to time. Consequent to the said allotment, the total paid-up equity share capital of the Company stands increased to 764,340,647 equity shares of H2/- each aggregating to H15,286.81 lacs. The equity shares issued and allotted as aforesaid rank pari passu with the existing equity shares of the Company in all respect.

During current and previous year, the Company did not declare any dividend

Shares allotted as fully paid-up without payment being received in cash / by way of bonus shares:

The Company has not issued bonus shares or shares for consideration other than cash during the five year period immediately preceding the reporting date.

Note 26: Other equity

Capital redemption reserve

Capital redemption reserve is created to keep the capital intact when preference shares are redeemed or equity shares are bought back. It is utilised in accordance with the provisions of the Companies Act, 2013.

Employee share option outstanding

The Company instituted the Magma Employee Stock Option Plan (MESOP) in 2007 and Magma Restricted Stock Option Plan 2014 (MRSOP) in 2014, which were approved by the Board of Directors and the shareholders of the Company. The share option outstanding reserve is used to recognise the grant date fair value of option issued under aforesaid plans.

Refer Note 42 for further details on employee stock options.

Statutory reserve (created pursuant to Section 45-IC of the Reserve Bank of India Act, 1934)

Statutory reserve represents the Reserve Fund created under section 45-IC of the Reserve Bank of India Act, 1934. Under section 45-IC, the Company is required to transfer a sum not less than twenty percent of its net profit for the financial year to the statutory reserve. The statutory reserve can be utilised for the purposes as may be specified by the Reserve Bank of India from time to time.

Securities premium reserve

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Capital reserve

Capital reserve has been created to set aside gains of capital nature from amalgamation and merger. It is utilised in accordance with the provisions of the Companies Act, 2013.

Debt instruments through other comprehensive income

This comprises changes in the fair value of debt instruments recognised in other comprehensive income and accumulated within equity. The group transfers amounts from such component of equity to retained earnings when the relevant debt instruments are derecognised.

Retained earnings

Retained earnings represents total of all profits retained since Company''s inception. Retained earnings are credited with current year profits, reduced by losses, if any, dividend payouts, transfers to General reserve or any such other appropriations to specific reserves. It also includes impact of remeasurement of defined benefit plans.

ii. Defined benefit plan Gratuity

The Company has a defined benefit gratuity plan in India, governed by the Payment of Gratuity Act, 1972. This plan entitles an employee, who has rendered at least five years of continuous service, to gratuity at the rate of fifteen days wages for every completed year of service or part thereof in excess of six months, based on the rate of wages last drawn by the employee concerned. The scheme is fully funded with Life Insurance Corporation of India (LIC). This defined benefit plan expose the Company to actuarial risks, such as regulatory risk, credit risk, liquidity risk, etc as defined below.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31 March 2021. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company''s financial statements as at balance sheet date:

A. Funding

The scheme is fully funded with Life Insurance Corporation of India (LIC). The funding requirements are based on the gratuity fund''s actuarial measurement framework set out in the funding policies of the plan. The funding of the plan is based on a separate actuarial valuation for funding purposes for which the assumptions may differ from the assumptions set out in Section E below.

Expected contributions to gratuity plan for the year ending 31 March 2022 is H31.53 lacs.

G. Description of risk exposures

Valuations are based on certain assumptions, which are dynamic in nature and vary over time. As such company is exposed to various risks as follow -

Credit Risk: If the scheme is insured and fully funded on Projected Unit Credit (''PUC) basis there is a credit risk to the extent the insurer(s) is/ are unable to discharge their obligations including failure to discharge in timely manner.

Pay-as-you-go Risk: For unfunded schemes financial planning could be difficult as the benefits payable will directly affect the revenue and this could be widely fluctuating from year to year. Moreover there may be an opportunity cost of better investment returns affecting adversely the cost of the scheme.

Discount Rate risk: The Company is exposed to the risk of fall in discount rate. A fall in discount rate will eventually increase in the ultimate cost of providing the above benefit thereby increasing the value of the liability.

Liquidity Risk: This risk arises from the short term asset and liability cash-flow mismatch thereby causing the company being unable to pay the benefits as they fall due in the short term. Such a situation could be the result of holding large illiquid assets disregarding the results of cash-flow projections and cash outgo inflow mismatch. (Or it could be due to insufficient assets/cash).

Future Salary Increase Risk: The Scheme cost is very sensitive to the assumed future salary escalation rates for all final salary defined benefit Schemes. If actual future salary escalations are higher than that assumed in the valuation actual Scheme cost and hence the value of the liability will be higher than that estimated.

Demographic Risk: In the valuation of the liability certain demographic (mortality and attrition rates) assumptions are made. The Company is exposed to this risk to the extent of actual experience eventually being worse compared to the assumptions thereby causing an increase in the scheme cost.

Regulatory Risk: Gratuity Benefit must comply with the requirements of the Payment of Gratuity Act, 1972 (as amended up-to-date). There is a risk of change in the regulations requiring higher gratuity payments (e.g. raising accrual rate from 15/26 etc.)

A Description of share-based payment arrangements

The company instituted the Magma Employee Stock Option Plan (MESOP) in 2007 and Magma Restricted Stock Option Plan 2014 (MRSOP) in 2014, which were approved by the Board of Directors and the shareholders of the Company.

MESOP, 2007

Under MESOP 2007, the Company provided for the creation and issue of 1,000,000 options, that would eventually convert into equity shares of H10/- each in the hands of the Company''s employees. The options are to be granted to the eligible employees at the discretion of and at the exercise price determined by the Nomination and Remuneration Committee of the Board of Directors. The options generally vest in a graded manner and are exercisable within 3/4 years from the date of vesting. Following the sub-division of one equity share of the face value of H10/- each into five equity shares of the face value of H2/- each during the financial year ended 31 March 2011, the number of options increased from 1,000,000 to 5,000,000.

During the year, the Nomination and Remuneration Committee of the Board of Directors has granted 92,000 options (31 March 2020: 1,103,711 options) under MESOP 2007 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of H2/- each ).

MRSOP, 2014

Under MRSOP 2014, the Company provided for the creation and issue of 5,000,000 options, that would eventually convert into equity shares of H2/- each in the hands of the Company''s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Board of Directors and at the exercise price of the face value of H2/- each. The options generally will vest in a graded manner and are exercisable within 3 years from the date of vesting.

During the year, the Nomination and Remuneration Committee of the Board of Directors has granted 1,280,515 options (31 March 2020: Nil) under MRSOP 2014 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of HU- each).

B Measurement of Fair values

The fair value of employee share options has been measured using Black-Scholes model. The weighted average fair value of each option of Magma Fincorp Limited was H46.28 (31 March 2020: H58.93).

Expected volatility has been based on an evaluation of the historical volatility of the Company''s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behavior.

During the previous year, the Nomination and Remuneration Committee of the Board of Directors through Resolution by circulation passed on 19 November 2019 has approved the change in the method of pricing of options. Some unexercised or unvested options granted earlier under the MESOP Plan 2007 have been repriced at market price as on the date of such change, i.e. H39.45/- for each option.

The incremental fair value due to modification of the exercise price ranges from H10.02 to H13.88.

Related parties identified includes related parties as per section 2(76) of the Companies Act, 2013.

# represents expenses recovered towards infrastructural support, operational assistance and other services.

** The equity shares were alloted on 28 April 2020 by Magma HDI.

*** includes the impact of fair valuation of security deposits.

# The remuneration paid to KMP for the Financial Year 2019-20 had exceeded the limit specified under Regulation 17(6) (e) of the SEBI regulations. Since, resolution for payment of excess remuneration was not passed with requisite majority, the same has been reversed by the Company during the quarter ended 30 September 2020.The KMP has repaid the outstanding amount in 3rd quarter of FY 21 net of adjustment of TDS.

# # Mediclaim Paid includes recoverable portion of Top up Insurance with MHDI.

Note :

Pursuant to loss due to additional provision for COVID-19,the existing managerial remuneration paid by the Company to its Whole Time Director (upto 7 November 2020) and the Vice Chairman and Managing Director of the Company for the financial year ended 31 March 2021, being in excess of the limits prescribed under Section 197 read with Schedule V of the Companies Act, 2013 by H NIL and H49.93 Lacs for Whole Time Director and Vice Chairman and Managing Director respectively and in excess of limit prescribed under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 by H112.71 lacs and H224.40 lacs for Whole Time Director and Vice Chairman and Managing Director respectively. The Company is in process of obtaining approval from its shareholders vide special resolution at the forthcoming annual general meeting for such excess remuneration paid. The Company is reasonably certain of getting the required approval.

c) The amount included above represents best possible estimate arrived at on the basis of available information. The Management believes that it has a reasonable case in its defense of the proceedings and accordingly no further provision has been created.

d) The Company has a process whereby periodically all long term contracts are assessed for material foreseeable losses. As at year end, the Company does not have any long term contracts (including derivative contracts) for which there were material foreseeable losses.

2) Others

a) Commissioner of service tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at H464 lacs plus interest and penalty against which H404 lacs was paid and charged to the statement of profit and loss in earlier years. Both, the Company and the Department had gone into appeal in CESTAT against the order. Finally, in July 2017, order has been passed by Calcutta High Court where in Company''s appeal has been allowed except for H93 lacs. Accordingly, the Company has filed application seeking refund of balance amount of H311 lacs from Department which has been rejected by the Department. However, as per the Department there is an interpretation issue in the Order and accordingly they have raised a Demand of H618.03 lacs plus interest. The Company has filed a writ petition in Calcutta High Court wherein it has challenged the rejection of refund application and recovery of demand. The Company

has furnished Fixed Deposit with State Bank of India amounting to H619 lacs under the legal advice. There is a stay on the recovery proceedings till the disposal of the writ petition.

b) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon''ble High Court of Calcutta. The writ petition was dismissed by the Hon''ble High Court of Calcutta. The Company has filed an appeal against the order in the Division Bench of the Hon''ble High Court of Calcutta which has been admitted and next hearing is awaited. However, basis prudence, the Company has made a provision for the same amounting to H458.08 lacs as at 31 March 2021 (31 March 2020 H437.28 lacs).

c) On February 28, 2019, the Supreme Court of India held that allowances paid by establishments to its employees which meet the test of universality should be considered as ''basic wages'' while computing provident fund amounts for employees whose basic wages is less than statutory thresholds. On evaluation of the impact of the aforesaid judgement, the Management is of the view that no material additional liability would arise on account of the same.

d) In respect of a regulatory matter pertaining to the capital raise in the year 2012, the JV company, MHDI had received a show cause notice from the authorities and pursuant to it, the Company and its promoter entity, Celica Developers Private Limited (Celica) have agreed to indemnify investor(s) in MHDI to protect their proportionate interests in the event of any levy of penalty/fine on MHDI. The Company and Celica have executed an inter se indemnity agreement for sharing of pay out, if any, arising from the indemnity provided.

Based on the legal opinion obtained by MHDI, Management is of the view that the chances of any liability arising are remote. Consequently, chances of the inter se indemnity getting invoked is also considered remote.

Note 45: Transfers of financial assets

In the ordinary course of business, the Company enters into transactions that result in the transfer of financial assets. In accordance with the accounting policy set out in Note 2, the transferred financial assets continue to be recognised or derecognised as per the conditions specified in Ind AS.

The Company transfers financial assets that are not derecognised in their entirety are primarily through securitisation transactions, in which loans to customers are transferred to securitisation special purpose vehicles.

Transferred financial assets that are not derecognised in their entirety

Securitisation

Certain loans to customers are sold by the Company to securitisation special purpose vehicles, which in turn issue Pass Through Certificates (''PTC'') to investors collateralised by the purchased assets. In securitisation transactions entered, the Company transfers loans to an unconsolidated securitisation vehicle, however it retains credit risk (principally by providing credit enhancement). The Company retains substantial risks and rewards of such loan transferred and accordingly, does not derecognise the loans transferred in its entirety and recognises an associated liability for the consideration received.

Financial instruments valued at carrying value

The respective carrying values of certain on-balance sheet financial instruments approximate their fair value. These financial instruments include cash in hand, balances with other banks, receivables, payables and certain other financial assets and liabilities, with maturities less than a year from the balance sheet date. Carrying values were assumed to approximate fair values for these financial instruments as they are short-term in nature and their recorded amounts approximate fair values or are receivable or payable on demand.

C. Valuation framework

The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 : The fair value of financial instruments that are not traded in active markets is determined using valuation techniques which maximise the use of observable market data either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets, for substantially the full term of the financial instrument but do not qualify as Level 1 inputs. If all significant inputs required to fair value an instrument are observable the instrument is included in level 2.

Level 3 : If one or more of the significant inputs is not based in observable market data, the instruments is included in level 3. That is, Level 3 inputs incorporate market participants'' assumptions about risk and the risk premium required by market participants in order to bear that risk. The Company develops Level 3 inputs based on the best information available in the circumstances.

The Company assumes credit risk, market risk, compliance risk, operational risk and reputational risk in the normal course of it business. This exposes the company to a substantial level of inherent financial risk.

i Risk management framework

The Company''s board of directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The board of directors has established the risk management committee, which is responsible for developing and monitoring the Company''s risk management policies. The committee reports regularly to the board of directors on its activities.

Efficient and timely management of risks involved in the Company''s activities is critical for the financial soundness and profitability of the Company. Risk management involves the identifying, measuring, monitoring and managing of risks on a regular basis. The objective of risk management is to increase shareholders'' value and achieve a return on equity that is commensurate with the risks assumed. To achieve this objective, the Company employs leading risk management practices and recruits skilled and experienced people.

The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

ii Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s asset on finance;

The carrying amounts of financial assets represent the maximum credit risk exposure.

a) Credit risk management

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry. A financial asset is ''credit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• a breach of contract such as a default or past due event;

• when a borrower becomes 3 months overdue in its contractual payments;

The risk management committee has established a credit policy under which each new customer is analyzed individually for credit worthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available, background verification, financial statements, income tax returns, credit agency information, industry information, etc (as applicable).

b) Probability of default (PD)

Days past due (DPD) analysis is the primary input into the determination of the term structure of PD for exposures. The Company collects performance and default information about its credit risk exposures analyzed by type of product or borrower as well as by DPD.

The Company employs statistical models to analyze the data collected and generate estimates of the PD of exposures and how these are expected to change as a result of passage of time.

Expected loss has been calculated as an unbiased and probability-weighted amount for multiple scenarios. The probability of default was calculated for 3 scenarios: upside (0%), downside (32%) and base (68%). These weightage has been decided on best practices and expert''s judgement. Weight of downside has been increased from 16% to 32% and that of upside reduced from 16% to 0% to make additional provision on account of COVID -19 scenario.

c) Definition of default

The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 3 months overdue on its contractual payments.

The Company considers probability of default upon initial recognition of asset and whether there has been any significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information. Following indicators are incorporated:

- DPD analysis as on each reporting date

- significant increase in credit risk on other financial instruments of same borrower

- significant changes in value of the collateral supporting the obligation or in the quality of third party guarantees or credit enhancements.

d) Exposure at default (EAD)

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation;

To calculate the ECL for a Stage 1 loan, the Company assesses the possible default events within 12 months for the calculation of the 12 month ECL. For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the instruments.

The Company determines EADs by modelling the range of possible exposure outcomes at various points in time, corresponding the multiple scenarios.

e) Loss given default (LGD)

Loss given default (LGD) represents estimated financial loss the company is likely to suffer in respect of default account and it is used to calculate provision requirement on EAD along with PD. The Company uses collection details on previously defaulted cases for calculating LGD including estimated direct cost of collection from default cases. Appropriate discounting rates are applied to calculate present value of future estimated collection net of direct collection cost. LGD thus calculated is used for all stages, i.e. Stage 1, Stage 2 and Stage 3.

f) Discounting

ECL is computed by estimating timing of expected credit shortfalls associated with defaults and discounting them using effective interest rate.

g) Significant increase in credit risk

The Company continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is subject to 12 months ECL or life time ECL, the Company assesses whether there has been a significant increase in credit risk since initial recognition. The Company also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset, such as moving a customer/facility to the watch list, or the account becoming forborne. Regardless of the change in credit grades, if contractual payments are more than 1 month overdue, the credit risk is deemed to have increased significantly since initial recognition.

The Company has applied a three-stage approach to measure expected credit losses (ECL) on loans and other credit exposures accounted for at amortised cost and FVOCI. Loss rates are calculated using a ''roll rate'' method based on the probability of a

receivable progressing through successive stages of delinquency to write-off. Assets migrate through following three stages based on the changes in credit quality since initial recognition:

(a) Stage 1: 12- months ECL: For exposures where there is no significant increase in credit risk since initial recognition and that are not credit-impaired upon origination, the portion of the lifetime ECL associated with the probability of default events occurring within the next 12- months is recognised.

(b) Stage 2: Lifetime ECL, not credit-impaired: For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL is recognised.

(c) Stage 3: Lifetime ECL, credit-impaired: Financial assets are assessed as credit impaired upon occurrence of one or more events that have a detrimental impact on the estimated future cash flows of that asset. For financial assets that have become credit-impaired, a lifetime ECL is recognised and interest revenue is calculated by applying the effective interest rate to the amortised cost.

h) Expected Credit Loss on Loans

The Company assesses whether the credit risk on a financial asset has increased significantly on collective basis. For the purpose of collective evaluation of impairment, financial assets are grouped on the basis of shared credit risk characteristics, taking into account instrument type, product type, collateral type, and other relevant factors.

The Company considers defaulted assets as those which are contractually 3 months overdue, other than those assets where there is empirical evidence to the contrary. Financial assets which are contractually 1 month overdue are classified under Stage 2 - life time ECL, not credit impaired, barring those where there is empirical evidence to the contrary. An asset migrates down the ECL stage based on the change in the risk of a default occurring since initial recognition. If in a subsequent period, credit quality improves and reverses any previously assessed significant increase in credit risk since origination, then the loan loss provision stage reverses to 12-months ECL from lifetime ECL.

The Company measures the amount of ECL on a financial instrument in a way that reflects an unbiased and probability-weighted amount. The Company considers its historical loss experience and adjusts the same for current observable data. The key inputs into the measurement of ECL are the probability of default, loss given default and exposure at default. These parameters are derived from the Company''s internally developed statistical models and other historical data. In addition, the Company uses reasonable and supportable information on future economic conditions including macroeconomic factors. Since incorporating these forward looking information increases the judgment as to how the changes in these macroeconomic factor will affect ECL, the methodology and assumptions are reviewed regularly.

Forward looking information

In its ECL models, the Company relies on a broad range of forward looking information as macro economic inputs. As required by Ind AS 109, Macro Economic (ME) overlays are required to be factored in ECL Models and accordingly, Company have used consumer price index as the relevant ME variable. Overtime, new ME variable may emerge to have a better correlation and may replace ME being used now.

As per the Company''s assessment, due to COVID-19 wave 2, the Company is expected to evidence the stress in repayments during quarters ending 30 June 2021 and 30 September 2021 and thereafter gradual improvement from quarter ending 31 December 21 with resumption of normalcy during quarter ended 31 March 2022. ECL provision calculated as per ECL the model may not be enough to take care of the additional losses and hence Company has created additional ECL provision in form of Management overlay. The overlay is computed based on stressing of cash flows as on 31 March 2021 based on expected recovery pattern in the form of ''Roll Forward'' and ''Roll Back'' trends during year ending 31 March 2022.

Stage 3 Assets vs GNPA NNPA as per RBI framework

Stage 3 assets as at 31 March 2021, includes restructured loan where assets are considered as credit impaired whereas for the limited purpose of regulatory disclosures based on dispensation given by RBI, the same has been considered as standard assets. The restructured assets have been provided for accordingly under Ind AS.

Similarly, Stage 2 assets as at 31 March 2021 includes restructured loan where assets are considered as significant increase in credit risk whereas for the limited purpose of regulatory disclosures based on general RBI guidelines on restructuring the same has been considered as Sub - Standard assets. The restructured assets have been provided for accordingly under Ind AS, subject to minimum provisioning requirement as per RBI guidelines.

Further, Stage 1 and 2 assets as at 31 March 2021 also includes assets which are disbursed during moratorium period ie from 1st March 20 to 1st August 20 or were NPA as on 29 Feb 2020 and moratorium was provided to them under RBI notification dated 27 March 2020 and 17 April 2020. For the limited purpose of regulatory disclosures based on general RBI guidelines on restructuring, the same has been considered as sub-standard assets. The restructured assets have been provided as per Ind AS.

Policy on write off of loan assets

Financial assets are fully provided for or written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. However, financial assets that are written off could still be subject to enforcement activities under the Company recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in statement of profit or loss on actual realization from customer.

i) COVID-19

COVID-19 Wave 1:

In accordance with the Reserve Bank of India (RBI) COVID-19 Regulatory Package announced on March 27, 2020, April 17, 2020 and May 23, 2020 and the Board approved moratorium policy, the Company offered moratorium on payment of all installments and / or interest, as applicable, falling due between March 1,2020 and August 31,2020 to eligible borrowers as per the Company''s policy. For all loans where moratorium was availed by the borrowers, the Company had kept ageing of such loans and their asset classification at standstill during the moratorium period. The Company''s business was adversely impacted during the period of lockdown in March-June 2020 period, and the impact continued for some time even subsequently.

There was an adverse impact of COVID-19 on the credit loss incurred by the Company for the year ended March 2021. This being first such incident, the impact was additionally factored in our books of accounts by stressing the Expected Credit Loss (ECL) parameters, where required.

COVID-19 Wave 2:

The COVID-19 wave 2 induced significant rise in infections and tragic loss of human lives, resulting in lockdowns that have caused disturbance in the overall operations at beginning of the new financial year. The impact has spread in hinterland tier towns and impacted the collections from the customers, once again disturbing the operations of the Company significantly.

The Company estimates that impact of COVID-19 wave 2 and resultant lockdowns shall lead to higher credit losses. Unlike moratorium, the management expects muted response to the restructuring guidelines announced by the Reserve Bank of India on May 6, 2021 as its implementation would require physical connect with the customers, which is not feasible until the lockdowns are lifted. This will result in forward flow of the loan book to higher buckets in future and will thereafter take time to return to normalcy leading to significant increase in credit risk.

In view of above, the management on a prudent basis decided to implement a stricter write off policy of NPA accounts and also provide additionally as on 31 March, 2021 for credit losses that are likely on account of the wave 2. Accordingly :

(a) The Company has moved to more stringent write off policy for its portfolio. For Asset backed finance portfolio, write-off has been advanced to 180 days past due (dpd) against 730 dpd earlier; on Unsecured SME portfolio the write off has been advanced to 90 dpd against 450 dpd earlier, and on mortgage portfolio the write off has been introduced at 730 dpd. This has resulted in additional charge of H26,813.42 lacs during the year ended 31 March 2021. The recovery efforts would continue for the written off portfolio, and recoveries made will be credited to profit and loss account in the subsequent quarters in line with the applicable accounting policies.

(b) The Company has made an additional COVID-19 provision of H57,680.90 lacs as at 31 March 2021. The Company holds cumulative additional provision against the potential impact of COVID-19 to the tune of H66,342.52 lacs (H10,924.41 lacs as on 31 March 2020) and basis management estimate is adequate to cover the impact of wave 2 of COVID-19 on the entire loan portfolio.

Had the Company not moved to more stringent write off and not taken the additional COVID-19 provision impact, the profit before tax and profit after tax for the year ended 31 March 2021 would have been H7,229.29 lacs and H5,392.71 lacs respectively.

Further, the underlying forecasts and assumptions applied by the Company in determination of ECL provision (including additional COVID-19 provision) are subject to uncertainties which are often outside the control of the Company and accordingly, actual results may differ from these estimates.

Expected credit loss on trade receivables and other financial assets

Trade receivables primarily includes receivables against sale of power, support services and operating lease. These receivables are of short term nature and there has been no impairment allowance on the same. Credit risk on excess interest spread receivable is low as it primarily falls in Stage 1. Other financial asset are measured at FVTPL and hence the credit risk is already factored in the fair value.

Cash and cash equivalents and bank balance other than cash and cash equivalents

The Company holds cash and cash equivalents and bank balance of H61,242.19 lacs at 31 March 2021 (31 March 2020: H64,836.44 lacs). The cash and cash equivalents are held with bank and financial institution counterparties with sound credit ratings.

iii Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions in a timely manner, without incurring unacceptable losses or risking damage to the Company''s reputation. The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments.

The Company has obtained fund and non-fund based working capital lines from various banks. Further, the Company has access to funds from debt markets through commercial paper, non-convertible debentures and other debt instruments including term loans. Cash Credit / WCDL limits are renewed on annual basis and are therefore revolving in nature. The Company also manages liquidity by raising funds through Securitisation / assignment transactions.

iv. Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices, which will affect the Company''s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company - primarily H. In cases where the borrowings is denominated in foreign currency, the Company uses derivatives to manage market risks.

Interest rate risk

Interest rate risk is measured by using the cash flow sensitivity for changes in variable interest rates. Any movement in the reference rates could have an impact on the Company''s cash flows as well as costs.

The Company is subject to variable interest rates on some of its interest bearing financial assets/ liabilities. The Company also uses a mix of interest rate sensitive financial instruments to manage the liquidity and fund requirements for its day to day operations like short-term loans.

The model assumes that interest rate changes are instantaneous parallel shifts in the yield curve. Although some assets and liabilities may have similar maturities or periods to re-pricing, these may not react correspondingly to changes in market interest rates. Also, the interest rates on some types of assets and liabilities may fluctuate with changes in market interest rates, while interest rates on other types of assets may change with a lag.

The risk estimates provided assume a parallel shift of 100 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period-end balances are not necessarily representative of the average debt outstanding during the period. This analysis assumes that all other variables remain constant.

Legal and operational risk Legal risk

Legal risk is the risk relating to losses due to legal or regulatory action that invalidates or otherwise precludes performance by the end user or its counterparty under the terms of the contract or related netting agreements.

The Company has developed preventive controls and formalised procedures to identify legal risks so that potential losses arising from non-adherence to laws and regulations, negative publicity, etc. are significantly reduced.

As at 31 March 2021, there were legal cases pending against the Company aggregating H172.42 lacs (31 March 2020: H201.70 lacs). Based on the opinion of the Company''s legal advisors, the management believes that no substantial liability is likely to arise from these cases.

Operational risk

Operational risk framework is designed to cover all functions and verticals towards identifying the key risks in the underlying processes.

The framework, at its core, has the following elements :

1. Documented Operational Risk Management Policy.

2. Well defined Governance Structure.

3. Use of Identification and Monitoring tools such as Loss Data Capture, Risk and Control Self Assessment, Key Risk Indicators.

4. Standardised reporting templates, reporting structure and frequency.

5. Regular workshops and training for enhancing awareness and risk culture.

The Company has adopted the internationally accepted 3-lines of defense approach to operational risk management.

First line - Each function/vertical undergoes transaction testing to evaluate internal compliance and thereby lay down processes for further improvement. Thus, the approach is "bottom-up", ensuring acceptance of findings and faster adoption of corrective actions, if any, to ensure mitigation of perceived risks.

Second line - Independent risk management vertical supports the first line in developing risk mitigation strategies and provides oversight through regular monitoring. All key risks are presented to the Risk Management Committee on a quarterly basis.

Third line - Internal Audit conducts periodic risk-based audits of all functions and process to provide an independent assurance to the Audit Committee.

Note 49: Capital management

The Company maintains and actively managed capital base to cover risks inherent in the business and meets the Capital Adequacy Requirements (CRAR) of the Reserve Bank of India (RBI). The adequacy of the Company''s capital is monitored using, among other measures, the regulations issued by RBI. The Company has complied in full with all its externally imposed capital requirements over the reported period. The primary objectives of the Company''s capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder value. The funding requirements are met through equity, non-convertible debentures and other long-term/ short-term borrowings. The Company''s policy is aimed at appropriate combination of short-term and long term borrowings. The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

i. Regulatory capital

The Company''s regulatory capital consists of the sum of the following elements :

- Tier 1 capital, which includes ordinary share capital, retained earnings and reserves and deduction for intangible assets and other regulatory adjustments relating to items that are not included in equity but are treated differently for capital adequacy purposes.

* For the purpose calculation of CRAR , securitisation (PTC) transactions has been considered as ''zero risk weight asset'' as per Reserve Bank of India notification dated 13 March 2020, while the corresponding investments in pass through certificates have been considered as ''on balance sheet exposures'' in determination of risk weighted assets. The corresponding credit enhancement facilities have been deducted from Tier I and Tier II capital accordingly.

ii. Capital allocation

Management uses regulatory capital ratios to monitor its capital base. There is no allocation of capital required as Company is operating primarily in a single segment i.e., financing.

The Company''s policies in respect of capital management and allocation are reviewed regularly by the Board of Directors.

The Executive Committee (EXCOM) of the Company has been identified as the Chief Operating Decision Maker (CODM) pursuant to the requirements of Ind AS 108, "Operating Segments." The Company''s operating segments are established in the manner consistent with the components of the Company that are reviewed regularly by the CODM for the purpose of allocation of resources and evaluation of performance. The Company is engaged primarily in the business of financing and there are no separate reportable segments as per Ind AS 108. The Company does not have operations outside India and hence there is no external revenue or assets which require disclosure

No revenue from transactions with a single customer amounted to 10% or more of the Company''s total revenue for the year ended 31 March 2021 and 31 March 2020.

2 Exposure to Capital Market

The Company does not have any exposure to capital market during the financial year ended 31 March 2021 and 31 March 2020.

3 Details of financing of parent company products

The Company does not have a parent company and hence this discloure is not applicable.

4 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC

The Company has not exceeded the prudential exposure limits during the financial year ended 31 March 2021 and 31 March 2020.

The Company classifies non-performing assets (NPAs) at 3 months overdue and is compliant with the requirement for the financial year ending 31 March 2021 as per the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 1 September 2016. As company has adopted Ind-AS, provision on NPAs has been made as per expected credit loss method.

* Disclosure as per IND-AS, as required in RBI notification no. DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated 13 March 2020

^A Stage 3 assets as at 31 March 2021, includes restructured loan where assets are considered as credit impaired whereas for the limited purpose of regulatory disclosures based on dispensation given by RBI, the same has been considered as standard assets. The restructured assets have been provided for accordingly under Ind AS.

Similarly, Stage 2 assets as at 31 March 2021 includes restructured loan where assets are considered as significant increase in credit risk whereas for the limited purpose of regulatory disclosures based on general RBI guidelines on restructuring the same has been considered as Sub - Standard assets. The restructured assets have been provided for accordingly under Ind AS, subject to minimum provisioning requirement as per RBI guidelines.

(o) Disclosures relating to fraud in terms of the notification issued by Reserve Bank of India

During the year ended 31 March 2021, 20 frauds (31 March 2020: 34 frauds) has been reported to RBI. The un-recovered amounts aggregating to H460.22 lacs (31 March 2020: H287.04 lacs) have been fully provided for / written-off.

(p) Liquidity Coverage Ratio (LCR) disclosures Qualitative disclosure

Liquidity Coverage Ratio (LCR) is a tool for measuring and promoting short term resilience of the Company to potential liquidity disruptions by ensuring maintenance of sufficient unencumbered high quality liquid assets (HQLAs) to survive at severe stress scenario lasting for 30 calendar days. Reserve Bank of India (RBI) introduced the LCR requirement for all deposit-taking NBFCs and non-deposit taking NBFCs with an asset size of H5,000 crore and above. The ratio comprises of HQLAs as numerator and net cash outflows in next 30 calendar days as denominator.

HQLA computation consist of two parts i.e.

(i) Assets to be included as HQLA without any haircut i.e. cash, government securities, etc. and<

Note 1 : Company Overview:

Magma Fincorp Limited (‘the Company’), incorporated and headquartered in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. The Company is registered as a systemically important non-deposit taking Non-Banking Financial Company CNBFC’) as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. The Company is also registered as a corporate agent under Insurance Regulatory and Development Authority of India (Registration of Corporate Agents) Regulations, 2015. Its equity shares are listed on National Stock Exchange and Bombay Stock Exchange.

Equity shares

The Company has only one class of equity shares having a par value of Rs.2/- each. Each holder of equity share is entitled to one vote per share.

The Company declares and pays dividend on equity shares in Indian rupees.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution to preference shareholders. The distribution will be in proportion to the number of equity shares held by the equity shareholders.

During the year, the Company has allotted on 10 May 2017 and 31 January 2018, 14,000 equity shares and 55,000 equity shares respectively of the face value of Rs.2/- each to the eligible employees of the Company under Employee Stock Option Plan pursuant to SEBI (ESOS and ESPS) Guidelines, 1999, and with corresponding provision of SEBI (Share Based Employee Benefits) Regulations 2014, as amended from time to time.

On 12 April 2018, the Company has allotted 3,22,58,064 equity shares of face value of Rs.2/- each to Qualified Institutional Buyers, aggregating to approximately Rs.50,000 lacs, including premium of Rs.153/- per share under Chapter VIII of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended and Companies Act, 2013 read with relevant rules thereunder and other applicable provisions. Consequent to the said allotment, the total paid-up equity share capital of the Company stands increased to 26,92,86,736 equity shares of Rs.2/- each aggregating to Rs.5,385.73 lacs. The equity shares issued and allotted as aforesaid rank pari passu with the existing equity shares of the Company in all respect.

During the year ended 31 March 2018, the amount of per share dividend recommended by the Board as distribution to equity shareholders is Rs.0.80 (40%) per equity share of the face value of Rs.2/- each including shares alloted post 31 March 2018, pursuant to Qualified Institutional Placement (QIP) and ESOP scheme. Total dividend on 26,92,86,736 equity shares for the year ended 31 March 2018 would amount to Rs.2,597.11 lacs including corporate dividend tax of Rs.442.82 lacs, subject to approval of shareholders.

Preference shares

The Company declares and pays dividend on preference shares in both Indian rupees and foreign currencies.

In the event of liquidation of the Company, the holders of preference shares will have priority over equity shares in payment of dividend and repayment of capital.

For the financial year ended 31 March 2017, the Company has recommended dividend based on the 6 months US Dollar Libor applicable as on 30 December 2016 and closing exchange rate applicable as on 31 March 2017 and which was liable to vary depending on the actual date of payment of the dividend. Accordingly, the excess dividend and tax thereon of Rs.0.90 lacs (2017: Rs.2.50 lacs) has been provided with respect to above preference shares for the previous financial year ended 31 March 2017 in the current financial year.

Shares allotted as fully paid-up without payment being received in cash / by way of bonus shares:

The Company has not issued bonus shares or shares for consideration other than cash during the five year period immediately preceding the reporting date.

Employee stock options

The Company instituted the Magma Employee Stock Option Plan (MESOP) in 2007 and Magma Restricted Stock Option Plan 2014 (MRSOP) in 2014, which were approved by the Board of Directors.

MESOP, 2007

Under MESOP, the Company provided for the creation and issue of 1,000,000 options, that would eventually convert into equity shares of Rs.10/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of and at the exercise price determined by the Nomination and Remuneration Committee of the Board of Directors. The options generally vest in a graded manner over a five year period and are exercisable within 3 years from the date of vesting. The options will get settled by issue of equity shares at the exercise price. Following the sub-division of one equity share of the face value of Rs.10/- each into five equity shares of the face value of Rs.2/- each during the financial year ended 31 March 2011, the number of options increased from 1,000,000 to 5,000,000.

During the year, the Nomination and Remuneration Committee of the Board of Directors has granted 5,15,000 options (2017: 1,25,000) under MESOP 2007 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of Rs.2/- each ).

MRSOP, 2014

Under MRSOP, the Company provided for the creation and issue of 5,000,000 options, that would eventually convert into equity shares of Rs.2/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Board of Directors and at the exercise price of the face value of Rs.2/- each. The options will vest in a graded manner and are exercisable within 3 years from the date of vesting. The options will get settled by issue of equity shares at the exercise price.

During the year, the Nomination and Remuneration Committee of the Board of Directors has granted 3,00,000 options (2017: Nil) under MRSOP 2014 to the eligible employees of the Company (each options entitles the option holder to 1 equity share of Rs.2/- each ).

The Company has recorded compensation cost for all grants using the intrinsic value based method of accounting, in line with the prescribed SEBI guidelines.

Had compensation cost been determined under the fair value approach described in the Guidance Note on, “Accounting for employee share based payments” issued by the Institute of Chartered Accountant of India (‘ICAI’), the Company’s net profit and basic and diluted earnings per share would have reduced to the proforma amounts as indicated.

* In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance Sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Company has not appropriated proposed dividend (including tax) on equity in the financial year ended 31 March 2018 and same will been shown in the financial year ended 31 March 2019 post approval by shareholders in Annual General Meeting.

Nature of security

(a) Debentures are secured by mortgage of Company’s immovable property situated at (i) Village - Mehrun, Taluk and District - Jalgaon in the state of Maharastra, and (ii) Rajarhat, Kolkata in the state of West Bengal and are also secured against designated Assets on finance. The total asset cover is hundred percent or above of the principal amount of the said debentures.

(b) Term loans from Banks / Financial Institutions are secured by way of hypothecation of designated Assets on finance and future rentals receivable therefrom.

(c) Term loans related to wind mills owned by the Company are secured by means of mortgage of the wind mills, assignment of the related receivables, and a bank guarantee in favour of the lending institution alongwith personal guarantee of a Director.

The above commercial papers carry interest rates ranging from 8.20% p.a. to 8.38% p.a. with maturity ranging from 2 month to 3 months (2017: from 7.61 % p.a. to 8.95 % p.a. with maturity ranging from 1 months to 3 months).

Details of cash credit facilities and working capital demand loans

The cash credit facilities are repayable on demand and carry interest rates ranging from 8.70 % p.a. to 12.10 % p.a. (2017: from 9.00 % p.a. to 11.20% p.a.). Working capital demand loans are repayable on demand and carry interest rates ranging from 8.15 % p.a. to 9.25 % p.a. (2017: from 8.20% p.a. to 9.60% p.a.). As per the prevalent practice, cash credit facilities and working capital demand loans are renewed on a year to year basis and therefore, are revolving in nature. The Company has entered into a forward buy contract of US $ 78.13 lacs (INR Rs.5,000.00 lacs). The said loan including the interest payable thereon has been fully hedged to INR liability. There is no un-hedged foreign currency exposure as on 31 March 2018.

* Nature of security

Cash Credit facilities and Working Capital Demand Loans from Banks are secured by way of hypothecation of the Company’s finance/ loan assets, tangible movable assets, plant and machinery, equipments, etc and future rental income therefrom and other current assets (expressly excluding those equipments, plant, machinery, spare parts, tangible movable assets etc. and future rental income therefrom which have been or will be purchased out of the term loans and / or refinance facility from Financial Institutions, Banks or any other financial organisation). These are collaterally secured by way of equitable mortgage over immovable property.

* The Company has no dues to micro and small enterprises covered under the Micro, Small and Medium Enterprises Development Act, 2006, as at 31 March 2018 and 31 March 2017. This information is required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006, and has been determined to the extent such parties have been identified on the basis of information available with the Company.

# There has been no delay in transfer of amounts required to be transferred to Investor Education and Protection Fund and balance would be credited as and when due.

## Includes provision for commission payable to executive director of Rs.230.00 lacs (2017: Rs. Nil), refer Note 36.

* The Company has invested in the pass through certificates (PTCs) on the assets securitised by it, as Minimum Retention Ratio, as prescribed in the guidelines issued by Reserve Bank of India from time to time. Current portion of PTCs amounting to Rs.6,504.06 lacs (2017: Rs.4,737.23 lacs) has been included under ‘Current Investments’ [Note 16].

# Assets on finance includes sub-standard assets of Rs.53,712.43 lacs (2017: Rs.69,754.07 lacs) and is net of amounts securitised / assigned aggregating to Rs.3,16,818.15 lacs (2017: Rs.3,62,064.98 lacs).

## During the year, the Company has created a provision of Rs.5.27 lacs (2017: Rs.168.00 lacs) towards other loans and advances. Accordingly, the balance of provision against other loans and advances as at 31 March 2018 is Rs.505.27 lacs (2017: Rs.500.00 lacs).

* Secured by underlying assets financed.

* Balances with banks held as security against borrowings, guarantees amounts to Rs.331.94 lacs (2017: Rs.475.17 lacs lacs) and as cash collateral for securitisation / direct assignment of receivables amounts to Rs.1,980.43 lacs (2017: Rs.8,154.08lacs).

* Balances with banks held as security against borrowings, guarantees amounts to Rs.2,287.55 lacs (2017: Rs.2,058.83 lacs) and as cash collateral for securitisation / direct assignment of receivables amounts to Rs.25,791.18 lacs (2017: Rs.12,050.87 lacs). Fixed deposits accounts with more than twelve months maturity amounting to Rs.2,312.37 lacs (2017: Rs.8,629.25 lacs) included under ‘Other NonCurrent Assets’ [Note 15].

Note 2 : Employee benefits *

Gratuity benefit plan

The scheme is fully funded with Life Insurance Corporation of India (LIC). The following tables set out the status of the gratuity plan as required under Accounting Standard (AS) 15 (revised) on Employee Benefits.

(a) Reconciliation of opening and closing balances of the present value of defined benefit obligation

(b) Changes in the fair value of the plan assets are as follows

(c) Net asset / (liability) recognised in the balance sheet

(d) Expenses recognised in the statement of profit and loss account

(e) Summary of actuarial assumptions

(f) Expected rate of return on plan assets: This is based on the expectation of the average long-term rate of return expected on investments of the fund during the estimated term of the obligations.

(g) Discount rate: The discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.

(h) Salary escalation rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors.

(i) Expected contribution for next year: The expected contributions by employer for the next year is Rs.308.63 lacs.

(j) Mortality: It is assumed that active members of the Scheme will experience in service mortality in accordance with the standard table Indian Assured Lives Mortality (2006-08) ultimate.

(k) Experience adjustments

Defined benefit plan

The contribution made to various statutory funds is recognized as expenses and included in Note 23 ‘Employee benefits expense’ under ‘Contribution to provident and other funds’ in Statement of Profit and Loss. The detail is as follows.

Note 3 : Lease transactions in the capacity of Lessee

Lease rental expense under non-cancellable operating lease during the year amounted to Rs.361.45 lacs (2017: Rs.32.32 lacs). Future minimum lease payments under non-cancellable operating lease is as below:

Additionally, the Company uses the office facilities under cancellable operating leases. The rental expense under cancellable operating lease during the year was Rs.1,765.16 lacs (2017: Rs.1,983.14 lacs). Above rental expense includes the cost allocated to the subsidiaries and joint ventures amounting to Rs.351.03 lacs (2017: Rs.485.44 lacs).

(c) The amount included above represents best possible estimate arrived at on the basis of available information. The Management believes that it has a reasonable case in its defense of the proceedings and accordingly no further provision has been created.

(d) The Company has a process whereby periodically all long-term contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision required under any law/accounting standard/RBI regulation for material foreseeable losses on such long term contracts has been made in the books of account.

(a) Commissioner of service tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs.464 lacs plus interest and penalty against which Rs.404 lacs was paid and charged to the statement of profit and loss in earlier years. Both, the Company and the Department had gone into appeal in CESTAT against the order. Finally, in July 2017, order has been passed by Calcutta High Court where in Company’s appeal has been allowed except for Rs.93 lacs. Accordingly, the Company has filed letter seeking refund of balance amount of Rs.311 lacs from Department.

(b) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon’ble High Court of Calcutta and had been granted stay order on the same. The case was transferred to Hon’ble Supreme Court and has since been remanded to Hon’ble High Court of Calcutta and is yet to be finally disposed off. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 01 April 2009.

Note 4 : Additional notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs. Nil (2017: Rs. Nil).

(b) Earnings in foreign currency Rs. Nil (2017: Rs. Nil ).

(c) Expenditure in foreign currency on account of professional fees, travelling and others Rs.78.29 lacs (2017: Rs.80.58 lacs).

(d) Dividend remitted in foreign currency

The Company does not have any gain/loss (2017: gain of Rs.23.10 lacs) relating to derivative financial instrument.

The Company does not have any exposure to exchange traded interest rate (IR) derivatives as at 31 March 2018 and 31 March 2017.

5 Disclosures on risk exposure in derivatives Qualitative disclosure

Fair value of derivative contracts is determined based on the appropriate valuation techniques considering the terms of the contract as at the balance sheet date. Mark to market losses in derivative contracts are recognised in the statement of profit and loss in the period in which they arise. Mark to market gains are not recognised keeping in view the principle of prudence as enunciated in “Accounting Standard (AS) 1 - Disclosure of Accounting Policies”.

(ii) Accounting for Excess Interest Spread (EIS)

The Company recognises EIS on securitisation transactions in line with RBI circular “Revisions to the Guidelines on Securitisation Transactions” issued on 21 August 2012 which requires recognition of EIS only when redeemed in cash. Accordingly, the gross income on securitisation aggregating to Rs.810.30 lacs for the year ended 31 March 2018 (2017: Rs.1,290.58 lacs) has not been recognised.

(iii) The value of “excess interest spread receivable” and “unrealised gain” on securitisation transactions undertaken in terms of guidelines on securitisation transaction issued by Reserve Bank of India on 21 August 2012 is given below:

(iv) Additional income tax on income distributed by Securitisation Trusts

In the Finance Act, 2013, a provision was introduced w.e.f. 01 June 2013 in respect of ‘Tax on Distributed Income by Securitisation Trusts’ (‘SDT’). The income so received was exempt in the hands of the Company. However the said provision has been withdrawn in Finance Act, 2016 w.e.f 01 June 2016. During the year, the income amounting to Rs. Nil (2017: Rs.1,261.88 lacs) has been received by the Company as an investor after withholding SDT of Rs. Nil lacs (2017: Rs.436.71 lacs).

* Provision of Rs.348.88 lacs (2017:Rs.348.88 lacs) has not been reversed on account of non-performing assets sold during the financial year ended 31 March 2017 where the sale value is higher than the NBV.

6 Details of non-performing financial assets purchased / sold

a) Details of non-performing financial assets purchased:

The Company has not purchased any non-performing financial assets during the financial year ended 31 March 2018 and 31 March 2017.

b) Details of non-performing financial assets sold:

* Cash credit and working capital demand loan from banks are usually for a period of 1 year. As per the prevalent practice, these facilities are renewed on a year to year basis and therefore, are revolving in nature. Accordingly, repayments of cash credit borrowings and working capital demand loans from banks aggregating Rs.5,18,156.85 lacs has been distributed over the same period as the maturity pattern of assets on finance. Borrowings includes Rs.82,955.62 lacs, which has been disclosed as ‘Current maturities of long term borrowings’ [Note 9].

7 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC

The Company has not exceeded the prudential exposure limits during the financial year ended 31 March 2018 and 31 March 2017.

The Company has not given any unsecured advances against intangible securities such as charge over the rights, licenses, authority, etc. during the financial year ended 31 March 2018 and 31 March 2017.

(h) Details of penalties imposed by RBI and other regulators

No penalties has been imposed by RBI and other regulators on the Company during the financial year ended 31 March 2018 and 31 March 2017.

The Company classifies non-performing assets (NPAs) at 3 months overdue and is compliant with the requirement for the financial year ending 31 March 2018, in a phased manner over 3 years commencing from the financial year 2015-16, as per the Master Direction - Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 01 September 2016. These provisioning norms are considered minimum and additional provision is made based on perceived credit risk where necessary. For the financial year 201617, the Company classified non-performing assets (NPAs) at 4 months overdue and accordingly the above figures are not comparable to that extent.

* Includes the balance of provisions for NPAs of MITL amounting to Rs.4,583.62 lacs as on effective date 1 October 2017, refer Note 39.

Related parties identified includes related parties as per section 2(76) of the Companies Act, 2013.

* represents expenses recovered towards infrastructural support, operational assistance and other services.

** acquired from Magma Advisory Services Limited by virtue of merger w.e.f. 1 April 2017.

# includes transactions post merger of Magma ITL Finance Limited with Magma Fincorp Limited and outstanding balance includes balance as on 1 October 2017 amounting to Rs.37.77 lacs.

^A represents transactions upto 30 September 2017 as Magma ITL Finance Limited got merged with the Company w.e.f. 1 October 2017. “ merged with the Company w.e.f. 1 April 2017.

Note 8 : Corporate social responsibility (CSR)

A CSR committee has been formed by the Company as per the Companies Act, 2013. CSR expenses have been incurred through out the year on the activities as specified in Schedule VII of the said Act.

a) Gross amount required to be spent by the Company during the year is Rs.310.43 lacs.

b) Amount spent during the year on CSR activities

Note 9 : Disclosures relating to fraud in terms of the notification issued by Reserve Bank of India

During the year ended 31 March 2018, 37 cases (2017: 16 cases) of frauds has been detected and reported. The un-recovered amounts aggregating to Rs.141.92 lacs (2017: Rs.162.74 lacs) have been fully provided for / written-off.

Note 10 : Amalgamation of Magma ITL Finance Limited

a) Pursuant to the Scheme of Amalgamation sanctioned by the Honourable National Company Law Tribunal (NCLT), Kolkata Bench on 08 May, 2018, the entire business and all assets and liabilities of erstwhile Magma ITL Finance Limited (MITL), a wholly owned subsidiary company engaged in the business of providing finance, has with effect from 1 October, 2017, been transferred to and vested in the Company. Accordingly, the said assets, liabilities, and transactions have been incorporated in these financial statements.

b) The appointed date of the amalgamation is 1 October, 2017.

c) The Amalgamation has been accounted for under “Pooling of Interest” method as prescribed by the Accounting Standard 14 “Accounting for Amalgamations” issued by the Institute of Chartered Accountants of India, in accordance with which:

(i) The assets and liabilities as at 1 October, 2017 have been incorporated in the financial statements of the Company at their carrying amounts in the books of erstwhile MITL subject to necessary adjustments made to ensure uniformity in the accounting policies between the two companies in accordance with Para 11 of Accounting Standard-14 “Accounting for Amalgamations”.

(ii) In terms of the Scheme of Amalgamation Consequent upon and simultaneously with the transfer and recording of assets and liabilities of the MITL in the books of the Company, entire shareholding that the Company held in MITL has been cancelled and MITL stands dissolved without winding-up on the effective date and therefore ceases to be wholly owned subsidiary of the Company. The difference in the value of Net Assets transferred and the carrying amount of Investments has been adjusted in the reserves.

To the extent that there are intercompany loans, deposits, balances as between the MITL and the

Company or vice versa, the obligation in respect thereof has come to an end and there is no liability in that behalf and corresponding effect has been given in the books of account and records of the Company for the reduction of any assets and liabilities as the case may be.

(iii) The impact on revenue and profit before tax is Rs.5,138.71 lacs and Rs.1,732.53 lacs, respectively for the year ended 31 March 2018.

(iv) The value of net identifiable assets of the MITL acquired is Rs.13,422.76 lacs and the difference between the value of investment and the share capital of the MITL of Rs.2,249.51 lacs has been adjusted with retained earnings.

Note 40 : Amalgamation of Magma Advisory Services Limited

a) Pursuant to the Scheme of Amalgamation sanctioned by the Hon’ble Regional Director, Eastern Region, Ministry of Corporate Affairs, on 15 January, 2018, the entire business and all assets and liabilities of erstwhile Magma Advisory Services Limited (MASL), a wholly owned subsidiary company engaged in the business of manpower outsourcing and providing advisory & consultancy services, has with effect from 1 April, 2017, been transferred to and vested in the Company. Accordingly, the said assets, liabilities, and transactions have been incorporated in these financial statements.

b) The appointed date of the amalgamation is 1 April, 2017.

c) The Amalgamation has been accounted for under “Pooling of Interest” method as prescribed by the Accounting Standard 14 “Accounting for Amalgamations” issued by the Institute of Chartered Accountants of India, in accordance with which:

(i) The assets and liabilities as at 1 April, 2017 have been incorporated in the financial statements of the Company at their carrying amounts in the books of erstwhile MASL subject to necessary adjustments made to ensure uniformity in the accounting policies between the two companies in accordance with in Para 11 of Accounting Standard-14 “Accounting for Amalgamations”.

(ii) In terms of the Scheme of Amalgamation

Consequent upon and simultaneously with the transfer and recording of assets and liabilities of the MASL in the books of the Company, entire shareholding that the Company held in MASL has been cancelled and MASL stands dissolved without winding-up on the effective date and therefore ceases to be wholly owned subsidiary of the Company. The difference in the value of Net Assets transferred and the carrying amount of Investments has been adjusted in the reserves.

To the extent that there are intercompany loans, deposits, balances between MASL and the Company or vice versa, the obligation in respect thereof has come to an end and there is no liability in that behalf and corresponding effect has been given in the books of account and records of the Company for the reduction of any assets and liabilities as the case may be.

(iii) Magma Housing Finance Limited, previously a step-down subsidiary of the Company, has become direct subsidiary of the Company.

(iv) The impact on revenue and profit before tax is Rs.0.91 lacs and ‘ (1.72) lacs, respectively for the year ended 31 March 2018.

(v) The value of net identifiable assets of the MASL acquired is Rs.22,008.84 lacs and the difference between the value of investment and the share capital of the MASL of Rs.25,222.22 lacs has been adjusted with retained earnings.

Note 11 : Segment reporting

As per paragraph 4 of Accounting Standard (AS) 17, on “Segment Reporting” prescribed under section 133 of the Companies Act, 2013, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding Company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented in the consolidated financial statements.

Note 12 : Previous year’s figure

Previous year’s figure including those in brackets have been regrouped and / or rearranged wherever necessary.

Note 13 : Disclosures relating to Specified Bank Notes (SBN) in terms of the notification issued by MCA

Details of Specified Bank Notes (SBN) held and transacted during the period 08 November 2016 to 30 December 2016

# Based on the daily cash register and petty cash summary statement maintained across the branches.

* Includes balance in State Bank of India eZ Card and replenishment in transit.

** Includes direct cash deposits made by the customers in Company’s bank accounts vide RBI Circular No. DCM (Plg) No.

1226/10.27.00/2016-17 dated 08 November 2016 under Section 3(c)(v). Also includes withdrawal from bank.

*** Includes SBN of Rs.5.29 lacs as part of petty cash at 127 branches which was exchanged across the counter at banks.

The above note is not applicable for the current financial year.

NOTE 1: COMPANY OVERVIEW:

Magma Fincorp Limited (‘the Company”), incorporated and headquartered in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. The Company is registered as a systemically important non-deposit taking Non-Banking Financial Company (‘NBFC’) as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. The Company is also registered as a corporate agent under Insurance Regulatory and Development Authority of India (Registration of Corporate Agents) Regulations, 2015. Its equity shares are listed on National Stock Exchange and Bombay Stock Exchange.

Equity shares

NOTE 2 : SHARE CAPITAL

The Company has only one class of equity shares having a par value of Rs.2/- each. Each holder of equity share is entitled to one vote per share.

The Company declares and pays dividend on equity shares in Indian rupees.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution to preference shareholders. The distribution will be in proportion to the number of equity shares held by the equity shareholders.

In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance Sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Company has not appropriated dividend on shares on recommendation of the Board and would record the same as a liability on the date of approval by the shareholders at the ensuing Annual General Meeting. However, the proposed dividend as at 31 March 2016 was accounted for as liability in accordance with the then existing Accounting Standard.

During the year, the Company has allotted on 13 August 2016 and 08 February 2017, 90,000 equity shares and 26,000 equity shares respectively of the face value of Rs.2/- each to the eligible employees of the Company and on 26 April 2016, 15,000 equity shares of the face value of Rs.2/- each to an eligible ex-employee of the Company, under Employee Stock Option Plan pursuant to SEBI (ESOS and ESPS) Guidelines, 1999, and with corresponding provision of SEBI (Share Based Employee Benefits) Regulations 2014, as amended from time to time. Consequent to the said allotment, the total paid-up equity share capital of the Company stands increased to 23,69,59,672 equity shares of Rs.2/- each aggregating to Rs.4,739.19 lacs.

During the year ended 31 March 2017, the amount of per share dividend recommended by the Board as distribution to equity shareholders is Rs.0.80 (40%) per equity share of the face value of Rs.2/- each. Total dividend on 23,69.59,672 equity shares for the year ended 31 March 2017 would amount to Rs.2,281.59 lacs including corporate dividend tax of Rs.385.92 lacs.

Preference shares

The Company declares and pays dividend on preference shares in both Indian rupees and foreign currencies.

65,00,999 cumulative non-convertible redeemable preference shares of Rs.100/- each aggregating to Rs.6,501.00 lacs (equivalent to USD 15 Million) allotted at par on 26 March 2007 are entitled to fixed dividend at the rate equivalent to 6 months US Dollar Libor applicable on the respective dates i.e. 30 December or 29 June depending upon the actual date of payment plus 3.25% on subscription amount of USD 15 Million.

In the event of liquidation of the Company, the holders of preference shares will have priority over equity shares in payment of dividend and repayment of capital.

In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance Sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Company has not appropriated dividend on shares on recommendation of the Board and would record the same as a liability on the date of approval by the shareholders at the ensuing Annual General Meeting. However, the proposed dividend as at 31 March 2016 was accounted for as liability in accordance with the then existing Accounting Standard.

For the financial year ended 31 March 2016, the Company has provided for dividend in financial statements based on the 6 months US Dollar Libor applicable as on 30 December 2015 and closing exchange rate applicable as on 31 March 2016 and which was liable to vary depending on the actual date of payment of the dividend. Accordingly, the excess dividend and tax thereon of Rs.2.50 lacs (2016: Rs.7.30 lacs) provided with respect to above preference shares for the previous financial year ended 31 March 2016 has been adjusted in the current year with consequent impact on earnings per share for the year.

The Company has redeemed Rs.1,300.20 lacs being fifth and final annual installment of Rs.20/- per share in respect of 65,00,999 cumulative non-convertible redeemable preference shares of Rs.100/- per share on 04 April 2016. The above preference shares were redeemed out of the proceeds of the issue of equity shares made for the purposes in the earlier years which inter-alia include redemption of preference shares and accordingly, no transfer has been made to capital redemption reserve.

Shares allotted as fully paid-up without payment being received in cash / by way of bonus shares:

The Company has not issued bonus shares or shares for consideration other than cash during the five year period immediately preceding the reporting date.

Employee stock options

The Company instituted the Magma Employee Stock Option Plan (MESOP) in 2007 and Magma Restricted Stock Option Plan 2014 (MRSOP) in 2014, which were approved by the Board of Directors.

MESOP, 2007

Under MESOP, the Company provided for the creation and issue of 10,00,000 options, that would eventually convert into equity shares of Rs.10/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of and at the exercise price determined by the Nomination and Remuneration Committee of the Board of Directors. The options generally vest in a graded manner over a five year period and are exercisable within 3 years from the date of vesting. Following the sub-division of one equity share of the face value of Rs.10/- each into five equity shares of the face value of Rs.2/- each during the financial year ended 31 March 2011, the number of options increased from 10,00,000 to 50,00,000.

During the year, the Nomination and Remuneration Committee of the Board of Directors has granted 1,25,000 options (2016: Nil) under MESOP 2007 at an exercise price of Rs.60/- per share to the eligible employees of the Company (each options entitles the option holder to 1 equity share of Rs.2/- each ).

MRSOP, 2014

Under MRSOP, the Company provided for the creation and issue of 50,00,000 options, that would eventually convert into equity shares of Rs.2/- each in the hands of the Company’s employees. The options are to be granted to the eligible employees at the discretion of the Nomination and Remuneration Committee of the Board of Directors and at the exercise price of the face value of Rs.2/- each. The options will vest in a graded manner and are exercisable within 3 years from the date of vesting.

During the year, the Nomination and Remuneration Committee of the Board of Directors has granted Nil options (2016: 250,000) under MRSOP 2014 at an exercise price of Rs.2/- per share to the eligible employees of the Company (each options entitles the option holder to 1 equity share of Rs.2/- each ).

The Company has recorded compensation cost for all grants using the intrinsic value based method of accounting, in line with the prescribed SEBI guidelines.

Had compensation cost been determined under the fair value approach described in the Guidance Note on, “Accounting for employee share based payments” issued by the Institute of Chartered Accountant of India (‘ICAI’), the Company’s net profit and basic and diluted earnings per share would have reduced to the proforma amounts as indicated.

Nature of security

(a) Debentures are secured by mortgage of Company’s immovable property situated at (i) Village - Mehrun, Taluk and District - Jalgaon in the state of Maharastra, and (ii) Rajarhat, Kolkata in the state of West Bengal and are also secured against designated Assets on finance.

(b) Term loans from Banks / Financial Institutions are secured by way of hypothecation of designated Assets on finance and future rentals receivable therefrom.

(c) Term loans related to wind mills owned by the Company are secured by means of mortgage of the wind mills, assignment of the related receivables, and a bank guarantee in favour of the lending institution alongwith personal guarantee of a Director.

The above commercial papers carry interest rates ranging from 7.61 % p.a. to 8.95 % p.a. with maturity ranging from 1 month to 3 months (2016: from 8.95 % p.a. to 10.00 % p.a. with maturity ranging from 3 months to 8 months).

Details of cash credit facilities and working capital demand loans

The cash credit facilities are repayable on demand and carry interest rates ranging from 9.00% p.a. to 11.20% p.a. (2016: from 9.25 % p.a. to 11.80% p.a.). Working capital demand loans are repayable on demand and carry interest rates ranging from 8.20% p.a. to 9.60% p.a. (2016: from 9.55% p.a. to 10.00% p.a.). As per the prevalent practice, cash credit facilities and working capital demand loans are renewed on a year to year basis and therefore, are revolving in nature.

* Nature of security

Cash credit facilities and working capital demand loans from Banks are secured by way of hypothecation of the Company’s finance/loan assets, plant and machinery and future rental income therefrom and other current assets excluding those from real estate (expressly excluding those equipments, plant, machinery, spare parts etc. and future rental income therefrom which have been or will be purchased out of the term loans and / or refinance facility from Financial Institutions, Banks or any other finance organisation). These are collaterally secured by way of equitable mortgage over immovable property.

* The Company has no dues to micro and small enterprises covered under the Micro, Small and Medium Enterprises Development Act, 2006, as at 31 March 2017 and 31 March 2016. This information is required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006, and has been determined to the extent such parties have been identified on the basis of information available with the Company.

# Balance would be credited to Investor Education and Protection Fund as and when due.

* Represents liability transferred to and vested in the Company pursuant to the amalgamation of erstwhile Shrachi Infrastructure Finance Limited with the Company in the financial year 2006-07. The Company, in accordance with Reserve Bank of India directives, had transferred the entire outstanding amount together with interest to an escrow account. Unclaimed balance has been credited to Investor Education and Protection Fund.

# Assets on finance includes sub-standard assets of Rs.69,754.07 lacs (2016: Rs.76,304.58 lacs) and is net of amounts securitised / assigned aggregating to Rs.3,62,064.98 lacs (2016: Rs.3,65,056.97 lacs).

* Secured by underlying assets financed.

* Balances with banks held as security against borrowings, guarantees amounts to Rs.475.17 lacs (2016: Rs.312.28 lacs) and as cash collateral for securitisation / direct assignment of receivables amounts to Rs.8,154.08 lacs (2016: Rs.378.00 lacs).

* Balances with banks held as security against borrowings, guarantees amounts to Rs.2,058.83 lacs (2016: Rs.1,800.43 lacs) and as cash collateral for securitisation / direct assignment of receivables amounts to Rs.12,050.87 lacs (2016: Rs.12,408.68 lacs). Fixed deposits accounts with more than twelve months maturity amounting to Rs.8,629.25 lacs (2016: Rs.705.74 lacs) included under ‘Other NonCurrent Assets’ [Note 15].

NOTE 3 : EMPLOYEE BENEFITS

Gratuity benefit plan

The scheme is funded with Life Insurance Corporation of India (LIC). The following tables set out the status of the gratuity plan as required under Accounting Standard (AS) 15 (revised) on Employee Benefits.

(a) Expected rate of return on plan assets: This is based on the expectation of the average long-term rate of return expected on investments of the fund during the estimated term of the obligations.

(b) Discount rate: The discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.

(c) Salary escalation rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors.

NOTE 4 : LEASE TRANSACTIONS IN THE CAPACITY OF LESSEE

Lease rental expense under non-cancellable operating lease during the year amounted to Rs.32.32 lacs (2016: Rs.26.10 lacs). Future minimum lease payments under non-cancellable operating lease is as below:

Additionally, the Company uses the office facilities under cancellable operating leases. The rental expense under cancellable operating lease during the year was Rs.1,983.14 lacs (2016: Rs.1,907.46 lacs). Above rental expense includes the cost allocated to the subsidiaries and joint ventures amounting to Rs.485.44 lacs (2016: Rs.289.56 lacs).

NOTE 5:

(a) Commissioner of service tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs.464 lacs plus interest and penalty against which Rs.404 lacs was paid and charged to the statement of profit and loss in earlier years. Both the Company and the Department had gone into appeal in CESTAT against the order. There were multiple hearings for the case in the CESTAT and High Court of Calcutta on this matter. Finally, the Honorary Bench of CESTAT in its order dated 28 March 2016 have remanded the matter back to the Commissioner. There is no outstanding demand as of now. The Company has filed an appeal before the High Court of Calcutta and the matter is yet to be finally disposed off.

(b) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon’ble High Court of Calcutta and had been granted stay order on the same. The case was transferred to Hon’ble Supreme Court and has since been remanded to Hon’ble High Court of Calcutta and is yet to be finally disposed off. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 01 April 2009.

NOTE 6 : ADDITIONAL NOTES

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs.Nil (2016: Rs.Nil).

(b) Earnings in foreign currency Rs.Nil (2016: Rs.Nil ).

(c) Expenditure in foreign currency on account of professional fees, travelling and others Rs.80.58 lacs (2016: Rs.71.82 lacs).

(d) Dividend remitted in foreign currency

NOTE 7 : DISCLOSURE REQUIRED IN TERMS OF THE REVISED REGULATORY FRAMEWORK FOR NBFC ISSUED BY RBI ON 10 NOVEMBER, 2014

1 Disclosures on risk exposure in derivatives Qualitative disclosure

Fair value of derivative contracts is determined based on the appropriate valuation techniques considering the terms of the contract as at the balance sheet date. Mark to market losses in derivative contracts are recognised in the statement of profit and loss in the period in which they arise. Mark to market gains are not recognised keeping in view the principle of prudence as enunciated in “Accounting Standard (AS) 1 - Disclosure of Accounting Policies”.

(ii) Accounting for Excess Interest Spread (EIS)

The Company recognises EIS on securitisation transactions in line with RBI circular “Revisions to the Guidelines on Securitisation Transactions” issued on 21 August 2012 which requires recognition of EIS only when redeemed in cash. Accordingly, the gross income on securitisation and assignment of loans aggregating to Rs.1,290.58 lacs for the year ended 31 March 2017 (2016: Rs.3,287.54 lacs) has not been recognised.

(iii) The value of “excess interest spread receivable” and “unrealised gain” on securitisation transactions undertaken in terms of guidelines on securitisation transaction issued by Reserve Bank of India on 21 August 2012 is given below:

(iv) Additional income tax on income distributed by Securitisation Trusts

In the Finance Act, 2013, a provision was introduced w.e.f. 01 June 2013 in respect of ‘Tax on Distributed Income by Securitisation Trusts’ (‘SDT’). The income so received was exempt in the hands of the Company. However the said provision has been withdrawn in Finance Act, 2016 w.e.f 01 June 2016. During the year, the income amounting to Rs.1,261.88 lacs (2016: Rs.4,330.67 lacs) has been received by the Company as an investor after withholding SDT of Rs.436.71 lacs (2016: Rs.1,495.33 lacs).

2 Details of non-performing financial assets purchased / sold

a) Details of non-performing financial assets purchased:

The Company has not purchased any non-performing financial assets during the financial year ended 31 March 2017 and 31 March 2016.

* Cash credit and working capital demand loan from banks are usually for a period of 1 year. As per the prevalent practice, these facilities are renewed on a year to year basis and therefore, are revolving in nature. Accordingly, repayments of cash credit borrowings and working capital demand loans from banks aggregating Rs.4,37,151.12 lacs has been distributed over the same period as the maturity pattern of assets on finance. Borrowings includes Rs.1,23,070.54 lacs, which has been disclosed as ‘Current maturities of long term borrowings’ [Note 9].

3 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC

The Company has not exceeded the prudential exposure limits during the financial year ended 31 March 2017 and 31 March 2016.

(a) Details of penalties imposed by RBI and other regulators

No penalties has been imposed by RBI and other regulators on the Company during the financial year ended 31 March 2017 and 31 March 2016.

(b) Details of Ratings assigned by credit rating agencies and migration of ratings during the year

The Company classifies non-performing assets (NPAs) at 4 months overdue and is compliant with the requirement for the financial year ending 31 March 2017 as per the Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 dated 01 September 2016. These provisioning norms are considered the minimum and additional provision is made based on perceived credit risk where necessary.

During the financial year ended 31 March 2017, the Company has recorded an additional provision of Rs.2,082.00 lacs towards NPAs which are more than 15 months overdue. This additional provision is in line with the RBI guidelines on NPA provisioning norms applicable for the year ending 31 March 2018. Accordingly, the profit before tax for the financial year ended 31 March 2017, is lower to the extent of Rs.2,082.00 lacs.

NOTE 8 : CORPORATE SOCIAL RESPONSIBILITY (CSR)

A CSR committee has been formed by the Company as per the Companies Act, 2013. CSR expenses have been incurred through out the year on the activities as specified in Schedule VII of the said Act.

a) Gross amount required to be spent by the Company during the year is Rs.413.47 lacs.

b) Amount spent during the year on CSR activities

During earlier year while calculating the eligibility amount in CSR, balance of provision for non-performing assets and provision for standard assets were added back to derive at the book profit. Going by the provisions of Section 198 of the Companies Act, 2013, the Company is not required to add back the balance of provision for non-performing assets and provision for standard assets, hence the same has not been considered while calculating the revised eligibility criteria for CSR.

NOTE 9 : DISCLOSURES RELATING TO FRAUD IN TERMS OF THE NOTIFICATION ISSUED BY RESERVE BANK OF INDIA

During the year ended 31 March 2017, 16 cases (2016: 25 cases) of frauds has been detected and reported. The un-recovered amounts aggregating to Rs.162.74 lacs (2016: Rs.380.91 lacs) have been fully provided for / written-off.

NOTE 10 : DISCLOSURES IN TERMS OF THE NOTIFICATION ISSUED BY THE RESERVE BANK OF INDIA ON 21 MARCH 2012

NOTE 11 : DISCLOSURES RELATING TO SPECIFIED BANK NOTES (SBN) IN TERMS OF THE NOTIFICATION ISSUED BY MCA Details of Specified Bank Notes (SBN) held and transacted during the period 08 November 2016 to 30 December 2016

# Based on the daily cash register and petty cash summary statement maintained across the branches.

* Includes balance in State Bank of India eZ Card and replenishment in transit.

** Includes direct cash deposits made by the customers in Company’s bank accounts vide RBI Circular No. DCM (Plg) No. 1226/10.27.00/2016-17 dated 08 November 2016 under Section 3(c)(v). Also includes withdrawal from bank.

*** Includes SBN of Rs.5.29 lacs as part of petty cash at 127 branches which was exchanged across the counter at banks.

NOTE 12 : SEGMENT REPORTING

As per paragraph 4 of Accounting Standard (AS) 17, on “Segment Reporting” prescribed under section 133 of the Companies Act, 2013, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding Company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented in the consolidated financial statements.

NOTE 13 : PREVIOUS YEAR’S FIGURE

Previous year’s figure including those in brackets have been regrouped and / or rearranged wherever necessary.

NOTE 1:

(a) Commissioner of service tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs. 464 lacs plus interest and penalty against which Rs. 404 lacs has been paid which has been charged to the statement of profit and loss in earlier years. Both the Company and the Department had gone into appeal in CESTAT against the order. There were multiple hearings for the case in the CESTAT and High Court of Kolkata on this matter. Finally, the Honorary Bench of CESTAT in its order dated 28 March 2016 have remanded the matter back to the Commissioner to examine the nature of the transactions and to make a fresh decision on the taxability of the transactions under consideration. There is no outstanding demand as of now. The Company is planning to file an appeal before the High Court of Kolkata.

(b) Commissioner of service tax had issued a show cause notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005- 06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs. 83 lacs plus interest and penalty. The Company had made payment of Rs. 68 lacs in the financial year 2010-11 against the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs. 15 lacs. The said amount of Rs. 15 lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another show cause notice dated 4 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs. 125 lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT, the Company made a payment of Rs. 25 lacs as pre-deposit in financial year 2011-12 which had been charged to the statement of profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs. 100 lacs. The said amount of Rs. 100 lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon''ble Court of Kolkata and had been granted stay order on the same. The case has since been transferred to Hon''ble Supreme Court and is yet to be finally disposed off by the Hon''ble Supreme Court. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 1 April 2009.

NOTE 2 : DISCLOSURES RELATING TO FRAUD IN TERMS OF THE NOTIFICATION ISSUED BY RESERVE BANK OF INDIA

During the year ended 31 March 2016, 25 cases (2015: 26 cases) of frauds have been detected and reported aggregating to Rs. 380.91 lacs (2015: Rs. 611.96 lacs). The un-recovered amounts have been fully provided for / written-off.

NOTE 3 : SEGMENT REPORTING

As per paragraph 4 of Accounting Standard (AS) 17, on "Segment Reporting" prescribed under section 133 of the Companies Act, 2013, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding Company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented in the consolidated financial statements.

NOTE 4 : PREVIOUS YEAR''S FIGURE

Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.

Note: 1 Company Overview

Magma Fincorp Limited (''the Company''), incorporated and headquartered in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. Magma is registered as a systemically important non deposit taking Non-Banking Financial Company (''NBFC'') as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. Its equity shares are listed on National Stock exchange and Bombay Stock exchange.

Note 2 : Segment reporting

As per paragraph 4 of Accounting Standard (AS) 17, on "Segment Reporting" notified by the Companies (Accounting Standards) Rules 2006, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented at Note 28 of the consolidated financial statements.

Note 3 : Related party disclosures

Aggregated related party disclosures as at and for the year ended 31 March 2014

Subsidiaries

Magma Advisory Services Limited (w.e.f. 21 May 2012) and Magma ITL Finance Limited (a joint venture with International Tractors Limited).

Step down subsidiaries

Magma Housing Finance (A Public Company with Unlimited Liability) (w.e.f. 11 February 2013) and International Autotrac Finance Limited (w.e.f. 11 June 2012 upto 22 November 2013).

Joint venture

Magma HDI General Insurance Company Limited and Jaguar Advisory Services Private Limited.

Enterprises having significant infuence

Fluence Advisory Services Limited (w.e.f. 25 September 2012), Pragati Sales Private Limited, Microfrm Capital Private Limited, Magma Consumer Finance Private Limited, Celica Developers Private Limited, Bhiwadi Polypack Limited (w.e.f. 16 September 2013), Smitkriti enterprises Private Limited (w.e.f. 20 September 2013), Bengal Speed Automobiles Private Limited (w.e.f. 01 April 2013), Camaro Infrastructure Private Limited, CLP Business LLP, Solvex estates LLP, Mask Corp, USA, Finprop estates Private Limited, Varuneha Commerce Private Limited.

Key management personnel Mayank Poddar and Sanjay Chamria

Relative of key management personnel

Anuj Poddar, Ashita Poddar, Kalpana Poddar, Mansi Tulshan, Nidhi Mansingka, Rajat Poddar, Shaili Poddar, Urmila Devi Poddar, Harshvardhan Chamria, Rajashree Tikmani, Vanita Chamria.

Note 4 : Contingent liabilities and commitments (to the extent not provided for)

(Rs. in Lacs)

As at As at 31 March 2014 31 March 2013

(a) Contingent liabilities

(a) Claims against the Company not acknowledged as debt

(i) Income tax matters under dispute 4.48 15.67

(ii) VAT matters under dispute 248.79 254.53

(iii) Service tax matters under dispute 115.00 115.00

(iv) Legal cases against the company * 255.88 322.33

(b) Guarantees

(i) Recourse obligation in respect of securitised assets [net of cash collaterals of 2,617.33 2,617.33

Rs. 1,746.00 lacs (2013: Rs. 1,746.00 lacs)] (ii) Unexpired bank guarantee 42,630.34 39,413.59

(iii) Corporate guarantee given for a subsidiary company - 1,000.00

(b) Commitments

(a) estimated amount of contracts remaining to be executed on capital account and not 333.43 1,151.83 provided for

(b) Redemption of preference shares (including premium) 11,672.44 17,984.48

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases.

Note 5 : Additional notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs. 132.66 (2013: Rs. Nil).

(b) earnings in foreign currency on account of market entry fee Rs. Nil (2013: Rs. 2,796.00 lacs).

(c) expenditure in foreign currency on account of professional fees, travelling and others Rs. 57.58 lacs (2013: Rs. 60.08 lacs).

Note 6 :

(a) Commissioner of Service Tax had issued a show cause notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confrming the service tax liability at Rs. 464 lacs plus interest and penalty. The Company had made payment of Rs. 304 lacs in financial year 2010-11 in relation to the said Order and charged the same to the statement of Profit and loss. Simultaneously, the Company had preferred an appeal against the Order of Commissioner of Service Ta x at the Customs, excise and Service Ta x Appellate Tribunal (CESTAT), Kolkata. The service tax department had also preferred an appeal against the said Order of the Commissioner with CESTAT, Kolkata. In course of hearing at CESTAT the Company made a further payment of Rs. 100 lacs as pre-deposit in financial year 2011-12 which had been charged to the statement of Profit and loss. Vide its Order dated 21 March 2012 the Hon''ble CESTAT has set aside the impugned Order of the Commissioner of Service Tax Kolkata and has passed an Order remanding the matter to the Commissioner of Service Tax, Kolkata for a revised assessment. Further the Company has filed a writ petition before the Hon''ble High Court of Calcutta against the impugned order of CESTAT. The Hon''ble High Court of Calcutta has admitted our writ and set aside and quashed the impugned order. The Hon''ble High Court vide it''s order has mentioned that Tribunal shall decide the Appeal afresh in accordance with law expeditiously. Now the matter is pending before CESTAT, Kolkata.

(b) Commissioner of service tax had issued a show cause notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, conforming the service tax liability at Rs. 83 lacs plus interest and penalty. The Company had made payment of Rs. 68 lacs in the financial years 2010-11 against the said Order and charged the same to the statement of Profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs. 15 lacs. The said amount of Rs. 15 lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another show cause notice dated 4 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance Limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, conforming the service tax liability at Rs. 125 lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT the Company made a payment of Rs. 25 lacs as pre-deposit in financial year 2011-12 which had been charged to the statement of Profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs. 100 lacs. The said amount of Rs. 100 lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Ta x Act, 1961. The Company had filed a writ petition before the Hon''ble High Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon''ble Supreme Court and is yet to be finally disposed off by the Hon''ble Supreme Court. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Ta x has been withdrawn effective 1 April 2009.

(b) Accounting for Excess Interest Spread (EIS)

The Company recognises EIS on securitisation transactions in line with RBI circular "Revisions to the Guidelines on Securitisation Transactions" issued on 21 August 2012 which requires recognition of EIS only when redeemed in cash. Accordingly, the gross income on securitisation and assignment of loans aggregating to Rs. 7,292.85 lacs for the year ended 31 March 2014 (2013: Rs. 338.55 lacs) has not been recognised.

(d) During the year, the Company has also undertaken direct assignment transaction in terms of guidelines on securitisation transaction issued by Reserve Bank of India on 21 August 2012, for a value of Rs. 2,27,842.00 lacs (2013: Rs. 10,434.52 lacs).

Note 7 : Additional income tax on income distributed by Securitisation Trusts

In the Finance Act, 2013, a new provision has been introduced w.e.f. 1 June 2013 in respect of ''Tax on Distributed Income by Securitisation Trusts'' (''SDT''). The income so received is exempt in the hands of the Company. During the year, the income amounting to Rs. 5,302.98 lacs has been received by the Company as an investor after withholding SDT of Rs. 1,802.48 lacs.

Note 8 : Disclosures relating to Fraud in terms of the notification issued by Reserve Bank of India

During the year ended 31 March 2014, 38 cases of frauds has been detected and reported aggregated to Rs. 464.71 lacs (2013: Rs. 649.04 lacs). The Company has subsequently recovered an amount of Rs. 106.84 lacs (2013: Rs. 62.14 lacs) till the balance sheet date. The un-recovered amounts have been fully provided for.

(b) In view of the proposed regulatory changes in capital adequacy, income recognition, asset classification and provisioning norms recommended in the RBI draft guidelines released on 12 December 2012, the Company classifies non-performing assets (NPAs) at 4 months default as compared to present requirement of 6 months. The Company also makes higher provision for NPAs as well as standard assets as given in the Table in Note 2 (v).

As a result of the above, the cumulative charge to statement of Profit & loss on account of additional provisioning including standard asset provisioning and interest reversal is higher by an amount of Rs. 7,674.03 lacs (2013: Rs. 4,095.99 lacs) as compared to the present RBI requirement.

Note 9 : Derivative transaction

The Company has recognised gain of Rs. 197.06 lacs for the year ended 31 March 2014 (2013: gain of Rs. 283.30 lacs) relating to derivative financial instrument.

The Company does not have any un-hedged foreign currency exposure.

Note 10 : Transfer pricing

The Company has developed a system of maintaining of information and documents as required by the transfer pricing legislation under the Income Ta x Act, 1961. Management is of the opinion that its domestic transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

Note 11 : Previous year''s figure

Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.

Note: 1 COMPANY OVERVIEW

Magma Fincorp Limited (''the Company''), incorporated and headquartered in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. Magma is registered as a systemically important non deposit taking Non-Banking Financial Company (''NBFC'') as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. Its shares are listed on National Stock Exchange and Bombay Stock Exchange.

(A) CHANGE IN ACCOUNTING POLICIES / ESTIMATES

Change in provisioning norms

In view of the imminent regulatory changes in capital adequacy, income recognition, asset classification and provisioning norms proposed in the RBI draft guidelines released on 12 December 2012, and expected to become effective at a future date, the Company has proactively refined its method of recognising delinquencies and loan losses giving effect to such refinements from 1 April 2012. Following the change, the Company recognises delinquencies and commences provisioning at 120 days, rather than recognising delinquencies at 180 days and writing off 100% of loan outstanding as done previously. These provisioning norms are considered the minimum and higher provision is made based on perceived credit risk where necessary.

The aforesaid revision in provisioning norms has resulted in reduction of interest income by Rs. 911.98 lacs, and a net lower provision/ write-off of Rs. 1,938.41 lacs for the year ended 31 March 2013. Recoveries made from loans previously written off are included in ''Other Income''.

Further, the Company has increased the standard provisioning by 0.05% to a total of 0.30% of the Standard Assets, from the existing 0.25% to progressively comply with the draft guidelines. This increase has resulted in an additional charge of Rs. 480.00 lacs for the year ended 31 March 2013.

2 Segment reporting

As per paragraph 4 of Accounting Standard (AS) 17, on "Segment Reporting" notified by the Companies (Accounting Standards) Rules 2006, where a single financial report contains both consolidated financial statements and the separate financial statements of the holding company, segment reporting needs to be presented only on the basis of consolidated financial statements. In view of this, segment information has been presented at Note no. 28 of the consolidated financial statements.

3 Related party disclosures

Aggregated Related Party disclosures as at and for the year ended 31 March 2013

Subsidiaries

Magma Advisory Services Limited * and Magma ITL Finance Limited (a joint venture with International Tractors Limited).

Step down subsidiaries

Magma Housing Finance (A Public Company with Unlimited Liability) ** and International Autotrac Finance Limited ***.

Joint venture

Magma HDI General Insurance Co. Limited and Jaguar Advisory Services Private Limited.

Enterprises having significant influence

Fluence Advisory Services Limited ****, Pragati Sales Private Limited, Microfirm Capital Private Limited (formerly Microfirm Softwares Private Limited), Magma Consumer Finance Private Limited, Celica Developers Private Limited, Camaro Infrastructure Private Limited, CLP Business LLP, Solvex Estates LLP, Mask Corp, USA, Finprop Estates Private Limited.

Key management personnel

Mayank Poddar and Sanjay Chamria

Relative of key management personnel

Anuj Poddar, Ashita Poddar, Kalpana Poddar, Mansi Tulshan, Nidhi Mansingka, Rajat Poddar, Shaili Poddar, Urmila Devi Poddar, Harshvardhan Chamria, Rajashree Tikmani, Vanita Chamria.

4 Additional notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs. Nil (2012: Rs.641.33 lacs).

(b) Earnings in Foreign Currency on account of Market entry fee Rs.2,796.00 lacs (2012: Nil).

(c) Expenditure in Foreign Currency on account of Travelling and Others Rs.37.25 lacs (2012: Rs.44.51 lacs).

(d) Expenditure in Foreign Currency on account of Professional fees during the year amounting to Rs.22.83 lacs (2012: Rs.81.55 lacs).

5 (a) Commissioner of service tax had issued a Show Cause Notice in respect of the financial years 2002-03 to 2006-07 on 16 October 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs.464 lacs plus interest and penalty. The Company had made payment of Rs.304 lacs in financial year 2010-11 in relation to the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the Order of Commissioner of Service Tax at the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata. The service tax department had also preferred an appeal against the said Order of the Commissioner with CESTAT, Kolkata. In course of hearing at CESTAT the Company made a further payment of Rs.100 lacs as pre-deposit in financial year 2011-12 which had been provided for in the statement of profit and loss. Vide its Order dated 21 March 2012 the Hon''ble CESTAT has set aside the impugned Order of the Commissioner of Service Tax Kolkata and has passed an Order remanding the matter to the Commissioner of Service Tax, Kolkata for a revised assessment. Further the Company has filed a writ petition before the Hon''ble High Court of Calcutta against the impugned order of CESTAT. The Hon''ble High Court of Calcutta has admitted our writ and set aside and quashed the impugned order. The Hon''ble High Court vide it''s order has mentioned that Tribunal shall decide the Appeal afresh in accordance with law expeditiously. Now the matter is pending before CESTAT, Kolkata.

(b) Commissioner of service tax had issued a show cause notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.83 lacs plus interest and penalty. The Company had made payment of Rs. 68 lacs in the financial years 2010-11 against the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs.15 lacs. The said amount of Rs.15 lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another Show Cause Notice dated 4 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.125 lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT the Company made a payment of Rs. 25 lacs as pre-deposit in financial year 2011-12 which had been provided for in the statement of profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs.100 lacs. The said amount of Rs.100 lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a writ petition before the Hon''ble Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon''ble Supreme Court and is yet to be finally disposed off by the Hon''ble Supreme Court. In view of this, the Company had not provided for any liability against fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 1 April 2009.

6 Disclosures relating to Fraud in terms of the notification issued by Reserve Bank of India on 2 July 2012

The total frauds detected and reported during the year ended 31 March 2013 aggregated to Rs.649.04 lacs. The Company has subsequently recovered an amount of Rs.62.14 lacs till the balance sheet date. The un-recovered amounts have been fully provided for.

7 Transfer Pricing

The Company has developed a system of maintaining of information and documents as required by the transfer pricing legislation under the Income-tax Act, 1961. Management is of the opinion that its domestic transactions are at arm''s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

8 Derivative transaction

The Company has recognized profit of Rs.283.30 lacs for the year ended 31 March 2013 (2012: loss of Rs.522.68 lacs) relating to derivative financial instrument.

The Company does not have any unhedged foreign currency exposure.

9 Previous year''s figure

Previous year''s figure including those in brackets have been regrouped and / or rearranged wherever necessary.

Note 01 COMPANY OVERVIEW

Magma Fincorp Limited ('Magma', 'MFL' or 'the Company'), incorporated in Kolkata, India is a publicly held non-banking finance company engaged in providing asset finance through its pan India branch network. Magma is registered as a systemically important non deposit taking Non-Banking Financial Company ('NBFC') as defined under Section 45-IA of the Reserve Bank of India (RBI) Act, 1934. The Company is headquartered at Kolkata.

(i) Employee benefits Gratuity benefit plan

The following tables set out the status of the gratuity plan as required under AS 15 (revised) Employee Benefit.

(a) Reconciliation of opening and closing balances of the present value of defined benefit obligation

(b) Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

(c) Expected rate of return on plan assets: This is based on the expectation of the average long-term rate of return expected on investments of the fund during the estimated term of the obligations.

(ii) Segment reporting

The Company's sole business segment is 'financing' and only geographical segment is 'India'. The Company considers business segment as the primary segment and geographical segment based on location of customers as a secondary segment. Since the Company has a single business segment and a single geographical segment, disclosures pertaining to the primary and secondary segments have not been presented.

(iii) Change in accounting policy

(a) The Company has been doing bilateral assignment of homogeneous retail financial assets generated by itself to Banks/ FIs under a deed of assignment in two types of structures in past. First type of structure involved sale of both principal and interest parts of the future receivables (known as premium structure) and second type of structure involved sale of only principal part of its future receivables (known as par structure). From the current year the Company has decided to assign its receivables only under par structure i.e assign only the principal component of the loans in order to ensure stability of income year on year. Accordingly, with effect from 1 April 2011, the Company has decided to recognise the income i.e. excess interest spread (the difference between the interest receivable from the customer and the interest payable by the Company to the assignee of such loan receivables) arising out of assignment of receivables based on the contractual accrual of the same. The Company believes that the revised method of accounting results into better information about the impact of the said items on the Company's periodic performance, leads to more conservative accounting, and is in line with the recommended practice of the Company's principal regulator. Consequently, an amount of Rs. 15,394.17 Lacs, being income relating to future period will be recognised over the tenure of the contracts assigned.

(b) Simultaneously with the change in income recognition on assets assigned, the Company has decided to amortise upfront brokerage expenses / income pertaining to all loan originations over the tenure of the underlying contracts. This change in method of accounting is in line with international practices on recognition of loan origination costs. Consequently, net expense of Rs. 6,553.89 Lacs for the year is not charged off in the statement of profit and loss and is amortised over the tenor of the contracts.

(c) In view of the changes in business practices and accounting policies as above, the profit for the year is not comparable with the previous year.

(iv) Related Party disclosures

Aggregated Related Party disclosures as at and for the year ended 31 March 2012

Subsidiary company

Magma ITL Finance Limited (a joint venture with International Tractors Limited).

Associates

Magma HDI General Insurance Co. Limited Enterprises having significant influence

Camaro Infrastructure Private Limited, Celica Developers Private Limited, CLP Business LLP, Finprop Estates Private Limited, Jaguar Advisory Services Private Limited, Magma Consumer Finance Private Limited, Mask Corp. USA, Microfirm Softwares Private Limited, Pragati Sales Private Limited, Solvex Estates LLP (Formerly Solvex Estates Private Limited), AMRI Hospitals Limited *, Bengal Tools Limited *, Calcutta Becon Engineering Co. Limited *, Chinar Builders & Contractors Limited *, Escort Projects Private Limited *, Everfast Promoters Private Limited *, Gagan Tradelink Private Limited *, GNB Credit Private Limited *, GNB Logistics Private Limited *, Hilife Infra Private Limited *, Hilltop Plaza Private Limited *, Juhi Investment Private Limited *, Kanaiya Engineering & Finance Limited *, Liberty Pharma Limited *, Lifelong Realtors Private Limited *, Nadia Security Printing & Stationery Company Limited *, Neobeam Properties Private Limited *, Romex Promoters Private Limited *, Shivangan Developers Private Limited *, Shrachi Developers Private Limited *, Shrachi Insurance Agencies Private Limited *, Shrachi Realty Private Limited *, Sino India Agro Machinery *, Spectra Realcon Private Limited *, Noblesse Crystal Private Limited (upto 8 November 2011), Pragati Cement (India) Private Limited (upto 30 September 2011)

Key management personnel

Mayank Poddar and Sanjay Chamria Ravi Todi *

Relative of key management personnel

Anuj Poddar, Ashita Poddar, Kalpana Poddar, Mansi Tulshan, Nidhi Mansingka, Rajat Poddar, Shaili Poddar, Urmila Devi Poddar, Harshvardhan Chamria, Rajashree Tikmani, Vanita Chamria, Chitralekha Todi *, Rahul Todi *, Rhea Todi *, Ruchi Todi *, Sarika Todi * and Shrawan Kumar Todi*

* upto 27 May 2011

(vii) The Company along with its associates had entered into a Joint Venture Agreement with HDI Gerling International Holding AG ("HDI"), now replaced with HDI-Gerling Industrie Verischerung AG, a part of the Talanx AG Group, Germany for the purpose of undertaking general insurance business in India through Magma HDI General Insurance Company Limited (the "Insurance Company") subject to necessary regulatory approvals. As per the terms of the Joint Venture Agreement, it has been agreed between the Company and HDI that set up costs and expenses shall be borne by the Company and HDI equally and on Completion (i.e. R2 approval being received from Insurance Regulatory Development Authority), the Insurance Company will reimburse to the Company and HDI the costs incurred by them respectively. Pursuant to the application seeking license for carrying on the business of general insurance in India, the Insurance Company, has since received the approval for its R1 and R2 application and is in the process of obtaining the R3 approval from the IRDA.

(v) Contingent liabilites and commitments (to the extent not provided for)

(a) Contingent liabilities As at As at Particulars 31 March 2012 31 March 2011

(a) Claims against the Company not acknowledged as debt

(i) Income tax matters under dispute 15.67 82.37

(ii) VAT matters under dispute 165.50 25.85

(iii) Service tax matters under dispute 115.00 300.65

(iv) Legal cases against the company* 53.29 371.79

(b) Guarantees

(i) Recourse obligation in respect of securitised assets (net of cash collaterals 7,085.22 14,634.15 Rs.46,267.94 and previous year Rs.48,513.19)

(ii) Unexpired bank guarantee 40,544.05 30,331.49

(iii) Corporate Guarantee given for a Subsidiary Company 2,000.00 4,344.35

* The Company is also involved in other law suits, claims, investigations and proceedings, including collection and repossession related matters, which arise in the ordinary course of business. However, there are no significant claims on such cases.

(vi) Additional Notes

(a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs.641.33 Lacs (Previous year: Rs.1,991.77 Lacs).

(b) Expenditure in Foreign Currency on account of Travelling and Others Rs.44.51 Lacs (Previous year: Rs.90.52 Lacs).

(c) Expenditure in Foreign Currency on account of Professional fees during the year amounting to Rs.81.55 Lacs (Previous year: Nil).

(d) Dividend remitted in foreign currency

(vii) (a) Commissioner of service tax had issued a Show Cause Notice in respect of the financial years 2002-03 to 2006-07 on 16 Oct 2007 and the matter was adjudicated vide Order dated 31 March 2009, confirming the service tax liability at Rs.464 Lacs plus interest and penalty. The Company had made payment of Rs.304 Lacs in financial year 2010-11 in relation to the said Order and charged the same to the statement of profit and loss. Simultaneously the Company had preferred an appeal against the Order of Commissioner of Service Tax at the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata. The service tax department had also preferred an appeal against the said Order of the Commissioner with CESTAT, Kolkata. In course of hearing at CESTAT the Company made a further payment of Rs.100 Lacs as pre-deposit in the current financial year 2011-12 which has been provided for in the statement of profit and loss. Vide its Order dated 21 March 2012 the Hon'ble CESTAT has set aside the impugned Order of the Commissioner of service tax Kolkata and has passed an Order remanding the matter to the Commissioner of service tax, Kolkata for a revised assessment.

(b) Commissioner of service tax had issued a Show Cause Notice dated 7 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.83 Lacs plus interest and penalty. The Company had made payment of Rs. 68 Lacs in the financial years 2010-11 against the said Order and charged the same to the statement of profit and loss. Simultaneously, the Company had preferred an appeal against the impugned Order of Commissioner of service tax in CESTAT, Kolkata which have stayed the balance of the demand amounting to Rs.15 Lacs. The said amount of Rs.15 Lacs has been shown as a contingent liability.

(c) Commissioner of service tax had issued another Show Cause Notice dated 04 April 2008 in respect of the financial years 2002-03 to 2005-06 in the matter of erstwhile Shrachi Infrastructure Finance limited which was merged with the Company with effect from 1 April 2006. The matter was decided by the Commissioner of service tax vide Order dated 24 September 2009, confirming the service tax liability at Rs.125 Lacs plus interest and penalty. The Company had preferred an appeal against the impugned Order of Commissioner of service tax before CESTAT, Kolkata. In course of hearing at CESTAT the Company made a payment of Rs. 25 Lacs as pre-deposit in the current financial year 2011-12 which has been provided for in the statement of profit and loss. CESTAT, Kolkata has stayed the balance of the demand amounting to Rs.100 Lacs. The said amount of Rs.100 Lacs has been shown as a contingent liability.

(d) Fringe benefit tax had been levied on fringe benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a Writ Petition before the Hon'ble Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon'ble Supreme Court and is yet to be finally disposed off by the Hon'ble Supreme Court. In view of this, the Company had not provided for any liability against Fringe benefit tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit tax has been withdrawn effective 1 April 2009.

(viii) The Company has prepared these financial statements as per the format prescribed by revised schedule VI to the Companies Act, 1956 ('the schedule') issued by Ministry of Corporate Affairs. Previous years' figures have been recast/restated to conform to the classification required by the revised schedule VI.

I) Assets on Finance

a) Assets on Finance is net of amounts securitised / assigned of Rs. 501,484.14 lacs (Previous Year: Rs. 481,834.74 lacs).

b) Value of repossessed assets as at the year-end is Rs. 273.93 lacs (Previous Year: Rs. 319.89 lacs).

iii) Operating Lease Rental for the year is Rs. 244.78 lacs (Previous Year: Rs. 991.41 lacs), included in Income from Operations.

iv) Employee Benefits

Gratuity and Other post-employment benefit plans

The following tables summarise the components of net benefit / expense recognised in the Profit and Loss Account and

Balance Sheet for the respective plans.

v) Employee Stock Option Scheme

The Nomination and Remuneration Committee of the Board of Directors had granted 350,800 Options (each Option entitled to 1 equity share of Rs. 10/- each at a price of Rs. 180/- per share) to the eligible employees of the Company under "Magma Employee Stock Option Plan 2007" on 12th October, 2007 (Refer note 2 (ix) (a)).

The disclosures in respect of Employees Stock Option Scheme which are outlined in this years Annexure to the Report of the Directors are treated as an annexure to these accounts.

vii) Business Segments

The Company is engaged primarily in the business of financing and only in one Geographical Segment viz. India. As such no separate Business and Geographical reportable segments information as per Accounting Standard 17 (Segment Reporting) has been furnished in these accounts.

ix) a) Pursuant to the approval of the shareholders at the Annual General Meeting held on 15th July, 2010, the equity shares of face value of Rs. 10/- each were sub-divided into five equity shares of face value of Rs. 2/- each on record date of 16th August, 2010. Accordingly, the EPS has been recalculated based on face value of Rs. 2/- each for the current year and for the earlier years as required by Accounting Standard 20 (Earnings Per Share).

b) The Company has allotted on 30th April, 2010, 2,000,000 Warrants to one of the Promoter entities carrying an option to subscribe to equivalent number of equity shares of Rs. 10/- each at a price of Rs. 250/- per equity share of the face value of Rs. 10/- each, on a future date not exceeding 18 months from the date of issue of such Warrants in terms of provisions of SEBI Guidelines for Preferential Issue (Chapter VII of the SEBI (Issue and Disclosure Requirements) Regulations, 2009). Following the subdivision of one equity share of the face value of Rs. 10/- each into five equity shares of the face value of Rs. 2/- each during the year, the number of warrants stand increased from 2,000,000 to 10,000,000 and the issue price stands reduced from Rs. 250/- to Rs. 50/- per equity share of Rs. 2/- each. The Company has already received Rs. 1250.00 lacs being 25% of the total issue price.

c) The Company has allotted on 12th May, 2010, 4,067,220 equity shares of Rs. 10/- each to Qualified Institutional Buyers (QIBs) in the Qualified Institutions Placement under chapter VIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 at a price of Rs. 301/- per equity share of Rs. 10/- each (including premium of Rs. 291/- per share) aggregating to Rs. 12,242.33 lacs (Refer note 2 (ix) (a)).

d) The Company has allotted on 25th May, 2010, 25,260 equity shares of Rs. 10/- each and on 19th November, 2010, 425,450 equity shares of Rs. 2/- each on preferential basis under Employee Stock Option Plan (ESOP) pursuant to SEBI (ESOS and ESPS) Guidelines, 1999 to the eligible employees of the Company (Refer note 2 (ix) (a)).

e) The total paid-up Equity Share Capital of the Company stands increased to 129,773,550 equity shares of Rs. 2/- each aggregating to Rs. 2,595.47 lacs. These equity shares will rank pari passu in all respects, including the right to receive all dividends and other distributions declared.

f) The Company has raised a sum of Rs. 3,500.00 lacs by allotting 2,500,000, 12%, Cumulative Redeemable Non- Convertible Preference Shares of Rs. 100/- each aggregating to Rs. 2,500.00 lacs and 1,000,000, 9.6% Cumulative Redeemable Non-Convertible Preference shares of Rs. 100/- each aggregating to Rs. 1,000.00 lacs respectively on private placement basis for augmenting the working capital requirements of the Company.

g) The Company has transferred Rs. 421.84 lacs to Capital Redemption Reserve on redemption of first installment of Rs. 20/- per share in respect of 2,109,199 Cumulative Non-Convertible Redeemable Preference Shares of Rs. 100/- per share on 17th February, 2011. The paid-up value as at 31st March, 2011 of the above preference shares stands reduced to Rs. 80/- per shares.

x) As per the terms of issue, the holders of the 6,500,999 Cumulative Non–Convertible Redeemable Preference Shares of Rs. 100/- each aggregating to Rs. 6501.00 lacs (equivalent to USD 15 Million) allotted on 26th March, 2007 are entitled to fixed Dividend at the rate equivalent to 6 months US Dollar Libor applicable on the respective dates i.e. 30th December or 29th June depending upon the actual date of payment plus 3.25% on subscription amount of USD 15 Million. Accordingly, the dividend for the financial year ended 31st March, 2011 has been provided in accounts based on the 6 months US Dollar Libor applicable as on 30th December, 2010 and closing exchange rate applicable as on 31st March, 2011 and which might vary depending on the actual date of payment of the Dividend. Accordingly, the excess/ (deficit) dividend and tax thereon of Rs. (37.06) lacs (Previous Year: Rs. 50.80 lacs) provided with respect to above Preference Shares for the previous financial year ended 31st March, 2010 has been adjusted in the current year with consequent impact on Earning per Share for the year.

xi) Related Party Disclosures

Aggregated Related Party Disclosures as at and for the year ended 31st March, 2011:

Subsidiary Company

Magma ITL Finance Limited (a joint venture with International Tractors Limited)

Associate

Magma HDI General Insurance Co. Limited

Enterprises having significant influence

AMRI Hospitals Limited, Bengal Tools Limited, Calcutta Becon Engineering Co. Limited, Camaro Infrastructure Private Limited, Celica Developers Private Limited, Chinar Builders & Contractors Limited, CLP Business LLP, Escort Projects Private Limited, Everfast Promoters Private Limited, Gagan Tradelink Private Limited, GNB Credit Private Limited, GNB Logistics Private Limited, Hilife Infra Private Limited, Hilltop Plaza Private Limited, Jaguar Advisory Services Private Limited, Juhi Investment Private Limited, Kanaiya Engineering & Finance Limited, Liberty Pharma Limited, Lifelong Realtors Private Limited, Magma Consumer Finance Private Limited, Mask Corp, USA, Microfirm Softwares Private Limited, Nadia Security Printing & Stationery Company Limited, Neobeam Properties Private Limited, Noblesse Crystal Private Limited, Pragati Cement (India) Private Limited (Formerly Purulia Cements Private Limited), Pragati Sales Private Limited, Romex Promoters Private Limited, Shivangan Developers Private Limited, Shrachi Developers Private Limited, Shrachi Insurance Agencies Private Limited, Shrachi Realty Private Limited, Sino India Agro Machinery, Solvex Estates LLP (Formerly Solvex Estates Private Limited), Spectra Realcon Private Limited, Web Development Company Limited.

Key Management Personnel

Mayank Poddar, Sanjay Chamria and Ravi Todi.

xii) The Company along with its associates has entered into a Joint Venture Agreement with HDI Gerling International Holding AG (“HDI”), a part of the Talanx AG Group, Germany for the purpose of undertaking general insurance business in India through Magma HDI General Insurance Company Limited (the “Insurance Company”) subject to necessary regulatory approvals. As per the terms of the Joint Venture Agreement, it has been agreed between the Company and HDI that set up costs and expenses shall be borne by the Company and HDI equally and on Completion (i.e. R2 approval being received from Insurance Regulatory Development Authority), the Insurance Company will reimburse to the Company and HDI the costs incurred by them respectively. Pursuant to the application seeking license for carrying on the business of general insurance in India, the Insurance Company, has since received the approval for its R1 application and is in the process of obtaining the R2 approval from the IRDA.

xiv) Contingent Liabilities not provided for

As at As at 31.03.2011 31.03.2010

i) Income Tax matters under dispute 82.37 30.50

ii) VAT matters under dispute 25.85 22.66

iii) Legal cases against the Company 371.79 190.27

iv) Recourse obligation in respect of securitised assets (net of cash collaterals) 14,634.15 11,988.01

v) Unexpired Bank Guarantees 30,331.49 14,400.74

vi) Corporate Guarantees given for a subsidiary Company 4,344.35 10,846.93

xviii)Based on information / documents available, no creditor is covered under The Micro, Small and Medium Enterprises Development Act, 2006 and hence no disclosures thereof are made in these accounts.

xix) a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs. 1,991.77 lacs (Previous Year: Rs. 3,663.51 lacs).

b) Expenditure in Foreign Currency on account of Travelling and Others Rs. 90.52 lacs (Previous Year: Rs. 11.68 lacs).

xx) a) Service Tax was imposed on Hire Purchase and Lease transactions with effect from 16th July, 2001. The Company has since discontinued such modes of financing. A writ petition under Article 226 of the Constitution was filed before the Honble High Court of Chennai by the Trade Association of Hire Purchase and Lease Financing Companies against the same. Thereafter the Special Leave Petition was filed before the Honble Supreme Court of India, which was disposed off during the year by the Honble Supreme Court of India which fastened a liability of service tax of Rs. 372.00 lacs, out of which Rs. 258 lacs has already been paid by the Company. Since such transaction pertains to the period 2002- 03 to 2006-07 and the transaction with the impugned p.arties have already been concluded, the resultant liability arising on account of service tax has been written off as charge incidental to carrying on business. Accordingly, the same has been charged to Income from Operations during the year.

b) The Service Tax Authorities had raised demands of Rs. 300.65 lacs (Previous year: Rs. 300.65 lacs) upon the Company with respect to certain items which are disputed and are being duly contested by the Company before the appropriate authority under guidance from its legal and tax advisors. In view of this, the Company have not provided for any liability against the same.

c) Fringe Benefit Tax had been levied on Fringe Benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a Writ Petition before the Honble Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Honble Supreme Court and is yet to be finally disposed off by the Honble Supreme Court. In view of this, the Company had not provided for any liability against Fringe Benefit Tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 1st April, 2009.

xxi) Previous years figures are regrouped / recast / restated, wherever considered necessary.

xxiii)The Reserve Bank of India (RBI) vide its Notification No. DNBS. 223/CGM (US) - 2011 dated 17th January, 2011 has issued directions to all NBFCs to make provision of 0.25% against standard assets with immediate effect. Accordingly, the Company has made provision of Rs. 1,090.00 lacs during the year against standard assets which has been charged to Profit and Loss Account. The above contingent provision against standard assets is treated as Tier II Capital.

I) Assets on Finance

a) Assets on Finance is net of amounts securitised / assigned of Rs. 4,81,834.74 (Previous Year: Rs. 4,96,578.39).

b) Value of repossessed assets as at the year-end is Rs. 319.89 (Previous Year: Rs. 865.16).

ii) Assets Given on Operating Lease

b) Operating Lease Rental for the year is Rs. 991.41 (Previous Year: Rs. 2,105.71), included in Income from Operations.

iii) Securitisation

Above excludes assignment of financial assets under bilateral arrangement with Banks / FIs.

iv) Retirement and Other Employee Benefits

Gratuity and Other post-employment benefit plans The following tables summarise the components of net benefit/ expense recognised in the Profit and Loss Account and Balance Sheet for the respective plans.

g) The estimate of future salary increases, considered in actuarial valuation, takes account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

vi) Employee Stock Option Scheme

The Remuneration Committee of the Board of Directors had granted 3,50,800 Options to the eligible employees of the Company under "Magma Employee Stock Option Plan 2007" on 12 October, 2007.

The disclosures in respect of Employees Stock Option Scheme which are outlined in this year’s Annexure to the Report of the Directors is treated as an annexure to these accounts.

The Company has raised Rs. 3,000 (Previous Year: Rs. Nil) during the year by issue of Perpetual Debt Instruments. These debentures are perpetual in nature and the Company has a Call Option only after a minimum period of 10 years from the date of issue subject to RBI regulations.

viii) Business Segments

The Company is engaged primarily in the business of financing and only in one Geographical Segment viz. India. As such no separate Business and Geographical reportable segment’s information as per Accounting Standard 17 (Segment Reporting) has been furnished in these accounts.

ix) Earning per Share

x) The details of Potential Equity Share / Equity Share transactions occurred after the balance sheet date which has not been considered for calculation of Diluted Earning per Share (EPS) in accordance with Accounting Standard 20 (Earning per Share), are as follows.

a) The Company has allotted on 30 April, 2010, 20,00,000 Warrants to one of the Promoter entities carrying an option / entitlement to subscribe to equivalent number of Equity Shares at a price of Rs. 250/- per Equity Share, on a future date not exceeding 18 months from the date of issue of such Warrants in terms of provisions of SEBI Guidelines for Preferential Issue (Chapter VII of the SEBI (Issue and Disclosure Requirements) Regulations, 2009).

b) The Company has allotted on 12 May, 2010, 40,67,220 Equity Shares to Qualified Institutional Buyers (QIBs) in the Qualified Institutions Placement under chapter VIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 at a price of Rs. 301/- per Equity Share (including premium of Rs. 291/- per Share) aggregating to Rs. 12,242.33. Further, the Company has allotted on preferential basis on 25 May, 2010, 25,260 Equity Shares under Employee Stock Option Plan (ESOP) pursuant to SEBI (ESOS and ESPS) Guidelines, 1999 to the eligible employees of the Company. The total paid-up Equity Share Capital of the Company stands increased to 2,58,69,620 Equity Shares of Rs.10/- each aggregating to Rs. 2,586.96. These Equity Shares will rank pari passu in all respects with the existing issued Equity Shares of par value of Rs.10/- per Share in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid in respect of Equity Shares of the Company.

c) The Company is in the process of issuing Cumulative Redeemable Non-Convertible Preference Shares and it has received Rs. 2,138.75 as application money against the same, pending allotment.

xi) a) As per the terms of issue, the holders of the 65,00,999 Cumulative Non–Convertible Redeemable Preference Shares of Rs. 100/- each aggregating to Rs. 6501.00 (equivalent to USD 15 Million) allotted on 26 March, 2007 are entitled to fixed Dividend at the rate equivalent to 6 months US Dollar Libor applicable on the respective dates i.e. 1st January or 1st July depending upon the actual date of payment plus 3.25% on subscription amount of USD 15 Million. Accordingly, the dividend for the financial year ended 31 March, 2010 has been provided in accounts based on the 6 months US Dollar Libor applicable as on 1 January, 2010 and closing exchange rate applicable as on 31 March, 2010 and which might vary depending on the actual date of payment of the Dividend. Accordingly, the excess dividend and tax thereon of Rs. 50.80 (Previous Year: Rs. 112.11) provided with respect to above Preference Shares for the previous financial year ended 31 March, 2009 has been reversed in the current year with consequent impact on Earning per Share for the year. The Company has also provided during the year Rs. 22.72 for differential dividend in respect of earlier years including tax thereon.

b) The Company has provided dividend on 2,58,69,620 Equity Shares of Rs.10/- each (including on 40,92,480 Equity Shares issued subsequent to balance sheet date).

xii) Related Party Disclosures

Aggregated Related Party Disclosures as at and for the year ended 31 March, 2010:

Subsidiary Company

Magma ITL Finance Limited (a joint venture with International Tractors Limited). Magma Consumer Finance Private Limited ceased to be a subsidiary on and w.e.f. 22 March, 2010.

Associates

Acme Abasan Private Limited, AMRI Hospitals Limited, Bengal Tools Limited, Betwa Highrise Private Limited, Betwa Nirman Private Limited, Calcutta Becon Engineering Co. Limited, Camaro Infrastructure Private Limited, Celica Developers Private Limited, Chinar Builders & Contractors Limited, CLP Business Private Limited, Gagan Tradelink Private Limited, Gitika Chemicals and Finance Private Limited, GNB Credit Private Limited, GNB Logistics Private Limited, Hardeo Finance Private Limited, Jaguar Advisory Services Private Limited, Juhi Investment Private Limited, Kanaiya Engineering & Finance Limited, Liberty Pharma Limited, Magma HDI General Insurance Company Limited, Mask Corp, USA, Microfirm Softwares Private Limited, Nadia Pulp & Board Limited, Nadia Security Printing & Stationery Company Limited, Neobeam Properties Private Limited, Noblesse Crystal Private Limited, Pragati Sales Private Limited, Shivangan Developers Private Limited, Shrachi Developers Private Limited, Shrachi Insurance Agencies Private Limited, Shrachi Jaideep Construction Private Limited, Shrachi Realty Private Limited, Sino India Agro Machinery, Solvex Estates Private Limited, Sunflower Engineering Industries Private Limited, Ultimate Complex Private Limited, CLP & Sons HUF, Mayank Poddar HUF, B L Chamria & Others HUF, Sanjay Chamria HUF and Ravi Todi HUF.

Key Management Personnel

Mayank Poddar, Sanjay Chamria and Ravi Todi.

Relatives of Key Management Personnel

xiii) The Company along with its associates have entered into a Joint Venture Agreement with HDI Gerling International Holding AG (“HDI”), a part of the Talanx AG Group, Germany for the purpose of undertaking General Insurance Business in India through the existing Company Magma HDI General Insurance Company Limited (the “JV Company”) subject to necessary regulatory approvals. As per the terms of the Joint Venture Agreement, it has been agreed between the Company and HDI that all out of pocket costs and expenses shall be borne by the Company and HDI equally (i.e. a 50:50 cost sharing ratio) and on Completion (i.e. R2 approval being received from Insurance Regulatory Development Authority), the JV Company will reimburse to the Company and HDI the costs incurred by them respectively.

xiv) Deferred Tax Liability

xv) Contingent Liabilities not provided for

As at As at 31 March 2010 31 March 2009

i) Income Tax matters under dispute 30.50 48.27

ii) VAT matters under dispute 22.66 22.66

iii) Legal cases against the Company 190.27 103.51

iv) Recourse obligation in respect of securitised assets (net of cash collaterals) 11,988.01 15,224.56

v) Unexpired Bank Guarantee 14,400.74 491.73

vi) Corporate Guarantees given for a subsidiary Company 10,846.93 3,000.00

* Included in Schedule 13 under respective heads of expenses.

xix) In respect of Fixed Assets under Schedule 5

a) Land and Buildings for own use include leasehold land Rs. 513.00 (Previous Year: Rs. 513.00).

b) Documentation in respect of certain land and buildings (including on lease) are yet to be completed.

xx) Based on information / documents available, no creditor is covered under The Micro, Small and Medium Enterprises Development Act, 2006 and hence no disclosures thereof are made in these accounts.

xxi) a) C.I.F. value of imports of goods acquired for asset financing arrangements Rs.3,663.51 (Previous Year: Rs. 2,274.83).

b) Expenditure in Foreign Currency on account of Traveling and Others Rs 11.68 (Previous Year: Rs. 30.92).

* Refer Note 2 (xi)(a), Schedule 16 to Accounts

** Amount remitted / paid to shareholders’ banks in India.

xxii) a) Service Tax was imposed on Hire Purchase and Lease transactions w.e.f. 16 July, 2001. The Company has thereafter discontinued such modes of financing. The levy of Service Tax on hire purchase and leasing transactions was however challenged by the Trade Association of Hire Purchase and Lease Financing Companies, which had filed a writ petition with the Hon’ble High Court of Chennai. The case is now pending before the Hon’ble Supreme Court of India. Pending disposal of the case, the Company did not recognize Service Tax liability on the aforesaid transactions for the relevant period. In the meantime, the Service Tax Authority has raised a demand upon the Company with respect to the above matter, which is being duly contested by the Company before the appropriate appellate authority under the guidance from its legal and tax advisors.

b) Fringe Benefit Tax had been levied on Fringe Benefit provided to employees as per Section 115W of the Income Tax Act, 1961. The Company had filed a Writ Petition before the Hon’ble Court of Calcutta and had been granted stay order on the same. The case has since been transferred to Hon’ble Supreme Court and is yet to be finally disposed off by the Hon’ble Supreme Court. In view of this, the Company had not provided for any liability against Fringe Benefit Tax in the earlier years. In terms of Finance Act, 2009, Fringe Benefit Tax has been withdrawn effective 1 April, 2009.

xxiii) Previous year’s figures are regrouped / recast / restated, wherever considered necessary.

* Allotment of Equity Shares of Celica Developers (P) Limited pursuant to Scheme of Amalgamation.

# Issue of Equity Shares against conversion of Preference Shares of Celica Developers (P) Limited.

xxvi) Additional disclosure required by NBFC-ND-SI in terms of the notification issued by RBI on 1 August, 2008